<PAGE>
June 30, 1999
ANNUAL REPORT TO SHAREHOLDERS
OF
FIRST
FUNDS
[PHOTO]
FIRST
TENNESSE
Investment Adviser
[LOGO]
<PAGE>
- -------------------------------------------------------------------------------
LETTER FROM THE PRESIDENT
- -------------------------------------------------------------------------------
Dear Shareholder:
In the First Funds Annual Report, you can learn about the financial markets and
the impact on the Portfolios over the past 12 months for the period ended June
30, 1999. For each Portfolio we reveal our current strategy, current outlook,
mutual fund characteristics, and performance results. We have also listed the
financial highlights for each portfolio and the holdings for each portfolio.
As we look back, the third quarter of 1998 marked the worst stock market
performance since the second quarter of 1990. The financial markets were full of
global turmoil as Russia devalued their currency and defaulted on their debt.
Japan too faced problems as they registered their third consecutive quarter of
negative growth. Bonds, especially Treasuries, performed well as investors
sought a safe haven. The Federal Reserve eased monetary policy during the
quarter by lowering interest rates.
The Fed lowered interest rates two more times during the fourth quarter of 1998.
In fact, rates fell worldwide. The stock market had a remarkable turnaround from
the previous quarter which led to another strong market the following quarter.
Equities rose during the first quarter of 1999 despite the escalating crisis in
Kosovo. U.S. domestic growth, manufacturing, sales, tight labor markets, low
lending rates, and low inflation boosted the stock market. Bond yields increased
during this time which led to poor bond market performance.
The stock market continued its good returns as the second quarter of this year
again showed domestic strength. This was also factored in the bond market where
yields rose and fixed income securities suffered as a result. The Federal
Reserve raised the Fed Funds interest rate by .25% on the last day of the
quarter.
Enjoy learning more in our Annual Report and if you have any questions or need
any other information please don't hesitate to call on us at 1-800-442-1941. You
can also visit our web site at www.firstfunds.com for daily prices, quarterly
commentaries and more.
Thank you for choosing First Funds to help you reach your financial goals.
Sincerely,
/s/ Richard C. Rantzow
Richard C. Rantzow
President
FIRST FUNDS
- Are NOT insured by the FDIC 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.
- ---------------------------------------------------------------------------- I
<PAGE>
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FIRST FUNDS GROWTH & INCOME PORTFOLIO
- -------------------------------------------------------------------------------
[PHOTO]
GROWTH & INCOME PORTFOLIO MANAGERS
EDWARD GOLDSTEIN AND DAVID THOMPSON, CFA
Mr. Goldstein is Managing Director of Memphis, Tennessee-based Highland Capital
Management Corp., sub-adviser to the Portfolio. A 1971 graduate of Boston
University, he went on to receive his MBA from Columbia University in 1976.
Joining Goldman, Sachs & Company in New York in 1976, he became a vice president
in the international department with responsibility for Japan, the Middle East
and Latin America. Mr. Goldstein joined Highland Capital in 1989, and has been
Portfolio Manager for the Portfolio since 1994.
Mr. Thompson is Senior Vice President with Highland Capital Management Corp. and
is a Chartered Financial Analyst. After graduating from the University of
Mississippi in 1981, he worked as an analyst for Gulf Oil for three years, then
went on to receive his MBA from the University of North Carolina in 1986. With
nine years of experience managing both individual and institutional investment
portfolios at major regional banks, Mr. Thompson joined Highland Capital's
equity team in 1995.
YEAR IN REVIEW-----------------------------------------------------------------
PERFORMANCE
For the year ended June 30, 1999, the First Funds Growth & Income Portfolio,
Class I, II and III, returned 25.69%, 18.10%, and 23.35% respectively, net of
fees and sales charges, versus 21.87% for the S&P 500.
MARKET REVIEW
The market again rewarded equity investors over the past 12 months ended June
30, 1999. As was the case in the preceding 12-month period, the stock market had
both ups and downs.
The third quarter of 1998 saw the market turn in its worst performance (S&P 500
down 9.95%). Just as rapidly as the stock market declined in the third quarter,
the market recovered in the fourth quarter of 1998 with the S&P 500 gaining
21.4%. The catalyst for this performance was the lowering of interest rates
three times in the quarter by the Federal Reserve.
COMPARISON OF THE CHANGE IN VALUE OF A $750,000 INVESTMENT IN THE FIRST FUNDS
GROWTH & INCOME PORTFOLIO (CLASS I) AND THE S&P 500.
[GRAPH]
$2,652,481
$2,577,135
PLEASE NOTE: CLASS I INCEPTION IS AUGUST 2, 1993. MINIMUM INVESTMENT FOR CLASS
I IS $750,000. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
II ----------------------------------------------------------------------------
<PAGE>
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FIRST FUNDS GROWTH & INCOME PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
GROWTH & INCOME PORTFOLIO (CLASS II) AND THE S&P 500.
[GRAPH]
$23,909
$23,041
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 20, 1995. CLASS II IS SUBJECT TO A
MAXIMUM INITIAL FRONT-END SALES LOAD OF 5.75% AND $9,425 IS THE NET INITIAL
INVESTMENT AFTER THE SALES LOAD IS DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE RESULTS.*
In the first quarter of 1999 the stock market rose again. However,
subtle shifts developed in the market during the first quarter as cyclical and
value stocks began to outperform the larger cap growth stocks that had propelled
this bull market for so long. Small cap stocks also began to participate in the
rally. The second quarter of 1999 saw a continuation of the market's strength
spreading to other segments of the market, including international markets.
PORTFOLIO UPDATE
The Portfolio continues to be overweighted in the financial, health care and
communication sectors. Pharmaceuticals have not performed particularly well of
late due to potential impacts of a prescription benefit being added to Medicare.
The financial sector has not performed up to the market's levels, yet a number
of our financial holdings have performed well. Valuations for financial stocks
are very attractive as a number of our financial stocks are selling at 30%
discounts to the market.
The communications sector has benefited from consolidation coupled with strong
earnings growth registered by a number of the companies such as MCI WorldCom.
This sector has benefited from the surge in internet usage and offers a means to
invest in the growth of the internet without the inherent risk in owning pure
internet stocks.
[CHART]
Growth & Income Portfolio
Investment Profile as of June 30, 1999
<TABLE>
<S> <C>
Capital Goods 2.9%
Communication Services 15.2%
Consumer Cyclicals 5.7%
Consumer Staples 9.9%
Energy 6.9%
Finance & Insurance 24.3%
Health Care 14.9%
Technology 12.0%
Short-Term Investments 8.2%
</TABLE>
CURRENT STRATEGY AND OUTLOOK
We favor many of the same stocks and sectors that we have owned for the past
several years due to favorable fundamentals and earnings. We believe that as the
earnings of our stocks exceed that of the overall market, our stocks in
aggregate should outperform the market. While the stocks in the Portfolio have
superior growth rates relative to the market, our price to earnings ratio is
only slightly higher than the price to earnings ratio for the market.
- ---------------------------------------------------------------------------- III
<PAGE>
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FIRST FUNDS GROWTH & INCOME PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
GROWTH & INCOME PORTFOLIO (CLASS III) AND THE S&P 500.
[GRAPH]
$32,962
$31,763
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 9, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
We expect inflation to remain subdued for the balance of 1999 and we anticipate
the economy slowing from its 4% plus pace early this year to a more sustainable
3% level in the second half of the year. One of the positive developments that
has resulted from a stronger than expected economy has been an improvement in
corporate earnings growth. At the beginning of 1999 we were expecting corporate
earnings to grow in the 2-3% range. It now appears that with the strong U.S.
economy and resurgence in parts of Southeast Asia, corporate profits could
increase by 8% this year.
We expect the equity market to stay within a narrow trading range for the
balance of 1999. With the market selling near 30 times earnings, there is little
case to be made for expanding market valuations. Even though value and cyclical
stocks have enjoyed a brief period of outperformance versus growth stocks, we
would anticipate that growth stocks would again return to the forefront,
especially given the potential of a slowing economy.
Earnings should be the drivers of individual stocks for the balance of the year.
Volatility will continue, but the improving breadth of the market should help to
alleviate the risk of a large-scale decline. In our portfolio management, we
continue to place our emphasis on individual stock selection and focus on
companies with superior earnings growth and attractive valuations.
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return* Total Return*
SINCE SINCE
INCEPTION 1 YEAR 5 YEAR INCEPTION
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I 253.65% 25.69% 26.90% 23.82%
CLASS II 230.06% 18.10% 25.17% 22.38%
CLASS III 231.92% 23.35% 25.49% 22.50%
S&P 500 244.85% 21.87% 27.66% 23.27%
</TABLE>
*TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1999 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 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 SHARES IS BASED ON THE PERFORMANCE OF CLASS I
SHARES AND DOES NOT REFLECT THE EFFECTS OF THESE FEES, WHICH, IF INCLUDED, WOULD
LOWER CLASS III PERFORMANCE. QUOTATION OF CLASS III PERFORMANCE REFLECTS A 1%
DEFERRED SALES LOAD APPLIED TO REDEMPTIONS MADE DURING THE FIRST YEAR AFTER
PURCHASE. WITHOUT THIS LOAD, THE FIGURES QUOTED WOULD HAVE BEEN 24.35% FOR 1
YEAR. 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.
CLASS II PERFORMANCE SHOWN IS BASED ON A MAXIMUM 5.75% INITIAL SALES CHARGE.
PERFORMANCE INFORMATION FOR CLASS II SHARES PRIOR TO THEIR INCEPTION DATE IS
BASED ON THE PERFORMANCE OF CLASS I SHARES AND DOES NOT REFLECT THE EFFECTS OF
THESE FEES WHICH, IF INCLUDED, WOULD LOWER CLASS II PERFORMANCE. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
IV ---------------------------------------------------------------------------
<PAGE>
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FIRST FUNDS CAPITAL APPRECIATION PORTFOLIO
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[PHOTO]
CAPITAL APPRECIATION PORTFOLIO MANAGEMENT TEAM
Curt D. McLeod is Vice President for IAI and joined the company in 1997.
Previously, he worked as a portfolio manager for 11 years with Piper Jaffray
Companies. Mr. McLeod is a Chartered Financial Analyst and has a Bachelor of
Arts in finance from the University of St. Thomas.
Scott Billeadeau is Vice President for IAI and joined the company in 1999. Prior
to joining IAI he was a senior portfolio manager for TradeStreet Investment
Associates, Inc. Mr. Billeadeau is a Chartered Financial Analyst and has an
Economics degree from Princeton University.
Robert E. Scott is Vice President for IAI and joined the company in 1994.
Previously Mr. Scott was a research specialist for the American Embassy in
Tokyo, Japan. He is a Chartered Financial Analyst and graduated from Harvard
University.
Robert J. Mlnarik is Vice President for IAI. He joined the company in 1996 and
prior to that was a Major in the United States Marine Corps. Mr. Mlnarik
graduated from the University of Michigan with a Bachelor of Science degree.
YEAR IN REVIEW-----------------------------------------------------------------
PERFORMANCE
For the year ended June 30, 1999, the Capital Appreciation Portfolio declined
2.16%, 7.93%, and 4.19% for Class I, II and III shares, respectively, net of
fees and sales charges. The Russell 2500 Growth Index returned 12.71% over the
same period.
MARKET REVIEW
The domestic economy continues to generate better than expected growth. Consumer
spending has remained strong as individuals received record tax refunds. The
strong economy has resulted in very good earnings growth for corporate America.
Inflation has remained low over the last year as measured by the modest consumer
price index level. Although the Federal Reserve recently raised short term
COMPARISON OF THE CHANGE IN VALUE OF A $750,000 INVESTMENT IN THE FIRST FUNDS
CAPITAL APPRECIATION PORTFOLIO (CLASS I) AND THE RUSSELL 2500 GROWTH INDEX.
[GRAPH]
$882,642
$788,135
PLEASE NOTE: CLASS I INCEPTION IS SEPTEMBER 2, 1997. MINIMUM INVESTMENT FOR
CLASS I IS $750,000. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
- ---------------------------------------------------------------------------- V
<PAGE>
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FIRST FUNDS CAPITAL APPRECIATION PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
CAPITAL APPRECIATION PORTFOLIO (CLASS II) AND THE RUSSELL 2500 GROWTH INDEX.
[GRAPH]
$10,992
$9,941
PLEASE NOTE: CLASS II INCEPTION IS OCTOBER 2, 1997. CLASS II IS SUBJECT TO A
MAXIMUM INITIAL FRONT-END SALES LOAD OF 5.75% AND $9,425 IS THE NET INITIAL
INVESTMENT AFTER THE SALES LOAD IS DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE RESULTS.*
interest rates, overall interest rates are at approximately the same level seen
a year ago. The Fed has also signaled its neutral stance in raising interest
rates again in the near future. Against this backdrop of strong economic
growth, low inflation and moderate interest rates, it is no surprise that
several stock market averages have recently hit all time highs.
Market volatility has increased over the last year. The markets sold off
sharply last August only to come roaring back in September. Market participants
view the increased level of volatility as a sign of increased risk in the stock
market. This is one of the reasons investors have shied away from small cap
stocks.
Over the last year, the large cap S&P 500 gained 22.75%. In contrast, the small
cap Russell 2000 Index, climbed 1.50% in the 12 months ended June 30, 1999.
Starting in April of this year and continuing through the end of June, small
cap stocks rallied significantly versus large caps. For the three months ended
June 30, 1999, the Russell 2000 Index rose 15.42% and the Portfolio
participated in this rally.
PORTFOLIO UPDATE
The Portfolio continued to benefit from its holdings in the health care sector.
Our stock selection within the sector combined with our overweighted position
contributed positively to performance. Standout health care stocks included
Xomed, Respironics, and First Commonwealth. First Commonwealth, a dental HMO,
agreed to be purchased by Guardian Life.
[CHART]
Capital Appreciation Portfolio
Investment Profile as of June 30, 1999
<TABLE>
<S> <C>
Short-Term Investments 1.9%
Basic Materials 0.9%
Capital Goods 9.0%
Consumer Cyclicals 20.8%
Consumer Staples 11.0%
Energy 1.1%
Financial 10.0%
Health Care 15.0%
Technology 26.0%
Transportation 4.3%
</TABLE>
Another strong performance area for the portfolio was the communications sector.
Winners in this area included Pinnacle Holdings and Centennial Cellular. Both of
these stocks were acquired this year. Within the consumer cyclicals, Nielsen
Media Research and Catalina Marketing both turned in strong performance. Two
areas that detracted from performance were the energy and technology sectors.
Although oil prices
VI ---------------------------------------------------------------------------
<PAGE>
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FIRST FUNDS CAPITAL APPRECIATION PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
CAPITAL APPRECIATION PORTFOLIO (CLASS III) AND THE RUSSELL 2500 GROWTH INDEX.
[GRAPH]
$10,992
$9,797
PLEASE NOTE: CLASS III INCEPTION IS OCTOBER 2, 1997. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
have recovered in the last few months, energy stocks as a group were the worst
performing stocks in the Russell 2500 Growth Index. The energy stocks within the
portfolio lagged the return of those within the Index and fortunately the
Portfolio has maintained a low exposure to the sector.
The biggest shortfall in performance occurred in the technology sector. Starting
last November, internet-based stocks took off in speculation and drove the
technology sector's performance. We have not owned the "pure" internet stocks
(those that derive all of their business from the internet) for two main
reasons. First, the pure internet stocks have no earnings and in fact some of
them may never have earnings. And second, the valuations appear very high even
as analysts invent new ways to value these companies.
CURRENT STRATEGY AND OUTLOOK
As noted above, we have recently seen stocks in the Portfolio acquired at
premium prices. We do not know whether this merger and acquisition activity will
continue, but it is a reflection of the inherent value in the Portfolio and in
small cap stocks in general. This acquisition activity may be a catalyst to
prolong the small cap rally that started in April. We will continue to execute
our discipline, owning well-positioned companies with sustainable competitive
advantages in stable, growing markets and we expect our companies to deliver
strong earnings growth.
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return* Total Return*
SINCE SINCE
INCEPTION 1 YEAR INCEPTION
- ----------------------------------------------------------
<S> <C> <C> <C>
CLASS I 5.08% (2.16)% 2.76%
CLASS II (6.20)% (7.93)% (3.61)%
CLASS III (2.03)% (4.19)% (1.17)%
RUSSELL 2500
GROWTH INDEX
CLASS I 17.69% 12.71% 9.29%
CLASS II 9.93% 12.71% 5.56%
CLASS III 9.93% 12.71% 5.56%
</TABLE>
*TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1999 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. CLASS I INCEPTION DATE IS SEPTEMBER
2, 1997. THE PORTFOLIO COMMENCED SALES OF CLASS II SHARES ON OCTOBER 2, 1997.
THESE SHARES INCLUDE A HIGHER TRANSFER AGENCY FEE AND A .25% SHAREHOLDER
SERVICES FEE. CLASS II PERFORMANCE SHOWN IS BASED ON A MAXIMUM 5.75% INITIAL
SALES CHARGE. ON OCTOBER 2, 1997, 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. QUOTATION OF CLASS III PERFORMANCE REFLECTS A
1% DEFERRED SALES LOAD APPLIED TO REDEMPTIONS MADE DURING THE FIRST YEAR AFTER
PURCHASE. WITHOUT THIS LOAD, THE FIGURES QUOTED WOULD HAVE BEEN (3.03)% FOR 1
YEAR. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
- ---------------------------------------------------------------------------- VII
<PAGE>
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FIRST FUNDS BOND PORTFOLIO
- -------------------------------------------------------------------------------
[PHOTO]
BOND PORTFOLIO MANAGERS
JAMES TURNER AND STEVEN WISHNIA
Mr. Turner is Senior Vice President with Highland Capital Management Corp., the
sub-adviser to the Portfolio. A 1959 graduate of the U.S. Military Academy, he
received a master's of science degree from Stanford University in 1964. Mr.
Turner was a vice president in the Trust Investment Department of FirsTier Bank,
N.A. in Omaha, Nebraska from 1979 through 1986. In 1986 he joined First
Tennessee Investment Management, and was part of that group's merger with
Highland Capital in 1994. He has managed/co-managed the Portfolio since 1993.
Mr. Wishnia is President of Highland Capital Management Corp. A 1972 graduate of
Pace University, Mr. Wishnia was Treasurer of S.G. Securities, a closed-end
mutual fund in Boston, MA from 1973 to 1975, prior to joining Highland
Investment Corporation, the predecessor firm to Highland Capital. Mr. Wishnia
was a co-founder of Highland Capital in 1987; he has co-managed the Portfolio
since 1994.
YEAR IN REVIEW----------------------------------------------------------------
PERFORMANCE
For the year ended June 30, 1999, the Class I, II, and III shares of the First
Funds Bond Portfolio, returned 2.04%, (1.96)%, and (0.06)% respectively, net of
fees and sales charges, versus a return of 2.78% for the Lehman Brothers
Government/Corporate Bond Index.
MARKET REVIEW
For the 12 months ended June 30, 1999, the first and second halves of the period
have been markedly different in terms of the direction of interest rates. Rates
fell substantially in the first half of the period and then rose in the second
half of the period.
In the third and fourth quarters of 1998, bonds were responding to an
international crisis triggered by Russia's default on billions of dollars worth
of debt in August of last year. Concern spread rapidly throughout the global
financial community and prompted a flight to safety, which forced interest
rates down. Meanwhile,
COMPARISON OF THE CHANGE IN VALUE OF A $750,000 INVESTMENT IN THE FIRST FUNDS
BOND PORTFOLIO (CLASS I) AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX.
[GRAPH]
$1,067,223
$1,051,026
PLEASE NOTE: CLASS I INCEPTION IS AUGUST 2, 1993. MINIMUM INVESTMENT FOR CLASS I
IS $750,000. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
VIII --------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS BOND PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
BOND PORTFOLIO (CLASS II) AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX.
[GRAPH]
$12,261
$11,443
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 20, 1995. CLASS II IS SUBJECT TO A
MAXIMUM FRONT-END INITIAL SALES LOAD OF 3.75% AND $9,625 IS THE NET INITIAL
INVESTMENT AFTER THE SALES LOAD IS DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE RESULTS.*
the Federal Reserve lowered short-term interest rates three times (a total of
.75%) in order to restore stability.
The bond market shifted its focus to the brisk economy during the first half of
1999. Early in the year the Fed hinted that they might raise rates to offset
their past decreases. Such comments plus relatively strong growth in the second
quarter of 1999 set off a significant retrenchment in bonds. On June 30th, the
Fed followed-up on their comments by increasing rates by a quarter of a percent.
Meanwhile inflation, which is the real threat to bonds, has remained subdued
throughout this period.
PORTFOLIO UPDATE
There were no significant shifts in sector allocations during the past 12
months. Exposure to government bonds, corporate bonds and cash increased by a
combined total of only 2.6%. The mortgage position declined by the same amount
to end the year at 1% of the Portfolio's holdings.
