FIRST FUNDS, 485BPOS, 2000-10-27

FIRST FUNDS
485BPOS, 2000-10-27

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<PAGE> 1
As filed with the Securities and Exchange Commission on October 27, 2000
----------------

FILE NOs. 811-6589
33-46374

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 24 [X]
--

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [X]
--

(Check appropriate box or boxes.)

FIRST FUNDS
-----------
(Exact name of Registrant as Specified in Charter)

370 17th Street, Suite 3100
Denver, CO 80202
----------------
(Address of principal executive offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (800) 442-1941
--------------

Russell C. Burk, Secretary
First Funds
370 17th Street, Suite 3100
Denver, CO 80202
----------------
(Name and Address of Agent of Service)

Copy to:

Desiree Franklin, Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2100
Memphis, TN 38103

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment

It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)

[X] on October 28, 2000, pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on ____________, pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2)

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered: Shares of Beneficial Interest, Growth and
Income, Capital Appreciation, Tennessee-Tax Free, Bond, Intermediate Bond, U.S.
Treasury Money Market, U.S. Government Money Market, Municipal Money Market and
Cash Reserve Portfolios
<PAGE> 2
[FIRST FUNDS LOGO]

BOND PORTFOLIO

PROSPECTUS
DATED OCTOBER 28, 2000

CLASS I
CLASS II
CLASS III

[PHOTO]

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus. Any
representation to the contrary is a criminal offense.

[GRAPHIC]

<PAGE> 3

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS

Page
----
<S> <C>
Investment Objective, Principal Strategies and Risks........................................................................1

Performance.................................................................................................................2

Fees and Expenses of the Portfolio..........................................................................................3

Investment Details..........................................................................................................4

Who Manages the Portfolio?..................................................................................................7

Portfolio Managers..........................................................................................................8

How to Invest in the Portfolio..............................................................................................8

Distribution Plans and Shareholder Servicing Plans.........................................................................17

Financial Highlights.......................................................................................................18

Appendix..................................................................................................................A-1

Additional Information about the Portfolio.........................................................................Back Cover
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Not all First Funds Portfolios and/or Classes may be available in your state.

No person has been authorized to give any information or to make any
representation that is not contained in this Prospectus, or in the Statement of
Additional Information ("SAI") that is incorporated herein by reference, in
connection with the offering made by this Prospectus and, if given or made, such
information or representations must not be relied upon. Also, this Prospectus
does not constitute an offering by the Trust or its Distributor in any
jurisdiction where such an offering would not be lawful.

<PAGE> 4

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INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RISKS
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE -- The objective of the Bond Portfolio (the "Portfolio") is
to achieve maximum total return through current income by investing at least 65%
of its total assets in fixed-income securities.

PRINCIPAL INVESTMENT STRATEGY -- Under normal market conditions, the Portfolio
primarily invests in medium to long term investment grade debt securities and
obligations issued by the U.S. government and U.S. corporations, as well as,
investment grade mortgage-backed and asset-backed securities. Investment grade
debt securities are securities rated Baa or higher by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's Corporation (`S&P"). The Portfolio
may also invest in unrated securities that Highland determines are of equivalent
quality to the other securities in which the Portfolio invests. The Portfolio
also may invest in securities of foreign issuers and engage in foreign currency
transactions.

While the dollar-weighted average maturity of the Portfolio may range from 5 to
15 years, Highland currently anticipates that the dollar-weighted average
maturity of the Portfolio will be between 7 and 11 years.

PRIMARY RISKS -- Because the Portfolio invests substantially all of its assets
in fixed-income securities, it is subject to risks such as credit or default
risks, and decreased value due to interest rate increases. The Portfolio's
performance may also be affected by risks to certain types of investments, such
as foreign securities and derivative instruments.

For more information about the risk factors identified above, please refer to
the section entitled "Investment Details" later in this prospectus. The SAI
contains additional information about the risks associated with investing in the
Portfolio.

AN INVESTOR IN THE PORTFOLIO COULD LOSE MONEY OVER SHORT OR EVEN LONG PERIODS OF
TIME.

PLEASE REMEMBER THAT THERE IS NO GUARANTEE THAT THE PORTFOLIO WILL ACHIEVE ITS
INVESTMENT OBJECTIVE, AND AN INVESTMENT IN THE PORTFOLIO IS NOT A DEPOSIT OR ANY
OTHER OBLIGATION OF A BANK, IS NOT INSURED, ENDORSED, OR GUARANTEED BY THE FDIC,
A BANK OR ANY GOVERNMENT AGENCY, AND INVOLVES INVESTMENT RISK INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

SHOULD I INVEST IN THE BOND PORTFOLIO?

The Portfolio may be appropriate for you if:

o You are seeking higher potential returns than money market funds and
you can tolerate the risks associated with investing in fixed-income
securities.

o You are seeking an income mutual fund for an asset allocation program.

o You have a term investment perspective and are prepared to maintain
your investment in the Portfolio for several years.

REMEMBER, NO SINGLE INVESTMENT CAN PROVIDE AN EFFECTIVE, BALANCED INVESTMENT
PLAN.

FUND FACTS

GOAL:

To achieve maximum total return through high current income by investing in
fixed income securities.

PRINCIPAL INVESTMENTS:

o U.S. Government Obligations

o Debt Obligations Issued by U.S. Corporations

o Mortgage-Backed and other Asset-Backed Securities

AVERAGE PORTFOLIO MATURITY:

7-11 years

CLASSES OF SHARES OFFERED IN THIS PROSPECTUS:

o Class I

o Class II

o Class III

INVESTMENT ADVISER:

o First Tennessee Bank National Association ("First Tennessee" or
"Adviser")

INVESTMENT SUB-ADVISER:

o Highland Capital Management Corp. ("Highland" or "Sub-Adviser")

PORTFOLIO MANAGERS:

o James R. Turner

o Steven Wishnia

DISTRIBUTOR:

o ALPS Mutual Funds Services, Inc. ("ALPS")

<PAGE> 5

--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------

The following bar chart and table can help you evaluate the potential risks of
investing in the Portfolio. Both the bar chart and the table show the
variability the Portfolio has experienced in its performance in the past. THE
PAST PERFORMANCE OF THE PORTFOLIO DOES NOT INDICATE HOW IT WILL PERFORM IN THE
FUTURE AND IS INTENDED TO BE USED FOR PURPOSES OF COMPARISON ONLY.

The performance of Class I shares shown in the bar chart reflects the expenses
associated with those shares from year to year.

WHAT IS THE LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX?

The Lehman Brothers Government/Credit Bond Index represents an unmanaged
diversified portfolio of investment grade bonds with maturities over one year.
The Lehman Brothers Government/Credit Bond Index is not a mutual fund and you
cannot invest in it directly. Also, the performance of the Lehman Brothers
Government/Credit Bond Index does not reflect the costs associated with
operating a mutual fund, such as buying, selling and holding securities.

YEAR-BY-YEAR TOTAL RETURN (CLASS I)

Best Quarter (quarter ended June 30, 1995) -- 6.58%
Worst Quarter (quarter ended March 31, 1996) -- (2.88)%
Year-to-date return (as of September 30, 2000) -- 6.41%

The following table lists the Portfolio's average year-by-year return by class
over the past one and five year periods and since the inception of each class of
shares. The table also compares the average annual total returns of each class
of shares for the periods shown to the performance of the Lehman Brothers
Government/Credit Bond Index over the same periods of time.

AVERAGE ANNUAL TOTAL RETURN
(for the period ended December 31, 1999)

<TABLE>
<CAPTION>
INCEPTION DATE 1 YEAR 5 YEARS SINCE INCEPTION
-------------- ------ ------- ---------------
<S> <C> <C> <C> <C>
CLASS I 8/2/93 (2.61)% 7.13% 5.36%
CLASS II 12/20/95 (6.73)% N/A 3.22%
CLASS III 12/9/93 (4.47)% 5.91% 4.06%
LEHMAN BROTHERS
GOV'T/CREDIT BOND INDEX 8/2/93 (2.16)% 7.61% 5.67%
</TABLE>

2
<PAGE> 6

--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
--------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolio.

Maximum deferred sales charge (load) None None 1.00%*
(as a percentage of original purchase price
or redemption proceeds, as applicable)

ANNUAL PORTFOLIO OPERATING EXPENSES
(expenses that are deducted from portfolio assets)

Management Fees** .55% .55% .55%
Distribution (12b-1) Fees .00% .00% .75%***
Other Expenses .31% .62% .73%
Total Portfolio Operating Expenses .86% 1.17% 2.03%
</TABLE>

* Applied to redemptions made during the first year after purchase. No deferred
sales charges are imposed on redemptions from Class III after one year from date
of purchase.

** First Tennessee, as Investment Adviser, has voluntarily agreed to waive a
portion of the investment management fee that it is entitled to receive under
the Investment Advisory and Management Agreement to the extent such management
fee exceeds .30% of the average net assets of the Portfolio.

*** The Trustees have agreed to limit the 12b-1 fees applicable to Class III
shares to .50%.

EXAMPLE -- The following example is intended to help you compare the cost of
investing in the Portfolio to the cost of investing in other mutual funds with
similar investment objectives. The example shows the cumulative amount of
portfolio expenses you would pay on a hypothetical investment of $10,000 in each
class of shares offered by the Portfolio. The example assumes a 5% average
annual return and that you reinvest all of your dividends. Your actual costs may
be higher or lower.

<TABLE>
<CAPTION>
ASSUMING REDEMPTION ASSUMING NO
AT END OF PERIOD REDEMPTION
------------------------------------------ -----------
CLASS I CLASS II CLASS III CLASS III
------- -------- --------- -----------
<S> <C> <C> <C> <C>
After 1 year $ 88 $ 490 $ 306 $ 206
After 3 years $ 274 $ 733 $ 636 $ 636
After 5 years $ 477 $ 994 $1,092 $1,092
After 10 years $1,060 $1,741 $2,355 $2,355
</TABLE>

3
<PAGE> 7

--------------------------------------------------------------------------------
INVESTMENT DETAILS
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE -- The objective of the Portfolio is to achieve maximum
total return through current income by investing at least 65% of its total
assets in fixed-income securities. The Portfolio attempts to maximize total
return by assembling a portfolio of income producing obligations that Highland
believes will provide the optimal balance between risk and return within the
universe of securities in which the Portfolio is permitted to invest.

PRINCIPAL INVESTMENT STRATEGY -- Under normal market conditions, the Portfolio
primarily invests in medium to long term investment grade debt securities and
obligations issued by the U.S. government and U.S. corporations, as well as,
investment grade mortgage-backed and asset-backed securities. Investment grade
debt securities are securities rated Baa or higher by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's Corporation ("S&P"). The Portfolio
may also invest in unrated securities that Highland determines are of equivalent
quality to the other securities in which the Portfolio invests. The Portfolio
also may invest in securities of foreign issuers and engage in foreign currency
transactions.

In selecting securities for the Portfolio, Highland evaluates a number of
factors concerning the security, including: the issuer's creditworthiness, the
features of the security, and the current price of the security compared to
Highland's estimate of the security's long-term value. Highland believes that by
lessening the effect of market and interest rate risk, investors should
experience greater overall returns; accordingly, during periods of fluctuating
economic conditions and interest rates, Highland may attempt to minimize market
risk by adjusting the dollar-weighted average maturity of the Portfolio.
Highland also will attempt to time Portfolio transactions to take advantage of
anticipated changes in interest rates.

PRINCIPAL RISKS -- The following table describes the securities in which the
Portfolio typically invests and the principal risks associated with those
securities.

SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY
---------- --------------------------------------------
<S> <C>
CORPORATE DEBT OBLIGATIONS: Corporate debt CALL RISK -- The risk that an issuer will exercise its
obligations include bonds, notes, debentures, and right to pay principal on an obligation held by the
other obligations of corporate entities to pay interest Portfolio (such as a mortgage-backed security) earlier
and repay principal. than expected. This may happen when there is a decline
in interest rates.

CREDIT RISK -- The risk that the issuer of a security,
or a party to a contract, will default or otherwise not
honor a financial obligation.

EXTENSION RISK -- The risk that an issuer will exercise
its right to pay principal on an obligation held by the
Portfolio (such as a mortgage-backed security) later
than expected. This may happen when there is a rise in
interest rates. Under these circumstances, the value of
the obligation will decrease and the Portfolio will also
suffer from the inability to invest in higher yielding
securities.

4
<PAGE> 8

SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY
---------- --------------------------------------------
<S> <C>

CORPORATE DEBT OBLIGATIONS (CONTINUED) LIQUIDITY RISK -- The risk that certain securities or
other investments may be difficult or impossible to sell
at the time the Portfolio would like to sell them or it
may be difficult for the Portfolio to sell the
investment for the value the Portfolio has placed on it.

U.S. GOVERNMENT OBLIGATIONS: U.S. government obligations CALL RISK
are debt obligations issued or guaranteed by the U.S.
Treasury or by an agency or instrumentality of the U.S. EXTENSION RISK
government. Not all U.S. government obligations are
backed by the full faith and credit of the United INTEREST RATE RISK
States. For example, obligations issued by the Federal
Farm Credit Bank or by the Federal National Mortgage
Association are supported by the agency's right to
borrow money from the U.S. Treasury under certain
circumstances. There is no guarantee that the government
will support these types of obligations, and, therefore,
they involve more risk than other government
obligations.

MORTGAGE-BACKED SECURITIES: Mortgage-backed securities CALL RISK
represent direct or indirect participations in, or are
collateralized by and payable from, mortgage loans CREDIT RISK
secured by real property. Mortgage-backed securities can
be backed by either fixed rate mortgage loans or EXTENSION RISK
adjustable rate mortgage loans, and may be issued by
either a governmental or non-governmental entity. INTEREST RATE RISK
Typically, mortgage-backed securities issued by private
entities do not have the same credit standing as LIQUIDITY RISK
mortgage-backed securities issued or guaranteed by the
U.S. Government.

ASSET-BACKED SECURITIES: Asset-backed securities are CREDIT RISK
securities whose principal and interest payments are
collateralized by pools of assets such as auto loans, INTEREST RATE RISK
credit card receivables, leases, installment contracts
and personal property. Principal and interest payments LIQUIDITY RISK
may be credit enhanced by a letter of credit, a pool
insurance policy or a senior/subordinated structure.

MONEY MARKET FUNDS: Open-ended mutual funds that invest CREDIT RISK
in commercial paper, banker's acceptances, repurchase
agreements, government securities, certificates of INTEREST RATE RISK
deposit, and other highly liquid and safe securities,
and pay money market rates of interest. INFLATION RISK -- The risk that your investment will not
provide enough income to keep pace with inflation.
</TABLE>

5
<PAGE> 9

SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY
---------- --------------------------------------------
<S> <C>
SECURITIES OF FOREIGN ISSUERS: SECURITIES OF FOREIGN FOREIGN INVESTMENT RISK -- The risk that foreign
ISSUERS: Securities issued by: (1) companies organized securities may be adversely affected by political
outside the United States, (2) companies whose instability of the issuer's country, changes in currency
securities are principally traded outside of the United exchange rates, foreign economic conditions, or
States, and (3) foreign governments and agencies or regulatory and reporting standards that are less
instrumentalities of foreign governments. stringent than those of the United States. Foreign
investment risks will normally be greatest when a Fund
invests in issuers located in emerging countries.

LIQUIDITY RISK

MARKET RISK -- The risk that the market value of a
security may increase or decrease, sometimes rapidly and
unpredictably. This risk is common to all stocks and
bonds and the mutual funds that invest in them.

VALUATION RISK -- The risk that the Portfolio has valued
certain securities at a higher price than it can sell
them. This risk is common where the security is from a
relatively new issuer with little or no previous market
history and a mutual fund's management is called upon to
assign a value to the security.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: CREDIT RISK
Repurchase agreements involve the purchase of a security
by a purchaser and a simultaneous agreement by the
seller (generally a bank or dealer) to repurchase the
security from the purchaser at a specified date or on
demand. This technique offers a method of earning income
on idle cash. Reverse repurchase agreements involve the
sale of a security to another party (generally a bank or
dealer) in return for cash and an agreement to be
security back at a specified price and time.
</TABLE>

In addition to the securities identified above, the Portfolio may, from time to
time, engage in the following non-principal investment practices or techniques:

BORROWING FROM BANKS. The Portfolio may borrow money from banks (up to 33 1/3%
of the Portfolio's total assets) for temporary or emergency purposes.

DERIVATIVE INSTRUMENTS. The Portfolio may invest in instruments and securities
generally known as derivative investments for hedging purposes only. These
investments may include the use of forward currency contracts, put and call
option contracts, zero coupon bonds, and stripped fixed-income obligations.

WHAT IS A DERIVATIVE INSTRUMENT?

A derivative is a financial contract whose value is based on (or "derived" from)
a traditional security (such as a stock or bond), an asset (such as a commodity
like gold), or a market index (such as the S&P 500 Index). Futures and options
are derivatives that have been traded on regulated exchanges for more than two
decades.

6
<PAGE> 10

and return characteristics of the Portfolio. They may increase the Portfolio's
volatility and may involve the investment of a small amount of cash relative to
the magnitude of the risk assumed. They also may result in a loss of principal
if Highland judges market conditions incorrectly or employs a strategy that does
not correlate well with the investment strategy of the Portfolio. Positions in
options involve the risk that such options may fail as a hedging technique and
that closing transactions may not be effected where a liquid secondary market
does not exist.

LENDING SECURITIES. The Portfolio may temporarily lend up to 33 1/3% of its
portfolio securities to broker-dealers and institutions, but only when the loans
are fully collateralized.

TEMPORARY DEFENSIVE POSITION. In response to adverse economic or market
conditions, the Portfolio may invest without limit in short-term money market
securities including, but not limited to, U.S. Government obligations,
commercial paper, and certificates of deposit. This strategy is inconsistent
with the investment objective and principal investment strategies of the
Portfolio, and if employed, could result in the Portfolio achieving a lower
return than it might have achieved under normal market conditions.

For more information about the securities in which the Portfolio invests and
their associated risks, please refer to the Appendix to this Prospectus and the
SAI.