After turning in the poorest returns during the third and fourth quarters of
1998, rising interest rates gave mortgages new life in 1999 with a final return
for the period of 4.01%. This rebound was due to the fact that early redemption
risk was reduced because homeowners no longer found it attractive to refinance
their existing mortgages. Governments were the next best performing sector with
a return of 3.05%. Corporates lagged at 1.89%. However, the Portfolio
benefited from being underweighted in long-term corporate bonds, the weakest
performer at (1.06%) over the 12-month period.
[CHART]
Bond Portfolio
Investment Profile as of June 30, 1999
<TABLE>
<S> <C>
Money Market Mutual Funds 0.7%
Corporate Bonds 62.8%
U.S. Government & Agency Obligations 35.7%
Mortgage-Backed Obligations 0.8%
</TABLE>
Only modest changes occurred in the Portfolio's structure. Average maturity and
duration declined slightly from 8.7 to 8.6 years and 5.6 to 5.4 years,
respectively. Average credit quality remained the same at A+.
- ---------------------------------------------------------------------------- IX
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS BOND PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
BOND PORTFOLIO (CLASS III) AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX.
[GRAPH]
$13,962
$12,828
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 2, 1993. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
CURRENT STRATEGY AND OUTLOOK
The bond market is now focused on domestic and global growth. The Fed has
suggested that a growth rate of our economy in excess of 3% could enable them to
justify another interest rate increase. Current indicators reflect some slowing
of growth domestically, but it still remains to be seen if it will be enough to
prevent another Fed tightening as a preemptive measure against any material rise
in inflation. Meanwhile, the global economy is recovering with the fastest
growth appearing to come from Southeast Asia. If growth continues and spreads,
our domestic inflation could be adversely affected.
With the market wary of the impact of future growth on inflation, the Portfolio
reflects a moderately negative bias regarding the outlook for interest rates.
With corporate bond returns having lagged last year, this suggests a potential
for better future performance.
Yields of corporate bonds in relation to Treasuries are generous--a result of
the recent large issuance of new corporate bonds which has caused a supply and
demand imbalance. Such issuance is projected to decline going forward. And once
the bulk of the new supply shrinks, corporate bonds will be better positioned to
improve returns as compared to Treasuries. Thus, an overweighted position in
the corporate sector appears justified.
BOND PORTFOLIO
<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return* Total Return*
SINCE SINCE
INCEPTION 1 YEAR 5 YEAR INCEPTION
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I 40.16% 2.04% 7.28% 5.88%
CLASS II 33.14% (1.96)% 6.18% 4.96%
CLASS III 30.80% (0.06)% 5.99% 4.65%
LEHMAN BROS. 42.32% 2.78% 7.77% 6.15%
GOV'T/CORP.
BOND INDEX
</TABLE>
*TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1999 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 IS BASED ON THE PERFORMANCE OF CLASS I SHARES AND DOES NOT REFLECT THE
EFFECTS OF THESE FEES, WHICH, IF INCLUDED, WOULD LOWER CLASS III PERFORMANCE.
QUOTATION OF CLASS III PERFORMANCE REFLECTS A 1% DEFERRED SALES LOAD APPLIED TO
REDEMPTIONS MADE DURING THE FIRST YEAR AFTER PURCHASE. WITHOUT THIS LOAD, THE
FIGURES QUOTED WOULD HAVE BEEN 0.94% FOR 1 YEAR. THE 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. CLASS II PERFORMANCE SHOWN IS
BASED ON A MAXIMUM 3.75% INITIAL SALES CHARGE. PERFORMANCE INFORMATION FOR CLASS
II SHARES PRIOR TO THEIR INCEPTION DATE IS BASED ON THE PERFORMANCE OF CLASS I
SHARES AND DOES NOT REFLECT THE EFFECTS OF THESE FEES WHICH, IF INCLUDED, WOULD
LOWER CLASS II PERFORMANCE. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE
RESULTS.
X ------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS INTERMEDIATE BOND PORTFOLIO
- -------------------------------------------------------------------------------
[PHOTO]
INTERMEDIATE BOND PORTFOLIO MANAGERS
RALPH W. HERBERT AND TED L. FLICKINGER, JR.
Mr. Herbert is Vice President for Martin & Company, the sub-adviser to the
Portfolio. He is a graduate of the University of Tennessee and in 1979 he
began his career with First American Bank. In 1987 he joined Culver Securities
as a municipal debt underwriter and two years later became portfolio manager
for Valley Fidelity Bank. That bank merged with First Tennessee Bank in 1991.
Mr. Herbert joined Martin & Company in 1998 when the firm became a subsidiary
of First Tennessee National Corporation.
Mr. Flickinger is Executive Vice President for Martin & Company and is a
Chartered Financial Analyst. Prior to joining the firm in 1990, he was an
assistant manager of the investment department of Home Federal Bank of Tennessee
for six years. His 21-year career includes management positions in the
investment departments of The Park National Bank and Fidelity Federal Savings
and Loan of Knoxville.
YEAR IN REVIEW-----------------------------------------------------------------
PERFORMANCE
For the year ended June 30, 1999, the Class I, II, and III shares of the
Intermediate Bond Portfolio returned 3.60%, 0.70%, and 1.58% respectively, net
of fees and sales charges, versus the Lehman Brothers Intermediate
Government/Corporate Bond Index return of 4.22% over the same period.
MARKET REVIEW
The past twelve months have exhibited a level of price volatility not often seen
in the fixed income markets. Interest rates fell during the third and fourth
quarters of 1998 and then rose during the first and second quarters of 1999.
The fall in rates in 1998 was primarily influenced by the Federal Reserve's
decision to lower the Federal Funds rate on three separate occasions. However, a
series of economic reports over a couple of weeks in late January
COMPARISON OF THE CHANGE IN VALUE OF A $750,000 INVESTMENT IN THE FIRST FUNDS
INTERMEDIATE BOND PORTFOLIO (CLASS I) AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
$798,930
$793,920
PLEASE NOTE: CLASS I INCEPTION IS MARCH 2, 1998. MINIMUM INVESTMENT FOR CLASS I
IS $750,000. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
- ---------------------------------------------------------------------------- xi
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS INTERMEDIATE BOND PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
INTERMEDIATE BOND PORTFOLIO (CLASS II) AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
$10,668
$10,280
PLEASE NOTE: CLASS II INCEPTION IS MARCH 9, 1998. CLASS II IS SUBJECT TO A
MAXIMUM INITIAL FRONT-END SALES LOAD OF 2.50% AND $9,750 IS THE NET INITIAL
INVESTMENT AFTER THE SALES LOAD IS DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE RESULTS.*
and early February 1999 renewed inflation fears. Continued economic strength
through the second quarter led the Fed to raise the Federal Funds rate by 25
basis points (0.25%) to 5% at their June 30, 1999 meeting.
U.S. economic growth combined with the lack of inflationary pressure continues
to astound many economists. Unemployment remains near record low levels yet we
haven't seen any serious signs of wage inflation. The housing market has also
remained strong despite rising mortgage rates.
Over the past twelve months, in the intermediate sector of the bond market,
Treasury securities outperformed agency issues. Both of which outperformed
corporate bonds. Corporate bond under-performance was a result of various
factors that included new issues and rising rates.
PORTFOLIO UPDATE
As real returns on fixed income securities declined during the third quarter of
1998, we reduced interest rate risk by shortening the Portfolio's duration in
August and again in September. The higher spreads on agency and corporate issues
made these sectors more attractive relative to Treasuries.
Purchases in the Portfolio were concentrated in the five to ten-year sector and
we ended the fourth quarter of 1998 with a targeted duration of 85% of the
Lehman Brothers Intermediate Government/Corporate Bond Index. Treasury to agency
swaps were used to shorten the duration of the Portfolio without reducing the
yield.
[CHART]
Intermediate Bond Portfolio
Investment Profile as of June 30, 1999
<TABLE>
<S> <C>
Money Market Mutual Funds 0.7%
Corporate Bonds 49.2%
U.S. Government & Agency Obligations 48.8%
Mortgage-Backed Obligations 1.3%
</TABLE>
During the first quarter of 1999, the Portfolio's duration was increased twice
but still remained at 95% of the Lehman Brothers Intermediate
Government/Corporate Bond Index's duration. We moved to 100% of the Index's
duration in early May as the yield on the 10-year Treasury increased from 5.37%
to 5.55%. This was an attractive opportunity to increase our duration exposure
and increase yield with longer-term securities.
xii ---------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS INTERMEDIATE BOND PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
INTERMEDIATE BOND PORTFOLIO (CLASS III) AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX.
[GRAPH]
$10,532
$10,355
PLEASE NOTE: CLASS III INCEPTION IS MAY 19, 1998. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
As yield curve spreads widened, we moved to 105% of the Index's duration in
early June. At that time, the 10-year Treasury yield had increased to 5.95% and
we felt that the risk/return characteristics of the yield curve justified
extending our duration even further. Fixed income securities experienced modest
capital losses when yields rose throughout the quarter.
CURRENT STRATEGY AND OUTLOOK
The past two quarters affirm our belief that the risk one assumes on the longer
end of the yield curve does not always justify the reward. During the past two
quarters, the total return on the 30-year Treasury Bond was a negative 10.53%,
while the return on the 5-year Treasury Note was down 2.27%. (The average
maturity of the Portfolio had a range of 4 to 4.5 years over that same period.)
We remain sensitive to interest rate risk and structure the Portfolio
appropriately. Should interest rates begin to move lower, fixed income losses
should be recouped. Meanwhile, we have increased the yield of the Portfolio as
we expect rates to remain in their current range and spreads to contract to more
normal levels.
In the coming months we will be watching for a deterioration in core inflation
rates, a rise in the rate of increase in labor compensation, slower productivity
growth, or a further decline in the unemployment rate. Any of these signals
might prompt the Fed to consider another rate increase.
INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return* Total Return*
SINCE SINCE
INCEPTION 1 YEAR INCEPTION
- -------------------------------------------------------------
<S> <C> <C> <C>
CLASS I 5.84% 3.60% 4.37%
CLASS II 2.78% 0.70% 2.12%
CLASS III 3.52% 1.58% 3.15%
LEHMAN BROS.
INTERMEDIATE
GOV'T/CORP.
BOND INDEX
CLASS I 6.52% 4.22% 4.85%
CLASS II 6.52% 4.22% 4.85%
CLASS III 5.66% 4.22% 4.83%
</TABLE>
*TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1999 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. CLASS I INCEPTION DATE IS MARCH 2,
1998. THE PORTFOLIO COMMENCED SALES OF CLASS II SHARES ON MARCH 9, 1998. THESE
SHARES INCLUDE A HIGHER TRANSFER AGENCY FEE AND A .25% SHAREHOLDER SERVICES FEE.
CLASS II PERFORMANCE SHOWN IS BASED ON A MAXIMUM 2.50% INITIAL SALES CHARGE. ON
MAY 19, 1998, 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. QUOTATION OF CLASS III PERFORMANCE REFLECTS A 1% DEFERRED SALES
LOAD APPLIED TO REDEMPTIONS MADE DURING THE FIRST YEAR AFTER PURCHASE. WITHOUT
THIS LOAD, THE FIGURES QUOTED WOULD HAVE BEEN 2.58% FOR 1 YEAR. PAST PERFORMANCE
IS NOT PREDICTIVE OF FUTURE RESULTS.
- --------------------------------------------------------------------------- xiii
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
- -------------------------------------------------------------------------------
[PHOTO]
TENNESSEE TAX-FREE PORTFOLIO MANAGERS
RALPH W. HERBERT AND TED L. FLICKINGER, JR.
Mr. Herbert is Vice President for Martin & Company, the sub-adviser to the
Portfolio. He is a graduate of the University of Tennessee and in 1979 he began
his career with First American Bank. In 1987 he joined Culver Securities as a
municipal debt underwriter and two years later became portfolio manager for
Valley Fidelity Bank. That bank merged with First Tennessee Bank in 1991. Mr.
Herbert joined Martin & Company in 1998 when the firm became a subsidiary of
First Tennessee National Corporation.
Mr. Flickinger is Executive Vice President for Martin & Company and is a
Chartered Financial Analyst. Prior to joining the firm in 1990, he was an
assistant manager of the investment department of Home Federal Bank of Tennessee
for six years. His 21-year career includes management positions in the
investment departments of The Park National Bank and Fidelity Federal Savings
and Loan of Knoxville.
YEAR IN REVIEW------------------------------------------------------------------
PERFORMANCE
For the year ended June 30, 1999, the Class I, II, and III shares of the
Tennessee Tax-Free Portfolio returned 2.54%, (0.15)%, and 1.13%, respectively,
net of fees and sales charges, versus a return of 2.30% for the Lehman Brothers
10-Year Municipal Bond Index.
MARKET REVIEW
The past twelve months have exhibited a level of price volatility not often seen
in the fixed income markets. Interest rates fell approximately 25 basis points
(.25%) on 10-year AA rated municipal bonds during the third and fourth quarters
of 1998 and then rose almost 65 basis points (.65%) during the first and second
quarters of 1999.
The fall in rates in 1998 was primarily influenced by the Federal Reserve's
decision to lower the Fed Funds rate on three separate occasions. Higher than
expected fourth quarter gross domestic product numbers, strong
COMPARISON OF THE CHANGE IN VALUE OF A $750,000 INVESTMENT IN THE FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS I) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
$904,267
$894,747
PLEASE NOTE: CLASS I INCEPTION IS DECEMBER 15, 1995. MINIMUM INVESTMENT FOR
CLASS I IS $750,000. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.*
xiv ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS II) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
$12,057
$11,558
PLEASE NOTE: CLASS II INCEPTION IS DECEMBER 29, 1995. CLASS II IS SUBJECT TO A
MAXIMUM FRONT-END INITIAL SALES LOAD OF 2.50% AND $9,750 IS THE NET INITIAL
INVESTMENT AFTER THE SALES LOAD IS DEDUCTED. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE RESULTS.*
wage growth, falling unemployment and a rising producers price index caused
interest rates to climb. Even though economic data released during the second
quarter of 1999 showed little sign of inflation, the Fed raised the Fed Funds
rate by 25 basis points (0.25%) to 5% at their June 30, 1999 meeting.
U.S. economic growth combined with the lack of inflationary pressure continues
to astound many economists. Unemployment remains near record low levels yet we
haven't seen any serious signs of wage inflation. Productivity gains also help
alleviate wage pressures.
Recent strength was evident as the robust housing market flourished during the
first two quarters of 1999 despite rising mortgage rates. The Government appears
strong too as projections estimate another budget surplus of $140 billion for
this year.
A limited supply of municipal bonds during the first half of 1999 has helped
keep municipal prices higher than comparable issues in the taxable markets.
Rising rates definitely impacted the performance of the fund during the first
and second quarters, but municipals still outperformed all other classes of
fixed income assets after adjusting for taxes.
[CHART]
Tennessee Tax-Free Portfolio
Investment Profile as of June 30, 1999
<TABLE>
<S> <C>
Money Market Mutual Funds 0.3%
Tennessee General Obligations Bonds 46.3%
Tennessee Revenue Bonds 48.8%
Other State General Obligation Bonds 2.3%
Other State Revenue Bonds 2.3%
</TABLE>
PORTFOLIO UPDATE
During the third and fourth quarters we bought bonds with maturities in the 2004
to 2009 range. Given the amount of bonds being refunded, we were fortunate to
have only a small amount of bonds "called". The Portfolio's duration shortened
slightly during this time as we intended to reduce interest rate risk.
During the first quarter of 1999, the Portfolio's duration was allowed to
passively shorten from 5.7 years to 5.5
- ---------------------------------------------------------------------------- xv
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS TENNESSEE TAX-FREE PORTFOLIO
- -------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FIRST FUNDS
TENNESSEE TAX-FREE PORTFOLIO (CLASS III) AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX.
[GRAPH]
$12,057
$11,818
PLEASE NOTE: CLASS III INCEPTION IS DECEMBER 15, 1995. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.*
years as municipals became fairly valued and as we were willing to further
reduce interest rate risk. Interest rates continued to rise so we extended the
duration of the Portfolio from 5.5 years back to 5.7 years early in the second
quarter of 1999. This extension was accomplished by buying bonds in the 2010 and
2011 range.
CURRENT STRATEGY AND OUTLOOK
In the coming months, we will be watching for a deterioration in core inflation
rates, a rise in the rate of increase in labor compensation, slower productivity
growth, or a further decline in the unemployment rate. Any of these signals
might prompt the Fed to consider another rate increase.
We feel that municipal bonds offer investors some of the best after-tax return
possibilities. Municipal valuations as a percentage of Treasuries, were at 83%
at quarter end. We believe that municipal bonds as an asset class are
undervalued, especially on the longer end of the yield curve. At the close of
the second quarter of 1999, 15-year municipals are receiving 96% of the yield of
a 30-year municipal but with only 50% of the interest rate risk. As a result, we
will be buying highly rated bonds in the 10- to 15-year maturity ranges. This
strategy will allow us to take almost full advantage of yield from the curve
without having to go to the long end of the yield curve to get it.
TENNESSEE TAX-FREE PORTFOLIO
<TABLE>
<CAPTION>
Cumulative Average Annual
Total Return* Total Return*
SINCE SINCE
INCEPTION 1 YEAR INCEPTION
- ------------------------------------------------------------
<S> <C> <C> <C>
CLASS I 19.29% 2.54% 5.11%
CLASS II 15.59% (0.15)% 4.22%
CLASS III 18.18% 1.13% 4.83%
LEHMAN BROS. 20.54% 2.30% 5.35%
10-YEAR
MUNICIPAL
BOND INDEX
</TABLE>
*TOTAL RETURNS ARE FOR THE PERIOD ENDED JUNE 30, 1999 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. CLASS I INCEPTION DATE IS DECEMBER
15, 1995. ON DECEMBER 15, 1995, THE PORTFOLIO ALSO COMMENCED SALES OF CLASS III
SHARES, WHICH INCLUDE A HIGHER TRANSFER AGENCY FEE AND A .50% DISTRIBUTION FEE.
ON DECEMBER 29, 1995, THE PORTFOLIO COMMENCED SALES OF CLASS II SHARES, WHICH
INCLUDE A HIGHER TRANSFER AGENCY FEE. CLASS II PERFORMANCE SHOWN IS BASED ON A
MAXIMUM 2.50% INITIAL SALES CHARGE. QUOTATION OF CLASS III PERFORMANCE REFLECTS
A 1% DEFERRED SALES LOAD APPLIED TO REDEMPTIONS MADE DURING THE FIRST YEAR AFTER
PURCHASE. WITHOUT THIS LOAD, THE FIGURES QUOTED WOULD HAVE BEEN 2.13% FOR 1
YEAR. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
xvi ---------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
DEFINITION OF COMMON TERMS
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.
<TABLE>
<CAPTION>
MOODY'S INVESTORS STANDARD & POOR'S CORP.
SERVICES, INC. (PLUS (+) OR MINUS (-))
<S> <C> <C>
Prime Aaa AAA
Excellent Aa AA
Good A A
Average Baa BBB
Fair Ba BB
Poor B B
Marginal Caa C
</TABLE>
DIVIDEND
Net income distributed to shareholders generated by securities in a
Portfolio. The Bond, Intermediate Bond, Tennessee Tax-Free, and all the Money
Market Portfolios pay dividends monthly. The Growth & Income pays dividends
quarterly and the Capital Appreciation Portfolio pays dividends annually.
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.
GENERAL OBLIGATION BONDS
General Obligation Bonds (GOs) are debt- 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
and street bonds. These bonds are also known as FULL FAITH AND CREDIT bonds
because the debt is a general obligation of the issuer.
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/or interest of the issuer. Examples of such
companies are MBIA (Municipal Bond Investors Assurance Corporation), and AMBAC
(American Municipal Bond Assurance Corporation).
NET ASSET VALUE (NAV)
NAV is the total 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 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.
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.
- -------------------------------------------------------------------------- xvii
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
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).
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. This index includes only investment-grade bonds with maturities over one
year.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX, an unmanaged
index, is a broad measure of bond performance, and includes reinvestment of
dividends and capital gains. This index includes only investment-grade bonds
with maturities of up to ten years.
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX, an unmanaged index, is a broad
measure of shorter-term municipal bond performance and includes reinvestment of
dividends and capital gains.
RUSSELL 2500 INDEX, an unmanaged index, measures performance of the 2,500
smallest companies in the Russell 3000 Index which represents approximately 23%
of the total market capitalization of the Russell 3000.
THE RUSSELL 2500 GROWTH INDEX measures the performance of those Russell 2500
companies with higher price-to-book ratios and higher forecasted growth values.
xviii --------------------------------------------------------------------------
<PAGE>
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders
of First Funds:
We have audited the accompanying statements of assets and liabilities of First
Funds (comprising, respectively, the Growth & Income, Capital Appreciation,
Bond, Intermediate Bond, Tennessee Tax-Free, U.S. Treasury Money Market, U.S.