--------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO?
--------------------------------------------------------------------------------

First Tennessee, 530 Oak Court Dr., Memphis, Tennessee, serves as Investment
Adviser to the Portfolio and, with the prior approval of the Board of Trustees
(the "Trustees") has engaged Highland to act as Sub-Adviser to the Portfolio.
Subject to First Tennessee's supervision, Highland is responsible for the
day-to-day investment management of the Portfolio, including providing
investment research and credit analysis concerning portfolio investments and
conducting a continuous program of investment of portfolio assets in accordance
with the investment policies and objectives of the Portfolio.

For managing its investment and business affairs, the Bond Portfolio is
obligated to pay First Tennessee a monthly management fee at the annual rate of
.55% of its average net assets. First Tennessee has voluntarily agreed to waive
that portion of the management fee that exceeds .30% of the average net assets
of the Portfolio. First Tennessee serves as an investment adviser to individual,
corporate and institutional advisory clients, pension plans and collective
investment funds, with approximately $23.2 billion in assets under
administration (including nondiscretionary accounts) and $9.8 billion in assets
under management as of June 30, 2000, and has experience in supervising
sub-advisers.

Highland, 6077 Primacy Parkway, Memphis, TN, serves as the Sub-Adviser for the
Portfolio, subject to the supervision of First Tennessee and pursuant to the
authority granted to it under its Sub-Advisory Agreement with First Tennessee.
On March 1, 1994, Highland merged with and into First Tennessee Investment
Management, Inc. ("FTIM"), an affiliate of First Tennessee, and changed its name
to Highland Capital Management Corp.

FTIM (now Highland), has been a wholly-owned subsidiary of First Tennessee
National Corporation since 1972. First Tennessee and Highland have a history of
investment management that dates back to 1929. Highland has a total of $5.2
billion in assets under management as of June 30, 2000. First Tennessee is
obligated to pay Highland a monthly sub-advisory fee at the annual rate of 0.33%
of the Portfolio's average net assets. The Portfolio is not responsible for
paying any portion of Highland's sub-advisory fee. Highland is currently waiving
some or all of its sub-advisory fee.

7
<PAGE> 11
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
[PHOTO]

James R. Turner is one of the Portfolio Managers of the Bond Portfolio. Mr.
Turner managed the assets of the Portfolio's predecessor from August 1986 until
the Portfolio's conversion to a mutual fund in 1993. Mr. Turner also manages
pension and endowment funds for both public and private entities. Mr. Turner is
a Senior Vice President of Highland and is a Chartered Financial Analyst. Mr.
Turner is a graduate of the U.S. Military Academy and received a Masters of
Science in Industrial Engineering from Stanford University.

Steven Wishnia, one of the Portfolio Managers of the Bond Portfolio, is a
Director and President of Highland. Mr. Wishnia joined Highland in 1987 and is a
graduate of Pace University.

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HOW TO INVEST IN THE PORTFOLIO
--------------------------------------------------------------------------------

WHAT CLASSES OF SHARES DOES THE BOND PORTFOLIO OFFER?

The Portfolio offers investors three different classes of shares. The different
classes of shares represent investments in the same portfolio of securities;
however, each class is subject to different expenses and likely will have
different share prices. When you buy shares, be sure to tell us the class of
shares in which you would like to invest.

CLASS I SHARES. Class I shares are offered to institutional investors
exclusively. Class I shares are not subject to any sales loads and do not incur
distribution or shareholder servicing fees.

CLASS II SHARES. Class II shares are offered to investors subject to an up-front
sales load. Under certain circumstances described later in this prospectus, the
sales load may be waived. The sales load is reflected in the offering price of
Class II shares. Class II shares also incur shareholder servicing fees.

CLASS III SHARES. Class III shares are offered to investors without the
imposition of any up-front sales load; however, you will pay a contingent
deferred sales charge ("CDSC") of 1.00% if you redeem the shares within one year
from the date of purchase. Class III shares also incur distribution and
shareholder servicing fees.

CLASS I

WHO MAY INVEST?

Class I shares are designed exclusively for investment of monies held in
non-retail trust, advisory, agency, custodial or similar accounts
("Institutional Accounts"). Class I shares may be purchased for Institutional
Accounts by financial institutions, business organizations, corporations,
municipalities, non-profit institutions, and other institutional investors
serving in a trust, advisory, agency, custodial or similar capacity (each an
"Institutional Investor" and collectively "Institutional Investors") who meet
the investment threshold for this Class of shares.

HOW IS AN INSTITUTIONAL ACCOUNT ESTABLISHED?

An initial investment must be preceded by or made in conjunction with the
establishment of an Institutional Account with an Institutional Investor.
Establishment of an Institutional Account may require that documents and
applications be completed and signed before the investment can be implemented.
The Institutional Investor may require that certain documents be provided prior
to making a redemption from the Portfolio.

Institutional Investors may charge fees in addition to those described herein.
Fee schedules for Institutional Accounts are available upon request from the
Institutional Investor and are detailed in the agreements by which each client
opens an account with an Institutional Investor.

8
<PAGE> 12

HOW ARE INVESTMENTS MADE?

Each Institutional Investor will transmit orders to Boston Financial Data
Services (the "Transfer Agent"). If an order is received by the Transfer Agent
prior to the close of business (normally 4:00 p.m. Eastern Time) on any Business
Day (as defined in the section "How Are Portfolio Shares Valued?") and the funds
are received by the Transfer Agent that day, the investment will earn dividends
declared, if any, on the day following purchase. Institutional Investors will
wire funds through the Federal Reserve System. Purchases will be processed at
the net asset value per share (NAV) next calculated after an order is received
and accepted by the Transfer Agent. The Portfolio requires advance notification
of all wire purchases. To secure same day acceptance of federal funds (monies
transferred from one bank to another through the Federal Reserve System with
same-day availability), an Institutional Investor must call the Transfer Agent
at 1-800-442-1941 (option 2), prior to the close of business (normally 4:00 p.m.
Eastern Time) on any Business Day to advise it of the wire. The Trust may
discontinue offering its shares in any Class of the Portfolio without notice to
shareholders.

MINIMUM INVESTMENT AND ACCOUNT BALANCE.

The minimum initial investment for each Institutional Investor is $750,000.
Institutional Investors may satisfy the minimum investment by aggregating their
Institutional Accounts within the Portfolio. Subsequent investments may be in
any amount. If an Institutional Investor's Class I account falls below $375,000
due to redemption, the Portfolio may close the account. An Institutional
Investor may be notified if the minimum balance is not being maintained and will
be allowed 30 days to make additional investments before the account is closed.
Shares will be redeemed at the NAV on the day the account is closed, and
proceeds will be sent to the address of record.

Should an Institutional Investor of Class I shares cease to be eligible to
participate in this Class, Class I shares held in an Institutional Account may
be converted to shares of another class. Any such conversion will be made on the
basis of the relative NAVs of the two Classes without the imposition of any
sales load, fee or other charge. Institutional Investors converted to Class III
shares will not be subject to the 1% CDSC in year 1. Institutional Investors
will receive at least 30 days prior notice of any proposed conversion.

HOW ARE REDEMPTIONS MADE?

Institutional Investors may redeem all or a portion of their account shares on
any Business Day. Shares will be redeemed at the NAV next calculated after the
Transfer Agent has received the redemption request and will earn dividends
declared, if any, through the day of redemption. If an account is closed, any
accrued dividends will be paid at the beginning of the following month.

Institutional Investors may make redemptions by wire provided they have
established a wire account with the Transfer Agent. Please call 1-800-442-1941
(option 2), to advise the Transfer Agent of the wire. If telephone instructions
are received before the close of business (normally 4:00 p.m. Eastern Time) on
any Business Day, proceeds of the redemption will be wired as federal funds on
the next Business Day to the bank account designated with the Transfer Agent.
The Institutional Investor may change the bank account designated to receive an
amount redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent at P.O. Box 8050, Boston, MA, 02266.

Pursuant to the Investment Company Act of 1940, as amended, if making immediate
payment of redemption proceeds could adversely affect the Portfolio, payments
may be made up to seven days later. Also, when the New York Stock Exchange
(NYSE) is closed (or when trading is restricted) for any reason other than
customary weekend or holiday closings, or under any emergency circumstances as
determined by the SEC to merit such action, the right of redemption may be
suspended or the date of payment postponed for a period of time that may exceed
seven days. To the extent Portfolio securities are traded in other markets on
days when the NYSE is closed, the Portfolio's NAV may be affected on days when
investors do not have access to the Portfolio to purchase or redeem shares.

If transactions by telephone cannot be executed (for example, during times of
unusual market activity), orders may be placed by mail to the Transfer Agent. In
case of suspension of the right of redemption, the Institutional Investor may
either withdraw its request for redemption or it will receive payment based on
the NAV next determined after the termination of the suspension.

ADDITIONAL INFORMATION

The Portfolio also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Highland's opinion, they are of a size that would disrupt management of the
Portfolio.

In order to allow Highland to manage the Portfolio most effectively,
Institutional Investors are strongly urged to initiate all trades (investments,
exchanges and redemptions of shares) as early in the day as possible and to
notify the Transfer Agent at least one day in advance of trades in excess of $1
million. In making

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<PAGE> 13

these trade requests, the name of the Institutional Investor and the account
number(s) must be supplied.

Transactions may be initiated by telephone. Please note that the Portfolio and
its agents will not be responsible for any losses resulting from unauthorized
telephone transactions if the Portfolio or its agents follow reasonable
procedures designed to verify the identity of the caller. These procedures may
include requesting additional information or using personalized security codes.
The Portfolio or its agents may also record calls and an Institutional Investor
should verify the accuracy of confirmation statements immediately after receipt.
If an Institutional Investor does not want the ability to initiate redemptions
and exchanges by telephone, please call the Transfer Agent for instructions.

CLASS II AND III

WHO MAY INVEST?

Class II and III shares are designed for individuals and other investors who
seek mutual fund investment convenience plus a lower investment minimum. These
classes offer investors differing expense and sales load structures to choose
between. See "Fees and Expenses of the Portfolio."

INVESTMENT REQUIREMENTS

The minimum initial investment in Class II and III shares is $1,000. Subsequent
investments may be in any amount of $100 or greater. If you participate in the
Systematic Investing Program (see "Systematic Investing Program" below) or the
"A Plus/First Horizon Card Program" (a consumer discount card program provided
by First Horizon Strategic Alliances, Inc., a subsidiary of First Tennessee),
the minimum initial investment is $250, and subsequent investments may be in any
amount of $25 or greater.

If you are an employee of First Tennessee or any of its affiliates and you
participate in the Systematic Investing Program, the minimum initial investment
is $50, and subsequent investments may be in any amount of $25 or greater.

If your balance in the Portfolio falls below the applicable minimum investment
requirement due to redemption, you may be given 30 days notice to reestablish
the minimum balance. If you do not re-establish the minimum balance, your
account may be closed and the proceeds mailed to you at the address on record.
Shares will be redeemed on the day the account is closed.

All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash or third party checks will be accepted. If you make a purchase
with more than one check, each check must have a value of at least $100, and the
minimum investment requirement still applies (excluding the specific
circumstances, stated above, which reduce the minimum investment requirement).
The Portfolio reserves the right to limit the number of checks processed at one
time. If your check does not clear, your purchase will be canceled and you could
be liable for any losses or fees incurred.

You may initiate any transaction either directly or through your Investment
Professional. Please note that the Portfolio and its agents will not be
responsible for any losses resulting from unauthorized transactions if the
Portfolio or its agents follow reasonable procedures designed to verify the
identity of the caller. These procedures may include requesting additional
information or using personalized security codes. Your Investment Professional
may also record calls and you should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the ability to
redeem and exchange by telephone, please check the box on your application (if
you invest directly) or, if you invest through an Investment Professional,
please call them for instructions.

HOW DO I SET UP AN ACCOUNT?

You may set up an account directly in the Portfolio or you may invest in the
Portfolio through your Investment Professional (see "How Do I Invest Through My
Investment Professional" below). Shares will be purchased based on the NAV next
calculated after the Transfer Agent has received the request in proper form.

If you are investing through an Investment Professional, transactions that your
Investment Professional initiates should be transmitted to the Transfer Agent
prior to the close of business (normally 4:00 p.m. Eastern Time) in order for
you to receive that day's share price. The Transfer Agent must receive payment
within three business days after an order is placed. Otherwise, the purchase
order may be canceled and you could be held liable for the resulting fees and/or
losses. An investor will earn dividends declared, if any, on the business day
following the day payment is received by the Transfer Agent.

HOW DO I INVEST DIRECTLY?

When opening a new account directly, you must complete and sign an account
application and send it to

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<PAGE> 14

First Funds, c/o Boston Financial Data Services, P.O. Box 8050, Boston, MA
02266-8050. Telephone representatives are available at 1-800-442-1941 (option
2), between the hours of 8:00 a.m. to 4:00 p.m. Central Time (9:00 a.m. to 5:00
p.m. Eastern Time), Monday through Friday.

Investments may be made in several ways:

BY MAIL: Make your check payable to FIRST FUNDS BOND PORTFOLIO, and mail it,
along with the application, to the address indicated on the application. Your
account will be credited on the business day that the Transfer Agent receives
your completed application.

BY BANK TRANSFER (ACH): Bank transfer allows you to move money between your bank
account and your First Funds account. This automatic service allows you to
transfer money from your bank account via the Automated Clearing House (ACH)
network to your First Funds account. First, a deposit account must be opened at
a bank providing bank transfer services and you must arrange for this service to
be provided. Next, an account must be established, and an application along with
a voided check or deposit slip sent to the Transfer Agent. It takes
approximately 15 days to set up an ACH account. Once you have completed this
process, you can initiate a bank transfer by contacting a representative from
your bank or First Funds at 1-800-442-1941 (option 2), providing the required
information, and authorizing the transfer to take place. Please allow two or
three days after the authorization for the transfer to occur.

BY WIRE: Call 1-800-442-1941 (option 2), to set up your account to accommodate
wire transactions. To initiate your wire transaction, call your depository
institution. Federal funds (monies transferred from one bank to another through
the Federal Reserve System with same-day availability) should be wired to:

State Street Bank and Trust Company
ABA #011000028
First Funds
Account #9905-440-5
(Account Registration)
(Account Number)
(Wire Control Number) *See Below*

Prior to sending wires, please be sure to call 1-800-442-1941 (option 2), to
receive a wire control number to be included in the body of the wire (see
above).

Your bank may charge you a fee for this service.

HOW DO I REDEEM SHARES WHEN INVESTING DIRECTLY?

You may redeem all or a portion of your shares on any day that the Portfolio is
open for business. Shares will be redeemed at the next calculated NAV after the
Transfer Agent has received the redemption request and will earn dividends
declared, if any, through the day of prior to redemption. If an account is
closed, any accrued dividends will be paid at the beginning of the following
month.

You may redeem shares in several ways:

BY MAIL: Write a "letter of instruction" with your name, the Portfolio's name,
your account number, the dollar amount or number of shares to be redeemed, and
any additional requirements that apply to each particular account. You will need
the letter of instruction signed by all persons required to sign for
transactions, exactly as their names appear on the account application, along
with a signature guarantee (if required) as described below.

A signature guarantee is designed to protect you, the Portfolio, and its agents
from fraud. Your written request requires a signature guarantee if you wish to
redeem more than $1,000 worth of shares; if your account registration has
changed within the last 30 days; if the check is not being mailed to the address
on your account; if the check is not being made out to the account owner; or if
the redemption proceeds are being transferred to another First Funds account
with a different registration. The following institutions should be able to
provide you with a signature guarantee: banks, broker-dealers, credit unions (if
authorized under state law), securities exchanges and associations, clearing
agencies, and savings associations. A signature guarantee may not be provided by
a notary public.

BY PHONE: Provided you have elected this option in advance, you may request a
redemption of shares by calling the Transfer Agent at 1-800-442-1941 (option 2).
Your redemption proceeds can be sent to you in the mail or, as more fully
described below, the proceeds can be sent directly to a bank account by bank
transfer or wire. For your protection, all telephone calls are recorded. Also,
neither First Funds, First Tennessee, Highland, nor the Transfer Agent or any of
their agents will be responsible for acting on telephone instructions they
believe are genuine. For more information about telephone redemptions, please
call 1-800-442-1941 (option 2).

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<PAGE> 15

BY BANK TRANSFER (ACH): When establishing your account in the Portfolio, you
must have indicated this account privilege in order to authorize the redemption
of monies with the proceeds transferred to your bank account via the ACH. To
authorize a redemption, simply contact the Transfer Agent at 1-800-442-1941
(option 2), and your redemption will be processed at the NAV next calculated.
Please allow two or three days after the authorization for monies to reach your
bank account.

BY WIRE: You may make redemptions by wire provided you have established your
account to accommodate wire transactions. If telephone instructions are received
before the close of business (normally 4:00 p.m. Eastern Time), proceeds of the
redemption will be wired as federal funds on the next Business Day to the bank
account designated with the Transfer Agent. You may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Transfer Agent.

ADDITIONAL REDEMPTION REQUIREMENTS: The Portfolio may hold payment on
redemptions until it is reasonably satisfied that investments made by check have
been collected, which can take up to seven days. Also, when the NYSE is closed
(or when trading is restricted) for any reason other than its customary weekend
or holiday closings, or under any emergency circumstances as determined by the
SEC to merit such action, the right of redemption may be suspended or the date
of payment postponed for a period of time that may exceed seven days. To the
extent that Portfolio securities are traded in other markets on days when the
NYSE is closed, the Portfolio's NAV may be affected on days when investors do
not have access to the Portfolio to purchase or redeem shares.

If you are unable to reach the Transfer Agent by telephone (for example, during
times of unusual market activity), consider placing your order by mail directly
to the Transfer Agent. In case of suspension of the right of redemption, you may
either withdraw your request for redemption or you will receive payment based on
the next determined NAV after the termination of the suspension.

HOW DO I INVEST THROUGH MY INVESTMENT PROFESSIONAL?

If you are investing through an investment adviser, broker dealer, or other
third party (each, an "Investment Professional"), you may be required to set up
a brokerage or agency account. Please call your Investment Professional for
information on establishing an account. If you are purchasing shares of the
Portfolio through a program of services offered or administered by your
Investment Professional, you should read the program materials in conjunction
with this Prospectus. Certain features of such programs may impose additional
requirements and charges for the services rendered. Your Investment Professional
may offer any or all of the services mentioned in this section, and is
responsible for initiating all initial purchase transactions. Please contact
your Investment Professional for information on these services.

HOW DO I REDEEM THROUGH MY INVESTMENT PROFESSIONAL?

On your behalf, the broker of record listed on your account may redeem shares.
Proceeds from the redemption can only be sent to your address of record.

SYSTEMATIC INVESTING PROGRAM

The Systematic Investing Program offers a simple way to maintain a regular
investment program. You may arrange automatic transfers (minimum $25 per
transaction) from your bank account to your First Funds account on a regular
basis. When you participate in this program, the minimum initial investment in
each Portfolio is $250. If you are an employee of First Tennessee or any of its
affiliates, the minimum initial investment in the Portfolio is $50. You may
change the amount of your automatic investment, skip an investment, or stop the
Systematic Investing Program by calling the Transfer Agent at 1-800-442-1941
(option 2), or your Investment Professional at least three Business Days prior
to your next scheduled investment date.

SYSTEMATIC WITHDRAWAL PLAN

You can have monthly, quarterly or semi-annual checks sent from your account to
you, to a person named by you, or to your bank checking account. Your Systematic
Withdrawal Plan payments are drawn from share redemptions and must be in the
amount of $100 or more per Portfolio per month. If Systematic Withdrawal Plan
redemptions exceed income dividends earned on your shares, your account
eventually may be exhausted. Please contact First Funds at 1-800-442-1941
(option 1) or your Investment Professional for more information.

SYSTEMATIC EXCHANGE PROGRAM

This account option may be added to your account if you would like to
automatically withdraw from one First Funds account into another First Funds
account on a regular basis. Please note that there may be a tax liability
associated with redemptions made from your

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<PAGE> 16

mutual fund investment. Talk to your Investment Professional regarding your
specific tax situation.

The systematic exchange program is established between identically registered
accounts. New accounts must meet the account minimum standards listed
previously. Call First Funds at 1-800-442-1941 (option 2) for more details on
establishing this program. See "How Are Exchanges Made?" for more information on
exchanges.

ADDITIONAL INFORMATION

TAX-DEFERRED RETIREMENT PLANS: Retirement plans can offer significant tax
savings to individuals. Please call First Funds at 1-800-442-1941 (option 1) or
your Investment Professional for more information on the plans and their
benefits, provisions and fees. The Transfer Agent or your Investment
Professional can set up your new account in the Portfolio under one of
several tax-deferred plans. These plans let you invest for retirement and defer
or eliminate the tax on your investment income. Minimums may differ from those
listed previously under "Investment Requirements." Plans include Traditional
Individual Retirement Accounts (IRAs) Roth IRA's, Education IRAs, Rollover IRAs,
Keogh Plans, and Simplified Employee Pension Plans (SEP-IRAs).

CLASS II

SALES LOADS

The public offering price for Class II shares is the sum of the NAV plus a sales
load. As indicated below, a portion of this load may be reallowed to a
broker-dealer which has entered into an agreement with ALPS, the Portfolio's
Distributor. You may calculate your sales load as follows:

TOTAL SALES LOAD FOR CLASS II SHARES

<TABLE>
<CAPTION>
AS a % OF OFFERING BROKER-DEALER
AMOUNT OF TRANSACTION PRICE PER SHARE AS a % OF NAV REALLOWANCE
--------------------- ------------------ ------------- -------------
<S> <C> <C> <C>
Less than $100,000 3.75 3.90 3.25
$100,000 to $249,999 3.00 3.09 2.65
$250,000 to $499,999 2.25 2.30 2.00
$500,000 to $999,999 1.50 1.52 1.25
$1,000,000 and over 0.50 0.50 0.40
</TABLE>

The broker-dealer reallowance may be changed from time to time.

You may purchase Class II shares without a sales load if the purchase will be:

(A) through an IRA, 401(k) Plan, 403(b) Plan or other defined
contribution plan or directed agency account if the trustee, custodian, or agent
thereof is a direct or indirect subsidiary or franchisee bank of First Tennessee
or its affiliates;

(B) by registered representatives, directors, advisory directors,
officers and employees (and their immediate families) of First Tennessee or its
affiliates;

(C) by a current or former Trustee, officer or employee of First Funds;
the spouse of a First Funds Trustee, officer or employee; a First Funds Trustee
acting as a custodian for a minor child or grandchild of a First Funds Trustee,
officer or employee; or the child or grandchild of a current or former Trustee,
officer or employee of First Funds who has reached the age of majority;

(D) by a charitable remainder trust or life income pool established for
the benefit of a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code);

(E) for use in a financial institution or investment adviser managed
account for which a management or investment advisory fee is charged;

(F) with redemption proceeds from other mutual fund complexes on which
the investor has paid a front-end sales charge within the past 60 days upon
presentation of purchase verification information; or

(G) through certain promotions where the load is waived for investors.

13
<PAGE> 17

In addition, you will not pay a sales load on the reinvestment of dividends or
distributions in the Portfolio or any other First Funds Portfolio, or in
connection with certain share exchanges as described under "How are Exchanges
Made?" Further, you generally will not pay a sales load on Class II shares of
the Portfolio which you buy using proceeds from the redemption of a First Funds
Portfolio which does not charge a front-end load, if you obtained such shares
through an exchange for Class II shares which you purchased with a sales load. A
sales load will apply to your purchase of Class II shares in the foregoing
situation only to the extent that the Portfolio's sales load exceeds the sales
load you paid in the prior purchase of Class II shares.

In addition, if you purchase Class II shares within 60 days after redeeming
shares of the Portfolio, you will receive credit toward the sales load payable
on the purchase to the extent of the sales load you paid on the shares you
redeemed. This reinstatement privilege may be exercised only with respect to
redemptions and purchases in the same First Funds Portfolio. The reinstatement
privilege can be exercised only one time with respect to any particular
redemption.

QUANTITY DISCOUNTS

You may be entitled to reduced sales charges through the Right of Accumulation
or a Letter of Intent, even if you do not make an investment of a size that
would normally qualify for a quantity discount.

To qualify for a reduction of or exception to the sales load, you or your
Investment Professional must notify the Transfer Agent at the time of purchase
or exchange. The reduction in sales load is subject to confirmation of your
holdings through a check of records. The Trust may modify or terminate quantity
discounts at any time. For more information about quantity discounts, contact
your service organization or First Funds at 1-800-442-1941 (option 1).

RIGHT OF ACCUMULATION. The sales charge schedule under the heading "Sales Loads"
shows that the sales load you will pay on Class II shares is reduced as your
aggregate investment increases. The Right of Accumulation allows you to combine
certain First Funds investments to determine your aggregate investment and the
applicable reduced sales load. You may combine the amount of your investment in
the Portfolio's Class II shares with the value of your investment in Class II of
any other First Funds Portfolio you own and on which you paid a sales load.

If you are a participant in a First Funds IRA or if you are a trustee or
custodian of another type of First Funds retirement plan, you may also include
as part of your aggregate investment any holdings through the IRA or in the plan
even if a load was not paid. If, for example, you beneficially own Class II
shares of a First Funds Portfolio with an aggregate current value of $99,000 and
you subsequently purchase shares of the Portfolio having a current value of
$1,000, the load applicable to the subsequent purchase would be reduced to 3.00%
of the offering price. Similarly, each subsequent purchase of First Funds Class
II shares may be added to your aggregate investment at the time of purchase to
determine the applicable sales loads.

LETTER OF INTENT. A Letter of Intent allows you to purchase Class II shares over
a 13-month period at a reduced sales charge. The sales charge is based on the
total amount you intend to purchase plus the total net asset value of Class II
shares which you already own on which you have paid a sales load. If you are a
participant in a First Funds IRA or if you are a trustee or custodian of another
type of First Funds retirement plan, you may also credit towards completion of
your Letter of Intent any Class II shares held through the IRA or in the plan,
even if a load was not paid. Each investment you make during the period may be
made at the reduced sales charge that would apply to the total amount you intend
to invest. The reduced sales load applies only to new purchases.

If you do not invest the total amount within the period, you may pay the
difference between the higher sales charge rate that would have been applied to
the purchases you made and the reduced sales charge rate you have paid. Shares
of the Portfolio equal to 5% of the amount you intend to invest will be held in
escrow and, if you do not pay the difference within 20 days following the
mailing of a request, the Transfer Agent will redeem a sufficient amount of your
escrowed shares to pay the additional sales charge. After the terms of your
Letter of Intent are fulfilled, the Transfer Agent will release your escrowed
shares.

If your purchases qualify for a further sales load reduction in addition to that
indicated in the Letter of Intent, the sales load will be adjusted to reflect
your total purchases. Signing a Letter of Intent does not bind you to purchase
the full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales load. To
apply, sign the Letter of Intent form at the time you purchase Class II shares.
You will be entitled to the applicable sales load that is in effect at the date
you submit the Letter of Intent until you complete your intended purchase.

QUALIFICATION OF DISCOUNTS. As shown in the schedule of Class II sales charges,
larger purchases may result in

14
<PAGE> 18
lower sales charges to you. For purposes of determining the amount of purchases
using the Right of Accumulation and Letter of Intent privileges, you may combine
your purchase with:

- purchases by your spouse for his, her or your joint account or for
the account of any minor children, and

- the aggregate investment of any trustee or other Institutional
Investor for you and/or your spouse or your minor children.

A trustee or custodian of any qualified pension or profit sharing plan may
combine its aggregate purchases.

OTHER. Class II shares also incur Shareholder Servicing Fees. See discussion
under "Distribution Plans and Shareholder Servicing Plans."

CLASS III

Class III shares are bought with no front-end load. Therefore, the offering
price for such shares will be at their NAV. Class III shares incur Distribution
Fees and Shareholder Servicing Fees. See discussion under "Distribution Plans
and Shareholder Servicing Plans."

DEFERRED SALES CHARGES. A contingent deferred sales charge (CDSC) of 1.00% is
imposed on redemptions of Class III shares within the first year after purchase,
based on the lower of the shares' cost and the current net asset value. Any
shares acquired by reinvestment of distributions will be redeemed without a
CDSC.

ALL CLASSES

HOW ARE PORTFOLIO SHARES VALUED?

The price at which you buy, sell or exchange Portfolio shares is the share price
or net asset value (NAV). The share price for each Class of shares of the
Portfolio is determined by adding the value of each Class' proportional share of
the Portfolio's investments, cash and other assets, deducting each Class'
proportional share of liabilities, and then dividing that value by the total
number of the shares outstanding in that Class.

The Portfolio is open for business each day that the NYSE is open (a "Business
Day"). The NAV is calculated at the close of the Portfolio's Business Day, which
coincides with the close of regular trading of the NYSE (normally 4:00 p.m.
Eastern Time). Share price is not calculated on the days that the NYSE is
closed.

When the Portfolio calculates the share price for each share Class, it values
the securities it holds at market value. Sometimes market quotes from some
securities are not available or are not representative of market value. Examples
would be when events occur that materially affect the value of a security at a
time when the security is not trading or when the securities are illiquid. In
that case, securities may be valued in good faith at fair value, using
consistently applied procedures decided on by the Trustees of First Funds.

WHAT ARE MY DISTRIBUTION OPTIONS?

The Portfolio earns interest from bond, money market, and other fixed-income
investments. These are passed along as dividend distributions. Income dividends
for the Portfolio are declared daily and paid monthly. The Portfolio may realize
capital gains if it sells securities for a higher price than it paid for them.
These are passed along as capital gain distributions.

When you fill out your account application, you can specify how you want to
receive your distributions. Currently, there are three available options:

1. REINVESTMENT OPTION. Your dividend distributions and capital gain
distributions, if any, will be automatically reinvested in additional shares of
the Portfolio. Reinvestment of distributions will be made at that day's NAV. If
you do not indicate a choice on your application, you will be assigned this
option.

2. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution, if any. Distribution checks will be mailed no later than seven
days after the last day of the month.

3. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for any dividend
distribution.

HOW ARE EXCHANGES MADE?

An exchange is the redemption of shares of one Portfolio and the purchase of
shares of another. The exchange privilege is a convenient way to sell and buy
shares of other Portfolios within First Funds. Not all First Funds Portfolios
may be available in your state. Please check with your Investment Professional
or call First Funds at 1-800-442-1941. Except as noted below, the Portfolio's
shares may be exchanged for the same Class of shares of other First Funds
Portfolios. The redemption and purchase will be made at the NAV next determined
after the exchange request is received and accepted by the Transfer Agent. You
may execute exchange transactions by calling the Transfer Agent at
1-800-442-1941 (option 2) prior to the close of business (normally 4:00 p.m.
Eastern Time) on any Business Day.

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<PAGE> 19

Class II shares of the First Funds Money Market Portfolios are not currently
available for investment. Investors in Class II shares wishing to exchange into
one of the Money Market Portfolios will receive Class III shares.

If you exchange shares subject to a CDSC the transaction will not be subject to
the CDSC. However, when you redeem the shares acquired through the exchange, the
redemption may be subject to the CDSC, depending upon when you originally
purchased the shares. The CDSC will be computed using the schedule of any
Portfolio into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. Also,
Institutional Investors converted to Class III shares will not be subject to the
1% CDSC in year 1.

When making an exchange or opening an account in another Portfolio by exchange,
the registration and tax identification numbers of the two accounts must be
identical. In order to open a new account through exchange, the minimum initial
investment requirements must be met.

Each exchange may produce a gain or loss for tax purposes. In order to protect
the Portfolio's performance and its shareholders, First Tennessee and Highland
discourage frequent exchange activity by investors in response to short-term
market fluctuations. The Portfolio reserves the right to refuse any specific
purchase order, including certain purchases by exchange if, in Highland's
opinion, the Portfolio would be unable to invest effectively in accordance with
its investment objective and policies, or would otherwise be affected adversely.
Exchanges or purchase orders may be restricted or refused if the Portfolio
receives or anticipates individual or simultaneous orders affecting significant
portions of the Portfolio's assets. Although the Portfolio will attempt to give
prior notice whenever it is reasonably able to do so, it may impose these
restrictions at any time. The Portfolio reserves the right to modify or withdraw
the exchange privilege upon 60 days notice and to suspend the offering of shares
in any Class without notice to shareholders. You or your Institutional Investor,
if you are invested in Class I, will receive written confirmation of each
exchange transaction.

Exchanges are generally not permitted from Class I to another Class. Should a
beneficial owner of Class I shares cease to be eligible to purchase shares of
Class I, Class I shares held in an Institutional Account may be converted to
shares of another Class.

STATEMENTS AND REPORTS

You, or if Class I, the Institutional Investor, will receive a monthly statement
and a confirmation after every transaction that affects the share balance or the
account registration. A statement with tax information will be mailed by January
31 of each tax year and also will be filed with the IRS. At least twice a year,
you, or if Class I, the Institutional Investor, will receive the Portfolio's
financial statements. To reduce expenses, only one copy of the Portfolio's
reports (such as the Prospectus and Annual Report) will be mailed to each
investor or, if Class I, each Institutional Investor. Please write to First
Funds at 370 17th Street, Suite 3100, Denver, Colorado 80202 to request
additional copies.

WHAT IS THE EFFECT OF FEDERAL INCOME TAX ON THIS INVESTMENT?

The Portfolio intends to distribute substantially all of its net investment
income and capital gains, if any, to shareholders within each calendar year as
well as on a fiscal year basis. Any net capital gains realized are normally
distributed in December. Income dividends for the Portfolio are declared daily
and paid monthly.

FEDERAL TAXES. Distributions of gains from the sale of assets held by the
Portfolio for more than one year generally are taxable to shareholders at the
applicable long-term capital gains rate, regardless of how long they have owned
their Portfolio shares. Distributions from other sources generally are taxed as
ordinary income.

Distributions are taxable when they are paid, whether taken in cash or
reinvested in additional shares, except that distributions declared in October,
November or December and paid in January are taxable as if paid on December 31.
The Portfolio will send each investor or, if Class I, each Institutional
Investor, an IRS Form 1099-DIV by January 31 of each year.

REDEMPTIONS AND EXCHANGES. A capital gain or loss may be realized when shares of
the Portfolio are redeemed or exchanged. For most types of accounts, the
Portfolio will report the proceeds of redemptions to each shareholder or, if
Class I, the Institutional Investor, and the IRS annually. However, the tax
treatment also depends on the purchase price and your personal tax position.

"BUYING A DIVIDEND." If you purchase shares just prior to a distribution of
income or capital gains, the purchase price will reflect the amount of the
upcoming

16
<PAGE> 20

distribution, but you will be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of your capital. This is known as "buying a dividend".

OTHER TAX INFORMATION. The information above is only a summary of some of the
federal tax consequences generally affecting the Portfolio and its shareholders,
and no attempt has been made to discuss individual tax consequences. In addition
to federal tax, distributions may be subject to state or local taxes.

Institutional Investors and other shareholders should consult their tax advisers
for details and up-to-date information on the tax laws in your state to
determine whether the Portfolio is suitable given your particular tax situation.
It is not anticipated that the Portfolio's distributions will be exempt from
state personal income tax, except to the extent that any distributions of income
are attributable to interest on bonds or securities of the U.S. Government or
any of its agencies or instrumentalities.

When you sign your account application, you will be asked to certify that your
taxpayer identification number is correct and that you are not subject to backup
withholding for failing to report income to the IRS. If you do not comply with
IRS regulations, the IRS can require the Portfolio to withhold 31% of taxable
distributions from your account.

--------------------------------------------------------------------------------
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING PLANS
--------------------------------------------------------------------------------

The Trustees have adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act for Class III shares of the Portfolio (the "Distribution Plan").
The Distribution Plan permits the use of portfolio assets to compensate ALPS for
its services and costs in distributing Class III shares and servicing
shareholder accounts.