Government Money Market, Municipal Money Market, and Cash Reserve Portfolios,
collectively the "Trust"), including the schedules of investments, as of June
30, 1999, and the related statements of operations, the statements of changes in
net assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The financial statements
for the year ended June 30, 1998 and financial highlights for the period from
July 1, 1994 to June 30, 1998 were audited by other auditors whose report, dated
August 21, 1998, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Funds as of June 30, 1999, the results of its operations, the changes in its net
assets, and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Denver, Colorado
August 6, 1999
[LOGO]
- ---------------------------------------------------------------------------- 1
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
Value
Shares (Note 1)
------ --------
COMMON STOCKS - 91.8%
CAPITAL GOODS - 2.9%
General Electric Co. 252,900 $ 28,577,700
------------
COMMUNICATION SERVICES - 15.2%
Vodafone Airtouch PLC ADR 237,625 46,812,125
GTE Corp. 459,375 34,797,656
MCI WorldCom, Inc.* 407,429 35,038,894
Sprint Corp. 583,400 30,810,812
------------
TOTAL COMMUNICATION SERVICES 147,459,487
------------
CONSUMER CYCLICALS - 5.7%
Federated Department Stores, Inc.* 296,200 15,680,088
Interpublic Group of Companies, Inc. 462,700 40,081,388
------------
TOTAL CONSUMER CYCLICALS 55,761,476
------------
CONSUMER STAPLES - 9.9%
Belo (A.H.) Corp., Class A 1,024,300 20,165,906
Pepsico, Inc. 751,300 29,065,919
Sara Lee Corp. 604,800 13,721,400
Sysco Corp. 1,097,400 32,716,238
------------
TOTAL CONSUMER STAPLES 95,669,463
------------
ENERGY - 6.9%
Coastal Corp. 785,050 31,402,000
Repsol S.A. ADR 389,751 7,916,817
Texaco, Inc. 435,100 27,193,750
------------
TOTAL ENERGY 66,512,567
------------
FINANCE & INSURANCE - 24.3%
Alza Corp.* 50,000 2,543,750
American International Group, Inc. 270,224 31,633,097
BankBoston Corp. 691,600 35,358,050
Chase Manhattan Corp. 478,050 41,411,081
Fannie Mae 174,300 11,917,763
Freddie Mac 526,400 30,531,200
Wells Fargo & Co. 1,003,900 42,916,725
UNUMProvident Corp. 340,700 18,653,325
XL Capital LTD 356,000 20,114,000
------------
TOTAL FINANCE & INSURANCE 235,078,991
------------
HEALTH CARE - 14.9%
Abbott Laboratories 600,800 27,336,400
Elan Corp., plc ADR 1,041,650 28,905,788
Medtronic, Inc. 351,975 27,410,053
Merck & Co., Inc. 380,200 28,134,800
Schering-Plough Corp. 611,200 32,393,600
------------
TOTAL HEALTH CARE 144,180,641
------------
TECHNOLOGY - 12.0%
Electronic Data Systems Corp. 631,900 35,741,843
EMC Corp. 849,400 46,717,000
Motorola, Inc. 357,750 33,896,812
------------
TOTAL TECHNOLOGY 116,355,655
------------
Value
Shares (Note 1)
------ --------
TOTAL COMMON STOCKS
(Cost $517,588,630) $889,595,980
------------
SHORT-TERM INVESTMENTS - 8.2%
MONEY MARKET MUTUAL FUNDS - 8.2%
SSGA Prime Money Market Fund 79,599,212 79,599,212
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $79,599,212) 79,599,212
------------
TOTAL INVESTMENTS - 100%
(Cost $597,187,842) $969,195,192
------------
------------
*Non-income producing security
ADR - American Depositary Receipt
INCOME TAX INFORMATION:
At June 30, 1999, the net unrealized appreciation based on cost for income tax
purposes of $597,216,687 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $374,182,610
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (2,204,105)
------------
Net unrealized appreciation $371,978,505
------------
------------
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1999 aggregated $168,375,294 and $220,860,919,
respectively.
UNAUDITED INCOME TAX INFORMATION:
For the year ended June 30, 1999, 100% of the Growth & Income Portfolio's
dividends from investment income qualify for the 70% dividend received
deduction for corporations.
The accompanying notes are an integral part of the financial statements
2 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
Value
Shares (Note 1)
------ --------
<S> <C> <C>
COMMON STOCKS - 98.1%
BASIC MATERIALS - 0.9%
Flanders Corp.* 75,900 $ 256,163
Minerals Technologies, Inc. 800 44,650
--------------
TOTAL BASIC MATERIALS 300,813
--------------
CAPITAL GOODS - 9.0%
Aptar Group, Inc. 11,200 336,000
Black Box Corp.* 21,900 1,097,738
JLK Direct Distribution, Inc., Class A* 33,500 311,969
Superior Services, Inc.* 10,000 266,250
Zebra Technologies Corp., Class A* 28,800 1,101,600
--------------
TOTAL CAPITAL GOODS 3,113,557
--------------
CONSUMER CYCLICALS - 20.8%
Aftermarket Technology Corp.* 62,500 671,875
Catalina Marketing Corp.* 13,500 1,242,000
Clear Channel Communications, Inc. 13,400 923,763
Lithia Motors, Inc., Class A* 5,800 118,900
Nielsen Media Research* 50,266 1,470,280
Right Management Consultants, Inc.* 37,700 584,350
Scientific Games Holding Corp.* 17,100 333,450
Service Experts, Inc.* 31,100 682,256
Sinclair Broadcast Group, Inc.* 52,900 859,625
Watsco, Inc. 16,700 273,462
--------------
TOTAL CONSUMER CYCLICALS 7,159,961
--------------
CONSUMER STAPLES - 11.0%
Apollo Group, Inc., Class A* 57,900 1,534,350
Barnett, Inc.* 24,500 183,750
Strayer Education, Inc. 25,900 793,188
Valassis Communications, Inc. 35,600 1,303,850
--------------
TOTAL CONSUMER STAPLES 3,815,138
--------------
ENERGY - 1.1%
Nuevo Energy Co.* 7,300 96,725
Petroleum Geo-Services ASA-ADR* 18,200 270,725
--------------
TOTAL ENERGY 367,450
--------------
FINANCIAL - 10.0%
Enhance Financial Services Group, Inc.* 19,400 383,150
Federated Investors, Inc., Class B* 24,900 446,644
MBIA, Inc. 2,607 168,803
Radian Group, Inc.* 36,859 1,799,180
Triad Guaranty, Inc.* 6,600 117,975
UniCapital Corp.* 86,400 545,400
--------------
TOTAL FINANCIAL 3,461,152
--------------
HEALTH CARE- 15.0%
Cardinal Health, Inc. 4,032 258,552
Henry Schein, Inc.* 8,000 253,500
IMPATH, Inc.* 2,100 56,569
First Commonwealth, Inc.* 17,300 423,850
Mentor Corp. 49,500 921,938
Patterson Dental Co.* 16,900 587,275
Respironics, Inc.* 71,300 1,073,956
Xomed Surgical Products, Inc. 33,300 1,604,644
--------------
TOTAL HEALTH CARE 5,180,284
--------------
TECHNOLOGY - 26.0%
American Management Systems, Inc.* 41,600 $ 1,331,200
Artesyn Technologies, Inc.* 16,294 361,523
The Bisys Group, Inc.* 14,200 830,700
Billing Concepts Corp.* 26,100 290,362
CCC Information Services Group, Inc.* 82,500 1,041,563
DII Group, Inc.* 11,800 437,337
Great Plains Software, Inc. 3,000 139,313
HNC Software, Inc.* 5,000 153,750
Hutchinson Technology, Inc.* 5,300 146,412
Hyperion Solutions Corp.* 60,100 1,070,531
INSpire Insurance Solutions,Inc. 34,100 492,319
International Telecommunication Data
Systems, Inc.* 47,300 750,887
Mastech Corp.* 40,300 745,550
Microchip Technology, Inc.* 8,800 416,900
National Computer System, Inc. 7,400 249,287
PPT Vision, Inc.* 20,000 100,000
Transaction System Architechs, Inc.* 3,100 120,900
Tollgrade Communications,Inc.* 15,400 231,000
UBICS, Inc.* 14,400 44,100
--------------
TOTAL TECHNOLOGY 8,953,634
--------------
TRANSPORTATION - 4.3%
Coach USA, Inc.* 35,100 1,472,006
--------------
TOTAL COMMON STOCKS
(Cost $31,151,674) 33,823,995
--------------
SHORT-TERM INVESTMENTS - 1.9%
MONEY MARKET MUTUAL FUNDS - 1.9%
SSGA Prime Money Market Fund 330,145 330,145
SSGA U.S. Treasury Money
Market Fund 330,145 330,145
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $660,290) 660,290
--------------
TOTAL INVESTMENTS - 100%
(Cost $31,811,964) $ 34,484,285
--------------
--------------
</TABLE>
*Non-income producing security
ADR - American Depositary Receipt
INCOME TAX INFORMATION:
At June 30, 1999, the net unrealized appreciation based on cost for income tax
purposes of $31,932,691 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost $ 6,712,743
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value (4,161,149)
--------------
Net unrealized appreciation $ 2,551,594
--------------
--------------
</TABLE>
As of June 30, 1999, the Capital Appreciation Portfolio had a capital loss
carryover of approximately $2,800,000 available to offset capital gains to
the extent provided in regulations, which will expire on June 30, 2007.
The accompanying notes are an integral part of the financial statements.
- ----------------------------------------------------------------------------- 3
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
The Capital Appreciation Portfolio intends to elect to defer to its fiscal year
ending June 30, 2000 $224,067 of losses recognized during the period
November 1, 1998 to June 30, 1999.
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1999 aggregated $15,114,971 and $17,933,961, respectively.
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Principal Value
Date Coupon Amount (Note 1)
---- ------ --------- --------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 35.7%
U.S. TREASURY BONDS - 15.5%
05/15/16 7.250% $ 12,120,000 $ 13,301,700
08/15/23 6.250% 22,020,000 22,040,655
--------------
TOTAL U.S. TREASURY BONDS 35,342,355
--------------
U.S. TREASURY NOTES - 13.4%
05/31/01 6.500% 2,940,000 2,991,450
02/28/02 6.250% 1,100,000 1,116,500
08/15/02 6.375% 2,945,000 3,001,141
10/31/02 5.750% 1,000,000 1,002,188
08/15/03 5.750% 3,750,000 3,750,000
02/15/04 5.875% 2,915,000 2,930,487
02/15/06 5.625% 4,930,000 4,854,512
08/15/07 6.125% 4,450,000 4,498,674
02/15/08 5.500% 6,745,000 6,559,513
--------------
TOTAL U.S TREASURY NOTES 30,704,465
--------------
FEDERAL HOME LOAN BANK - 2.4%
11/06/02 6.250% 2,200,000 2,196,084
11/19/02 6.220% 2,225,000 2,213,775
11/20/02 6.170% 1,100,000 1,096,064
--------------
TOTAL FEDERAL HOME LOAN BANK 5,505,923
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.5%
02/15/01 5.000% 2,000,000 1,975,810
12/14/01 4.750% 2,500,000 2,434,053
11/12/02 6.340% 1,100,000 1,096,646
04/25/06 7.710% 328,913 329,344
03/15/09 5.750% 2,300,000 2,174,379
--------------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION 8,010,232
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.9%
10/11/06 7.150% 2,000,000 1,986,386
--------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $82,740,630) 81,549,361
--------------
CORPORATE BONDS & NOTES - 62.8%
BANKS - 2.4%
First Chicago Corp.
01/15/03 7.625% 3,250,000 3,371,781
First Empire Cap Tr I
02/01/27 8.234% 2,200,000 2,178,260
--------------
TOTAL BANKS 5,550,041
--------------
BROKER/DEALERS - 7.4%
Bear Stearns Co.
08/01/02 6.500% 3,000,000 2,987,688
Donaldson, Lufkin & Jenrette, Inc.
07/15/03 6.170% 3,000,000 2,930,334
11/01/05 6.875% 1,000,000 985,509
02/15/16 5.625% 2,000,000 1,997,870
Lehman Brothers, Inc.
02/26/01 6.000% 2,500,000 2,469,985
04/15/03 7.250% 3,500,000 3,512,184
</TABLE>
The accompanying notes are an integral part of the financial statements.
4 -----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Principal Value
Date Coupon Amount (Note 1)
---- ------ --------- --------
<S> <C> <C> <C>
CORPORATE BONDS & NOTES (CONTINUED)
BROKER/DEALERS (CONTINUED)
Merrill Lynch, Inc.
01/15/07 7.000% $ 2,125,000 $ 2,100,318
--------------
TOTAL BROKER/DEALERS 16,983,888
--------------
CAPITAL GOODS - 10.4%
Arrow Electronics, Inc.
01/15/07 7.000% 3,800,000 3,725,702
Dover Corp.
11/15/05 6.450% 3,525,000 3,452,529
Lockheed Martin Corp.
05/15/01 6.850% 2,250,000 2,260,114
03/15/03 6.750% 3,500,000 3,505,607
Raytheon Co.
08/15/00 6.300% 2,500,000 2,506,650
07/15/05 6.500% 3,675,000 3,631,517
Tyco International Limited
11/01/01 6.500% 2,590,000 2,591,891
06/15/28 7.000% 2,300,000 2,130,430
--------------
TOTAL CAPITAL GOODS 23,804,440
--------------
CONSUMER NON-DURABLES - 3.5%
Anheuser Busch, Inc.
06/01/05 6.750% 1,000,000 992,412
09/01/05 7.000% 2,400,000 2,408,155
Coca-Cola Enterprises, Inc.
10/15/36 6.700% 2,250,000 2,271,195
Philip Morris, Inc.
12/01/99 7.125% 2,200,000 2,208,204
--------------
TOTAL CONSUMER NON-DURABLES 7,879,966
--------------
CONSUMER SERVICES - 15.4%
Airtouch Communications, Inc.
05/01/08 6.650% 4,450,000 4,329,618
Belo (AH) Corp.
06/01/02 6.875% 3,800,000 3,797,967
MCI WorldCom, Inc.
04/15/02 6.125% 4,425,000 4,388,423
Price/Costco, Inc.
06/15/05 7.125% 3,600,000 3,646,346
Rite Aid Corp.
08/15/13 6.875% 3,450,000 3,162,687
Sprint Corp.
11/15/28 6.875% 2,300,000 2,094,221
USA Waste Services, Inc.
10/01/04 7.000% 3,000,000 3,027,972
WMX Technologies, Inc.
10/15/00 6.250% 3,100,000 3,099,461
Wal-Mart Stores, Inc.
02/01/00 5.650% 3,800,000 3,796,162
Waste Management Step Bond
10/01/02 7.700% 3,800,000 3,922,250
--------------
TOTAL CONSUMER SERVICES 35,265,107
--------------
FINANCIAL SERVICES - 11.3%
Associates Corp. of North America
09/17/99 6.680% $ 1,905,000 $ 1,908,391
10/15/02 6.375% 1,000,000 995,718
05/15/37 5.960% 1,500,000 1,504,855
BHP Finance USA
03/01/06 6.690% 3,350,000 3,236,894
CNA Financial Corp.
04/15/05 6.500% 2,725,000 2,655,671
Countrywide Home Loans, Inc.
10/22/04 6.840% 2,500,000 2,480,587
Ford Motor Credit Co.
09/25/01 7.000% 3,345,000 3,395,476
General Motors Acceptance Corp.
12/07/01 5.350% 3,500,000 3,418,663
Nationwide Mutual
Insurance Co. 144A*
02/15/04 6.500% 1,000,000 986,799
Provident Companies, Inc.
03/15/28 7.250% 2,600,000 2,511,049
Sun Canada Financial Co.
12/15/07 6.625% 2,850,000 2,797,816
--------------
TOTAL FINANCIAL SERVICES 25,891,919
--------------
TRAVEL & TRANSPORTATION - 3.8%
Norfolk Southern Corp.
02/15/04 7.875% 2,400,000 2,509,886
Northwest Airlines Corp.
07/02/16 7.670% 2,204,907 2,266,975
Union Pacific Corp.
01/15/04 6.125% 4,000,000 3,882,380
--------------
TOTAL TRAVEL & TRANSPORTATION 8,659,241
--------------
UTILITIES - 8.6%
Coastal Corp.
02/01/09 6.375% 3,000,000 2,818,992
Enron Corp.
07/15/28 6.950% 3,150,000 2,876,958
GTE Corp.
04/15/06 6.360% 4,400,000 4,288,720
11/01/08 6.900% 3,200,000 3,198,378
Public Service Electric & Gas Co.
11/01/01 7.875% 2,000,000 2,058,540
TXU Eastern Funding Co. 144A*
05/15/09 6.750% 4,600,000 4,363,086
--------------
TOTAL UTILITIES 19,604,674
--------------
TOTAL CORPORATE BONDS & NOTES
(Cost $145,809,149) 143,639,276
--------------
MORTGAGE-BACKED OBLIGATIONS - 0.8%
Federal National Mortgage Association,
Pool #250885
04/01/27 7.500% 1,830,452 1,852,747
Government National Mortgage
Association, Pool #26825
09/15/08 9.000% 78,619 83,543
--------------
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $1,904,177) 1,936,290
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----------------------------------------------------------------------------- 5
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS - 0.7%
SSGA Prime Money Market Fund $ 1,559,826 $ 1,559,826
--------------
TOTAL MONEY MARKET MUTUAL FUNDS 1,559,826
(Cost $1,559,826) --------------
TOTAL INVESTMENTS - 100%
(Cost $232,013,782) $228,684,753
--------------
--------------
</TABLE>
*Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1999, these securities
amounted to a value of $5,349,885 or 2.3% of net assets.
INCOME TAX INFORMATION:
At June 30, 1999, the net unrealized depreciation based on cost for income tax
purposes of $232,015,564 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $ 1,084,803
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (4,415,614)
--------------
Net unrealized depreciation $ (3,330,811)
--------------
--------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1999 aggregated $65,450,436 and $49,729,570, respectively.
Purchases and sales of U.S. Government and Agency securities, other than
short-term securities, for the year ended June 30, 1999 aggregated $33,230,472
and $25,091,306, respectively.
INTERMEDIATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Principal Value
Date Coupon Amount (Note 1)
---- ------ --------- --------
<S> <C> <C> <C>
U.S GOVERNMENT & AGENCY OBLIGATIONS - 48.8%
U.S. TREASURY NOTES - 21.5%
04/30/00 6.750% $ 3,000,000 $ 3,035,625
08/31/00 6.250% 3,000,000 3,027,189
10/31/00 5.750% 3,000,000 3,011,250
04/30/01 6.250% 2,000,000 2,024,376
08/31/01 6.500% 8,000,000 8,150,000
10/31/01 6.250% 5,000,000 5,070,315
05/31/02 6.500% 2,000,000 2,045,000
08/15/02 6.375% 1,000,000 1,019,063
10/31/02 5.750% 2,000,000 2,004,376
05/15/08 5.625% 9,000,000 8,814,375
11/15/08 4.750% 10,000,000 9,178,130
--------------
TOTAL U.S TREASURY NOTES 47,379,699
--------------
FEDERAL HOME LOAN BANK - 4.8%
09/20/00 6.125% 3,000,000 3,014,484
11/06/02 6.250% 600,000 598,932
11/19/02 6.220% 1,400,000 1,392,937
11/20/02 6.170% 700,000 697,495
09/02/03 5.575% 5,000,000 4,893,490
--------------
TOTAL FEDERAL HOME LOAN BANK 10,597,338
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 6.7%
11/12/02 6.340% 700,000 697,866
01/15/04 5.000% 5,000,000 4,765,845
03/15/09 5.750% 10,000,000 9,453,820
--------------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION 14,917,531
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 14.0%
09/20/00 6.110% 2,000,000 2,008,554
03/15/01 5.625% 5,000,000 4,988,640
01/15/03 5.250% 5,000,000 4,872,000
02/13/04 5.125% 5,000,000 4,790,880
11/13/06 6.950% 2,100,000 2,102,772
01/15/09 5.250% 10,000,000 9,132,090
06/15/09 6.375% 3,000,000 2,968,359
--------------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION 30,863,295
--------------
TENNESSEE VALLEY AUTHORITY - 1.8%
11/01/00 6.000% 4,000,000 4,014,188
--------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $109,735,446) 107,772,051
--------------
CORPORATE BONDS & NOTES - 49.2%
BANKS - 4.8%
BancOne Corp.
05/01/07 7.600% 725,000 750,225
Bank One Texas
02/15/08 6.250% 5,000,000 4,734,475
First Chicago Corp.
01/15/03 7.625% 1,525,000 1,582,143
National City Corp.
03/01/04 6.625% 1,650,000 1,641,126
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 -----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
INTERMEDIATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Principal Value
Date Coupon Amount (Note 1)
---- ------ --------- --------
<S> <C> <C> <C>
CORPORATE BONDS & NOTES (CONTINUED)
BANKS (CONTINUED)
Wachovia Corp.
02/20/01 5.400% $ 2,000,000 $ 1,972,536
--------------
TOTAL BANKS 10,680,505
--------------
BASIC MATERIALS - 3.2%
Aluminum Co. of America
02/01/01 5.750% 2,000,000 1,988,264
E.I. du Pont de Nemours & Co.
10/11/00 6.210% 2,000,000 2,003,076
09/01/02 6.500% 3,000,000 3,025,788
--------------
TOTAL BASIC MATERIALS 7,017,128
--------------
BROKER/DEALERS - 6.4%
Merrill Lynch & Co., Inc.
02/12/03 6.000% 4,000,000 3,935,648
01/15/04 5.880% 4,000,000 3,859,980
08/01/04 6.550% 1,400,000 1,396,867
Morgan Stanley Group, Inc.
03/01/07 6.875% 5,000,000 4,955,290
--------------
TOTAL BROKER/DEALERS 14,147,785
--------------
CAPITAL GOODS - 4.5%
Lockheed Martin Corp.
05/15/01 6.850% 650,000 652,922
03/15/03 6.750% 1,300,000 1,302,083
McDonnell Douglas Corp.
07/01/00 8.250% 4,600,000 4,676,305
Raytheon Co.
08/15/02 6.450% 1,350,000 1,350,371
Rockwell International Corp.
09/15/02 6.750% 2,000,000 2,010,328
--------------
TOTAL CAPITAL GOODS 9,992,009
--------------
CONSUMER NON-DURABLES - 1.9%
Nike, Inc.
06/16/00 6.510% 2,000,000 2,000,652
Philip Morris, Inc.
01/01/01 9.000% 1,250,000 1,294,218
Sara Lee Corp.
10/18/99 6.400% 1,000,000 1,001,876
--------------
TOTAL CONSUMER NON-DURABLES 4,296,746
--------------
CONSUMER SERVICES - 8.7%
Belo (AH) Corp.
06/01/02 6.875% 1,650,000 1,649,117
CPC International, Inc.
09/19/00 6.200% 2,000,000 2,001,062
Pitney Bowes, Inc.
07/16/01 6.780% 1,000,000 1,008,330
02/01/05 5.950% 5,000,000 4,864,740
Price/Costco, Inc.
06/15/05 7.125% 1,375,000 1,392,702
Safeway, Inc.
09/15/04 6.850% 1,400,000 1,404,656
Walt Disney Co.
12/15/03 5.125% 5,000,000 4,746,820
Wal-Mart Stores, Inc.
05/15/02 6.750% $ 2,000,000 $ 2,028,076
--------------
TOTAL CONSUMER SERVICES 19,095,503
--------------
FINANCIAL SERVICES - 12.8%
BHP Finance USA
03/01/06 6.690% 1,350,000 1,304,420
CNA Financial Corp.
11/15/03 6.250% 2,000,000 1,957,700
Capital Holdings Corp.
10/21/99 8.900% 1,450,000 1,461,050
Cigna Corp.
01/15/06 6.375% 1,350,000 1,289,944
Dow Jones & Co., Inc.
12/01/00 5.750% 1,000,000 995,593
Ford Motor Credit Co.
11/08/00 6.250% 2,000,000 2,004,056
09/25/01 7.000% 1,000,000 1,015,090
General Electric Capital Corp.
04/15/02 7.450% 2,000,000 2,059,570
12/15/07 6.290% 5,000,000 4,998,645
05/01/18 6.666% 2,000,000 2,011,646
Household Finance Corp.
06/30/00 6.375% 250,000 250,607
International Lease Finance
11/01/99 6.125% 2,000,000 2,002,336
Norwest Corp.
04/01/00 7.125% 2,000,000 2,017,756
U.S. West Capital Funding, Inc.
07/15/05 6.250% 5,000,000 4,765,760
--------------
TOTAL FINANCIAL SERVICES 28,134,173
--------------
TRAVEL & TRANSPORTATION - 1.8%
Norfolk Southern Corp.
05/15/07 7.350% 3,800,000 3,873,918
--------------
UTILITIES - 5.1%
Duke Energy Corp.
11/01/99 8.000% 1,000,000 1,005,748
GTE Corp.
11/01/08 6.900% 3,500,000 3,498,226
Kentucky Utilities Co.
06/15/00 5.950% 2,000,000 1,995,784
National Rural Utilities
04/01/01 6.450% 2,000,000 2,007,202
New York Telephone Co.
02/15/04 6.250% 875,000 868,685
Texas Utilities Co.
10/01/02 6.200% 2,000,000 1,979,734
--------------
TOTAL UTILITIES 11,355,379
--------------
TOTAL CORPORATE BONDS & NOTES
(Cost $110,003,211) 108,593,146
--------------
MORTGAGE-BACKED OBLIGATIONS - 1.3%
Federal National Mortgage Association
06/25/00 6.500% 177,495 177,555
Federal Home Loan Mortgage Corporation
Series 1665 Class KA
07/15/00 6.500% 94,398 94,617
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----------------------------------------------------------------------------- 7
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
INTERMEDIATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Principal Value
Date Coupon Amount (Note 1)
---- ------ --------- --------
<S> <C> <C> <C>
Federal Home Loan Mortgage Corporation
Series 1698 Class E
10/15/06 6.000% $ 2,495,059 $ 2,497,529
--------------
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $2,764,525) 2,769,701
--------------
<CAPTION>
Shares
------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS - 0.7%
SSGA Prime Money Market Fund 1,493,347 1,493,347
--------------
TOTAL MONEY MARKET MUTUAL FUNDS 1,493,347
(Cost $1,493,347) --------------
TOTAL INVESTMENTS - 100%
(Cost $223,996,529) $ 220,628,245
--------------
--------------
INCOME TAX INFORMATION:
At June 30, 1999, the net unrealized depreciation based on cost for income tax
purposes of $223,996,529 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $ 611,993
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (3,980,277)
--------------
Net unrealized depreciation $ (3,368,284)
--------------
--------------
</TABLE>
The Intermediate Bond Portfolio intends to elect to defer to its fiscal year
ending June 30, 2000 $133,588 of losses recognized during the period
November 1, 1998 to June 30, 1999.
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1999 aggregated $137,845,266 and $99,795,606, respectively.
Purchases and sales of U.S. Government and Agency securities, other than
short-term securities, for the year ended June 30, 1999 aggregated $51,543,264
and $30,140,234, respectively.
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Bond Rating Principal Value
Date Coupon Moody/S&P Amount (Note 1)
---- ------ ------------ --------- --------
<S> <C> <C> <C> <C>
TENNESSEE MUNICIPAL OBLIGATIONS - 95.1%
GENERAL OBLIGATION BONDS - 46.3%
Anderson County
Refunding & Improvement -
Rural Elementary School
03/01/08 5.150%, FGIC Aaa/AAA $ 500,000 $ 506,166
Chattanooga
09/01/02 5.000% Aa3/AA 1,900,000 1,948,530
11/01/06 5.600% Aa3/AA 500,000 525,130
05/01/08 5.400%, FSA Aaa/AAA 500,000 515,078
Crockett County
04/01/11 5.000%, AMBAC Aaa/NR 500,000 497,765
Franklin City
Special School District
06/01/12 5.100% Aa3/NR 2,500,000 2,516,902
Franklin County
03/01/13 5.250%, MBIA Aaa/AAA 750,000 757,927
Gatlinburg
11/01/04 4.500%, FGIC Aaa/NR 3,000,000 3,011,136
Grundy County
05/01/06 5.350%, FGIC Aaa/AAA 300,000 312,671
Hamilton County
07/01/03 5.200% Aa2/NR 1,000,000 1,032,030
07/01/05 5.400% Aa2/NR 500,000 522,640
Jackson
Refunding & Improvement
03/01/14 5.125%, MBIA Aaa/NR 3,100,000 3,071,403
Johnson City
03/01/04 6.500% A1/NR 250,000 259,875
06/01/07 4.350%, FGIC Aaa/AAA 3,000,000 2,921,457
06/01/08 5.600%, FSA Aaa/AAA 500,000 528,707
06/01/12 5.900%, FSA Aaa/AAA 245,000 262,280
05/01/14 5.550%, FGIC Aaa/AAA 2,250,000 2,305,800
Kingsport
09/01/02 5.500% A1/NR 1,000,000 1,050,256
09/01/06 5.000%, MBIA Aaa/NR 1,150,000 1,172,823
09/01/07 5.900% A1/A+ 1,000,000 1,066,806
Knox County
04/01/08 5.100% Aa/AA 2,000,000 2,035,736
02/01/12 5.000% Aa3/AA 2,000,000 1,992,522
Knoxville
Refunding & Improvement, MBIA
05/01/07 5.250% Aaa/AAA 3,000,000 3,086,487
05/01/08 5.300% Aaa/AAA 1,350,000 1,385,686
Lawrence County
08/01/99 5.900%, AMBAC Aaa/AAA 1,000,000 1,002,022
Maury County
04/01/07 5.125%, AMBAC Aaa/AAA 2,000,000 2,035,712
Memphis
08/01/06 5.200% Aa/AA 500,000 518,270
10/01/10 4.375% Aa2/AA 2,500,000 2,369,662
11/01/10 5.200% Aa/AA 1,000,000 1,019,467
07/01/12 5.250% Aa/AA 3,000,000 3,036,480
11/01/13 5.250% Aa/AA 1,000,000 1,005,366
Metropolitan Nashville & Davidson
12/01/06 6.600% Aa/AA 1,350,000 1,395,313
05/15/07 5.700% Aa/AA 1,000,000 1,050,951
12/01/07 5.000% Aa/AA 1,000,000 1,025,518
11/15/10 5.125% Aa2/AA 500,000 506,285
11/15/11 5.125% Aa2/AA 1,000,000 1,005,859
Monroe County
05/01/03 5.200%, AMBAC Aaa/AAA 500,000 516,760
05/01/06 5.250%, FSA Aaa/NR 1,500,000 1,561,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 -----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Bond Rating Principal Value
Date Coupon Moody/S&P Amount (Note 1)
---- ------ ------------ --------- --------
<S> <C> <C> <C> <C>
TENNESSEE MUNICIPAL OBLIGATIONS - 95.1%
GENERAL OBLIGATION BONDS - 46.3%
Murfreesboro
05/01/00 6.250% A1/NR $ 250,000 $ 255,123
08/01/04 5.500% A1/NR 1,000,000 1,037,681
Oak Ridge
07/01/08 5.400% Aa/A+ 1,000,000 1,030,885
07/01/10 5.550% Aa/A+ 500,000 515,159
Putnam County, MBIA
04/01/05 5.250% Aaa/AAA 3,000,000 3,097,362
04/01/07 5.100% Aaa/AAA 1,540,000 1,565,964
Rutherford County
04/01/08 5.200% Aa3/AA- 2,000,000 2,044,566
04/01/09 5.250% Aa3/AA- 500,000 512,808
Sevier County
04/01/08 5.250%, FGIC Aaa/AAA 750,000 776,117
Shelby County
04/01/03 5.000% Aa2/AA+ 500,000 512,500
03/01/04 5.550% Aa2/AA+ 1,000,000 1,026,199
04/01/09 5.500% Aa3/AA+ 1,125,000 1,160,057
04/01/09 5.500% NR/AA+ 375,000 395,331
06/01/09 5.625% Aa2/AA+ 1,000,000 1,056,184
11/01/09 5.300% Aa2/AA+ 3,000,000 3,117,951
04/01/10 5.500% Aa2/AA+ 750,000 790,414
04/01/14 5.625% NR/AA+ 2,000,000 2,053,062
Tennessee State
06/01/05 6.700% Aaa/AAA 1,000,000 1,062,503
03/01/06 5.300% Aaa/AAA 2,500,000 2,616,923
05/01/06 5.000% Aaa/AAA 600,000 615,674
03/01/07 5.400% Aaa/AAA 1,740,000 1,828,636
05/01/08 5.000% Aaa/AAA 5,000,000 5,089,030
05/01/09 4.750% Aaa/AAA 2,000,000 1,987,464
05/01/11 5.000% Aaa/AAA 4,000,000 4,013,924
05/01/13 5.300% Aaa/AAA 750,000 761,066
Tipton County
04/01/12 5.250%, AMBAC Aaa/NR 500,000 509,521
Weakley County
05/01/09 5.000%, FGIC Aaa/AAA 350,000 350,678
White House
02/01/12 5.300%, MBIA Aaa/AAA 1,000,000 1,009,260
Williamson County
04/01/06 5.500% Aa1/NR 2,000,000 2,077,638
05/01/10 4.800% Aa1/NR 1,000,000 991,606
Wilson County
03/30/07 5.000%, FSA Aaa/NR 2,000,000 2,025,486
04/01/07 5.250% A1/NR 1,000,000 1,032,965
06/01/13 5.500%, FGIC Aaa/AAA 500,000 518,780
--------------
TOTAL GENERAL OBLIGATION BONDS 98,772,995
--------------
REVENUE BONDS - 48.8%
AIRPORT AUTHORITY - 1.2%
Memphis - Shelby County
09/01/12 5.350% Baa2/BBB 500,000 501,838
Metropolitan Nashville
07/01/08 4.600%, FGIC Aaa/AAA 2,000,000 1,972,470
--------------
TOTAL AIRPORT AUTHORITY 2,474,308
--------------
TENNESSEE MUNICIPAL OBLIGATIONS (CONTINUED)
REVENUE BONDS (CONTINUED)
HEALTH & EDUCATION - 19.1%
Anderson County
Methodist Medical Center
07/01/05 5.500% A1/NR $1,400,000 $1,440,949
07/01/08 5.700% A1/NR 1,000,000 1,028,027
Blount County
07/01/09 5.250% Baa1/NR 2,765,000 2,752,248
Bradley County
03/01/06 5.300%, MBIA Aaa/AAA 500,000 515,750
03/01/10 4.250%,FGIC Aaa/AAA 4,065,000 3,856,970
Bristol
Memorial Hospital
09/01/13 5.125%, FGIC Aaa/AAA 1,500,000 1,468,834
Chattanooga-Hamilton
10/01/04 5.375%, FSA Aaa/AAA 2,000,000 2,072,876
Franklin
09/01/09 4.750% NR/A+ 2,150,000 2,115,824
Jackson
04/01/06 5.300% A1/A+ 1,000,000 1,023,260
04/01/07 5.300% A1/A+ 2,000,000 2,057,426
04/01/10 5.500%, AMBAC Aaa/AAA 400,000 412,690
Johnson City
07/01/09 5.125%, MBIA NR/AAA 5,705,000 5,749,425
Knox County
Ft. Sanders
01/01/04 7.000%, MBIA Aaa/AAA 500,000 518,550
Knox County
Baptist Health
04/15/02 4.600%, AMBAC Aaa/AAA 500,000 503,877
04/15/11 5.500%, CONLEE NR/AAA 3,000,000 3,112,413
Metropolitan Nashville & Davidson
Baptist Hospital
11/01/05 5.000%, MBIA Aaa/AAA 1,000,000 1,016,212
Metropolitan Nashville & Davidson
Meharry
12/01/04 7.875% Aaa/NR 210,000 231,387
Shelby County
Methodist Healthcare, MBIA
04/01/02 5.000% Aaa/AAA 2,700,000 2,749,100
04/01/03 5.000% Aaa/AAA 2,000,000 2,039,574
08/01/06 4.350% NR/AAA 2,335,000 2,287,518
08/01/12 5.500% Aaa/AAA 2,000,000 2,051,040
Sullivan County
Holston Valley Healthcare, MBIA
02/15/09 7.200% Aaa/AAA 750,000 781,786
02/15/13 5.750% Aaa/AAA 1,000,000 1,031,373
--------------
TOTAL HEALTH & EDUCATION 40,817,109
--------------
HOUSING - 0.9%
Metropolitan Nashville & Davidson
Multi-Family Housing
02/01/21 5.200%, FSA NR/AAA 1,000,000 1,032,885
Tennessee Housing
Development Agency
07/01/03 6.700% Aa2/AA 190,000 197,640
01/01/11 5.800% Aa2/AA 400,000 417,372
07/01/13 5.800% Aa2/AA 350,000 359,440
--------------
TOTAL HOUSING 2,007,337
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----------------------------------------------------------------------------- 9
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Bond Rating Principal Value
Date Coupon Moody/S&P Amount (Note 1)
---- ------ ------------ --------- --------
<S> <C> <C> <C> <C>
TENNESSEE MUNICIPAL OBLIGATIONS (CONTINUED)
REVENUE BONDS (CONTINUED)
INDUSTRIAL DEVELOPMENT - 0.8%
Hamilton County
09/01/01 5.300%, FGIC Aaa/AAA $ 1,000,000 $ 1,022,105
Memphis - Shelby County
03/15/05 5.400% NR/AA- 650,000 680,114
--------------
TOTAL INDUSTRIAL DEVELOPMENT 1,702,219
--------------
PUBLIC BUILDING AUTHORITY - 1.3%
Gatlinburg
12/01/01 6.500%, AMBAC Aaa/AAA 500,000 526,527
Johnson City
09/01/14 5.000%, MBIA Aaa/AAA 1,000,000 977,069
Sevier County, AMBAC
09/01/06 5.500% Aaa/AAA 775,000 807,389
09/01/10 5.400% Aaa/NR 500,000 514,327
--------------
TOTAL PUBLIC BUILDING AUTHORITY 2,825,312
--------------
STATE AUTHORITY - 3.9%
Tennessee State Local
Development Authority
03/01/02 6.600% A2/AA- 250,000 264,891
10/01/02 5.600% NR/A 400,000 416,092
03/01/03 6.700% A2/AA- 750,000 795,872
03/01/05 5.500% A2/AA- 2,500,000 2,635,578
03/01/14 5.125%, MBIA Aaa/AAA 2,000,000 1,971,472
10/01/14 6.450% NR/A 1,000,000 1,094,728
Tennessee State School
Board Authority
05/01/11 5.500% A1/AA 500,000 524,088
05/01/11 6.875% A1/AA 500,000 521,189
--------------
TOTAL STATE AUTHORITY 8,223,910
--------------
UTILITY - 21.6%
Clarksville
Water, Sewer & Gas, MBIA
02/01/01 5.500% Aaa/AAA 500,000 509,930
02/01/10 5.300% Aaa/NR 900,000 922,390
Dickson
Electric
09/01/11 5.625%, MBIA Aaa/AAA 1,000,000 1,059,527
Fayetteville
Electric
04/01/11 5.250% A/NR 1,750,000 1,769,673
Franklin
Water & Sewer
09/01/11 5.000% Aa2/NR 750,000 753,109
Harpeth Valley
Utility District
09/01/03 5.250% A1/A 1,000,000 1,034,305
09/01/06 5.500% A1/A 500,000 522,533
09/01/11 5.500% A1/A 1,650,000 1,689,692
Johnson City
Electric, MBIA
05/01/10 5.400% Aaa/AAA 500,000 513,463
05/01/12 5.100% Aaa/AAA 1,500,000 1,500,000
Knox Chapman
Water & Sewer
01/01/04 5.500%, MBIA Aaa/AAA 565,000 589,668
Knoxville
Electric
07/01/12 5.700% Aa3/AA $ 500,000 $ 524,932
Knoxville
Gas
03/01/03 5.300% Aa3/AA 1,000,000 1,038,959
03/01/14 5.350% Aa3/AA 2,760,000 2,771,827
Knoxville
Waste Water
04/01/01 4.375% Aa3/AA 2,000,000 2,005,910
La Follette
Electric, AMBAC
06/01/11 5.800% Aaa/AAA 430,000 463,724
03/01/15 5.250% Aaa/NR 1,000,000 1,004,937
La Vergne
Water & Sewer
03/01/14 5.400% A1/NR 500,000 505,904
Lawrenceburg
Electric
07/01/06 5.200%, MBIA Aaa/AAA 345,000 354,985
Lenoir City
Electric, AMBAC
06/01/07 5.000% Aaa/NR 2,000,000 2,047,188
06/01/08 5.000% Aaa/NR 2,000,000 2,040,306
Madison
Utility District
02/01/10 5.600%, MBIA Aaa/AAA 500,000 523,197
Memphis
Electric
01/01/03 5.800% Aa/AAA 2,900,000 3,033,339
01/01/10 5.000% Aa/AAA 1,000,000 1,000,808
Memphis
Sanitation Sewer System
01/01/05 5.250% Aa2/AA+ 2,250,000 2,328,122
Metropolitan Nashville & Davidson
Electric
05/15/06 4.700% Aa/AA 2,000,000 1,981,382
Metropolitan Nashville & Davidson
Water & Sewer
01/01/08 5.000%, FGIC Aaa/AAA 4,000,000 4,069,280
01/01/13 5.200%, FGIC Aaa/AAA 1,500,000 1,529,197
01/01/15 5.750%, AMBAC Aaa/AAA 1,000,000 1,053,505
Rutherford County
Water Works
02/01/11 5.100%, FGIC Aaa/NR 500,000 502,047
Sevier County
Gas
05/01/11 5.400%, AMBAC Aaa/NR 1,000,000 1,020,401
Sumner County
Solid Waste
08/01/04 5.125%, AMBAC Aaa/AAA 1,500,000 1,543,173
Tennessee
Energy Acquisitions
09/01/05 4.400%, AMBAC Aaa/AAA 4,000,000 3,942,456
--------------
TOTAL UTILITY 46,149,869
--------------
TOTAL REVENUE BONDS 104,200,064
--------------
TOTAL TENNESSEE MUNICIPAL OBLIGATIONS
(Cost $201,981,108) 202,973,059
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
TENNESSEE TAX-FREE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Bond Rating Principal Value
Date Coupon Moody/S&P Amount (Note 1)
---- ------ ------------ --------- --------
<S> <C> <C> <C> <C>
OTHER STATE MUNICIPAL OBLIGATIONS - 4.6%
GENERAL OBLIGATION BONDS - 2.3%
Austin, Texas
09/01/06 7.000% Aa/AA $ 750,000 $ 780,035
Harris County, Texas
08/15/15 6.500% NR/NR 300,000 324,985
08/15/15 6.500% Aa2/AA 785,000 838,674
Indiana
02/01/04 5.500% NR/AAA 500,000 525,562
Las Vegas, Nevada
10/01/09 6.600%, FGIC Aaa/AAA 1,000,000 1,078,445
Louisiana State
05/01/07 6.500%, AMBAC Aaa/AAA 1,250,000 1,346,849
--------------
TOTAL GENERAL OBLIGATIONS BONDS 4,894,550
--------------
REVENUE BONDS - 2.3%
HEALTH & EDUCATION - 0.5%
Wisconsin State
Health & Education Facilities
11/15/10 6.250% NR/AA+ 1,000,000 1,061,337
--------------
TRANSPORTATION - 0.5%
Indianapolis
Public Improvement Transportation
07/01/10 6.000% Aa/AA- 950,000 1,013,237
--------------
UTILITY - 1.3%
Washington State
Public Power Supply
07/01/01 7.000%, FGIC Aaa/AAA 1,250,000 1,314,841
07/01/04 4.800%, MBIA Aaa/AAA 500,000 503,757
Wisconsin State
Clean Water
06/01/05 6.700% NR/AA+ 1,000,000 1,067,134
--------------
TOTAL UTILITY 2,885,732
--------------
TOTAL REVENUE BONDS 4,960,306
--------------
TOTAL OTHER STATE MUNICIPAL OBLIGATIONS
(Cost $9,288,450) 9,854,856
--------------
<CAPTION>
Shares
------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS - 0.3%
Federated Tennessee Municipal
Cash Trust 646,370 646,370
--------------
TOTAL MONEY MARKET MUTUAL FUNDS 646,370
(Cost $646,370) --------------
TOTAL INVESTMENTS - 100%
(Cost $211,915,928) $ 213,474,285
--------------
--------------
</TABLE>
The Portfolio had the following insurance concentration greater than 10% at
June 30, 1999 (as a percentage of net assets):
<TABLE>
<S> <C>
MBIA 20.0%
FGIC 12.7%
AMBAC 10.1%
</TABLE>
INCOME TAX INFORMATION:
At June 30, 1999, the net unrealized appreciation based on cost for income tax
purposes of $211,915,928 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost $ 3,402,890
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value (1,844,533)
--------------
Net unrealized appreciation $ 1,558,357
--------------
--------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities, for the
year ended June 30, 1999 aggregated $89,094,734 and $64,792,196, respectively.