Under the Distribution Plan, ALPS receives an amount up to .75% of the average
annual net assets of the Portfolio that are attributable to Class III shares.
The Trustees have limited the amount that may be paid under the Distribution
Plan to .50%. All or a portion of the fees paid to ALPS under the Distribution
Plan will, in turn, be paid to certain broker-dealers, investment advisers, and
other third parties (each an "Investment Professional" and collectively
"Investment Professionals") as compensation for selling Class III shares and for
providing ongoing sales support services.

The Trustees also have adopted Shareholder Servicing Plans on behalf of the
Class II and Class III shares of the Portfolio. Under the Shareholder Servicing
Plans, certain broker-dealers, banks, and other financial institutions
(collectively "Service Organizations") are paid an amount equal to .25% of the
average annual net assets of the Portfolio that are attributable to each Class
of shares as compensation for shareholder services and account maintenance.
These services include responding to shareholder inquiries, directing
shareholder communications, account balance maintenance, and dividend posting.

Because the fees paid under the Distribution and the Shareholder Servicing Plans
are paid out of portfolio assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than other types of
sales charges.

17
<PAGE> 21

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance for the past five years. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned on an investment
in the Portfolio (assuming reinvestment of all dividends and distributions).
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Portfolio's financial statements, is included in the Portfolio's annual
report, which is available upon request by calling First Funds at 1-800-442-1941
(option 1).

BOND PORTFOLIO

<TABLE>
<CAPTION>
CLASS I
--------------------------------------------------------------------
For the Year
Ended June 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.83 $ 10.29 $ 9.84 $ 9.73 $ 9.91
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.58 0.59 0.61 0.61 0.60
Net realized and unrealized gain (loss) on
investments (0.27) (0.37) 0.45 0.11 (0.18)
-------- -------- -------- -------- --------
Total from investment operations 0.31 0.22 1.06 0.72 0.42
-------- -------- -------- -------- --------
Distributions:
Net investment income (0.58) (0.59) (0.61) (0.61) (0.60)
Net realized gain (0.03) (0.09) -- -- --
-------- -------- -------- -------- --------
Total distributions (0.61) (0.68) (0.61) (0.61) (0.60)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.53 $ 9.83 $ 10.29 $ 9.84 $ 9.73
======== ======== ======== ======== ========

TOTAL RETURN+ 3.35% 2.04% 11.02% 7.58% 4.23%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $222,222 $224,467 $219,088 $123,184 $107,832
Ratio of expenses to average daily net assets (1) 0.53% 0.48% 0.49% 0.49% 0.41%
Ratio of net investment income to average net assets 6.07% 5.73% 5.98% 6.20% 5.99%
Portfolio turnover rate 17% 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. 0.86% 0.88% 0.89% 0.89% 0.91%
</TABLE>

+ Total return would have been lower had various fees not been waived during the
period.

18
<PAGE> 22

FINANCIAL HIGHLIGHTS
BOND PORTFOLIO (CONTINUED)

<TABLE>
<CAPTION>
CLASS II
--------------------------------------------------------------------------
For the Year
Ended June 30,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996**
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.81 $ 10.26 $ 9.81 $ 9.71 $ 10.18
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.55 0.55 0.57 0.57 0.29
Net realized and unrealized gain (loss) on
investments (0.27) (0.35) 0.46 0.10 (0.47)
--------- --------- --------- --------- ---------
Total from investment operations 0.28 0.20 1.03 0.67 (0.18)
--------- --------- --------- --------- ---------
Distributions:
Net investment income (0.55) (0.56) (0.58) (0.57) (0.29)
Net realized gain (0.03) (0.09) -- -- --
--------- --------- --------- --------- ---------
Total distributions (0.58) (0.65) (0.58) (0.57) (0.29)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.51 $ 9.81 $ 10.26 $ 9.81 $ 9.71
========= ========= ========= ========= =========

TOTAL RETURN+*** 3.04% 1.86% 10.72% 7.12% (1.75)%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 6,107 $ 5,172 $ 1,801 $ 841 $ 67
Ratio of expenses to average daily net assets(1) 0.84% 0.81% 0.84% 0.90% 0.80%*
Ratio of net investment income to average net assets 5.76% 5.40% 5.63% 5.79% 5.61%*
Portfolio turnover rate 17% 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. 1.17% 1.21% 1.24% 1.30% 1.30%*
</TABLE>

<TABLE>
<CAPTION>
CLASS III
-------------------------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.81 $ 10.27 $ 9.82 $ 9.71 $ 9.89
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 0.49 0.47 0.48 0.49 0.49
Net realized and unrealized gain (loss) on
investments (0.23) (0.36) 0.46 0.11 (0.18)
--------- --------- --------- --------- ---------
Total from investment operations 0.26 0.11 0.94 0.60 0.31
--------- --------- --------- --------- ---------
Distributions:
Net investment income (0.49) (0.48) (0.49) (0.49) (0.49)
Net realized gain (0.03) (0.09) -- -- --
--------- --------- --------- --------- ---------
Total distributions (0.52) (0.57) (0.49) (0.49) (0.49)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.55 $ 9.81 $ 10.27 $ 9.82 $ 9.71
========= ========= ========= ========= =========
TOTAL RETURN+ 2.82% 0.94% 9.72% 6.37% 3.11%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 1,781 $ 2,656 $ 2,113 $ 2,553 $ 3,445
Ratio of expenses to average daily net assets(1) 1.45% 1.55% 1.67% 1.63% 1.49%
Ratio of net investment income to average net assets 5.15% 4.66% 4.80% 5.07% 4.92%
Portfolio turnover rate 17% 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. 2.03% 2.12% 2.07% 2.03% 1.99%
</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 returns for periods of less than one year are not annualized.

19
<PAGE> 23

--------------------------------------------------------------------------------
APPENDIX
--------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S INVESTMENTS

The following information provides a brief description of the securities in
which the Portfolio may invest and the transactions it may make. The Portfolio
is not limited by this discussion, however, and may purchase other types of
securities and may enter into other types of transactions if they are consistent
with the Portfolio's investment objective and policies.

DELAYED-DELIVERY AND WHEN-ISSUED TRANSACTIONS. The Portfolio may buy and sell
obligations on an when-issued or delayed-delivery basis, with payment and
delivery taking place at a future date. The market value of obligations
purchased in this way may change before the delivery date, which could increase
fluctuations in the Portfolio's share price, yield, and return. Ordinarily, the
Portfolio will not earn interest on obligations until they are delivered.

DEMAND FEATURES AND STAND-BY COMMITMENTS. A demand feature is a put that
entitles the security holder to repayment of the principal amount of the
underlying security at any time or at specified intervals. A stand-by commitment
is a put that entitles the security holder to same-day settlement at amortized
cost plus accrued interest.

ILLIQUID INVESTMENTS. Under guidelines established by the Trustees, Highland
determines the liquidity of the Portfolio's investments. The absence of a
trading market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expense, and it may be difficult or impossible for the
Portfolio to sell them promptly at an acceptable price. The Portfolio may invest
up to 15% of its net assets in illiquid investments and private placement.

RESTRICTED SECURITIES. The Portfolio may purchase securities which cannot be
sold to the public without registration under the Securities Act of 1933
(restricted securities). Unless registered for sale, these securities can only
be sold in privately negotiated transactions or pursuant to an exemption from
registration. Provided that the security has a demand feature of seven days or
less, or a dealer or institutional trading market exists, these restricted
securities are not treated as illiquid securities for the purposes of the
Portfolio's investment limitations. Investing in restricted securities could
have the effect of increasing the level of Portfolio illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.

LETTERS OF CREDIT. Issuers or financial intermediaries who provide features or
standby commitments often support their ability to buy obligations on demand by
obtaining letters of credit (LOCs) or other guarantees from domestic or foreign
banks. LOCs also may be used as credit supports for municipal instruments.
Highland may rely upon its evaluation of a bank's credit in determining whether
to purchase an instrument supported by an LOC. In evaluating a foreign bank's
credit, Highland will consider whether adequate public information about the
bank is available and whether the bank may be subject to unfavorable political
or economic developments, currency controls, or other governmental restrictions
that might affect the bank's ability to honor its credit commitment.

REFUNDING CONTRACTS. The Portfolio may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the Portfolio
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
Although the Portfolio may sell its rights under a refunding contract, these
contracts are relatively new and the secondary market for them may be less
liquid than the secondary market for other types of municipal securities.

U.S. TREASURY OBLIGATIONS. U.S. treasury obligations are obligations issued by
the United States and backed by its full faith and credit.

VARIABLE AND FLOATING RATE INSTRUMENTS. Variable and floating rate instruments,
including certain participation interests in municipal obligations, have
interest rate adjustment formulas that help to stabilize their market values.
Many variable or floating rate instruments also carry demand features that
permit the Portfolio to sell them at par value plus accrued interest on short
notice.

A-1

<PAGE> 24
================================================================================

[FIRST FUNDS LETTERHEAD]

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

If you would like more information about the Portfolio, the following documents
are available free upon request.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains additional information about all aspects of the Portfolio. A
current SAI has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated herein by reference. For a copy of the SAI, write or
call the Portfolio at the address or phone number listed below.

Information about the Portfolio (including the SAI) also may be reviewed and
copied, upon payment of a duplicating fee, at the SEC's Public Reference Room in
Washington, D.C. You also can obtain this information, upon payment of a
duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Copies of this information may also be obtained,
upon payment of a duplicating fee, by electronic request at the following e-mail
address: [email protected].

The SEC also maintains a Web site located at http://www.sec.gov that contains
the SAI, material incorporated herein by reference, and other information
regarding the Portfolio. For more information about the operation of the Public
Reference Room, please call the SEC at 1-202-942-8090.

ANNUAL AND SEMI-ANNUAL REPORTS

The Portfolio's annual and semi-annual reports provide additional information
about the Portfolio's investments. The annual report contains a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during the last fiscal year.

TO OBTAIN THE SAI OR THE MOST RECENT ANNUAL OR SEMI-ANNUAL REPORT FOR
THE PORTFOLIO FREE OF CHARGE, OR TO OBTAIN OTHER INFORMATION ABOUT THE
PORTFOLIO AND TO MAKE SHAREHOLDER INQUIRIES, YOU MAY WRITE TO
FIRST FUNDS AT 370 17TH STREET, SUITE 3100, DENVER, COLORADO 80202 OR
CALL FIRST FUNDS AT 1-800-442-1941 (OPTION 1).

Investment Company Act File No. 811-6589

FIRST FUNDS

o Are NOT insured by the FDIC or
any other governmental agency.

o Are NOT bank deposits or other
obligations of or guaranteed
by First Tennessee Bank
National Association or any of
its affiliates.

o Involve investment risks,
including the possible loss of
the principal amount invested.

[FIRST TENNESSEE LOGO]

[ALPS MUTUAL FUNDS SERVICES LOGO]

================================================================================
<PAGE> 25
[FIRST FUNDS LOGO]

CAPITAL APPRECIATION PORTFOLIO

PROSPECTUS
Dated October 28, 2000

CLASS I
CLASS II
CLASS III
CLASS IV

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus. Any
representation to the contrary is a criminal offense.

[GRAPHIC]

<PAGE> 26

===================================================================================================================================

TABLE OF CONTENTS
Page
----
<S> <C>
Investment Objective, Principal Strategies and Risks.........................................................................1

Performance..................................................................................................................2

Fees and Expenses of the Portfolio...........................................................................................3

Investment Details...........................................................................................................4

Who Manages the Portfolio?...................................................................................................6

Portfolio Managers...........................................................................................................7

How to Invest in the Portfolio...............................................................................................8

Distribution Plans and Shareholder Servicing Plans..........................................................................17

Financial Highlights........................................................................................................18

Appendix...................................................................................................................A-1

Additional Information about the Portfolio..........................................................................Back Cover
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Not all First Funds Portfolios and/or Classes may be available in your state.

<PAGE> 27

-------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RISKS
-------------------------------------------------------------------------------

INVESTMENT OBJECTIVE -- The objective of the Capital Appreciation Portfolio (the
"Portfolio") is to seek long-term capital appreciation by investing at least 65%
of its total assets in equity securities of medium and smaller capitalization
companies.

PRINCIPAL INVESTMENT STRATEGIES -- Under normal market conditions, DMC currently
intends to invest at least 80% of the Portfolio's total assets in equity
securities of companies with market capitalizations generally between $200
million and $2 billion at the time of purchase, with an average market
capitalization of the Portfolio not to exceed $1.5 billion. The Portfolio also
may invest in preferred stock, bonds and debentures convertible into common
stock of U.S. based companies of all sizes, industries, and geographical
markets. The Portfolio may also invest in securities of foreign issuers.

PRIMARY RISKS -- You may be interested in the Portfolio if you are comfortable
with above-average risk and intend to make a long-term investment commitment.
Like all managed funds, there is a risk that the Adviser's strategy for managing
the Portfolio may not achieve the desired results. In addition, the price of
common stock moves up and down in response to corporate earnings and
developments, interest rate movements, economic and market conditions and
anticipated events. As a result, the price of the Portfolio's investments may go
down and you could lose money on your investment.

The Portfolio's share price may fluctuate more than that of funds primarily
invested in stocks of large companies. Occasionally, small company securities
may under perform as compared to the securities of larger companies. They may
also pose greater risk due to narrow product lines, limited financial resources,
less depth in management or a limited trading market for their stocks.

THE VALUE OF THE PORTFOLIO'S SHARES, LIKE STOCK PRICES, GENERALLY WILL FLUCTUATE
WITHIN A WIDE RANGE. AN INVESTOR IN THE PORTFOLIO COULD LOSE MONEY OVER SHORT OR
EVEN LONG PERIODS OF TIME.
.
PLEASE REMEMBER THAT THERE IS NO GUARANTEE THAT THE PORTFOLIO WILL ACHIEVE ITS
INVESTMENT OBJECTIVE, AND AN INVESTMENT IN THE PORTFOLIO IS NOT A DEPOSIT OR ANY
OTHER OBLIGATION OF A BANK, IS NOT INSURED, ENDORSED, OR GUARANTEED BY THE FDIC,
A BANK OR ANY GOVERNMENT AGENCY, AND INVOLVES INVESTMENT RISK INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

SHOULD I INVEST IN THE CAPITAL APPRECIATION PORTFOLIO?

The Portfolio may be appropriate for you if:

o You can tolerate the price fluctuations and volatility that are
inherent in investing in a stock mutual fund that invests in small and
medium-capitalization companies.

o You are seeking long-term capital appreciation in your investment.

o You wish to add an aggressive growth oriented stock fund to your
existing investment portfolio.

o You are not seeking current income or the preservation of capital.
REMEMBER, NO SINGLE INVESTMENT CAN PROVIDE AN EFFECTIVE, BALANCED
INVESTMENT PLAN.

FUND FACTS
GOAL:
Long-term capital appreciation

PRINCIPAL INVESTMENTS:
o Common Stocks
o Small Company Stocks

CLASSES OF SHARES OFFERED IN THIS PROSPECTUS:
o Class I
o Class II
o Class III
o Class IV

CO-INVESTMENT ADVISERS:
o First Tennessee Bank National Association ("First Tennessee")
o Delaware Management Company ("DMC" or "Adviser")

PORTFOLIO MANAGERS:
o Gerald S. Frey
o Marshall T. Bassett
o John A. Heffern
o Jeffrey W. Hynoski
o Stephan T. Lampe
o Lori P. Wachs
o Francis J. Houghton, Jr.
o Barry Gladstein

DISTRIBUTOR:
o ALPS Mutual Funds Services, Inc. ("ALPS")

1
<PAGE> 28

--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------

The performance of Class I shares shown in the bar chart reflects the expenses
associated with those shares from year to year.

WHAT IS THE RUSSELL 2000(TM) GROWTH INDEX?

The Russell 2000(TM) Growth Index measures the performance of those Russell
2000(TM) Index companies with higher price-to-book ratios and higher forecasted
growth values. The Russell 2000(TM) Growth Index is not a mutual fund and you
cannot invest in it directly. Also, the performance of the Russell 2000(TM)
Growth Index does not reflect the costs associated with operating a mutual fund,
such as buying, selling, and holding securities.

YEAR-BY-YEAR TOTAL RETURN (CLASS I)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

12/31/98 12/31/99
-------- --------
<S> <C>
1.59% 27.83%
</TABLE>

Best Quarter (quarter ended December 31, 1999) - 29.28%
Worst Quarter (quarter ended September 30, 1998) - (24.12)%
Year-to-date return (as of September 30, 2000) - 22.49%

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

The following table lists the Portfolio's average year-by-year return by class
over the past one year period and since the inception of each class of shares.
The table compares the average annual total returns of each class of shares of
the Portfolio for the periods shown to the performance of the Russell 2500(TM)
Growth Index. The table also compares the average annual returns of each class
of shares of the Portfolio for the periods shown to the performance of the
Russell 2000(TM) Growth Index. The Portfolio has changed its benchmark index to
the Russell 2000(TM) Growth Index primarily because the market capitalization
characteristics of the Russell 2000(TM) Growth Index better reflect the
investment strategy and market capitalization of the Portfolio.

AVERAGE ANNUAL TOTAL RETURN
(for the period ended December 31, 1999)
--------------------------------------------------------------------------------

INCEPTION DATE 1 YEAR SINCE INCEPTION
--------------- ------ ---------------
<S> <C> <C> <C>
CLASS I 9/2/97 27.83% 11.39%
CLASS II 10/2/97 20.06% 6.21%
CLASS III 10/2/97 25.29% 8.07%
CLASS IV* 8/3/99 N/A N/A
RUSSELL 2500(TM) GROWTH 9/2/97 55.50% 47.90%
RUSSELL 2000(TM) GROWTH 9/2/97 43.10% 16.78%
</TABLE>

* Information for Class IV shares is not included in the table because the Class
has not been in existence for one full calendar year.

2
<PAGE> 29

--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
--------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolio.