RATINGS:
The Moody's and S&P ratings are believed to be the most recent ratings at June
30, 1999. Ratings are not covered by the Report of Independent Accountants.
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.
- ---------------------------------------------------------------------------- 11
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Discount Rate or Principal Value
Date Coupon Rate Amount (Note 1)
---- ----------- --------- --------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 57.8%
U.S. TREASURY BILLS - 57.8%
08/19/99 4.46% $ 7,000,000 $ 6,957,506
--------------
TOTAL U.S. TREASURY OBLIGATIONS 6,957,506
--------------
<CAPTION>
Maturity
Amount
------
<S> <C> <C>
REPURCHASE AGREEMENTS - 42.2%
Shearson Lehman, 4.75%, dated
6/30/99, due 07/01/99, collateralized
by $5,181,088 U.S. Treasury Bond,
13.125%, due 05/15/01 5,079,670 5,079,000
--------------
TOTAL REPURCHASE AGREEMENTS 5,079,000
--------------
TOTAL INVESTMENTS - 100% $ 12,036,506
--------------
--------------
</TABLE>
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $12,036,506
As of June 30, 1999, the U.S. Treasury Money Market Portfolio had capital loss
carryovers of approximately $10,000, $8,000 and $3,000 available to offset
capital gains to the extent provided in regulations, which will expire on June
30, 2005, June 30, 2006, and June 30, 2007, respectively.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Discount Rate or Principal Value
Date Coupon Rate Amount (Note 1)
---- ---------------- --------- --------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 94.7%
FEDERAL FARM CREDIT BANK - 6.3%
01/18/00 4.76% $ 3,000,000 $ 2,998,209
02/01/00 4.80% 3,000,000 2,999,023
--------------
TOTAL FEDERAL FARM CREDIT BANK 5,997,232
--------------
FEDERAL HOME LOAN BANK - 19.7%
07/15/99 5.54% 1,000,000 999,977
07/15/99 5.54% 1,000,000 999,978
07/26/99 8.45% 4,000,000 4,009,400
09/03/99 5.10% 3,000,000 2,999,620
01/19/00 4.70% 5,000,000 4,868,139
04/14/00 4.96% 5,000,000 4,998,033
--------------
TOTAL FEDERAL HOME LOAN BANK 18,875,147
--------------
FEDERAL HOME LOAN MORTGAGE CORP. - 5.2%
07/01/99 4.97% 5,000,000 5,000,000
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 63.5%
07/06/99 4.93% 20,000,000 19,986,306
08/06/99 4.74% 10,000,000 9,952,600
09/03/99 4.88% 15,000,000 14,869,867
12/13/99 4.66% 2,000,000 1,957,283
01/27/00 5.43% 2,000,000 2,006,954
03/23/00 4.97% 5,000,000 4,997,645
06/22/00 4.98% 7,000,000 6,996,637
--------------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION 60,767,292
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 90,639,671
--------------
<CAPTION>
MATURITY
AMOUNT
------
<S> <C> <C>
REPURCHASE AGREEMENTS - 5.3%
Shearson Lehman, 4.75%, dated
6/30/99, due 07/01/99, collateralized
by $5,160,598 U.S. Treasury Bond,
8.375%, due 08/15/08 5,059,668 5,059,000
--------------
TOTAL REPURCHASE AGREEMENTS 5,059,000
--------------
TOTAL INVESTMENTS - 100% $ 95,698,671
--------------
--------------
</TABLE>
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $95,698,671
As of June 30, 1999, the U.S. Government Money Market Portfolio had capital
loss carryovers of approximately $7,000, and $1,000 available to offset capital
gains to the extent provided in regulations, which will expire on June 30, 2005
and June 30, 2006, respectively.
The accompanying notes are an integral part of the financial statements.
12 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Discount Rate or Principal Value
Date Coupon Rate Amount (Note 1)
---- ----------- ------ --------
<S> <C> <C> <C>
MUNICIPAL BONDS & NOTES - 100.0%
ALABAMA - 2.1%
Columbia Pollution Control
07/01/99 3.50%* $ 1,300,000 $ 1,300,000
-------------
ARIZONA - 2.4%
Maricopa County, Pollution Control
07/05/99 3.20%* 1,500,000 1,500,000
-------------
CALIFORNIA - 1.3%
California Pollution Control
Shell Oil
07/01/99 3.35%* 300,000 300,000
07/01/99 2.85%* 100,000 100,000
07/01/99 3.30%* 400,000 400,000
-------------
800,000
-------------
FLORIDA - 4.1%
Orlando
Special Assessment
07/07/99 3.45%* 2,400,000 2,400,000
Florida
University Athletic Association
07/01/99 3.60%* 100,000 100,000
-------------
2,500,000
-------------
GEORGIA - 7.4%
Burke County
Development Authority, Pollution Control
11/28/99 3.45% 2,100,000 2,100,000
Cobb County Housing Authority
Post Bridge Project
07/07/99 3.35%* 550,000 550,000
Georgia
Municipal Gas Authority
07/07/99 3.50%* 1,000,000 1,000,000
Putnam County
Development Authority, Pollution Control
07/01/99 3.75%* 200,000 200,000
Smyrna Housing Authority
Post Valley Project
07/07/99 3.35%* 700,000 700,000
-------------
4,550,000
-------------
KANSAS - 5.0%
City of Burlington
Electric
07/29/99 3.05% 1,000,000 1,000,000
Wyandotte County
02/01/00 3.30% 2,095,750 2,095,750
-------------
3,095,750
-------------
LOUISIANA - 2.3%
Lake Charles
07/01/99 3.45%* 100,000 100,000
Louisiana
Public Facilities, Hospital
07/07/99 3.55%* 1,300,000 1,300,000
-------------
1,400,000
-------------
MARYLAND - 1.6%
Montgomery County
Development Authority, Pollution Control
07/01/99 3.32%* $ 1,000,000 $ 1,000,000
-------------
MICHIGAN - 1.6%
Michigan
08/27/99 4.25% 1,000,000 1,000,000
-------------
MINNESOTA - 2.1%
Minneapolis
07/01/99 3.50%* 1,300,000 1,300,000
-------------
MISSISSIPPI - 1.3%
Jackson County
07/01/99 3.40%* 800,000 800,000
-------------
MISSOURI - 4.9%
Columbia
Capital Improvements
02/01/00 5.10% 1,000,000 1,009,679
Kansas City
Industrial Development
07/07/99 3.50%* 1,200,000 1,200,000
Missouri State
Environmental Improvement
07/07/99 3.60%* 800,000 800,000
-------------
3,009,679
-------------
NEVADA - 1.6%
Clark County, Airport Authority
07/07/99 3.30%* 980,000 980,000
-------------
NEW JERSEY - 7.8%
New Jersey Economic Development
Water
07/01/99 3.10%* 2,800,000 2,800,000
New Jersey
Sports & Expo
07/01/99 3.65%* 200,000 200,000
Salem County
Pollution Control
07/01/99 3.30%* 800,000 800,000
South Jersey
Transportation Authority
11/03/99 2.95% 1,000,000 1,000,000
-------------
4,800,000
-------------
NEW YORK - 12.3%
New York City
07/07/99 3.30%* 1,700,000 1,700,000
New York City
07/01/99 4.00%* 1,300,000 1,300,000
New York City
07/01/99 4.00%* 1,800,000 1,800,000
New York City
07/01/99 4.00%* 1,200,000 1,200,000
New York City Housing Development
07/07/99 3.20%* 1,000,000 1,000,000
New York State Energy
07/01/99 3.45%* 300,000 300,000
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 13
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
Due Discount Rate or Principal Value
Date Coupon Rate Amount (Note 1)
---- ----------- ------ --------
<S> <C> <C> <C>
MUNICIPAL BONDS & NOTES (CONTINUED)
NEW YORK (CONTINUED)
New York City
Water & Sewer System
07/01/99 3.55%* $ 300,000 $ 300,000
-------------
7,600,000
-------------
OHIO - 7.8%
Loveland
City School District
12/01/99 3.20% 620,000 620,000
Medina County Housing
Oaks at Medina
07/01/99 3.62%* 1,800,000 1,800,000
Ohio State Development Authority
Air Quality
07/01/99 3.50%* 300,000 300,000
Ohio State Building Authority
10/01/99 4.00% 1,340,000 1,342,761
Perrysburg Ohio
12/01/99 3.20% 735,000 735,000
-------------
4,797,761
-------------
OREGON - 2.4%
Portland
12/15/99 3.75% 1,500,000 1,503,696
-------------
PENNSYLVANIA - 5.8%
Pennsylvania State
Higher Education
07/07/99 3.70%* 2,000,000 2,000,000
07/07/99 3.70%* 1,100,000 1,100,000
Washington County
Higher Education
07/07/99 3.45%* 500,000 500,000
-------------
3,600,000
-------------
RHODE ISLAND - 4.1%
Rhode Island
07/07/99 3.40%* 2,500,000 2,500,000
-------------
SOUTH CAROLINA - 5.7%
York County
Pollution Control
08/15/99 2.75%* 1,000,000 1,000,000
Piedmont
Power Agency
07/07/99 3.55%* 2,500,000 2,500,000
-------------
3,500,000
-------------
TENNESSEE - 8.9%
Chattanooga Health, Education & Housing
Baylor
07/07/99 3.75%* 1,110,000 1,110,000
Clarksville Public Building Authority
07/01/99 3.80%* 1,310,000 1,310,000
Memphis
07/07/99 3.55%* 500,000 500,000
07/07/99 3.55%* 700,000 700,000
Metro. Gov't Nashville
Airport
07/07/99 3.50%* 800,000 800,000
Washington County
Industrial Development Springbrook
Property
07/07/99 3.75%* $ 1,050,000 $ 1,050,000
-------------
5,470,000
-------------
TEXAS - 1.8%
Harris County
10/08/99 3.20% 1,100,000 1,100,000
-------------
UTAH - 0.8%
Salt Lake City
Utility
07/07/99 3.50%* 500,000 500,000
-------------
VIRGINIA - 2.8%
Lynchburg
Industrial Development
07/07/99 3.55%* 1,700,000 1,700,000
-------------
WASHINGTON - 2.1%
Snohomish County
Public Utilities
07/07/99 3.30%* 1,300,000 1,300,000
-------------
TOTAL MUNICIPAL BONDS & NOTES 61,606,886
-------------
TOTAL INVESTMENTS - 100% $ 61,606,886
-------------
-------------
</TABLE>
*Floating or variable rate security - rate disclosed as of June 30, 1999.
Maturity date represents the next interest rate reset.
INCOME TAX INFORMATION:
Total cost for Federal income tax purposes - $61,606,886
As of June 30, 1999, the Municipal Money Market Portfolio had capital loss
carryovers of approximately $3,000, and $1,000 available to offset capital
gains to the extent provided in regulations, which will expire on June 30, 2002
and June 30, 2006, respectively.
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.
14 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
CASH RESERVE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Showing Percentage of Total Value of Investments)
<TABLE>
<CAPTION>
Due Discount Rate or Principal Value
Date Coupon Rate Amount (Note 1)
---- ----------- ------ --------
<S> <C> <C> <C>
CERTIFICATE OF DEPOSIT - 2.2%
Nationsbank Carolinas
01/06/00 5.00% $ 2,000,000 $ 1,999,800
-------------
COMMERCIAL PAPER - 53.7%
ASSET-BACKED SECURITIES - 11.4%
CXC, Inc.
11/10/99 4.90% 4,000,000 3,928,133
Enterprise Funding Corp.
09/24/99 5.25% 3,681,000 3,635,371
Moriarty Ltd.
08/16/99 5.30% 3,000,000 2,979,683
-------------
10,543,187
-------------
CONSUMER GOODS - 4.4%
Gillette Co.
07/01/99 5.70% 4,000,000 4,000,000
-------------
CONSUMER NON-DURABLE - 4.3%
Golden Peanut Co.
07/23/99 4.82% 4,000,000 3,988,218
-------------
ENERGY - 3.2%
Alleghny Energy
08/03/99 4.84% 3,000,000 2,986,690
-------------
ENTERTAINMENT - 3.2%
Walt Disney Co.
09/14/99 4.89% 3,000,000 2,969,438
-------------
PERSONAL CREDIT INSTITUTIONS - 18.3%
American Express Credit Corp.
09/27/99 4.80% 4,000,000 3,953,067
HD Real Estate Funding Corp.
07/06/99 4.83% 4,000,000 3,997,317
Prudential Funding Corp.
07/16/99 4.75% 4,000,000 3,992,083
USAA Capital Corp.
08/26/99 4.79% 5,000,000 4,962,744
-------------
16,905,211
-------------
TELECOMMUNICATION - 4.3%
Compagnie Financial Alcatel
09/08/99 4.84% 4,000,000 3,962,893
-------------
UTILITIES - 4.6%
National Rural Utilities Cooperative
09/17/99 4.93% 4,295,000 4,249,122
-------------
TOTAL COMMERCIAL PAPER 49,604,759
-------------
VARIABLE RATE NOTES - 35.7%
ASSET-BACKED SECURITIES - 4.3%
SMM Trust 1999-E
01/05/00 4.98%* 4,000,000 4,000,000
-------------
BEVERAGES - 4.3%
Pepsico,Inc.
08/19/99 4.84%* 4,000,000 3,997,810
-------------
BROKER/DEALERS - 5.4%
Goldman Sachs Group 144A**
01/07/00 5.20%* $ 5,000,000 $ 5,004,872
-------------
CHEMICAL & ALLIED PRODUCTS - 4.3%
Dow Chemical Co.
03/15/00 5.04%* 4,000,000 3,998,954
-------------
FINANCIAL SERVICES - 8.7%
First National Bank Chicago
07/27/99 5.02%* 4,000,000 3,999,832
Key Bank
06/14/00 5.04%* 4,000,000 3,997,747
-------------
7,997,579
-------------
SHORT-TERM BUSINESS CREDIT INSTITUTIONS - 8.7%
Caterpillar Financial Services
09/01/99 5.06%* 3,000,000 2,999,688
Texaco Capital Corp.
05/03/00 4.85%* 5,000,000 4,995,870
-------------
7,995,558
-------------
TOTAL VARIABLE RATE NOTES 32,994,773
-------------
</TABLE>
<TABLE>
<CAPTION>
Maturity
Amount
------
<S> <C> <C>
REPURCHASE AGREEMENTS - 8.4%
Shearson Lehman, 4.75%, dated
6/30/99, due 07/01/99, collateralized
by $7,909,860 U.S. Treasury Note,
5.25%, due 01/31/01 7,750,022 7,749,000
-------------
TOTAL REPURCHASE AGREEMENTS 7,749,000
-------------
TOTAL INVESTMENTS - 100% $ 92,348,332
-------------
-------------
</TABLE>
*Floating or variable rate security - rate disclosed as of June 30, 1999.
Maturity date represents the next interest rate reset.
**Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1999, these securities
amounted to a value of $9,004,872 or 9.8% of net assets.
INCOME TAX INFORMATION:
Total cost for income tax purposes - $92,348,332
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 15
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO
------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (cost-see below) (Note 1) $ 969,195,192 $ 34,484,285
Receivable for investments sold 0 1,889,986
Receivable for portfolio shares sold 1,227,270 26,833
Dividends receivable 723,752 1,947
Interest receivable 193,272 3,850
Other assets 37,935 123
------------------------------------------------
Total assets 971,377,421 36,407,024
------------------------------------------------
LIABILITIES:
Payable for investments purchased 0 56,045
Payable for portfolio shares redeemed 1,068,273 2,529
Accrued management fee 390,628 19,992
Accrued administration fee 114,705 4,291
Accrued co-administration fee 38,799 1,497
Accrued 12b-1 fee 103,593 392
Accrued shareholder servicing fee 61,573 865
Other payables and accrued expenses 191,251 74,891
------------------------------------------------
Total liabilities 1,968,822 160,502
------------------------------------------------
NET ASSETS $ 969,408,599 $ 36,246,522
------------------------------------------------
------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $ 523,273,950 $ 36,726,291
(Over) distributed net investment income (2,321) 0
Accumulated net realized gain (loss) on
investments 74,129,620 (3,152,090)
Net unrealized appreciation
in value of investments 372,007,350 2,672,321
------------------------------------------------
NET ASSETS $ 969,408,599 $ 36,246,522
------------------------------------------------
------------------------------------------------
COST OF INVESTMENTS $ 597,187,842 $ 31,811,964
------------------------------------------------
------------------------------------------------
NET ASSET VALUE PER SHARE
Net Assets
Class I $ 790,985,005 $ 33,802,764
Class II $ 82,895,786 $ 2,051,458
Class III $ 95,527,808 $ 392,300
------------------------------------------------
Shares outstanding of $.001 par value capital
stock, unlimited shares authorized
Class I 30,120,221 3,297,147
Class II 3,151,997 201,150
Class III 3,674,485 39,066
------------------------------------------------
Net Asset Value and redemption price per
share
Class I $ 26.26 $ 10.25
Class II $ 26.30 $ 10.20
Class III $ 26.00 $ 10.04
------------------------------------------------
Maximum offering price per share
Class I (no sales charge) $ 26.26 $ 10.25
Class II (net asset value plus maximum
sales charge of 5.75% of offering price) $ 27.90 $ 10.82
Class III (no sales charge) $ 26.00 $ 10.04
------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
BOND INTERMEDIATE BOND TENNESSEE TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost-see below) (Note 1) $ 228,684,753 $ 220,628,245 $ 213,474,285
Receivable for portfolio shares sold 257,333 68,756 234,072
Interest receivable 4,086,496 3,628,206 3,296,612
Other assets 8,880 6,851 5,787
------------------------------------------------------------
Total assets 233,037,462 224,332,058 217,010,756
------------------------------------------------------------
LIABILITIES:
Payable for portfolio shares redeemed 211,168 132,760 116,010
Dividends payable 382,332 613,284 713,365
Accrued advisory fee 27,014 0 0
Accrued administration fee 27,865 28,154 26,885
Accrued co-administration fee 9,284 9,370 9,043
Accrued 12b-1 fee 3,117 760 13,007
Accrued shareholder servicing fee 3,015 1,149 1,903
Other payables and accrued expenses 77,532 94,414 80,582
------------------------------------------------------------
Total liabilities 741,327 879,891 960,795
------------------------------------------------------------
NET ASSETS $ 232,296,135 $ 223,452,167 $ 216,049,961
------------------------------------------------------------
------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $ 234,905,855 $ 226,798,325 $ 214,203,208
(Over) Undistributed net investment income (102,903) 106,973 32,059
Accumulated net realized gain (loss) on
investments 822,212 (84,847) 256,337
Net unrealized appreciation/(depreciation)
in value of investments (3,329,029) (3,368,284) 1,558,357
------------------------------------------------------------
NET ASSETS $ 232,296,135 $ 223,452,167 $ 216,049,961
------------------------------------------------------------
------------------------------------------------------------
COST OF INVESTMENTS $ 232,013,782 $ 223,996,529 $ 211,915,928
------------------------------------------------------------
------------------------------------------------------------
NET ASSET VALUE PER SHARE
Net Assets
Class I $ 224,467,375 $ 219,298,250 $ 185,444,976
Class II $ 5,172,317 $ 3,057,193 $ 13,227,267
Class III $ 2,656,443 $ 1,096,724 $ 17,377,718
------------------------------------------------------------
Shares outstanding of $.001 par value capital
stock, unlimited shares authorized
Class I 22,826,492 22,430,873 18,389,570
Class II 527,471 312,689 1,308,965
Class III 270,691 112,205 1,721,629
------------------------------------------------------------
Net Asset Value and redemption price per
share
Class I $ 9.83 $ 9.78 $ 10.08
Class II $ 9.81 $ 9.78 $ 10.11
Class III $ 9.81 $ 9.77 $ 10.09
------------------------------------------------------------
Maximum offering price per share
Class I (no sales charge) $ 9.83 $ 9.78 $ 10.08
Class II (net asset value plus maximum
sales charge of 3.75%, 2.50% and 2.50%,
respectively, of offering price) $ 10.19 $ 10.03 $ 10.37
Class III (no sales charge) $ 9.81 $ 9.77 $ 10.09
------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------- 17
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<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) $ 12,036,506 $ 95,698,671 $ 61,606,886 $ 92,348,332
Cash 217 679 47,872 719
Receivable for portfolio shares sold 95,280 10,000 0 43,608
Interest receivable 670 487,507 293,186 228,595
Other assets 0 3,095 1,741 1,530
-----------------------------------------------------------------------------------
Total assets 12,132,673 96,199,952 61,949,685 92,622,784
-----------------------------------------------------------------------------------
LIABILITIES:
Payable for portfolio shares redeemed 106,280 0 0 115,944
Dividends payable 26,334 348,715 129,711 113,117
Accrued management fee 50 7,718 4,779 7,866
Accrued administration fee 0 5,781 3,573 5,896
Accrued co-administration fee 0 1,974 1,355 1,973
Accrued 12b-1 fee 3,629 759 1,754 24,370
Other payables and accrued expenses 26,847 82,205 37,807 41,795
-----------------------------------------------------------------------------------
Total liabilities 163,140 447,152 178,979 310,961
-----------------------------------------------------------------------------------
NET ASSETS $ 11,969,533 $ 95,752,800 $ 61,770,706 $ 92,311,823
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $ 11,987,217 $ 95,761,396 $ 61,774,616 $ 92,311,584
Undistributed net investment income 73 331 0 22
Accumulated net realized gain (loss)
on investments (17,757) (8,927) (3,910) 217
-----------------------------------------------------------------------------------
NET ASSETS $ 11,969,533 $ 95,752,800 $ 61,770,706 $ 92,311,823
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
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 $5,079,000, $5,059,000, $0 and $7,749,000, respectively.
<TABLE>
<CAPTION>
(2) Shares Outstanding
Net ($.001 par value, unlimited
Assets shares authorized)
------ ------------------
<S> <C> <C>
U.S. Treasury Money Market
Class I $ 7,308,801 7,319,337
Class III 4,660,732 4,667,880
U.S. Government Money Market
Class I 94,078,760 94,087,450
Class III 1,674,040 1,673,946
Municipal Money Market
Class I 56,437,737 56,441,658
Class III 5,332,969 5,332,958
Cash Reserve
Class I 29,351,279 29,350,610
Class III 62,960,544 62,960,974
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO
-----------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 9,964,502 $ 38,676
Interest 1,458,579 58,656
-----------------------------------------
Total investment income 11,423,081 97,332
-----------------------------------------
EXPENSES:
Management fee (Note 3) 5,385,198 283,135
Administration fee (Note 4) 1,242,738 49,965
Co-administration fee (Note 4) 414,246 16,655
Fund accounting/Transfer agent fee:
Class I 376,587 42,189
Class II 59,002 3,460
Class III 103,510 725
Blue Sky fee:
Class I 19,949 4,151
Class II 6,325 659
Class III 6,905 444
Distribution fee:
Class III 618,981 3,018
Shareholder servicing fee:
Class II 153,178 3,906
Class III 206,312 1,006
Custodian fee 148,962 26,618
Trustees fee 35,859 1,868
Registration fee 29,314 9,335
Audit 27,877 29,014
Legal 30,849 1,630
Reports to Shareholders 45,915 2,613
Miscellaneous 57,714 10,831
-----------------------------------------
Total expenses before waiver 8,969,421 491,222
Waiver of expenses (Note 5) (1,242,738) (49,965)
-----------------------------------------
Net expenses 7,726,683 441,257
-----------------------------------------
NET INVESTMENT INCOME (LOSS) 3,696,398 (343,925)
-----------------------------------------
Net realized gain (loss) on investments 88,739,605 (3,081,885)
Change in net unrealized appreciation/
depreciation 104,769,457 2,466,249
-----------------------------------------
Net gain (loss) on investments 193,509,062 (615,636)
-----------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 197,205,460 $ (959,561)
-----------------------------------------
-----------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------- 19
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
BOND INTERMEDIATE BOND TENNESSEE TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME $ 14,354,402 $ 13,135,687 $ 10,297,638
--------------------------------------------------------
EXPENSES:
Management fee (Note 3) 1,272,593 1,073,039 1,061,111
Administration fee (Note 4) 347,071 321,911 318,333
Co-administration fee (Note 4) 115,690 107,304 106,111
Fund accounting/Transfer agent fee:
Class I 142,478 133,783 133,654
Class II 2,570 2,033 10,212
Class III 6,529 517 18,683
Blue Sky fee:
Class I 6,502 8,047 752
Class II 2,887 1,537 752
Class III 1,280 368 752
Distribution fee:
Class III 18,928 4,880 122,030
Shareholder servicing fee:
Class II 9,204 6,048 7,085
Class III 6,306 1,619 0
Custodian fee 39,615 35,739 41,435
Trustees fee 10,300 13,121 9,879
Registration fee 28,446 28,070 34,844
Audit 25,483 47,263 26,493
Legal 9,876 30,202 29,134
Reports to Shareholders 16,155 19,485 18,784
Miscellaneous 9,710 20,196 18,959
--------------------------------------------------------
Total expenses before waiver 2,071,623 1,855,162 1,959,003
Waiver of expenses (Note 5) (929,906) (1,077,244) (1,101,788)
Fees reimbursed by administrator 0 0 (24,476)
--------------------------------------------------------
Net expenses 1,141,717 777,918 832,739
--------------------------------------------------------
NET INVESTMENT INCOME 13,212,685 12,357,769 9,464,899
--------------------------------------------------------
Net realized gain on investments 1,106,799 157,324 352,760
Change in net unrealized appreciation/
depreciation (9,618,801) (5,299,490) (4,927,848)
--------------------------------------------------------
Net loss on investments (8,512,002) (5,142,166) (4,575,088)
--------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,700,683 $ 7,215,603 $ 4,889,811
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET CASH RESERVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 2,801,674 $ 4,777,993 $ 1,589,796 $ 5,000,274
-------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 137,925 234,187 124,234 238,787
Administration (Note 4) 40,106 68,205 36,053 69,596
Co-administration fee (Note 4) 26,738 45,470 24,036 46,397
Fund accounting/Transfer agent fee:
Class I 13,112 43,524 28,293 20,781
Class III 23,450 1,860 4,718 45,547
Blue sky fee:
Class I 1,726 4,759 4,056 2,908
Class III 6,038 1,972 2,820 4,168
Distribution fee:
Class III 101,361 6,522 11,119 152,396
Custodian fee 84,316 81,256 18,848 47,955
Trustees fee 2,059 3,652 437 3,971
Audit 5,102 24,184 3,650 33,167
Legal 2,198 2,746 135 2,890
Reports to shareholders 4,852 6,465 0 7,095
Registration 6,029 0 5,600 16,358
Miscellaneous 13,193 8,703 2,296 7,763
-------------------------------------------------------------------------------------
Total expenses before waiver 468,205 533,505 266,295 699,779
Waiver of expenses (Note 5) (96,398) (160,513) (84,936) (163,750)
-------------------------------------------------------------------------------------
Net expenses 371,807 372,992 181,359 536,029
-------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,429,867 4,405,001 1,408,437 4,464,245
-------------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,940 (1,107) 0 3,447
-------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,432,807 $ 4,403,894 $ 1,408,437 $ 4,467,692
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------- 21
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------
For the Period
For the Year For the Year For the Year September 2, 1997
Ended June 30, Ended June 30, Ended June 30, to June 30,
1999 1998 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 3,696,398 $ 3,015,742 $ (343,925) $ (125,902)
Net realized gain (loss) on
investments 88,739,605 10,927,323 (3,081,885) 884,892
Change in net unrealized
appreciation/depreciation 104,769,457 103,659,235 2,466,249 206,072
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 197,205,460 117,602,300 (959,561) 965,062
---------------------------------------------------------------------------------------
DISTRIBUTIONS:
From net investment income:
Class I (3,611,722) (2,843,865) 0 0
Class II (98,157) (160,717) 0 0
Class III 0 0 0 0
From net realized gain:
Class I (18,142,545) (10,122,599) (780,800) 0
Class II (1,602,790) (1,037,908) (37,718) 0
Class III (2,209,366) (2,240,676) (10,677) 0
---------------------------------------------------------------------------------------
Net decrease in net assets
from distributions (25,664,580) (16,405,765) (829,195) 0
---------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 116,277,623 137,051,702 2,147,360 38,987,569
Proceeds from shares issued in
connection with common trust
fund and collective investment
pool conversion (Note 6) 0 336,944,637 0 0
Reinvested dividends 15,884,506 14,882,981 796,222 0
Cost of shares redeemed (111,879,817) (100,318,257) (3,913,074) (947,861)
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from share transactions 20,282,312 388,561,063 (969,492) 38,039,708
---------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 191,823,192 489,757,598 (2,758,248) 39,004,770
NET ASSETS:
Beginning of period 777,585,407 287,827,809 39,004,770 0
---------------------------------------------------------------------------------------
End of period* $ 969,408,599 $ 777,585,407 $ 36,246,522 $ 39,004,770
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
*Includes (over) undistributed
net investment income of $ (2,321) $ 11,160 $ 0 $ 0
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND INTERMEDIATE BOND
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------
For the Period
For the Year For the Year For the Year March 2, 1998
Ended June 30, Ended June 30, Ended June 30, to June 30,
1999 1998 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 13,212,685 $ 9,618,610 $ 12,357,769 $ 3,773,291
Net realized gain on investments 1,106,799 2,329,047 157,324 351,280
Change in net unrealized
appreciation/depreciation (9,618,801) 4,587,848 (5,299,490) 16,917
---------------------------------------------------------------------------------------
Net increase in net assets
from operations 4,700,683 16,535,505 7,215,603 4,141,488
---------------------------------------------------------------------------------------
DISTRIBUTIONS:
From net investment income:
Class I (12,947,111) (9,451,778) (12,192,668) (3,758,861)
Class II (205,107) (82,660) (133,188) (14,367)
Class III (118,305) (112,904) (31,913) (63)
From net realized gain:
Class I (1,953,692) 0 (478,824) 0
Class II (29,251) 0 (6,249) 0
Class III (23,546) 0 (1,405) 0
---------------------------------------------------------------------------------------
Net decrease in net assets
from distributions (15,277,012) (9,647,342) (12,844,247) (3,773,291)
---------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 30,018,648 49,650,869 57,021,977 29,636,640
Proceeds from shares issued in
connection with common trust
fund and collective investment
pool conversion (Note 6) 0 48,681,990 0 184,904,888
Reinvested dividends 10,217,950 7,562,651 5,439,657 1,629,713
Cost of shares redeemed (20,365,500) (16,361,008) (34,193,286) (15,726,975)
---------------------------------------------------------------------------------------
Net increase in net assets
from share transactions 19,871,098 89,534,502 28,268,348 200,444,266
---------------------------------------------------------------------------------------
Total increase in net assets 9,294,769 96,422,665 22,639,704 200,812,463
NET ASSETS:
Beginning of period 223,001,366 126,578,701 200,812,463 0
---------------------------------------------------------------------------------------
End of period* $232,296,135 $223,001,366 $223,452,167 $200,812,463
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
*Includes (over) undistributed
net investment income of $ (102,903) $ (24,216) $ 106,973 $ 135,043
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 23
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TENNESSEE TAX-FREE
PORTFOLIO
------------------------------------------------------------
For the Year For the Year
Ended June 30, Ended June 30,
1999 1998
------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 9,464,899 $ 3,738,480
Net realized gain on investments 352,760 560,943
Change in net unrealized
appreciation/depreciation (4,927,848) 286,177
------------------------------------------------------------
Net increase in net assets
from operations 4,889,811 4,585,600
------------------------------------------------------------
DISTRIBUTIONS:
From net investment income:
Class I (8,303,485) (3,130,378)
Class II (496,265) (344,269)
Class III (665,149) (263,833)
From net realized gain:
Class I (513,687) 0
Class II (31,953) 0
Class III (44,141) 0
------------------------------------------------------------
Net decrease in net assets
from distributions (10,054,680) (3,738,480)
------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 2):
Proceeds from sales of shares 60,438,058 46,234,728
Proceeds from shares issued in
connection with common trust
fund and collective investment
pool conversion (Note 6) 0 148,766,645
Reinvested dividends 1,088,193 521,092
Cost of shares redeemed (35,438,573) (21,869,114)
------------------------------------------------------------
Net increase in net assets
from share transactions 26,087,678 173,653,351
------------------------------------------------------------
Total increase in net assets 20,922,809 174,500,471
NET ASSETS:
Beginning of period 195,127,152 20,626,681
------------------------------------------------------------
End of period* $216,049,961 $195,127,152
------------------------------------------------------------
------------------------------------------------------------
*Includes undistributed
net investment income of $ 32,059 $ 32,059
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. TREASURY MONEY U.S. GOVERNMENT MONEY
MARKET PORTFOLIO MARKET PORTFOLIO
----------------------------------------------------------------------------------------
For the Year For the Year For the Year For the Year
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 1998 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,429,867 $ 2,730,276 $ 4,405,001 $ 4,997,553
Net realized gain (loss) on
investments 2,940 (8,602) (1,107) (104)
----------------------------------------------------------------------------------------
Net increase in net assets from
operations 2,432,807 2,721,674 4,403,894 4,997,449
----------------------------------------------------------------------------------------
DISTRIBUTIONS:
From net investment income
Class I (666,882) (418,272) (4,289,430) (4,772,745)
Class III (1,762,992) (2,311,924) (115,571) (224,807)
----------------------------------------------------------------------------------------
Net decrease in net assets from
distributions (2,429,874) (2,730,196) (4,405,001) (4,997,552)
----------------------------------------------------------------------------------------
SHARE TRANSACTIONS AT NET ASSET
VALUE OF $1.00 PER SHARE (NOTE 2):
Proceeds from sales of shares 158,496,952 195,269,967 148,976,160 178,096,113
Reinvested dividends 478,573 168,849 114,515 212,777
Cost of shares redeemed (208,610,939) (201,103,688) (144,105,292) (185,567,585)
----------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from share
transactions (49,635,414) (5,664,872) 4,985,383 (7,258,695)
----------------------------------------------------------------------------------------
Total increase (decrease)
in net assets (49,632,481) (5,673,394) 4,984,276 (7,258,798)
NET ASSETS:
Beginning of period 61,602,014 67,275,408 90,768,524 98,027,322
----------------------------------------------------------------------------------------
End of period* $11,969,533 $61,602,014 $95,752,800 $ 90,768,524
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
*Includes undistributed net
investment income of $ 73 $ 80 $ 331 $ 331
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 25
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MUNICIPAL MONEY CASH RESERVE
MARKET PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------
For the Year For the Year For the Year For the Year
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 1998 1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,408,437 $ 1,700,829 $ 4,464,245 $ 3,441,382
Net realized gain (loss) on
investments 0 578 3,447 (3,292)
-----------------------------------------------------------------------------------------
Net increase in net assets from
operations 1,408,437 1,701,407 4,467,692 3,438,090
-----------------------------------------------------------------------------------------
DISTRIBUTIONS:
From net investment income
Class I (1,297,153) (1,422,183) (1,682,792) (997,201)
Class III (111,284) (278,646) (2,781,453) (2,444,181)
-----------------------------------------------------------------------------------------
Net decrease in net assets from
distributions (1,408,437) (1,700,829) (4,464,245) (3,441,382)
-----------------------------------------------------------------------------------------
SHARE TRANSACTIONS AT NET ASSET
VALUE OF $1.00 PER SHARE (NOTE 2):
Proceeds from sales of shares 107,473,646 92,913,367 187,659,183 214,585,155
Reinvested dividends 111,074 273,909 2,753,796 2,394,995
Cost of shares redeemed (86,022,985) (111,853,446) (196,589,773) (168,324,452)
-----------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from share
transactions 21,561,735 (18,666,170) (6,176,794) 48,655,698
-----------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 21,561,735 (18,665,592) (6,173,347) 48,652,406
NET ASSETS:
Beginning of period 40,208,971 58,874,563 98,485,170 49,832,764
-----------------------------------------------------------------------------------------
End of period* $61,770,706 $ 40,208,971 $92,311,823 $ 98,485,170
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
*Includes undistributed net
investment income of $ 0 $ 0 $ 22 $ 22
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $21.56 $17.03 $14.12 $12.22 $10.53
-------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13 0.17 0.18 0.19 0.23
Net realized and unrealized gain on investments 5.30 5.25 3.75 2.58 2.21
-------------------------------------------------------------------
Total from investment operations 5.43 5.42 3.93 2.77 2.44
-------------------------------------------------------------------
Distributions:
Net investment income (0.12) (0.17) (0.18) (0.19) (0.23)
Net realized gain (0.61) (0.72) (0.84) (0.68) (0.52)
-------------------------------------------------------------------
Total distributions (0.73) (0.89) (1.02) (0.87) (0.75)
-------------------------------------------------------------------
Net asset value, end of period $26.26 $21.56 $17.03 $14.12 $12.22
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ 25.69% 32.55% 28.83% 23.54% 24.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $790,985 $651,363 $221,136 $159,146 $114,000
Ratio of expenses to average daily net assets(1) 0.80% 0.82% 0.83% 0.76% 0.47%
Ratio of net investment income to average net assets 0.57% 0.78% 1.19% 1.40% 2.12%
Portfolio turnover rate 21% 7% 25% 41% 33%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 0.95% 0.97% 0.98% 1.00% 0.99%
<CAPTION>
CLASS II
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $21.58 $17.05 $14.12 $13.05
-------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.10 0.13 0.09
Net realized and unrealized gain on investments 5.31 5.27 3.76 1.74
-------------------------------------------------------------------
Total from investment operations 5.37 5.37 3.89 1.83
-------------------------------------------------------------------
Distributions:
Net investment income (0.04) (0.12) (0.12) (0.08)
Net realized gain (0.61) (0.72) (0.84) (0.68)
-------------------------------------------------------------------
Total distributions (0.65) (0.84) (0.96) (0.76)
-------------------------------------------------------------------
Net asset value, end of period $26.30 $21.58 $17.05 $14.12
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+*** 25.33% 32.17% 28.48% 14.71%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $82,896 $46,863 $16,514 $1,918
Ratio of expenses to average daily net assets(1) 1.10% 1.13% 1.14% 1.06%*
Ratio of net investment income to average net assets 0.28% 0.47% 0.88% 1.10%*
Portfolio turnover rate 21% 7% 25% 41%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.25% 1.28% 1.29% 1.30%*
</TABLE>
* Annualized.
** Class II commenced operations on December 20, 1995.
*** Class II total return does not include the one time front-end sales
charge.
+ 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.
- ---------------------------------------------------------------------------- 27
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH & INCOME PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
CLASS III
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $21.47 $16.99 $14.11 $12.23 $10.51
-------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.04) 0.02 0.03 0.06
Net realized and unrealized gain (loss) on
investments 5.25 5.24 3.74 2.60 2.24
-------------------------------------------------------------------
Total from investment operations 5.14 5.20 3.76 2.63 2.30
-------------------------------------------------------------------
Distributions:
Net investment income - - (0.04) (0.07) (0.06)
Net realized gain (0.61) (0.72) (0.84) (0.68) (0.52)
-------------------------------------------------------------------
Total distributions (0.61) (0.72) (0.88) (0.75) (0.58)
-------------------------------------------------------------------
Net asset value, end of period $26.00 $21.47 $16.99 $14.11 $12.23
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ 24.35% 31.16% 27.44% 22.19% 22.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $95,528 $79,360 $50,178 $36,892 $19,363
Ratio of expenses to average daily net assets(1) 1.88% 1.87% 1.94% 1.87% 1.72%
Ratio of net investment income to average net assets (0.50)% (0.28)% 0.08% 0.29% 0.87%
Portfolio turnover rate 21% 7% 25% 41% 33%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 2.03% 2.02% 2.09% 2.11% 2.26%
</TABLE>
+ Total return would have been lower had various fees not been waived during the
period.