SHAREHOLDER FEES
(fees paid directly from your investment) CLASS I CLASS II CLASS III CLASS IV
----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on None 5.75% None None
purchases as a percentage of offering price

Maximum deferred sales charge (load) None None 1.00%* 5.00%
(as a percentage of original purchase price
or redemption proceeds, as applicable)

ANNUAL PORTFOLIO OPERATING EXPENSES
(expenses that are deducted from portfolio assets)

Management Fees .85% .85% .85% .85%

Distribution (12b-1) Fees .00% .00% .75% 1.00%

Other Expenses .41% .85% .97% .67%**

Total Portfolio Operating Expenses 1.26% 1.70% 2.57% 2.52%
</TABLE>

* Applied to redemptions made during the first year after purchase. No deferred
sales charges are imposed on redemptions from Class III after one year from date
of purchase.
** Because Class IV Shares have not been in existence for a full year, this
number is estimated.

<TABLE>
<CAPTION>
ASSUMING REDEMPTION ASSUMING NO
AT END OF PERIOD REDEMPTION
--------------------------------------------------------------- ---------------------------

CLASS I CLASS II CLASS III CLASS IV* CLASS III CLASS IV*
------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
After 1 year $ 128 $ 738 $ 360 $ 755 $ 260 $ 255
After 3 years $ 400 $1,080 $ 799 $1,084 $ 799 $ 784
After 5 years $ 691 $1,444 $1,365 $1,540 $1,365 $1,340
After 10 years $1,521 $2,466 $2,901 $2,651 $2,901 $2,651
</TABLE>

* The Class IV example reflects the conversion of Class IV shares to Class II
shares after eight years from the date of purchase of Class IV shares.

3
<PAGE> 30

--------------------------------------------------------------------------------
INVESTMENT DETAILS
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE -- The objective of the Portfolio is to seek long-term
capital appreciation by investing at least 65% of its total assets in equity
securities of medium and smaller capitalization companies.

In selecting investments for the Portfolio, DMC analyzes the fundamental values
of individual companies as well as particular industries. In particular, a
company is evaluated by visiting management and through assessing other levels
of the company, its competitors, its customers, and its vendors. Fundamental
analysis considers a company's essential soundness and future prospects, as well
as overall industry outlook. The Portfolio also may invest in foreign securities
that DMC believes possess unusual values.

PRINCIPAL RISKS -- The following table describes the securities in which the
Portfolio typically invests and the principal risks associated with those
securities.

<TABLE>
<CAPTION>
SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY

<S> <C>
COMMON STOCKS: Securities that represent MARKET RISK -- The risk that the market
shares of ownership in a corporation. value of a security may increase or
Stockholders participate in the decrease, sometimes rapidly and
corporation's profits and losses, unpredictably. This risk is common to
proportionate to the number of shares all stocks and bonds and the mutual
they own. funds that invest in them.

VALUATION RISK -- The risk that the
Portfolio has valued certain securities
at a higher price than it can sell them.
This risk is common where the security
is from a relatively new issuer with
little or no previous market history and
a mutual fund's management is called
upon to assign a value to the security.

SMALL COMPANY STOCKS: Common stocks LIQUIDITY RISK -- The risk that certain
issued by companies with smaller market securities or other investments may be
capitalizations. difficult or impossible to sell at the
time the Portfolio would like to sell
them. It may be difficult for the
Portfolio to sell the investment for the
value the Portfolio has placed on it.

MARKET RISK

SMALL COMPANY STOCK RISK -- Small
capitalization stocks involve greater
risk than those associated with larger,
more established companies. Small
company stocks may be subject to abrupt
or erratic price movements.

VALUATION RISK
</TABLE>

4
<PAGE> 31
<TABLE>
<CAPTION>
SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY

<S> <C>
MONEY MARKET FUNDS: Open-ended mutual CREDIT RISK -- The risk that the issuer
funds that invest in commercial paper, of a security, or a party to a contract,
banker's acceptances, repurchase will default or otherwise not honor a
agreements, government securities, financial obligation.
certificates of deposit, and other
highly liquid and safe securities, and INTEREST RATE RISK -- The risk of a
pay money market rates of interest. decline in market value of an interest
bearing instrument due to changes in
interest rates. For example, a rise in
interest rates typically will cause the
value of a fixed rate security to fall.
On the other hand, a decrease in
interest rates will cause the value of a
fixed rate security to increase.

INFLATION RISK -- The risk that your
investment will not provide enough
income to keep pace with inflation.

SECURITIES OF FOREIGN ISSUERS: FOREIGN INVESTMENT RISK -- The risk that
Securities issued by: (1) companies foreign securities may be adversely
organized outside the United States, (2) affected by political instability of the
companies whose securities are issuer's country, changes in currency
principally traded outside of the United exchange rates, foreign economic
States, and (3) foreign governments and conditions, or regulatory and reporting
agencies or instrumentalities of foreign standards that are less stringent than
governments. Securities of foreign those of the United States. Foreign
issuers include American Depositary investment risks will normally be
Receipts (ADRs), which are U.S. greatest when a Fund invests in issuers
dollar-denominated securities. located in emerging countries.

LIQUIDITY RISK

MARKET RISK

VALUATION RISK

REPURCHASE AGREEMENTS AND REVERSE CREDIT RISK
REPURCHASE AGREEMENTS: Repurchase
agreements involve the purchase of a
security by a purchaser and a
simultaneous agreement by the seller
(generally a bank or dealer) to
repurchase the security from the
purchaser at a specified date or on
demand. This technique offers a method
of earning income on idle cash. Reverse
repurchase agreements involve the sale
of a security to another party
(generally a bank or dealer) in return
for cash and an agreement to buy the
security back at a specified price and
time.
</TABLE>

5
<PAGE> 32

In addition to the securities identified above, the Portfolio may, from time to
time, engage in the following non-principal investment practices or techniques:

BORROWING FROM BANKS. The Portfolio may borrow money from banks (up to 33 1/3%
of the Portfolio's total assets) for temporary or emergency purposes.

CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities which
are preferred stock or debt obligations that pay a fixed dividend or interest
payment and are convertible into common stock at a specified price or conversion
ratio.

DERIVATIVE INSTRUMENTS. The Portfolio may invest in instruments and securities
generally known as derivative investments. These investments may include the use
of forward currency contracts, put and call option contracts, zero coupon bonds,
and stripped fixed-income obligations.

WHAT IS A DERIVATIVE INSTRUMENT?

DMC may not buy any of these instruments or use any of these techniques unless
they believe that doing so will help the Portfolio achieve its investment
objective. Use of these instruments and techniques can alter the risk and return
characteristics of the Portfolio. They may increase the Portfolio's volatility
and may involve the investment of a small amount of cash relative to the
magnitude of the risk assumed. This is called leverage. They also may result in
a loss of principal if DMC judges market conditions incorrectly or employs a
strategy that does not correlate well with the investment strategy of the
Portfolio. Positions in options involve the risk that such options may fail as a
hedging technique and that closing transactions may not be effected where a
liquid secondary market does not exist.

LENDING SECURITIES. The Portfolio may temporarily lend up to 33 1/3% of its
portfolio securities to broker-dealers and institutions, but only when the loans
are fully collateralized.

For more information about the securities in which the Portfolio invests and
their associated risks, please refer to the Appendix to this prospectus and the
SAI.

--------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO?
--------------------------------------------------------------------------------

First Tennessee (530 Oak Court Drive, Memphis, Tennessee) and DMC (2005 Market
Street, Philadelphia, Pennsylvania) serve as Co-Investment Advisers to the
Portfolio. At a special meeting on May 17, 2000, shareholders of the Portfolio
approved an Investment Advisory and Management Agreement between First Funds and
DMC naming DMC as Co-Adviser to the Portfolio. Effective June 1, 2000, DMC
replaced Investment Advisers, Inc. as Co-Adviser to the Portfolio. First
Tennessee, among other things, provides investment management evaluations to the
Board of Trustees of First Funds (the "Trustees"), monitors the activities of
DMC, including DMC's Portfolio transactions, and coordinates DMC's activities
with the Portfolio's custodian, transfer agent, administrator, and independent
accountants. DMC is responsible for the day-to-day investment management of the
Portfolio, including providing investment research and credit analysis
concerning portfolio investments and conducting a continuous program of
investment of portfolio assets in accordance with the investment policies and
objective of the Portfolio.

The Portfolio is obligated to pay First Tennessee a monthly management fee at
the annual rate of 0.15% of its average net assets for the investment advisory
services First Tennessee provides. First Tennessee serves as an investment
adviser to individual, corporate and institutional advisory clients, pension
plans and collective

6
<PAGE> 33

investment funds, with approximately $23.2 billion in assets under
administration (including nondiscretionary accounts) and $9.8 billion in assets
under management as of June 30, 2000, and has experience in supervising
sub-advisers.

DMC is responsible for the day-to-day investment and reinvestment of the
Portfolio's assets in accordance with its investment objective and policies. DMC
is obligated to provide a continual program of investment of portfolio assets,
to conduct investment research and credit analysis concerning portfolio
investments, and to place orders for all purchases and sales of investments on
behalf of the Portfolio.

As compensation for the services it provides, DMC is entitled to receive from
the Portfolio a monthly management fee at the annual rate of 0.70% on the first
$50 million of the Portfolio's average net assets and .65% on average daily net
assets of the Portfolio in excess of $50 million.

As of June 30, 2000, DMC had approximately $45.0 billion under management in a
wide range of asset classes for institutional investors, large private trusts
and mutual fund shareholders. DMC is organized as a series of Delaware
Management Business Trust ("DMBT"), a business trust organized under the laws of
the State of Delaware. DMC and DMBT are part of the Delaware Investments family
of companies, which are located at 2005 Market Street, Philadelphia, PA 19103.
They are indirect, wholly-owned subsidiaries of Lincoln National Corporation,
Centre Square, West Tower, 1500 Market St., Suite 3900, Philadelphia, PA
19102-2112 ("LNC"). LNC is a publicly-owned company whose shares are traded on
the New York Stock Exchange.

--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------

[PHOTO]

GERALD S. FREY is Vice President/Senior Portfolio Manager of DMC and joined the
company in 1996. Prior to joining DMC, he was a Senior Director with Morgan
Grenfell Capital Management in New York. Mr. Frey has 22 years' experience in
the money management business and holds a bachelor's degree in Economics from
Bloomsburg University and attended Wilkes College and New York University.

MARSHALL T. BASSETT is Vice President of DMC and joined the company in 1997.
Prior to joining DMC, he served as Vice President in Morgan Stanley Asset
Management's Emerging Growth Group, where he analyzed small growth companies.
Prior to that, he was a trust officer at Sovran Bank and Trust Company. Mr.
Bassett received his bachelor's degree and MBA from Duke University.

JOHN A. HEFFERN is Vice President of DMC and joined the company in 1997. Prior
to joining DMC, he was a Senior Vice President, Equity Research at NatWest
Securities Corporation's Specialty Finance Services unit and a Principal and
Senior Regional Bank Analyst at Alex, Brown & Sons. Mr. Heffern holds a
bachelor's degree and an MBA from the University of North Carolina at Chapel
Hill.

JEFFREY W. HYNOSKI is Vice President of DMC and joined the company in 1998.
Prior to joining DMC, he served as a Vice President for Bessemer Trust Company
in the mid and large capitalization growth group. Prior to that, Mr. Hynoski
held positions at Lord Abbett & Co. and Cowen Asset Management. Mr. Hynoski
holds a bachelor's degree in Finance from the University of Delaware and an MBA
from Pace University.

STEPHAN T. LAMPE is Vice President of DMC and joined the company in 1995. Prior
to joining DMC, he served as a manager at Price Waterhouse. Mr. Lampe is a
Certified Public Accountant. Mr. Lampe earned a bachelor's degree and an MBA
from the University of Pennsylvania's Wharton School.

LORI P. WACHS is Vice President of DMC and joined the company in 1992. Prior to
joining DMC, she was with Goldman Sachs, where she was an equity analyst for two
years. Ms. Wachs earned a bachelor's degree in Finance and Oriental Studies from
the University of Pennsylvania's Wharton School.

FRANCIS J. HOUGHTON, JR. is Vice President of DMC and joined the company in
1990. Prior to joining DMC, he served as Chairman of BMI Capital Corporation;
Portfolio Manager for Neuberger & Berman; Partner, Member of the Executive
Committee and Director of Research for Oppenheimer & Company, Inc.; and Vice
President and Portfolio

7
<PAGE> 34

Manager of J.M. Hartwell & Company. Mr. Houghton earned a BBA from Manhattan
College and attended NYU Graduate School of Business Administration.

BARRY S. GLADSTEIN is Vice President/Portfolio Analyst of DMC and joined the
company in 1995. Prior to joining DMC, he held positions with Cigna Corporation
and Arthur Young and Company. Mr. Gladstein earned a bachelor's degree from
Binghamton University and an MBA from the University of Pennsylvania's Wharton
School. He is a Certified Public Accountant.

--------------------------------------------------------------------------------
HOW TO INVEST IN THE PORTFOLIO
--------------------------------------------------------------------------------

CLASS I

WHO MAY INVEST?

Class I shares are designed exclusively for investment of monies held in
non-retail trust, advisory, agency, custodial or similar accounts
("Institutional Accounts"). Class I shares may be purchased for Institutional
Accounts by financial institutions, business organizations, corporations,
municipalities, non-profit institutions, and other entities serving in a trust,
advisory, agency, custodial or similar capacity (each an "Institutional
Investor" and collectively "Institutional Investors") who meet the investment
threshold for this Class of shares.

HOW IS AN INSTITUTIONAL ACCOUNT ESTABLISHED?

HOW ARE INVESTMENTS MADE?

Each Institutional Investor will transmit orders to Boston Financial Data
Services (the "Transfer Agent"). Institutional Investors will wire funds through
the Federal Reserve System. Purchases will be processed at the net asset value
per share ("NAV") next calculated after an order is received by the Transfer
Agent. The Portfolio requires advance notification of all wire purchases. To
secure same day acceptance of federal funds (monies transferred from one bank to
another through the Federal Reserve System with same-day availability), an
Institutional Investor must call the Transfer Agent at 1-800-442-1941, (option
2) prior to the close of business (normally 4:00 p.m. Eastern Time) on any
Business Day to advise it of the wire. The Trust may discontinue offering its
shares in any Class of a Portfolio without notice to shareholders.

WHAT CLASSES OF SHARES DOES THE CAPITAL APPRECIATION PORTFOLIO OFFER?

The Portfolio offers investors four different classes of shares. The different
classes of shares represent investments in the same portfolio of securities;
however, each class is subject to different expenses and likely will have
different share prices. When you buy shares, be sure to tell us the class of
shares in which you would like to invest.

CLASS I SHARES. Class I shares are offered to institutional investors
exclusively. Class I shares are not subject to any sales loads and do not incur
distribution or shareholder servicing fees.

CLASS IV SHARES. Class IV shares are offered to investors without the imposition
of any up-front sales load; however, Class IV shares are subject to a CDSC of up
to 5.00%. The CDSC is phased out over a period of six years. After eight years
from the date of purchase, Class IV shares automatically convert to Class II
shares. Class IV shares also incur distribution fees.

8
<PAGE> 35

MINIMUM INVESTMENT AND ACCOUNT BALANCE.

The minimum initial investment for each Institutional Investor is $750,000.
Institutional Investors may satisfy the minimum investment by aggregating their
Institutional Accounts within the Portfolio. Subsequent investments may be in
any amount. If an Institutional Investor's Class I account falls below $375,000
due to redemption, the Portfolio may close the account. An Institutional
Investor may be notified if the minimum balance is not being maintained and will
be allowed 30 days to make additional investments before its account is closed.
Shares will be redeemed at the NAV on the day the account is closed, and
proceeds will be sent to the address of record

Should an Institutional Investor of Class I shares cease to be eligible to
participate in this Class, Class I shares held in an Institutional Account may
be converted to shares of another Class. Any such conversion will be made on the
basis of the relative NAVs of the two Classes without the imposition of any
sales load, fee or other charge. Institutional Investors converted to Class III
shares will not be subject to the 1% CDSC in year 1. Institutional Investors
will receive at least 30 days prior notice of any proposed conversion.

HOW ARE REDEMPTIONS MADE?

Institutional Investors may make redemptions by wire provided they have
established a wire account with the Transfer Agent. Please call 1-800-442-1941
(option 2) to advise the Transfer Agent of the wire. If telephone instructions
are received before the close of business (normally 4:00 p.m. Eastern Time) on
any Business Day, proceeds of the redemption will be wired as federal funds on
the next Business Day to the bank account designated with the Transfer Agent.
The Institutional Investor may change the bank account designated to receive an
amount redeemed at any time by sending a letter of instruction with a signature
guarantee to the Transfer Agent at P.O. Box 8050, Boston, MA 02266.

ADDITIONAL INFORMATION

The Portfolio also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
DMC's opinion, they are of a size that would disrupt management of the
Portfolio.

In order to allow DMC to manage the Portfolio most effectively, Institutional
Investors are strongly urged to initiate all trades (investments, exchanges and
redemptions of shares) as early in the day as possible and to notify the
Transfer Agent at least one day in advance of trades in excess of $1 million. In
making these trade requests, the name of the Institutional Investor and the
account number(s) must be supplied.

9
<PAGE> 36

CLASS II, III, AND IV

WHO MAY INVEST?

Class II, III and IV shares are designed for individuals and other investors who
seek mutual fund investment convenience plus a lower investment minimum. These
classes offer investors differing expense and sales load structures to choose
between. See "Fees and Expenses of the Portfolio".

INVESTMENT REQUIREMENTS

The minimum initial investment in Class II, III, and IV shares is $1,000.
Subsequent investments may be in any amount of $100 or greater. If you
participate in the Systematic Investing Program (see "Systematic Investing
Program" below) or the "A Plus/First Horizon Card Program" (a consumer discount
card program provided by First Horizon Strategic Alliances, Inc., a subsidiary
of First Tennessee), the minimum initial investment is $250, and subsequent
investments may be in any amount of $25 or greater.

If your balance in the Portfolio falls below the applicable minimum investment
requirement due to redemption, you may be given 30 days notice to reestablish
the minimum balance. If you do not reestablish the minimum balance, your account
may be closed and the proceeds mailed to you at the address on record. Shares
will be redeemed on the day the account is closed.

You may initiate any transaction either directly or through your Investment
Professional. Please note that the Portfolio and its agents will not be
responsible for any losses resulting from unauthorized transactions, if the
Portfolio or its agents follow reasonable procedures designed to verify the
identity of the caller. These procedures may include requesting additional
information or using personalized security codes. Your Investment Professional
may also record calls and you should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the ability to
redeem and exchange by telephone, please check the box on your application (if
you invest directly) or, if you invest through an Investment Professional,
please call them for instructions.

HOW DO I SET UP AN ACCOUNT?

HOW DO I INVEST DIRECTLY?

When opening a new account directly, you must complete and sign an account
application and send it to First Funds, c/o Boston Financial Data Services, P.O.
Box 8050, Boston, MA 02266-8050. Telephone representatives are available at
1-800-442-1991, (option 2) between the hours of 8:00 a.m. to 4:00 p.m. Central
Time (9:00 a.m. to 5:00 p.m. Eastern Time), Monday through Friday.

Investments may be made in several ways:

BY MAIL: Make your check payable to FIRST FUNDS CAPITAL APPRECIATION PORTFOLIO,
and mail it, along with the application, to the address indicated on the
application. Your account will be credited on the business day that the Transfer
Agent receives your completed application.

10
<PAGE> 37

First Funds account. First, a deposit account must be opened at a bank providing
bank transfer services and you must arrange for this service to be provided.
Next, an account must be established, and an application along with a voided
check or deposit slip sent to the Transfer Agent. It takes approximately 15 days
to set up an ACH account. Once you have completed this process, you can initiate
a bank transfer by contacting a representative from your bank or First Funds at
1-800-442-1941 (option 2), providing the required information, and authorizing
the transfer to take place. Please allow two or three days after the
authorization for the transfer to occur.

BY WIRE: Call 1-800-442-1941, (option 2) to set up your account to accommodate
wire transactions. To initiate your wire transaction, call your depository
institution. Federal funds (monies transferred from one bank to another through
the Federal Reserve System with same-day availability) should be wired to:

State Street Bank and Trust Company
ABA #011000028
First Funds
Account #9905-440-5
(Account Registration)
(Account Number)
(Wire Control Number) *See Below*

Prior to sending wires, please be sure to call 1-800-442-1941, (option 2) to
receive a wire control number to be included in the body of the wire (see
above).

Your bank may charge you a fee for this service.

HOW DO I REDEEM SHARES WHEN INVESTING DIRECTLY?

You may redeem all or a portion of your shares on any day that the Portfolio is
open for business. Shares will be redeemed at the NAV next calculated after the
Transfer Agent has received the redemption request.

You may redeem shares in several ways:

BY PHONE: Provided you have elected this option in advance, you may request a
redemption of shares by calling the Transfer Agent at 1-800-442-1941 (option 2).
Your redemption proceeds can be sent to you in the mail or, as more fully
described below, the proceeds can be sent directly to a bank account by bank
transfer or wire. For your protection, all telephone calls are recorded. Also,
neither First Funds, First Tennessee, DMC, nor the Transfer Agent or any of
their agents will be responsible for acting on telephone instructions they
believe are genuine. For more information about telephone redemptions, please
call 1-800-442-1941 (option 2).

BY WIRE: You may make redemptions by wire provided you have established a
Portfolio account to accommodate wire transactions. If telephone instructions
are received before the close of business (normally 4:00 p.m. Eastern Time),
proceeds of the redemption will be wired as federal funds on the next Business
Day to the bank account designated with the Transfer Agent. You may change the
bank account designated to receive an amount redeemed at any time by sending a
letter of instruction with a signature guarantee to the Transfer Agent.

11
<PAGE> 38

circumstances as determined by the SEC to merit such action, the right of
redemption may be suspended or the date of payment postponed for a period of
time that may exceed seven days. To the extent that Portfolio securities are
traded in other markets on days when the NYSE is closed, the Portfolio's NAV may
be affected on days when investors do not have access to the Portfolio to
purchase or redeem shares.

If you are unable to reach the Transfer Agent by telephone (for example, during
times of unusual market activity), consider placing your order by mail directly
to the Transfer Agent. In case of suspension of the right of redemption, you may
either withdraw your request for redemption or you will receive payment based on
the NAV next determined after the termination of the suspension.

HOW DO I INVEST THROUGH MY INVESTMENT PROFESSIONAL?

HOW DO I REDEEM THROUGH MY INVESTMENT PROFESSIONAL?

On your behalf, the broker of record listed on your account may redeem shares.
Proceeds from the redemption can only be sent to your address of record.

SYSTEMATIC INVESTING PROGRAM

The Systematic Investing Program offers a simple way to maintain a regular
investment program. You may arrange automatic transfers (minimum $25 per
transaction) from your bank account to your First Funds account on a regular
basis. When you participate in this program, the minimum initial investment in
each Portfolio is $250. If you are an employee of First Tennessee or any of its
affiliates, the minimum initial investment in the Portfolio is $50. You may
change the amount of your automatic investment, skip an investment, or stop the
Systematic Investing Program by calling the Transfer Agent at 1-800-442-1941,
(option 2) or your Investment Professional at least three Business Days prior to
your next scheduled investment date.

SYSTEMATIC WITHDRAWAL PLAN

SYSTEMATIC EXCHANGE PROGRAM

ADDITIONAL INFORMATION

TAX-DEFERRED RETIREMENT PLANS: Retirement plans can offer significant tax
savings to individuals. Please call First Funds at 1-800-442-1941 (option 1) or
your Investment Professional for more information on the plans and their
benefits, provisions and fees. The Transfer Agent or your Investment
Professional can set up your new account in the Portfolio under one of several
tax-deferred plans. These plans let you invest for retirement and defer or
eliminate the tax on your investment income. Minimums may differ from those
listed previously under "Investment Requirements." Plans include traditional
Individual Retirement Accounts (IRAs), Roth IRAs, Education IRAs, Rollover IRAs,
Keogh Plans, and Simplified Employee Pension Plans (SEP-IRAs).

12
<PAGE> 39

CLASS II

SALES LOADS

TOTAL SALES LOAD FOR CLASS II SHARES
<TABLE>
<CAPTION>

AS A % OF OFFERING BROKER-DEALER
AMOUNT OF TRANSACTION PRICE PER SHARE AS A % OF NAV REALLOWANCE
-------------------- ------------------ ------------- -------------
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00

$50,000 to $99,999 4.50 4.71 4.00

$100,000 to $249,999 3.50 3.63 3.00

$250,000 to $499,999 2.50 2.56 2.25

$500,000 to $999,999 1.50 1.52 1.25

$1,000,000 and over 0.50 0.50 0.40
</TABLE>

The broker-dealer reallowance may be changed from time to time.

You may purchase Class II shares without a sales load if the purchase will be:

(B) by registered representatives, directors, advisory directors,
officers and employees (and their immediate families) of First Tennessee or its
affiliates;

(D) by a charitable remainder trust or life income pool established for
the benefit of a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code);

(E) for use in a financial institution or investment adviser managed
account for which a management or investment advisory fee is charged;

(G) through certain promotions where the load is waived for investors.

In addition, if you purchase Class II shares within 60 days after redeeming
shares of the Portfolio, you will receive credit towards the sales load payable
on the purchase to the extent of the sales load you paid on the shares you
redeemed. This reinstatement privilege may be exercised only with respect to
redemptions and purchases in the same First Funds Portfolio. The reinstatement
privilege can be exercised only one time with respect to any particular
redemption.

13
<PAGE> 40

QUANTITY DISCOUNTS

If you are a participant in a First Funds IRA or if you are a trustee or
custodian of another type of First Funds retirement plan, you may also include
as part of your aggregate investment any holdings through the IRA or in the plan
even if a load was not paid. If, for example, you beneficially own Class II
shares of a First Funds Portfolio with an aggregate current value of $99,000 and
you subsequently purchase shares of the Portfolio having a current value of
$1,000, the load applicable to the subsequent purchase would be reduced to 3.50%
of the offering price. Similarly, each subsequent purchase of First Funds Class
II shares may be added to your aggregate investment at the time of purchase to
determine the applicable sales loads.

QUALIFICATION OF DISCOUNTS. As shown in the schedule of Class II sales charges,
larger purchases may result in lower sales charges to you. For purposes of
determining the amount of purchases using the Right of Accumulation and Letter
of Intent privileges, you may combine your Purchase with:

- purchases by your spouse for his, her or your joint account or for
the account of any minor children, and

- the aggregate investment of any trustee or other Institutional
Investor for you and/or your spouse or your minor children.

A trustee or custodian of any qualified pension or profit sharing plan may
combine its aggregate purchases.

OTHER. Class II shares also incur Shareholder Servicing Fees. See discussion
under "Distribution Plan and Shareholder Servicing Plans."

CLASS III

14
<PAGE> 41

"Distribution Plans and Shareholder Servicing Plans."

CLASS IV

Class IV shares are bought without a front-end load; that is, the offering price
for such shares will be their NAV. Class IV shares incur Distribution Fees. See
discussion under "Distribution Plans and Shareholder Servicing Plans."

DEFERRED SALES CHARGES. A CDSC of up to 5.00% is imposed on redemptions of Class
IV shares based on the lower of the shares' cost and the current net asset
value. The CDSC associated with the Class IV shares is phased out over a period
of six years. Any shares acquired by reinvestment of dividends will be redeemed
without the imposition of any CDSC. In addition, the CDSC imposed on redemptions
of Class IV shares may be waived for Systematic Withdrawal Plans with respect to
up to 10% per year of the account value at the time of establishment.

<TABLE>

YEAR YEAR YEAR YEAR YEAR YEAR
1 2 3 4 5 6
---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
5% 4% 3% 3% 2% 1%
</TABLE>

AUTOMATIC CONVERSION. After eight years from the date of purchase, Class IV
shares will automatically convert to Class II shares.

ALL CLASSES

HOW ARE PORTFOLIO SHARES VALUED?

WHAT ARE MY DISTRIBUTION OPTIONS?

The Portfolio may earn dividends from its stocks and interest from bond, money
market, and other fixed-income investments. These are passed along as dividend
distributions. Income dividends for the Portfolio, if any, are declared and paid
annually. The Portfolio may realize capital gains if it sells securities for a
higher price than it paid for them. These are passed along as capital gain
distributions.

When you fill out your account application, you can specify how you want to
receive your distributions. Currently, there are three available options:

2. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution, if any. Distribution checks will be mailed no later than seven
days after the last day of the month.

3. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for any dividend
distribution.

HOW ARE EXCHANGES MADE?

15
<PAGE> 42

determined after the exchange request is received and accepted by the Transfer
Agent. You may execute exchange transactions by calling the Transfer Agent at
1-800-442-1941 (option 2) prior to the close of business (normally 4:00 p.m.
Eastern Time) on any Business Day.

Investors in Class II or Class IV shares wishing to exchange into one of the
Money Market Portfolios that do not offer these classes will receive Class III
shares.

Each exchange may produce a gain or loss for tax purposes. In order to protect
the Portfolio's performance and its shareholders, First Tennessee and DMC
discourage frequent exchange activity by investors in response to short-term
market fluctuations. The Portfolio reserves the right to refuse any specific
purchase order, including certain purchases by exchange if, in DMC's opinion,
the Portfolio would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise be adversely affected.
Exchanges or purchase orders may be restricted or refused if the Portfolio
receives or anticipates individual or simultaneous orders affecting a
significant portion of the Portfolio's assets. Although the Portfolio will
attempt to give prior notice whenever it is reasonably able to do so, it may
impose these restrictions at any time. The Portfolio reserves the right to
modify or withdraw the exchange privilege upon 60 days notice and to suspend the
offering of shares in any Class without notice to shareholders. You or your
Institutional Investor, if you are invested in Class I, will receive written
confirmation of each exchange transaction.

STATEMENTS AND REPORTS

WHAT IS THE EFFECT OF FEDERAL INCOME TAX ON THIS INVESTMENT?

FEDERAL TAXES. Distributions of gains from the sale of assets held by the
Portfolio for more than one year generally are taxable to shareholders at the
applicable or long-term capital gains rate, regardless of how long they have
owned their Portfolio shares. Distributions from other sources generally are
taxed as ordinary income. A portion of the Portfolio's dividends may qualify for
the dividends-received deduction for corporations.

16
<PAGE> 43

"BUYING A DIVIDEND." If you purchase shares just prior to a distribution of
income or capital gains, the purchase price will reflect the amount of the
upcoming distribution, but you will be taxed on the entire amount of the
distribution received, even though, as an economic matter, the distribution
simply constitutes a return of your capital. This is known as "buying a
dividend".

Institutional Investors and other shareholders should consult their tax advisor
for details and up-to-date information on the tax laws in your state to
determine whether the Portfolio is suitable given your particular tax situation.
It is not anticipated that the Portfolio's distributions will be exempt from
state personal income tax, except to the extent that any distributions of income
are attributable to interest on bonds or securities of the U.S. Government or
any of its agencies or instrumentalities.

-------------------------------------------------------------------------------
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING PLANS
-------------------------------------------------------------------------------

The Trustees have adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act for both the Class III and Class IV shares of the Portfolio (each a
"Distribution Plan" and together the "Distribution Plans"). Both Distribution
Plans permit the use of portfolio assets to compensate ALPS for its services and
costs in distributing Class III and Class IV shares and servicing shareholder
accounts.

Under the Distribution Plans, ALPS receives an amount equal to .75% of the
average annual net assets of the Portfolio that are attributable to Class III
shares and an amount equal to 1.00% of the average annual net assets of the
Portfolio that are attributable to Class IV shares. All or a portion of the fees
paid to ALPS under the Distribution Plans will, in turn, be paid to certain
broker-dealers, investment advisers, and other third parties (each an
"Investment Professional" and collectively "Investment Professionals") as
compensation for selling Class III and IV shares and for providing ongoing sales
support services.

The Trustees also have adopted Shareholder Servicing Plans on behalf of the
Class II and III shares of the Portfolio. Under the Shareholder Servicing Plans,
certain broker-dealers, banks, and other financial institutions (collectively
"Service Organizations") are paid an amount equal to .25% of the average annual
net assets of the Portfolio that are attributable to each Class of shares as
compensation for shareholder services and account maintenance. These services
include responding to shareholder inquiries, directing shareholder
communications, account balance maintenance, and dividend posting.

17
<PAGE> 44
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------

The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance since inception. Certain information reflects
financial results for a single Portfolio share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Portfolio's financial statements, is included in the Portfolio's annual
report, which is available upon request by calling First Funds at 1-800-442-1941
(option 1).

CAPITAL APPRECIATION PORTFOLIO

CLASS I
----------------------------------------------------------
For the Year
Ended June 30,
----------------------------------------------------------
2000(o) 1999(o) 1998**
---------- ---------- ----------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.25 $ 10.74 $ 10.00
---------- ---------- ----------

Income from investment operations:
Net investment loss (0.09) (0.09) (0.03)
Net realized and unrealized gain (loss) on
investments 4.31 (0.16) 0.77
---------- ---------- ----------
Total from investment operations 4.22 (0.25) 0.74
---------- ---------- ----------
Distributions:
Net realized gain -- (0.24) --
---------- ---------- ----------
Net asset value, end of period $ 14.47 $ 10.25 $ 10.74
========== ========== ==========
TOTAL RETURN+ 41.17% (2.16)% 7.40%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 46,042 $ 33,803 $ 37,014
Ratio of expenses to average daily net assets(1) 1.19% 1.29% 1.16%*
Ratio of net investment loss to average net assets (0.77)% (1.00)% (0.54)%*
Portfolio turnover rate 286% 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 1.26% 1.44% 1.36%*
</TABLE>

CLASS II
-------------------------------------------------------
For the Year
Ended June 30,
-------------------------------------------------------
2000(o) 1999(o) 1998**
--------- --------- ---------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.20 $ 10.71 $ 10.51
--------- --------- ---------
Income from investment operations:
Net investment loss (0.15) (0.13) (0.05)
Net realized and unrealized gain (loss) on
investments 4.26 (0.14) 0.25
--------- --------- ---------
Total from investment operations 4.11 (0.27) 0.20
--------- --------- ---------
Distributions:
Net realized gain -- (0.24) --
--------- --------- ---------
Net asset value, end of period $ 14.31 $ 10.20 $ 10.71
========= ========= =========
TOTAL RETURN+*** 40.29% (2.35)% 1.90%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 3,883 $ 2,051 $ 1,400
Ratio of expenses to average daily net assets(1) 1.63% 1.66% 1.52%*
Ratio of net investment loss to average net assets (1.21)% (1.37)% (0.90)%*
Portfolio turnover rate 286% 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 1.70% 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 returns for periods of less than one year are not annualized.

(o) Per share amounts calculated based on the average shares outstanding during
the period.

18
<PAGE> 45

FINANCIAL HIGHLIGHTS
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)

<TABLE>
<CAPTION>
CLASS III
----------------------------------------------------------
For the Year
----------------------------------------------------------
2000(o) 1999(o) 1998**
------- ------- ------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.04 $10.64 $10.51
------ ------ ------
Income from investment operations:
Net investment loss (0.25) (0.19) (0.10)
Net realized and unrealized gain (loss) on
investments 4.23 (0.17) 0.23
------ ------ ------
Total from investment operations 3.98 (0.36) 0.13
------ ------ ------
Distributions:
Net realized gain - (0.24) -
------ ------ ------
Net asset value, end of period $14.02 $10.04 $10.64
====== ====== ======

TOTAL RETURN+ 39.64% (3.22)% 1.24%#

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (thousands) $634 $392 $590
Ratio of expenses to average daily net assets(1) 2.50% 2.44% 2.28%*
Ratio of net investment loss to average net assets (2.09)% (2.15)% (1.65)%*
Portfolio turnover rate

(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 2.57% 2.59% 2.47%*
</TABLE>

CLASS IV
--------------
For the Period
Ended June 30
--------------
2000(o)
-------
<S> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $10.06
------
Income from investment operations:

Net investment loss (0.19)
Net realized and unrealized gain on investments 4.62
------
Total from investment operations 4.43
------
Distributions:
Net asset value, end of period $14.49
======
TOTAL RETURN+ 4.04%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 175
Ratio of expenses to average daily net assets(1) 2.46%*
Ratio of net investment loss to average net assets (2.04)%*
Portfolio turnover rate 286%

(1) During the period, various fees were waived. The
ratio of expenses to average net assets had
such waivers not occurred is as follows. 2.52%*
</TABLE>

* Annualized.