The accompanying notes are an integral part of the financial statements.
28 --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
-------------------------------------------------------------------
1999^ 1998**
----- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.74 $10.00
-------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.09) (0.03)
Net realized and unrealized gain (loss) on
investments (0.16) 0.77
-------------------------------------------------------------------
Total from investment operations (0.25) 0.74
-------------------------------------------------------------------
Distributions:
Net realized gain (0.24) -
-------------------------------------------------------------------
Net asset value, end of period $10.25 $10.74
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ (2.16)% 7.40%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $33,803 $37,014
Ratio of expenses to average daily net assets(1) 1.29% 1.16%*
Ratio of net investment loss to average net assets (1.00)% (0.54)%*
Portfolio turnover rate 47% 44%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.44% 1.36%*
<CAPTION>
CLASS II
-------------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
-------------------------------------------------------------------
1999^ 1998**
----- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.71 $10.51
-------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.13) (0.05)
Net realized and unrealized gain (loss) on
investments (0.14) 0.25
-------------------------------------------------------------------
Total from investment operations (0.27) 0.20
-------------------------------------------------------------------
Distributions:
Net realized gain (0.24) -
-------------------------------------------------------------------
Net asset value, end of period $10.20 $10.71
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+*** (2.35)% 1.90%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $2,051 $1,400
Ratio of expenses to average daily net assets(1) 1.66% 1.52%*
Ratio of net investment loss to average net assets (1.37)% (0.90)%*
Portfolio turnover rate 47% 44%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.81% 1.72%*
</TABLE>
* Annualized.
** Classes I and II commenced operations on September 2, 1997 and October 2,
1997, respectively.
*** Class II total return does not include the one time sales charge.
+ 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.
^ Per share amounts calculated based on the average shares outstanding during
the period.
The accompanying notes are an integral part of the financial statements.
- ---------------------------------------------------------------------------- 29
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
CLASS III
-------------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
-------------------------------------------------------------------
1999^ 1998**
----- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.64 $10.51
-------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.19) (0.10)
Net realized and unrealized gain (loss) on
investments (0.17) 0.23
-------------------------------------------------------------------
Total from investment operations (0.36) 0.13
-------------------------------------------------------------------
Distributions:
Net realized gain (0.24) -
-------------------------------------------------------------------
Net asset value, end of period $10.04 $10.64
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ (3.22)% 1.24%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $392 $590
Ratio of expenses to average daily net assets(1) 2.44% 2.28%*
Ratio of net investment loss to average net assets (2.15)% (1.65)%*
Portfolio turnover rate 47% 44%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 2.59% 2.47%*
</TABLE>
* Annualized.
** Class III commenced operations on October 2, 1997.
+ 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.
^ Per share amounts calculated based on the average shares outstanding during
the period.
The accompanying notes are an integral part of the financial statements.
30 --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
BOND PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.29 $9.84 $9.73 $9.91 $9.41
-------------------------------------------------------------------
Income from investment operations:
Net investment income 0.59 0.61 0.61 0.60 0.57
Net realized and unrealized gain (loss) on
investments (0.37) 0.45 0.11 (0.18) 0.50
-------------------------------------------------------------------
Total from investment operations 0.22 1.06 0.72 0.42 1.07
-------------------------------------------------------------------
Distributions:
Net investment income (0.59) (0.61) (0.61) (0.60) (0.57)
Net realized gain (0.09) - - - -
-------------------------------------------------------------------
Total distributions (0.68) (0.61) (0.61) (0.60) (0.57)
-------------------------------------------------------------------
Net asset value, end of period $9.83 $10.29 $9.84 $9.73 $9.91
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ 2.04% 11.02% 7.58% 4.23% 11.87%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $224,467 $219,088 $123,184 $107,832 $90,574
Ratio of expenses to average daily net assets (1) 0.48% 0.49% 0.49% 0.41% 0.35%
Ratio of net investment income to average net assets 5.73% 5.98% 6.20% 5.99% 6.07%
Portfolio turnover rate 22% 26% 56% 56% 23%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 0.88% 0.89% 0.89% 0.91% 0.91%
<CAPTION>
CLASS II
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.26 $9.81 $9.71 $10.18
-------------------------------------------------------------------
Income from investment operations:
Net investment income 0.55 0.57 0.57 0.29
Net realized and unrealized gain (loss) on
investments (0.35) 0.46 0.10 (0.47)
-------------------------------------------------------------------
Total from investment operations 0.20 1.03 0.67 (0.18)
-------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.58) (0.57) (0.29)
Net realized gain (0.09) - - -
-------------------------------------------------------------------
Total distributions (0.65) (0.58) (0.57) (0.29)
-------------------------------------------------------------------
Net asset value, end of period $9.81 $10.26 $9.81 $9.71
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+*** 1.86% 10.72% 7.12% (1.75)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $5,172 $1,801 $841 $67
Ratio of expenses to average daily net assets(1) 0.81% 0.84% 0.90% 0.80%*
Ratio of net investment income to average net assets 5.40% 5.63% 5.79% 5.61%*
Portfolio turnover rate 22% 26% 56% 56%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.21% 1.24% 1.30% 1.30%*
</TABLE>
* Annualized.
** Class II commenced operations on December 20, 1995.
*** Class II total return does not include the one time sales charge.
+ 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.
- ---------------------------------------------------------------------------- 31
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
CLASS III
-------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.27 $9.82 $9.71 $9.89 $9.40
-------------------------------------------------------------------
Income from investment operations:
Net investment income 0.47 0.48 0.49 0.49 0.43
Net realized and unrealized gain (loss) on
investments (0.36) 0.46 0.11 (0.18) 0.49
-------------------------------------------------------------------
Total from investment operations 0.11 0.94 0.60 0.31 0.92
-------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.49) (0.49) (0.49) (0.43)
Net realized gain (0.09) - - - -
-------------------------------------------------------------------
Total distributions (0.57) (0.49) (0.49) (0.49) (0.43)
-------------------------------------------------------------------
Net asset value, end of period $9.81 $10.27 $9.82 $9.71 $9.89
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL RETURN+ 0.94% 9.72% 6.37% 3.11% 10.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $2,656 $2,113 $2,553 $3,445 $1,916
Ratio of expenses to average daily net assets(1) 1.55% 1.67% 1.63% 1.49% 1.84%
Ratio of net investment income to average net assets 4.66% 4.80% 5.07% 4.92% 4.58%
Portfolio turnover rate 22% 26% 56% 56% 23%
(1)During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 2.12% 2.07% 2.03% 1.99% 3.35%
</TABLE>
+ Total return would have been lower had various fees not been waived during the
period.
The accompanying notes are an integral part of the financial statements.
32 --------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
---------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
---------------------------------------------------------------
1999 1998**
---- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.02 $10.00
---------------------------------------------------------------
Income from investment operations:
Net investment income 0.58 0.19
Net realized and unrealized gain (loss)
on investments (0.22) 0.02
---------------------------------------------------------------
Total from investment operations 0.36 0.21
---------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.19)
Net realized gain (0.02) -
---------------------------------------------------------------
Total distributions (0.60) (0.19)
---------------------------------------------------------------
Net asset value, end of period $9.78 $10.02
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL RETURN+ 3.60% 2.17%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $219,298 $199,872
Ratio of expenses to average daily net assets(1) 0.36% 0.37%*
Ratio of net investment income to average net assets 5.76% 5.87%*
Portfolio turnover rate 48% 9%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 0.86% 0.87%*
<CAPTION>
CLASS II
---------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
---------------------------------------------------------------
1999 1998**
---- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.02 $9.99
---------------------------------------------------------------
Income from investment operations:
Net investment income 0.55 0.18
Net realized and unrealized gain (loss)
on investments (0.22) 0.03
---------------------------------------------------------------
Total from investment operations 0.33 0.21
---------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.18)
Net realized gain (0.02) -
---------------------------------------------------------------
Total distributions (0.57) (0.18)
---------------------------------------------------------------
Net asset value, end of period $9.78 $10.02
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL RETURN+*** 3.32% 2.07%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $3,057 $923
Ratio of expenses to average daily net assets(1) 0.68% 0.65%*
Ratio of net investment income to average net assets 5.43% 5.59%*
Portfolio turnover rate 48% 9%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.19% 1.16%*
</TABLE>
* Annualized.
** Classes I and II commenced operations on March 2, 1998 and March 9, 1998,
respectively.
*** Class II total return does not include the one time sales charge.
+ 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.
- ---------------------------------------------------------------------------- 33
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
CLASS III
---------------------------------------------------------------
For the Year For the Period
Ended June 30, Ended June 30,
---------------------------------------------------------------
1999 1998**
---- ------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.02 $9.99
---------------------------------------------------------------
Income from investment operations:
Net investment income 0.49 0.06
Net realized and unrealized gain (loss)
on investments (0.23) 0.03
---------------------------------------------------------------
Total from investment operations 0.26 0.09
---------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.06)
Net realized gain (0.02) 0.00
---------------------------------------------------------------
Total distributions (0.51) (0.06)
---------------------------------------------------------------
Net asset value, end of period $9.77 $10.02
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL RETURN+ 2.58% 0.92%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $1,097 $17
Ratio of expenses to average daily net assets(1) 1.22% 1.35%*
Ratio of net investment income to average net assets 4.90% 4.89%*
Portfolio turnover rate 48% 9%*
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.92% 1.86%*
</TABLE>
* Annualized.
** Class III commenced operations on May 19, 1998.
+ 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.
34 ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TENNESSEE TAX-FREE PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.31 $9.99 $9.71 $10.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.46 0.48 0.50 0.23
Net realized and unrealized gain (loss) on
investments (0.20) 0.32 0.28 (0.29)
------------------------------------------------------------------------
Total from investment operations 0.26 0.80 0.78 (0.06)
------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.48) (0.50) (0.23)
Net realized gain (0.03) - - -
------------------------------------------------------------------------
Total distributions (0.49) (0.48) (0.50) (0.23)
------------------------------------------------------------------------
Net asset value, end of period $10.08 $10.31 $9.99 $9.71
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 2.54% 8.16% 8.26% (0.65)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $185,445 $176,884 $8,935 $5,925
Ratio of expenses to average daily net assets (1) 0.36% 0.31% 0.07% 0.50%*
Ratio of net investment income to average net assets 4.49% 4.71% 5.09% 4.31%*
Portfolio turnover rate 31% 15% 122% 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. 0.86% 0.85% 1.14% 1.42%*
<CAPTION>
CLASS II
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.34 $10.01 $9.73 $10.06
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.46 0.48 0.51 0.21
Net realized and unrealized gain (loss) on
investments (0.20) 0.33 0.28 (0.33)
------------------------------------------------------------------------
Total from investment operations 0.26 0.81 0.79 (0.12)
------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.48) (0.51) (0.21)
Net realized gain (0.03) - - -
------------------------------------------------------------------------
Total distributions (0.49) (0.48) (0.51) (0.21)
------------------------------------------------------------------------
Net asset value, end of period $10.11 $10.34 $10.01 $9.73
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+*** 2.46% 8.22% 8.37% (1.25)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $13,227 $8,973 $5,941 $1,875
Ratio of expenses to average daily
net assets (1) 0.44% 0.37% 0.12% 0.49%*
Ratio of net investment income to average net assets 4.41% 4.65% 5.03% 4.32%*
Portfolio turnover rate 31% 15% 122% 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. 0.94% 0.91% 1.14% 1.42%*
</TABLE>
* Annualized.
** Classes I and II commenced operations on December 15, 1995 and December 29,
1995, respectively.
*** Class II total return does not include the one time sales charge.
+ 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.
- ---------------------------------------------------------------------------- 35
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TENNESSEE TAX-FREE PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
CLASS III
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.32 $10.00 $9.72 $10.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.42 0.45 0.50 0.19
Net realized and unrealized gain (loss) on
investments (0.20) 0.32 0.28 (0.28)
------------------------------------------------------------------------
Total from investment operations 0.22 0.77 0.78 (0.09)
------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.45) (0.50) (0.19)
Net realized gain (0.03) - - -
------------------------------------------------------------------------
Total distributions (0.45) (0.45) (0.50) (0.19)
------------------------------------------------------------------------
Net asset value, end of period $10.09 $10.32 $10.00 $9.72
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 2.13% 7.86% 8.20% (0.87)%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $17,378 $9,270 $5,750 $896
Ratio of expenses to average daily
net assets (1) 0.75% 0.61% 0.23% 0.98%*
Ratio of net investment income to average net assets 4.10% 4.41% 4.93% 3.83%*
Portfolio turnover rate 31% 15% 122% 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. 1.65% 1.65% 1.91% 1.91%*
</TABLE>
* Annualized.
** Class III commenced operations on December 15, 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.
36 ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. TREASURY MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<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 0.044 0.051 0.050 0.052 0.050
------------------------------------------------------------------------
Distributions:
Net investment income (0.044) (0.051) (0.050) (0.052) (0.050)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.51% 5.19% 5.09% 5.30% 5.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $7,309 $19,314 $6,141 $75,703 $67,377
Ratio of expenses to average net assets (1) 0.51% 0.45% 0.37% 0.36% 0.36%
Ratio of net investment income to average net assets 4.57% 5.09% 5.01% 5.19% 5.00%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 0.69% 0.63% 0.55% 0.56% 0.63%
<CAPTION>
CLASS III
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.042 0.049 0.047 0.044
------------------------------------------------------------------------
Distributions:
Net investment income (0.042) (0.049) (0.047) (0.044)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.27% 5.03% 4.84% 4.47%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $4,661 $42,288 $61,135 $3,528
Ratio of expenses to average net assets (1) 0.73% 0.62% 0.62% 0.62%*
Ratio of net investment income to average net assets 4.35% 4.92% 4.76% 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. 0.91% 0.80% 0.80% 0.82%*
</TABLE>
* Annualized.
** Class III 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.
- ---------------------------------------------------------------------------- 37
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<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 0.047 0.052 0.051 0.053 0.053
------------------------------------------------------------------------
Distributions:
Net investment income (0.047) (0.052) (0.051) (0.053) (0.053)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.81% 5.37% 5.23% 5.37% 5.39%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $94,079 $88,255 $94,541 $88,111 $88,057
Ratio of expenses to average net assets (1) 0.39% 0.35% 0.35% 0.33% 0.31%
Ratio of net investment income to average net assets 4.71% 5.24% 5.11% 5.28% 5.27%
(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% 0.52% 0.53% 0.53% 0.58%
<CAPTION>
CLASS III
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.043 0.049 0.048 0.044
------------------------------------------------------------------------
Distributions:
Net investment income (0.043) (0.049) (0.048) (0.044)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.42% 5.05% 4.91% 4.49%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $1,674 $2,513 $3,486 $228
Ratio of expenses to average net assets (1) 0.73% 0.65% 0.65% 0.65%*
Ratio of net investment income to average net assets 4.37% 4.94% 4.81% 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. 0.90% 0.82% 0.83% 0.85%*
</TABLE>
* Annualized.
** Class III 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.
38 ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
MUNICIPAL MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<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 0.029 0.033 0.033 0.035 0.034
------------------------------------------------------------------------
Distributions:
Net investment income (0.029) (0.033) (0.033) (0.035) (0.034)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 2.92% 3.33% 3.32% 3.52% 3.48%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $56,438 $36,279 $45,988 $71,665 $94,078
Ratio of expenses to average net assets (1) 0.33% 0.38% 0.35% 0.32% 0.30%
Ratio of net investment income to average net assets 2.87% 3.28% 3.25% 3.50% 3.44%
(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 0.50% 0.56% 0.53% 0.52% 0.57%
<CAPTION>
CLASS III
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.025 0.030 0.030 0.030
------------------------------------------------------------------------
Distributions:
Net investment income (0.025) (0.030) (0.030) (0.030)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 2.56% 3.06% 3.03% 3.03%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $5,333 $3,929 $12,886 $2,905
Ratio of expenses to average net assets (1) 0.68% 0.63% 0.62% 0.58%*
Ratio of net investment income to average net assets 2.52% 3.03% 2.98% 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. 0.86% 0.81% 0.79% 0.78%*
</TABLE>
* Annualized.
** Class III 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.
- ---------------------------------------------------------------------------- 39
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CASH RESERVE PORTFOLIO
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996 1995**
---- ---- ---- ---- ------
<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 0.048 0.053 0.051 0.053 0.042
------------------------------------------------------------------------
Distributions:
Net investment income (0.048) (0.053) (0.051) (0.053) (0.042)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.94% 5.46% 5.23% 5.39% 4.27%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $29,351 $40,242 $14,241 $16,369 $15,460
Ratio of expenses to average net assets (1) 0.39% 0.36% 0.40% 0.42% 0.43%*
Ratio of net investment income to average net assets 4.84% 5.33% 5.13% 5.22% 5.48%*
(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% 0.54% 0.57% 0.61% 0.70%*
<CAPTION>
CLASS III
------------------------------------------------------------------------
For the Year
Ended June 30,
------------------------------------------------------------------------
1999 1998 1997 1996**
---- ---- ---- ------
<S> <C> <C> <C> <C>
SELECTED PER - SHARE DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.046 0.051 0.049 0.047
------------------------------------------------------------------------
Distributions:
Net investment income (0.046) (0.051) (0.049) (0.047)
------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL RETURN+ 4.67% 5.21% 5.00% 4.78%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $62,961 $58,243 $35,592 $24,190
Ratio of expenses to average net assets (1) 0.66% 0.60% 0.64% 0.62%*
Ratio of net investment income to average net assets 4.58% 5.09% 4.88% 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. 0.83% 0.77% 0.82% 0.81%*
</TABLE>
* Annualized.
** Classes I and III commenced operations on September 26, 1994 and July 28,
1995, respectively.
+ 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.
40 ----------------------------------------------------------------------------
<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 nine 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.
The Bond, Intermediate Bond and Money Market Portfolios may offer three classes
of shares (Classes I, II and III) and the Growth & Income, Capital Appreciation
and Tennessee Tax-Free Portfolios may offer four classes of shares (Classes I,
II, III and IV). As of June 30, 1999, Class II shares have not been issued for
the Money Market Portfolios and Class IV shares have not been issued for any
Portfolio. 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/fund accounting 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:
GROWTH & INCOME, CAPITAL APPRECIATION, BOND, INTERMEDIATE BOND AND TENNESSEE
TAX-FREE PORTFOLIOS: Securities held in the Growth & Income and Capital
Appreciation Portfolios 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 Bond,
Intermediate Bond 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.
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 advisers 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.
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 Intermediate Bond,
Tennessee Tax-Free and Municipal Money Market Portfolios, accretion of market
discount represents unrealized gain until realized at the time of security
disposition or maturity. For the Intermediate Bond Portfolio, amortization of
market premium represents unrealized loss 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.
DISTRIBUTIONS TO SHAREHOLDERS: For the Money Market Portfolios, Bond Portfolio,
Intermediate Bond Portfolio and Tennessee Tax-Free Portfolio, distributions are
declared daily and paid monthly from net investment income. Distributions for
the Growth & Income Portfolio are declared and paid quarterly. Distributions for
the Capital Appreciation Portfolio are declared and paid annually. Any net
capital gains earned by each Portfolio are distributed at least annually 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, 1999, the
effects of certain differences due to net paydown losses and market discount
reclasses were reclassified. The Bond Portfolio and the Intermediate Bond
Portfolio reflected an increase (decrease) in un(over)distributed net investment
income and an increase (decrease) in accumulated net realized gain (loss) on
investments of $20,849 and $28,070, respectively.
- ---------------------------------------------------------------------------- 41
<PAGE>
- -------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING AND OPERATING POLICIES (CONTINUED)
In addition, $343,925 has been reclassified to paid-in-capital for the Capital
Appreciation Portfolio to reflect an accumulated net investment loss which may
not be offset against capital gains or carried forward for tax purposes. The
calculation of net investment income in the Financial Highlights excludes these
adjustments.