** Class III and IV commenced operations on October 2, 1997 and August 3, 1999,
respectively.

+ Total return would have been lower had various fees not been waived during
the period.

# Total returns for periods of less than one year are not annualized.

(o) Per share amounts calculated based on the average shares outstanding during
the period.

19
<PAGE> 46

--------------------------------------------------------------------------------
APPENDIX
--------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S INVESTMENTS

DELAYED-DELIVERY AND WHEN-ISSUED TRANSACTIONS. The Portfolio may buy and sell
obligations on a when-issued or delayed-delivery basis, with payment and
delivery taking place at a future date. The market value of obligations
purchased in this way may change before the delivery date, which could increase
fluctuations in the Portfolio's share price, yield, and return. Ordinarily, the
Portfolio will not earn interest on obligations until they are delivered.

FORWARDS. A forward represents a contract that obligates the counterparty to
buy, and the other to sell, a specific underlying asset at a specific price,
amount, and date in the future. Forwards are similar to futures except for the
fact that forwards are privately negotiated. The most common type of forward
contracts are foreign currency exchange contracts.

The Portfolio may enter into forward exchange currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain firm purchase and sale commitments
denominated in foreign currencies. A forward exchange currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contract and the closing of such contract is included in net
realized gain or loss on foreign currency transactions. Fluctuations in the
value of forward exchange currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Portfolio.

RESTRICTED SECURITIES. The Portfolio may purchase securities which cannot be
sold to the public without registration under the Securities Act of 1933
("Restricted Securities"). Unless registered for sale, these securities can only
be sold in privately negotiated transactions or pursuant to an exemption from
registration. Provided that the security has a demand feature of seven days or
less, or a dealer or institutional trading market exists, these Restricted
Securities are not treated as illiquid securities for the purposes of the
Portfolio's investment limitations. Investing in Restricted Securities could
have the effect of increasing the level of Portfolio illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.

ILLIQUID SECURITIES. Under guidelines established by the Board of Trustees, DMC
determines the liquidity of the Portfolio's investments. The absence of a
trading market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments or securities subject to legal
restrictions may involve time-consuming negotiation and legal expenses. It may
be difficult or impossible for the Portfolio to sell illiquid or Restricted
Securities promptly at an acceptable price. The Portfolio may invest up to 15%
of its net assets in illiquid investments.

MONEY MARKET INSTRUMENTS. Money market instruments are high quality instruments
that present minimal credit risk. They may include U.S. government obligations,
commercial paper and other short-term corporate obligations, and certificates of
deposit, bankers' acceptances, bank deposits and other financial institution
obligations. These instruments may carry fixed or variable rates.

OPTIONS CONTRACTS. An option is a contract that gives the owner the right, but
not the obligation, to either buy (call option) or sell (put option) an
underlying security or currency at a fixed price for a specified period of time.
The Portfolio may buy and sell (write) put and call options contracts to manage
its exposure to changing interest rates and security prices.

A-1

<PAGE> 47

adjust the risk and return characteristics of the overall strategy. The
Portfolio may enter into forward contracts for settlement or hedging purposes.
The Portfolio may invest in options based on any type of security, index, or
currency, including options traded on foreign exchanges and options not traded
on exchanges.

Options can be volatile investments and involve certain risks. If DMC applies a
hedge at an inappropriate time or judges market conditions incorrectly, options
strategies may result in a loss and lower the Portfolio's return. The Portfolio
could also experience losses if the prices of its options positions were poorly
correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. The use of options may
increase the volatility of the Portfolio and may involve the investment of a
small amount of cash relative to the risk assumed.

The Portfolio will be able to hedge its total assets by writing calls or
purchasing puts under normal conditions. In addition, the Portfolio will not
write puts whose underlying value exceeds 25% of total assets, and will not buy
calls with a value exceeding 5% of total assets.

U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations purchased by the
Portfolio are debt obligations issued or guaranteed by the U.S. Treasury or by
an agency or instrumentality of the U.S. Government. Not all U.S. Government
obligations are backed by the full faith and credit of the United States. For
example, obligations issued by the Federal Farm Credit Bank or by the Federal
National Mortgage Association are supported by the agency's right to borrow
money from the U.S. Treasury under certain circumstances. Obligations issued by
the Federal Home Loan Bank are supported only by the credit of the agency. There
is no guarantee that the government will support these types of obligations, and
therefore they involve more risk than other government obligations.

U.S. TREASURY OBLIGATIONS. U.S. Treasury obligations purchased by the Portfolio
are obligations issued by the United States and backed by its full faith and
credit.

ZERO COUPON BONDS. Zero Coupons purchased by the Portfolio do not make regular
interest payments; instead they are sold at a deep discount from their face
value and are redeemed at face value when they mature. Because zero coupon bonds
do not pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the Portfolio takes into account as
income a portion of the difference between a zero coupon bond's purchase price
and its face value.

A broker-dealer creates a derivative zero by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury Receipts) are
examples of derivative zeros.

The Federal Reserve Bank creates STRIPS (Separate Trading of Registered Interest
and Principal of Securities) by separating the interest and principal components
of an outstanding U.S. Treasury bond and selling them as individual securities.
Bonds issued by the Resolution Funding Corporation (REFCORP) and the Financing
Corporation (FICO) can also be separated in this fashion. The risks of these
securities are similar to those of other debt securities, although they may be
more volatile and the value of certain types of stripped securities may move in
the same direction as interest rates. Original issue zeros are zero coupon
securities originally issued by the U.S. Government, a government agency, or a
corporation in zero coupon form.

A-2

<PAGE> 48

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================================================================================

[FIRST FUNDS LETTERHEAD]

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

If you would like more information about the Portfolio, the following documents
are available free upon request.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

ANNUAL AND SEMI-ANNUAL REPORTS

Investment Company Act File No. 811-6589

FIRST FUNDS

o Are NOT insured by the FDIC or
any other governmental agency.

o Are NOT bank deposits or other
obligations of or guaranteed
by First Tennessee Bank
National Association or any of
its affiliates.

o Involve investment risks,
including the possible loss of
the principal amount invested.

[FIRST TENNESSEE LOGO]

[ALPS MUTUAL FUNDS SERVICES LOGO]

================================================================================
<PAGE> 52

[FIRST FUNDS LOGO]

GROWTH & INCOME PORTFOLIO

PROSPECTUS
DATED OCTOBER 28, 2000

CLASS I
CLASS II
CLASS III
CLASS IV

[PHOTO]

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus. Any
representation to the contrary is a criminal offense.

[GRAPHIC]

<PAGE> 53

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
<S> <C>
Investment Objective, Principal Strategies and Risks........................................................................1

Performance.................................................................................................................2

Fees and Expenses of the Portfolio..........................................................................................3

Investment Details..........................................................................................................4

Who Manages the Portfolio?..................................................................................................6

Portfolio Managers..........................................................................................................6

How to Invest in the Portfolio..............................................................................................7

Distribution Plans and Shareholder Servicing Plans.........................................................................16

Financial Highlights.......................................................................................................17

Appendix..................................................................................................................A-1

Not all First Funds Portfolios and/or Classes may be available in your state.

<PAGE> 54

INVESTMENT OBJECTIVE -- The objective of the Growth & Income Portfolio (the
"Portfolio") is to achieve maximum total return through a combination of capital
appreciation and dividend income by investing at least 65% of its total assets
in equity securities.

PRINCIPAL INVESTMENT STRATEGY -- Under normal market conditions, the Adviser and
Sub-Adviser currently intend to invest at least 80% of the Portfolio's assets in
common stock and American Depositary Receipts (ADRs) of U.S. and international
companies that are traded on major domestic securities exchanges (NYSE, ASE,
NASDAQ). The Portfolio may also invest in convertible preferred stock, bonds,
and debentures that are convertible into common stock.

PRIMARY RISKS -- You may be interested in the Portfolio if you are comfortable
with the risks of equity and fixed-income investing and intend to make a
long-term investment commitment. Like all managed funds, there is a risk that
the Adviser's strategy for managing the Portfolio may not achieve the desired
results. In addition, the price of common stock moves up and down in response to
corporate earnings and developments, interest rate movements, economic and
market conditions and anticipated events. As a result, the price of the
Portfolio's investments may go down and you could lose money on your investment.

THE VALUE OF THE PORTFOLIO'S SHARES, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE
WITHIN A WIDE RANGE. AN INVESTOR IN THE PORTFOLIO COULD LOSE MONEY OVER SHORT OR
EVEN LONG PERIODS OF TIME.

SHOULD I INVEST IN THE GROWTH & INCOME PORTFOLIO?

The Portfolio may be appropriate for you if:

o You can tolerate the price fluctuations and volatility that are
inherent in investing in a broad-based stock mutual fund.

o You are looking for an investment that seeks to provide long-term
growth as well as some dividend income.

o You wish to add a growth and income stock fund to your existing
investment portfolio.

o You are seeking growth of capital and income over a long-term
investment time horizon--at least five years.

REMEMBER, NO SINGLE INVESTMENT CAN PROVIDE AN EFFECTIVE, BALANCED INVESTMENT
PLAN.

FUND FACTS

GOAL:

Maximum current total return through -

o Capital Appreciation

o Dividend Income

PRINCIPAL INVESTMENTS:

o Common Stocks

o ADRs

o Convertible Securities

CLASSES OF SHARES OFFERED IN THIS PROSPECTUS:

o Class I

o Class II

o Class III

o Class IV

INVESTMENT ADVISER:

o First Tennessee Bank National Association
("First Tennessee" or "Adviser")

INVESTMENT SUB-ADVISER:

o Highland Capital Management Corp.
("Highland" or "Sub-Adviser")

PORTFOLIO MANAGERS:

o Edward J. Goldstein

o David L. Thompson

DISTRIBUTOR:

o ALPS Mutual Funds Services, Inc. ("ALPS")

1
<PAGE> 55

--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------

The performance of Class I shares shown in the bar chart reflects the expenses
associated with those shares from year to year.

WHAT IS THE S&P 500 INDEX?

The S&P 500 Index is an unmanaged index tracking the performance of 500 publicly
traded U.S. stocks and is often used to indicate the performance of the overall
domestic stock market. The S&P 500 is not a mutual fund, and you cannot invest
in it directly. Also, the performance of the S&P 500 does not reflect the costs
associated with operating a mutual fund, such as buying, selling, and holding
securities.

YEAR-BY-YEAR TOTAL RETURN (CLASS I)

Best Quarter (quarter ended December 31, 1998) -- 20.60%
Worst Quarter (quarter ended September 30, 1998) -- (9.33)%
Year-to-date return (as of September 30, 2000) -- 6.70%

The following table lists the Portfolio's average year-by-year return by class
over the past one and five year periods and since the inception of each class of
shares. The table also compares the average annual total returns of each class
of shares of the Portfolio for the periods shown to the performance of the S&P
500 Index.

AVERAGE ANNUAL TOTAL RETURN
(for the period ended December 31, 1999)

<TABLE>
<CAPTION>
INCEPTION DATE 1 YEAR 5 YEARS SINCE INCEPTION
-------------- ------ ------- ---------------
<S> <C> <C> <C> <C>
CLASS I 8/2/93 22.35% 27.22% 22.95%
CLASS II 12/20/95 15.01% N/A 24.82%
CLASS III 12/9/93 20.08% 25.86% 21.76%
CLASS IV* 8/3/99 N/A N/A N/A
S&P 500 8/2/93 21.05% 23.56% 22.87%
</TABLE>

* Information for Class IV shares is not included in the table because the Class
has not been in existence for one full calendar year.

2
<PAGE> 56

--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIO
--------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolio.

Maximum deferred sales charge (load) None None 1.00%* 5.00%
(as a percentage of original purchase price
or redemption proceeds, as applicable)

ANNUAL PORTFOLIO OPERATING EXPENSES
(expenses that are deducted from portfolio assets)

Management Fees .65% .65% .65% .65%

Distribution (12b-1) Fees .00% .00% .75% 1.00%

Other Expenses .30% .60% .60% .33%**

Total Portfolio Operating Expenses .95% 1.25% 2.00% 1.98%
</TABLE>

* Applied to redemptions made during the first year after purchase. No deferred
sales charges are imposed on redemptions from Class III after one year from date
of purchase.

** Because Class IV shares have not been in existence for a full year, this
amount is estimated.

<TABLE>
<CAPTION>
ASSUMING REDEMPTION ASSUMING NO
AT END OF PERIOD REDEMPTION
--------------------------------------------- ---------------------
CLASS I CLASS II CLASS III CLASS IV* CLASS III CLASS IV*
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
After 1 year $ 97 $ 695 $ 303 $ 701 $ 203 $ 201
After 3 years $ 303 $ 949 $ 627 $ 921 $ 627 $ 621
After 5 years $ 525 $ 1,222 $ 1,077 $ 1,267 $ 1,077 $ 1,067
After 10 years $ 1,165 $ 1,998 $ 2,324 $ 2,115 $ 2,324 $ 2,115
</TABLE>

* The Class IV example reflects the conversion of Class IV shares to Class II
shares after eight years from the date of purchase of Class IV shares.

3
<PAGE> 57

--------------------------------------------------------------------------------
INVESTMENT DETAILS
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE -- The objective of the Portfolio is to achieve maximum
total return through a combination of capital appreciation and dividend income
by investing at least 65% of its total assets in equity securities.

In selecting investments for the Portfolio, Highland analyzes the fundamentals
of individual companies. Fundamental analysis considers a company's essential
soundness and future prospects, as well as overall industry outlook. Highland
believes that companies with superior financial characteristics bought at
attractive valuation levels have produced superior results over time. To find
such characteristics, Highland's analysts search for companies producing
consistent earnings and growth over a full market cycle. The portfolio managers,
in turn, use this research to select stocks for purchase or sale by the
Portfolio.

PRINCIPAL RISKS -- The following table describes the securities in which the
Portfolio typically invests and the principal risks associated with those
securities.

<TABLE>
<CAPTION>
SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY
---------- --------------------------------------------
<S> <C>
COMMON STOCKS: Securities that represent shares of MARKET RISK -- The risk that the market value of a
ownership in a corporation. Stockholders participate in security may increase or decrease, sometimes rapidly
the corporation's profits and losses, proportionate to and unpredictably. This risk is common to all stocks
the number of shares they own. and bonds and the mutual funds that invest in them.

VALUATION RISK -- The risk that the Portfolio has
valued certain securities at a higher price than it can
sell them. This risk is common where the security is
from a relatively new issuer with little or no previous
market history and a mutual fund's management is called
upon to assign a value to the security.

AMERICAN DEPOSITARY RECEIPTS: Certificates issued by a FOREIGN RISK -- The risk that foreign securities may be
U.S. bank which represent a stated number of shares of adversely affected by political instability of the
a foreign corporation that the bank holds in its vault. issuer's country, changes in currency exchange rates,
An ADR entitles the holder to all dividends and capital foreign economic conditions, or regulatory and
gains earned by the underlying foreign shares. While reporting standards that are less stringent than those
ADRs represent a stated number of shares of a foreign of the United States.
corporation, ADRs are traded on domestic securities
exchanges. MARKET RISK

VALUATION RISK
</TABLE>

4
<PAGE> 58

<TABLE>
<CAPTION>
SECURITIES PRINCIPAL RISKS ASSOCIATED WITH THE SECURITY
---------- --------------------------------------------
<S> <C>
MONEY MARKET FUNDS: Open-ended mutual funds that invest CREDIT RISK -- The risk that the issuer of a security,
in commercial paper, banker's acceptances, repurchase or a party to a contract, will default or otherwise not
agreements, government securities, certificates of honor a financial obligation.
deposit, and other highly liquid and safe securities,
and pay money market rates of interest. INTEREST RATE RISK -- The risk of a decline in market
value of an interest bearing instrument due to changes
in interest rates. For example, a rise in interest
rates typically will cause the value of a fixed rate
security to fall. On the other hand, a decrease in
interest rates will cause the value of a fixed rate
security to increase.

INFLATION RISK -- The risk that your investment will
not provide enough income to keep pace with inflation.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE CREDIT RISK
AGREEMENTS: Repurchase agreements involve the purchase
of a security by a purchaser and a simultaneous
agreement by the seller (generally a bank or dealer) to
repurchase the security from the purchaser at a
specified date or on demand. This technique offers a
method of earning income on idle cash. Reverse
repurchase agreements involve the sale of a security to
another party (generally a bank or dealer) in return
for cash and an agreement to buy the security back at a
specified price and time.
</TABLE>

In addition to the securities identified above, the Portfolio may, from time to
time, engage in the following non-principal investment practices or techniques:

BORROWING FROM BANKS. The Portfolio may borrow money from banks (up to 33 1/3%
of the Portfolio's total assets) for temporary or emergency purposes.

WHAT IS A DERIVATIVE INSTRUMENT?

Highland may not buy any of these instruments or use any of these techniques
unless it believes that doing so will help the Portfolio achieve its investment
objective. Use of these instruments and techniques can alter the risk and return
characteristics of the Portfolio. They may increase the Portfolio's volatility
and may involve the investment of a small amount of cash relative to the
magnitude of the risk assumed. They also may result in a loss of principal if
Highland judges market conditions incorrectly or employs a strategy that does
not correlate well with the investment strategy of the Portfolio. Positions in
options involve the risk that such options may fail as a hedging technique and
that closing transactions may not be effected where a liquid secondary market
does not exist.

5
<PAGE> 59

LENDING SECURITIES. The Portfolio may temporarily lend up to 33 1/3% of its
portfolio securities to broker-dealers and institutions, but only when the loans
are fully collateralized.

For more information about the securities in which the Portfolio invests and
their associated risks, please refer to the Appendix to this Prospectus and the
SAI.