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
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
-------------------------------------------------------------------------------------------
For the Year For the Year For the Year For the Period
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 1998 1999 1998
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dollars issued and redeemed:
Class I:*
Issued $ 72,689,105 $ 86,107,454 $ 777,187 $ 36,806,365
Conversion (Note 6) 0 336,944,637 0 0
Distributions reinvested 12,066,519 11,495,391 749,183 0
Redeemed (86,550,330) (84,830,917) (2,964,048) (664,722)
-------------------------------------------------------------------------------------------
Net increase (decrease) $ (1,794,706) $ 349,716,565 $ (1,437,678) $ 36,141,643
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Class II:**
Issued $ 29,534,834 $ 28,599,520 $ 1,187,706 $ 1,442,812
Distributions reinvested 1,674,476 1,190,189 36,490 0
Redeemed (8,928,871) (5,829,163) (598,870) (90,116)
-------------------------------------------------------------------------------------------
Net increase $ 22,280,439 $ 23,960,546 $ 625,326 $ 1,352,696
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Class III:**
Issued $ 14,053,684 $ 22,344,728 $ 182,467 $ 738,392
Distributions reinvested 2,143,511 2,197,401 10,549 0
Redeemed (16,400,616) (9,658,177) (350,156) (193,023)
-------------------------------------------------------------------------------------------
Net increase (decrease) $ (203,421) $ 14,883,952 $ (157,140) $ 545,369
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Shares issued and redeemed:
Class I:*
Issued 3,214,783 4,294,210 88,649 3,510,847
Conversion (Note 6) 0 16,404,315 0 0
Distributions reinvested 525,597 597,853 79,956 0
Redeemed (3,825,520) (4,074,239) (318,412) (63,893)
-------------------------------------------------------------------------------------------
Net increase (decrease) (85,140) 17,222,139 (149,807) 3,446,954
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Class II:**
Issued 1,308,316 1,425,388 131,289 139,460
Distributions reinvested 73,080 61,918 3,911 0
Redeemed (400,544) (284,427) (64,816) (8,694)
-------------------------------------------------------------------------------------------
Net increase 980,852 1,202,879 70,384 130,766
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Class III:**
Issued 630,641 1,117,289 18,065 73,185
Distributions reinvested 94,055 114,866 1,143 0
Redeemed (746,627) (489,406) (35,623) (17,704)
-------------------------------------------------------------------------------------------
Net increase (decrease) (21,931) 742,749 (16,415) 55,481
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>
*Capital Appreciation Portfolio Class I commenced operations on September 2,
1997.
**Capital Appreciation Portfolio Class II and III commenced operations on
October 2, 1997.
42 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
BOND INTERMEDIATE BOND TENNESSEE TAX-FREE
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------
For the For the For the For the For the For the
Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended
June 30, June 30, June 30, June 30, June 30, June 30,
1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dollars issued and redeemed:
Class I:*
Issued $ 24,844,510 $ 46,340,246 $ 52,943,178 $ 28,713,805 $ 38,017,179 $ 33,623,138
Conversion (Note 6) 0 48,681,990 0 184,904,888 0 148,766,645
Distributions reinvested 9,867,882 7,380,447 5,283,672 1,616,030 71,799 40,522
Redeemed (19,100,552) (13,222,635) (33,299,042) (15,726,975) (25,180,888) (14,953,896)
------------------------------------------------------------------------------------------------
Net increase $ 15,611,840 $ 89,180,048 $ 24,927,808 $ 199,507,748 $ 12,908,090 $ 167,476,409
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class II:**
Issued $ 3,985,687 $ 2,812,425 $ 2,490,231 $ 906,154 $ 5,523,897 $ 3,978,499
Distributions reinvested 218,438 76,219 134,814 13,622 423,324 256,834
Redeemed (623,882) (1,986,006) (392,578) 0 (1,371,416) (1,411,935)
------------------------------------------------------------------------------------------------
Net increase $ 3,580,243 $ 902,638 $ 2,232,467 $ 919,776 $ 4,575,805 $ 2,823,398
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class III:***
Issued $ 1,188,451 $ 498,198 $ 1,588,568 $ 16,681 $ 16,896,982 $ 8,633,091
Distributions reinvested 131,630 105,985 21,171 61 593,070 223,736
Redeemed (641,066) (1,152,367) (501,666) 0 (8,886,269) (5,503,283)
------------------------------------------------------------------------------------------------
Net increase (decrease) $ 679,015 $ (548,184) $1,108,073 $ 16,742 $ 8,603,783 $ 3,353,544
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Shares issued and redeemed:
Class I:*
Issued 2,432,923 4,572,530 5,277,980 2,872,017 3,663,984 3,276,947
Conversion (Note 6) 0 4,782,121 0 18,490,489 0 14,429,355
Distributions reinvested 962,005 727,742 526,173 161,641 6,934 3,956
Redeemed (1,863,613) (1,308,146) (3,324,360) (1,573,067) (2,430,886) (1,455,374)
------------------------------------------------------------------------------------------------
Net increase 1,531,315 8,774,247 2,479,793 19,951,080 1,240,032 16,254,884
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class II:**
Issued 391,682 278,620 246,281 90,798 532,449 387,208
Distributions reinvested 21,314 7,526 13,437 1,362 40,794 25,004
Redeemed (60,985) (196,406) (39,189) 0 (132,428) (137,427)
------------------------------------------------------------------------------------------------
Net increase 352,011 89,740 220,529 92,160 440,815 274,785
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class III:***
Issued 114,645 49,250 158,359 1,665 1,625,294 840,009
Distributions reinvested 12,867 10,482 2,116 6 57,195 21,795
Redeemed (62,631) (113,964) (49,941) 0 (858,698) (538,938)
------------------------------------------------------------------------------------------------
Net increase (decrease) 64,881 (54,232) 110,534 1,671 823,791 322,866
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
*Intermediate Bond Portfolio Class I commenced operations on March 2, 1998.
**Intermediate Bond Portfolio Class II commenced operations on March 9, 1998.
***Intermediate Bond Portfolio Class III commenced operations on May 19, 1998.
- ---------------------------------------------------------------------------- 43
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET PORTFOLIO U.S. GOVERNMENT MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------------------------
For the Year For the Year For the Year For the Period
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 1998 1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares/Dollars issued and
redeemed:
Class I:
Issued $ 18,590,020 $ 28,322,040 $ 114,177,832 $ 149,805,484
Distributions reinvested 1,131 4,022 13 351
Redeemed (30,598,349) (15,151,653) (108,353,060) (156,091,631)
------------------------------------------------------------------------------------------------
Net increase (decrease) $ (12,007,198) $ 13,174,409 $ 5,824,785 $ (6,285,796)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class III:
Issued $ 139,906,932 $ 166,947,927 $ 34,798,328 $ 28,290,629
Distributions reinvested 477,442 164,827 114,502 212,426
Redeemed (178,012,590) (185,952,035) (35,752,232) (29,475,954)
------------------------------------------------------------------------------------------------
Net decrease $(37,628,216) $ (18,839,281) $ (839,402) $ (972,899)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL MONEY MARKET PORTFOLIO CASH RESERVE PORTFOLIO
------------------------------------------------------------------------------------------------
For the Year For the Year For the Year For the Period
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1999 1998 1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares/Dollars issued and
redeemed:
Class I:
Issued $ 84,302,797 $ 78,625,128 $ 47,673,460 75,241,145
Distributions reinvested 23 159 1 0
Redeemed (64,144,557) (88,334,438) (58,566,116) (49,239,160)
------------------------------------------------------------------------------------------------
Net increase (decrease) $ 20,158,263 $ (9,709,151) $ (10,892,655) $ 26,001,985
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Class III:
Issued $ 23,170,849 $ 14,288,239 $ 139,985,723 139,344,010
Distributions reinvested 111,051 273,750 2,753,795 2,394,995
Redeemed (21,878,428) (23,519,008) (138,023,657) (119,085,292)
------------------------------------------------------------------------------------------------
Net increase (decrease) $ 1,403,472 $ (8,957,019) $ 4,715,861 $ 22,653,713
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
3. INVESTMENT ADVISORY AND MANAGEMENT AND SUB-ADVISORY AGREEMENTS
For managing its investment and business affairs, the Growth & Income Portfolio,
Bond Portfolio, Intermediate Bond Portfolio and Tennessee Tax-Free Portfolio
each pay First Tennessee Bank National Association ("First Tennessee"), a
monthly management fee at the annual rate of .65%, .55%, .50% and .50%
respectively, of its average net assets. For managing its investment and
business affairs, each of the Money Market Portfolios pays First Tennessee 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 First Tennessee through $1 billion, and .22% on amounts greater than
$1 billion. Under the Investment Advisory and Management Agreement, First
Tennessee is authorized, at its own expense, to hire sub-advisers to provide
investment advice to it and to each Portfolio.
First Tennessee and Investment Advisers, Inc. ("IAI") serve as co-advisers of
the Capital Appreciation Portfolio pursuant to the authority granted to them
under their respective Co-Advisory Agreements with the Portfolio. The Capital
Appreciation Portfolio is obligated to pay First Tennessee monthly management
fees at the annual rate of .15% of its average net assets. The Capital
Appreciation Portfolio is obligated to pay IAI monthly management fees at the
annual rate of .70% for the first $50 million of the Portfolio's average net
assets and .65% on average net assets of the Portfolio in excess of $50 million.
For the Growth & Income and Bond 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 Growth & Income
Portfolio's average net assets and .33% of Bond Portfolio's average net assets.
For the Intermediate Bond and Tennessee Tax-Free Portfolios, Martin & Company,
Inc. ("Martin") serves as sub-adviser of each Portfolio pursuant to the
authority granted to it under its Sub-Advisory Agreement with First Tennessee.
Martin is an affiliate of First Tennessee and is a wholly-owned subsidiary of
First Tennessee National Corporation. Martin is paid by First Tennessee a
monthly sub-advisory fee at the annual rate of .30% of each Portfolio's average
net assets.
44 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT ADVISORY AND MANAGEMENT AND SUB-ADVISORY AGREEMENTS (CONTINUED)
For the Money Market Portfolios, BlackRock Institutional Management Corporation
("BlackRock") (formerly PNC Institutional Management Corporation) serves as the
sub-adviser of each Portfolio pursuant to the authority granted to it under its
Sub-Advisory Agreement with First Tennessee. BlackRock is a wholly-owned
subsidiary of PNC Bank National Association. BlackRock is paid by First
Tennessee 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 administration fees
from each of the Money Market Portfolios at the annual rate of .075% of average
net assets and, from the Growth & Income, Capital Appreciation, Bond,
Intermediate Bond and Tennessee Tax-Free Portfolios, at the annual rate of .15%
of average net assets.
First Tennessee serves as the Co-Administrator for each Portfolio. As the
Co-Administrator, First Tennessee 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. First
Tennessee is entitled to receive co-administration fees 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 and Class IV of the Growth & Income, Capital Appreciation and
Tennessee Tax-Free Portfolios, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended. Each Class III Distribution Plan provides for
payment of a fee to ALPS at the annual rate of up to .75% of the average net
assets of Class III of the Growth & Income, Capital Appreciation, Bond,
Intermediate Bond and Tennessee Tax-Free Portfolios, and .25% of the average net
assets of Class III of each of the Money Market Portfolios. Each Class IV
Distribution Plan provides for payment of a fee to ALPS at the annual rate of up
to 1.00% of the average net assets of Class IV of the Growth & Income and
Capital Appreciation Portfolios and .70% of the average net assets of Class IV
of the Tennessee Tax-Free Portfolio. The Trustees have also adopted Shareholder
Servicing Plans on behalf of Class II and III of the Growth & Income, Capital
Appreciation, Bond, Intermediate Bond and Tennessee Tax-Free Portfolios under
which broker/dealers, advisers or other financial institutions are paid at the
annual rate of up to .25% of each class' average net assets for shareholder
services and account maintenance.
5. WAIVER OF FEES
GROWTH & INCOME, CAPITAL APPRECIATION, BOND AND INTERMEDIATE BOND PORTFOLIOS:
For the year ended June 30, 1999, First Tennessee voluntarily agreed to waive
its management fee for the Growth & Income, Capital Appreciation, Bond and
Intermediate Bond Portfolios to .50%, .00%, .15% and .00% of average net assets,
respectively. Pursuant to the voluntary waiver agreement, for the year ended
June 30, 1999, First Tennessee waived management fees of $1,242,738, $49,965,
$925,522 and $1,073,039 for the Growth & Income, Capital Appreciation, Bond and
Intermediate Bond Portfolios, respectively.
For the period from November 2, 1998 to June 30, 1999, the 12b-1 fee charged by
Class III of the Bond and Intermediate Bond Portfolios was waived to .50% of
average net assets. Pursuant to this waiver, 12b-1 fees were waived in the
amount of $4,384 and $1,338 for the Bond and Intermediate Bond Portfolios,
respectively.
For the first six months of operations for the Intermediate Bond Portfolio, ALPS
agreed to waive its administration fee to .075% of the first $20 million of
average net assets in the Portfolio, .1125% of the next $5 million and .15% of
the average net assets in excess of $25 million. Pursuant to this waiver
agreement, for the year ended June 30, 1999, ALPS waived administration fees of
$2,867.
TENNESSEE TAX-FREE PORTFOLIO:
Since the Portfolio's inception, First Tennessee, as Investment Adviser, has
voluntarily agreed to waive its entire management fee.
For the year ended June 30, 1999, the 12b-1 fee charged by Class III of the
Tennessee Tax-Free Portfolio was waived to .50% of average net assets.
For the period July 1, 1998 through November 30, 1998, ALPS agreed to
voluntarily reimburse Class III of the Tennessee Tax-Free Portfolio for half of
the 0.50% 12b-1 fee charged by that class or .25% of that class' average net
assets. After November 30, 1998, ALPS agreed to voluntarily reimburse Class III
of the Tennessee Tax-Free Portfolio for .10% of the .50% 12b-1 fee charged by
that class.
Pursuant to the voluntary waiver and reimbursement agreements, for the year
ended June 30, 1999, fees were waived and reimbursed for the Tennessee Tax-Free
Portfolio as follows:
<TABLE>
<S> <C>
Management fees waived $ 1,061,111
Reimbursement by administrator $ 24,476
12b-1 fees waived $ 40,677
</TABLE>
- ---------------------------------------------------------------------------- 45
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. WAIVER OF FEES (CONTINUED)
MONEY MARKET PORTFOLIOS:
For the period July 1, 1998 to May 14, 1999, First Tennessee voluntarily agreed
to waive a portion of its management and co-administration fees payable by the
U.S. Treasury Money Market Portfolio so that it pays .10% and .025%,
respectively, of its average net assets. For the period from May 14, 1999 to
June 30, 1999, First Tennessee voluntarily agreed to waive a portion of its
management and co-administration fees payable by the U.S. Treasury Money Market
Portfolio so that it pays .08% and .00%, respectively, of its average net
assets. Additionally, for the period from May 14, 1999 to June 30, 1999, ALPS
agreed to waive its entire administration fee for the U.S. Treasury Money Market
Portfolio.
For the year ended June 30, 1999, First Tennessee voluntarily agreed to waive a
portion of its management and co-administration fees payable by the U.S.
Government Money Market, Municipal Money Market and Cash Reserve Portfolios, so
that each Portfolio pays .10% and .025%, respectively, of its average net
assets.
For the year ended June 30, the expense waivers were as follows:
<TABLE>
<CAPTION>
Management Fee Co-Administration Fee Administration Fee
-------------- --------------------- ------------------
<S> <C> <C> <C>
U.S. Treasury Money Market $83,083 $11,892 $1,423
U.S. Government Money Market $137,583 $22,930 $0
Municipal Money Market $72,802 $12,134 $0
Cash Reserve $140,357 $23,393 $0
</TABLE>
6. CONVERSION OF COMMON TRUST FUNDS AND COLLECTIVE INVESTMENT POOLS
On March 2, 1998, the Growth & Income Portfolio issued shares in a tax-free
conversion to acquire the net assets of the Common Stock - Total Return Fund,
the Common Stock - Stable Value Fund and the Common Trust Fund 1 of First
Tennessee Bank. The following is a summary of shares issued, net assets
acquired, net asset value per share and unrealized appreciation as of the date
acquired.
<TABLE>
<S> <C>
Shares issued 11,062,850
Net assets acquired $ 227,230,934
Net asset value $ 20.54
Unrealized appreciation $ 83,270,056
</TABLE>
On March 2, 1998, the Growth & Income Portfolio issued shares in a taxable
conversion to acquire the net assets of the Pooled Equity Fund and the Common
Trust Fund 3 of First Tennessee Bank. The following is a summary of shares
issued, net assets acquired and net asset value per share. Because the
conversion was taxable, no unrealized appreciation was acquired.
<TABLE>
<S> <C>
Shares issued 5,341,465
Net assets acquired $ 109,713,703
Net asset value $ 20.54
</TABLE>
On March 2, 1998, the Bond Portfolio issued shares in a tax-free conversion to
acquire the net assets of the Common Fixed Income - Total Return Fund of First
Tennessee Bank. The following is a summary of shares issued, net assets
acquired, net asset value per share and unrealized appreciation as of the date
acquired.
<TABLE>
<S> <C>
Shares issued 4,782,121
Net assets acquired $ 48,681,990
Net asset value $ 10.18
Unrealized appreciation $ 2,173,653
</TABLE>
On March 2, 1998, the Intermediate Bond Portfolio issued shares in a tax-free
conversion to acquire the net assets of the Common Fixed Income - Stable Value
Fund, the Pooled Intermediate Bond Fund, the Common Trust Fund 2 and the Common
Trust Fund 4 of First Tennessee Bank. The following is a summary of shares
issued, net assets acquired, net asset value per share and unrealized
appreciation as of the date acquired.
<TABLE>
<S> <C>
Shares issued 18,490,489
Net assets acquired $ 184,904,888
Net asset value $ 10.00
Unrealized appreciation $ 1,914,289
</TABLE>
On March 2, 1998, the Tennessee Tax-Free Portfolio issued shares in a tax-free
conversion to acquire the net assets of the Common Tax-Exempt - Total Return
Fund, the Common Tax-Exempt - Stable Value Fund and the Common Trust Fund 5 of
First Tennessee Bank. The following is a summary of shares issued, net assets
acquired, net asset value per share and unrealized appreciation as of the date
acquired.
46 ----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FIRST FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CONVERSION OF COMMON TRUST FUNDS AND COLLECTIVE INVESTMENT POOLS (CONTINUED)
<TABLE>
<S> <C>
Shares issued 14,429,355
Net assets acquired $ 148,766,645
Net asset value $ 10.31
Unrealized appreciation $ 5,930,274
</TABLE>
7. OTHER
Based on the recommendation of the Audit Committee of the Trust, the Board of
Trustees has accepted the resignation of PricewaterhouseCoopers LLP as the
Trust's independent auditor and voted to appoint Deloitte & Touche LLP for the
current fiscal year. For the fiscal years ended June 30, 1998 and June 30, 1997,
PricewaterhouseCoopers LLP's audit reports contained no adverse opinion or
disclaimer of opinion; nor were their reports qualified as to uncertainty, audit
scope, or accounting principles. Further, there were no disagreements between
the Trust and PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the satisfaction
of PricewaterhouseCoopers LLP would have caused them to make reference to the
disagreement in their report.
As of June 30, 1999, one shareholder (a related party) owned 13% of the Growth &
Income Portfolio, 85% of the Capital Appreciation Portfolio and 41% of the Bond
Portfolio. Additionally, as of June 30, 1999, three shareholders (one of which
is a related party) owned 38% of the U.S. Treasury Money Market Portfolio, one
shareholder owned 14% of the U.S. Government Money Market Portfolio and two
shareholders owned 61% of the Cash Reserve Portfolio.
The Trustees of the Trust receive an annual Trustees fee of $6,000 and an
additional fee for each Trustee's meeting attended.
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[GRAPHIC] 370 Seventeenth Street
FIRST FUNDS Suite 3100
Denver, Colorado 80202
1-800-442-1941
www.firstfunds.com
INVESTMENT ADVISER - All Portfolios except TRANSFER AND SHAREHOLDER SERVICING
Capital Appreciation Portfolio AGENT
First Tennessee Bank National Association Boston Financial Data Services
Memphis, Tennessee Boston, Massachusetts
CO-INVESTMENT ADVISERS - Capital CUSTODIAN
Appreciation Portfolio
State Street Bank& Trust Company
First Tennessee Bank National Association Boston, Massachusetts
Memphis, Tennessee
OFFICERS
Investment Advisers, Inc.
Minneapolis, Minnesota Richard C. Rantzow, President
Russell Burk, Secretary
SUB-ADVISER - Money Market Portfolios Jeremy May, Treasurer
BlackRock Institutional Management Corporation TRUSTEES
Wilmington, Delaware
Thomas M. Batchelor
SUB-ADVISER - Growth & Income and Bond John A. DeCell
Portfolios L.R. Jalenak, Jr.
Larry W. Papasan
Highland Capital Management Corporation Richard C. Rantzow
Memphis, Tennessee
SUB-ADVISER - Intermediate Bond and Tennessee
Tax-Free Portfolios
Martin & Company, Inc.
Knoxville, Tennessee
ADMINISTRATOR AND DISTRIBUTOR
ALPS Mutual Funds Services, Inc.
Denver, Colorado
This report has been prepared for First Funds
CO-ADMINISTRATOR shareholders and may be distributed to others
only if preceded or accompanied by a prospectus.
First Tennessee Bank National Association
Memphis, Tennessee
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[GRAPHIC] FIRST
TENNESSEE ALPS MUTUAL FUNDS SERVICES
NOT FDIC INSURED Investment Adviser Sponsor and Distributor