--------------------------------------------------------------------------------
WHO MANAGES THE PORTFOLIO?
--------------------------------------------------------------------------------

First Tennessee, 530 Oak Court Dr., Memphis, Tennessee, serves as Investment
Adviser to the Portfolio and, with the prior approval of the Board of Trustees
of First Funds (the "Trustees"), has engaged Highland to act as Sub-Adviser to
the Portfolio. Subject to First Tennessee's supervision, Highland is responsible
for the day-to-day investment management of the Portfolio, including providing
investment research and credit analysis concerning portfolio investments and
conducting a continuous program of investment of portfolio assets in accordance
with the investment policies and objectives of the Portfolio.

For managing its investment and business affairs, the Portfolio is obligated to
pay First Tennessee a monthly management fee at the annual rate of .65% of its
average net assets. First Tennessee serves as an investment adviser to
individual, corporate and institutional advisory clients, pension plans and
collective investment funds, with approximately $23.2 billion in assets under
administration (including nondiscretionary accounts) and $9.8 billion in assets
under management as of June 30, 2000, and has experience in supervising
sub-advisers.

Highland, 6077 Primacy Parkway, Memphis, TN, serves as the Sub-Adviser for the
Portfolio subject to the supervision of First Tennessee and pursuant to the
authority granted to it under its Sub-Advisory Agreement with First Tennessee.
On March 1, 1994, Highland merged with and into First Tennessee Investment
Management, Inc. ("FTIM"), an affiliate of First Tennessee, and changed its name
to Highland Capital Management Corp.

FTIM (now Highland), has been a wholly-owned subsidiary of First Tennessee
National Corporation since 1972. First Tennessee and Highland have a history of
investment management that dates back to 1929. Highland has a total of $5.2
billion in assets under management as of June 30, 2000. First Tennessee is
obligated to pay Highland a monthly sub-advisory fee at the annual rate of .38%
of the Portfolio's average net assets. The Portfolio is not responsible for
paying any portion of Highland's sub-advisory fee.

--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------

[PHOTO]

Edward J. Goldstein, one of the Portfolio Managers for the Portfolio, is a
Director and Executive Vice President of Highland. He joined Highland in
September, 1989. Mr. Goldstein is a graduate of Boston University and received a
Masters degree in Business Administration from Columbia University.

David L. Thompson, one of the Portfolio Managers for the Portfolio, is a
Director and Senior Vice President of Highland. He joined Highland in May 1995
and is a Chartered Financial Analyst. Mr. Thompson is a graduate of the
University of Mississippi and received a Masters degree in Business
Administration from the University of North Carolina.

6
<PAGE> 60

--------------------------------------------------------------------------------
HOW TO INVEST IN THE PORTFOLIO
--------------------------------------------------------------------------------

CLASS I

WHO MAY INVEST?

HOW IS AN INSTITUTIONAL ACCOUNT ESTABLISHED?

HOW ARE INVESTMENTS MADE?

Each Institutional Investor will transmit orders to Boston Financial Data
Services (the "Transfer Agent"). Institutional Investors will wire funds through
the Federal Reserve System. Purchases will be processed at the net asset value
per share (NAV) next calculated after an order is received and accepted by the
Transfer Agent. The Portfolio requires advance notification of all wire
purchases. To secure same day acceptance of federal funds (monies transferred
from one bank to another through the Federal Reserve System with same-day
availability), an Institutional Investor must call the Transfer Agent at
1-800-442-1941 (option 2), prior to the close of business (normally 4:00 p.m.
Eastern Time) on any Business Day to advise it of the wire. The Trust may
discontinue offering its shares in any Class of the Portfolio without notice to
shareholders.

WHAT CLASSES OF SHARES DOES THE GROWTH & INCOME PORTFOLIO OFFER?

CLASS I SHARES. Class I shares are offered to institutional investors
exclusively. Class I shares are not subject to any sales loads and do not incur
distribution or shareholder servicing fees.

MINIMUM INVESTMENT AND ACCOUNT BALANCE.

7
<PAGE> 61

investments may be in any amount. If an Institutional Investor's Class I account
falls below $375,000 due to redemption, the Portfolio may close the account. An
Institutional Investor may be notified if the minimum balance is not being
maintained and will be allowed 30 days to make additional investments before the
account is closed. Shares will be redeemed at the NAV on the day the account is
closed, and proceeds will be sent to the address of record.

HOW ARE REDEMPTIONS MADE?

ADDITIONAL INFORMATION

CLASS II, III, AND IV

WHO MAY INVEST?

Class II, III, and IV shares are designed for individuals and other investors
who seek mutual fund investment convenience plus a lower investment minimum.
These classes offer investors differing expense and sales load structures to
choose between. See "Fees and Expenses of the Portfolio".

INVESTMENT REQUIREMENTS

8
<PAGE> 62

Investing Program" below) or the "A Plus/First Horizon Card Program" (a consumer
discount card program provided by First Horizon Strategic Alliances, Inc., a
subsidiary of First Tennessee), the minimum initial investment is $250, and
subsequent investments may be in any amount of $25 or greater.

HOW DO I SET UP AN ACCOUNT?

HOW DO I INVEST DIRECTLY?

When opening a new account directly, you must complete and sign an account
application and send it to First Funds, c/o Boston Financial Data Services, P.O.
Box 8050, Boston, MA 02266-8050. Telephone representatives are available at
1-800-442-1941 (option 2), between the hours of 8:00 a.m. to 4:00 p.m. Central
Time (9:00 a.m. to 5:00 p.m. Eastern Time), Monday through Friday.

Investments may be made in several ways:

BY MAIL: Make your check payable to FIRST FUNDS GROWTH & INCOME PORTFOLIO, and
mail it, along with the application, to the address indicated on the
application. Your account will be credited on the business day that the Transfer
Agent receives your completed application.

State Street Bank and Trust Company
ABA #011000028
First Funds
Account #9905-440-5
(Account Registration)
(Account Number)
(Wire Control Number) *See Below*

9
<PAGE> 63

Prior to sending wires, please be sure to call 1-800-442-1941 (option 2), to
receive a wire control number to be included in the body of the wire (see
above).

Your bank may charge you a fee for this service.

HOW DO I REDEEM SHARES WHEN INVESTING DIRECTLY?

You may redeem shares in several ways:

10
<PAGE> 64

HOW DO I INVEST THROUGH MY INVESTMENT PROFESSIONAL?

HOW DO I REDEEM THROUGH MY INVESTMENT PROFESSIONAL?

On your behalf, the broker of record listed on your account may redeem shares.
Proceeds from the redemption can only be sent to your address of record.

SYSTEMATIC INVESTING PROGRAM

SYSTEMATIC WITHDRAWAL PLAN

SYSTEMATIC EXCHANGE PROGRAM

ADDITIONAL INFORMATION

TAX-DEFERRED RETIREMENT PLANS: Retirement plans can offer significant tax
savings to individuals. Please call First Funds at 1-800-442-1941 (option 1) or
your Investment Professional for more information on the plans and their
benefits, provisions and fees. The Transfer Agent or your Investment
Professional can set up your new account in the Portfolio under one of several
tax-deferred plans. These plans let you invest for retirement and defer or
eliminate the tax on your investment income. Minimums may differ from those
listed previously under "Investment Requirements." Plans include traditional
Individual Retirement Accounts (IRAs) Roth IRA's, Education IRAs, Rollover IRAs,
Keogh Plans, and Simplified Employee Pension Plans (SEP-IRAs).

CLASS II

SALES LOADS

11
<PAGE> 65

TOTAL SALES LOAD FOR CLASS II SHARES

<TABLE>
<CAPTION>
AS A % OF OFFERING BROKER-DEALER
AMOUNT OF TRANSACTION PRICE PER SHARE AS A % OF NAV REALLOWANCE
--------------------- ------------------ ------------- -------------
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00

$50,000 to $99,999 4.50 4.71 4.00

$100,000 to $249,999 3.50 3.63 3.00

$250,000 to $499,999 2.50 2.56 2.25

$500,000 to $999,999 1.50 1.52 1.25

$1,000,000 and over 0.50 0.50 0.40
</TABLE>

The broker-dealer reallowance may be changed from time to time.

You may purchase Class II shares without a sales load if the purchase will be:

(B) by registered representatives, directors, advisory directors,
officers and employees (and their immediate families) of First Tennessee or its
affiliates;

(D) by a charitable remainder trust or life income pool established for
the benefit of a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code);

(E) for use in a financial institution or investment adviser managed
account for which a management or investment advisory fee is charged;

(G) through certain promotions where the load is waived for investors.

QUANTITY DISCOUNTS

To qualify for a reduction of or exception to the sales load, you or your
Investment Professional must notify the Transfer Agent at the time of purchase
or exchange.

12
<PAGE> 66

The reduction in sales load is subject to confirmation of your holdings through
a check of records. The Trust may modify or terminate quantity discounts at any
time. For more information about quantity discounts, contact your service
organization or First Funds at 1-800-442-1941 (option 1).

If you are a participant in a First Funds IRA or if you are a trustee or
custodian of another type of First Funds retirement plan, you may also include
as part of your aggregate investment any holdings through the IRA or in the plan
even if a load was not paid. If, for example, you beneficially own Class II
shares of a First Funds Portfolio with an aggregate current value of $99,000 and
you subsequently purchase shares of the Portfolio having a current value of
$1,000, the load applicable to the subsequent purchase would be reduced to 3.50%
of the offering price. Similarly, each subsequent purchase of First Funds Class
II shares may be added to your aggregate investment at the time of purchase to
determine the applicable sales loads.

o purchases by your spouse for his, her or your joint account or for
the account of any minor children, and

o the aggregate investment of any trustee or other Institutional
Investor for you and/or your spouse or your minor children.

A trustee or custodian of any qualified pension or profit sharing plan may
combine its aggregate purchases.

OTHER. Class II shares also incur Shareholder Servicing Fees. See discussion
under "Distribution Plans and Shareholder Servicing Plans."

CLASS III

13
<PAGE> 67

CLASS IV

Class IV shares are bought with no front-end load. Therefore, the offering price
for such shares will be at their NAV. Class IV shares incur Distribution Fees.
See discussion under "Distribution Plans and Shareholder Servicing Plans."

DEFERRED SALES CHARGES. A CDSC of up to 5.00% is imposed on redemptions of Class
IV shares, based on the lower of the shares cost and the current net asset
value. As shown in the table below, the CDSC associated with the Class IV shares
is phased out over a period of six years. Any shares acquired by reinvestment of
dividends will be redeemed without the imposition of any CDSC. In addition, the
CDSC imposed on redemptions of Class IV shares may be waived for Systematic
Withdrawal Plans with respect to up to 10% per year of the account value at the
time of establishment.

AUTOMATIC CONVERSION. After eight years from the date of purchase, Class IV
shares will automatically convert to Class II shares.

ALL CLASSES

HOW ARE PORTFOLIO SHARES VALUED?

WHAT ARE MY DISTRIBUTION OPTIONS?

The Portfolio may earn dividends from its stocks and interest from bond, money
market, and other fixed-income investments. These are passed along as dividend
distributions. Income dividends for the Portfolio are declared and paid
quarterly. The Portfolio may realize capital gains if it sells securities for a
higher price than it paid for them. These are passed along as capital gain
distributions.

When you fill out your account application, you can specify how you want to
receive your distributions. Currently, there are three available options:

2. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution, if any. Distribution checks will be mailed no later than seven
days after the last day of the month.

3. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for any dividend
distribution.

HOW ARE EXCHANGES MADE?

Investors in Class II or Class IV shares wishing to exchange into one of the
Money Market Portfolios that do not offer these Classes will receive Class III
shares.

14
<PAGE> 68

STATEMENTS AND REPORTS

WHAT IS THE EFFECT OF FEDERAL INCOME TAX ON THIS INVESTMENT?

OTHER TAX INFORMATION. The information above is only a summary of some of the
federal tax consequences generally affecting the Portfolio and its shareholders,

15
<PAGE> 69

and no attempt has been made to discuss individual tax consequences. In addition
to federal tax, distributions may be subject to state or local taxes.

16
<PAGE> 70

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

GROWTH & INCOME PORTFOLIO

<TABLE>
<CAPTION>
CLASS I
----------------------------------------------------------------------------

For the Year
Ended June 30,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 26.26 $ 21.56 $ 17.03 $ 14.12 $ 12.22
------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.11 0.13 0.17 0.18 0.19
Net realized and unrealized gain on investments 1.88 5.30 5.25 3.75 2.58
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.99 5.43 5.42 3.93 2.77
------------ ------------ ------------ ------------ ------------
Distributions:
Net investment income (0.09) (0.12) (0.17) (0.18) (0.19)
Net realized gain (2.83) (0.61) (0.72) (0.84) (0.68)
------------ ------------ ------------ ------------ ------------
Total distributions (2.92) (0.73) (0.89) (1.02) (0.87)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 25.33 $ 26.26 $ 21.56 $ 17.03 $ 14.12
============ ============ ============ ============ ============

TOTAL RETURN+ 8.15% 25.69% 32.55% 28.83% 23.54%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 790,050 $ 790,985 $ 651,363 $ 221,136 $ 159,146
Ratio of expenses to average daily net assets(1) 0.87% 0.80% 0.82% 0.83% 0.76%
Ratio of net investment income to average net assets 0.44% 0.57% 0.78% 1.19% 1.40%
Portfolio turnover rate 28% 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. 0.95% 0.95% 0.97% 0.98% 1.00%
</TABLE>

+ Total return would have been lower had various fees not been waived during the
period.

17
<PAGE> 71

FINANCIAL HIGHLIGHTS
GROWTH & INCOME PORTFOLIO (CONTINUED)

<TABLE>
<CAPTION>
CLASS II
-------------------------------------------------------------------

For the Year
Ended June 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996**
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 26.30 $ 21.58 $ 17.05 $ 14.12 $ 13.05
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.03 0.06 0.10 0.13 0.09
Net realized and unrealized gain on investments 1.88 5.31 5.27 3.76 1.74
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.91 5.37 5.37 3.89 1.83
---------- ---------- ---------- ---------- ----------
Distributions:
Net investment income (0.05) (0.04) (0.12) (0.12) (0.08)
Net realized gain (2.83) (0.61) (0.72) (0.84) (0.68)
---------- ---------- ---------- ---------- ----------
Total distributions (2.88) (0.65) (0.84) (0.96) (0.76)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.33 $ 26.30 $ 21.58 $ 17.05 $ 14.12
========== ========== ========== ========== ==========

TOTAL RETURN+*** 7.80% 25.33% 32.17% 28.48% 14.71%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 101,907 $ 82,896 $ 46,863 $ 16,514 $ 1,918
Ratio of expenses to average daily net assets(1) 1.18% 1.10% 1.13% 1.14% 1.06%*
Ratio of net investment income to average net assets 0.13% 0.28% 0.47% 0.88% 1.10%*
Portfolio turnover rate 28% 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% 1.25% 1.28% 1.29% 1.30%*
</TABLE>

<TABLE>
<CAPTION>
Class III
------------------------------------------------------------------

For the Year
Ended June 30,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 26.00 $ 21.47 $ 16.99 $ 14.11 $ 12.23
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.13) (0.11) (0.04) 0.02 0.03
Net realized and unrealized gain on investments 1.83 5.25 5.24 3.74 2.60
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.70 5.14 5.20 3.76 2.63
---------- ---------- ---------- ---------- ----------
Distributions:
Net investment income -- -- -- (0.04) (0.07)
Net realized gain (2.83) (0.61) (0.72) (0.84) (0.68)
---------- ---------- ---------- ---------- ----------
Total distributions (2.83) (0.61) (0.72) (0.88) (0.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.87 $ 26.00 $ 21.47 $ 16.99 $ 14.11
========== ========== ========== ========== ==========

TOTAL RETURN+ 7.02% 24.35% 31.16% 27.44% 22.19%

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 101,084 $ 95,528 $ 79,360 $ 50,178 $ 36,892
Ratio of expenses to average daily net assets(1) 1.92% 1.88% 1.87% 1.94% 1.87%
Ratio of net investment income to average net assets (0.61)% (0.50)% (0.28)% 0.08% 0.29%
Portfolio turnover rate 28% 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. 2.00% 2.03% 2.02% 2.09% 2.11%
</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 returns for periods of less than one year are not annualized.

18
<PAGE> 72

FINANCIAL HIGHLIGHTS
GROWTH & INCOME PORTFOLIO (CONTINUED)

<TABLE>
<CAPTION>
CLASS IV
--------------

For the Period
Ended June 30,
2000**
--------------
<S> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 25.83
--------------
Income from investment operations:
Net investment loss (0.07)
Net realized and unrealized gain on investments 2.20
--------------
Total from investment operations 2.13
--------------
Distributions:
Net investment income --
Net realized gain (2.83)
--------------
Total distributions (2.83)
--------------
Net asset value, end of period $ 25.13
==============

TOTAL RETURN+ 8.72%#

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $5,372
Ratio of expenses to average daily net assets(1) 1.91%*
Ratio of net investment income to average net assets (0.60)%*
Portfolio turnover rate 28%

(1) During the period, various fees were waived.
The ratio of expenses to average net assets had
such waivers not occurred is as follows. 1.98%*
</TABLE>

* Annualized

** Class IV commenced operations on August 3, 1999.

+ Total return would have been lower had various fees not been waived during
the period.

# Total returns for periods of less than one year are not annualized.

19
<PAGE> 73

--------------------------------------------------------------------------------
APPENDIX
--------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S INVESTMENTS

The following information provides a brief description of the securities in
which the Portfolio may invest and the transactions it may take. The Portfolio
is not limited by this discussion, however, and may purchase other types of
securities and may enter into other types of transactions if they are consistent
with the Portfolio's investment objective and policies.

FOREIGN INVESTMENTS. The Portfolio may invest in foreign securities, which may
involve additional risks. Foreign securities and securities denominated in or
indexed to foreign currencies may be affected by the strength of foreign
currencies relative to the U.S. dollar, or by political, regulatory, or economic
developments in foreign countries. Foreign companies may not be subject to
accounting standards or governmental supervision comparable to U.S. companies,
and there may be less public information about their operations. Foreign markets
may be less liquid or more volatile than U.S. markets, and may offer less
protection to investors. In addition to the political and economic factors that
can affect foreign securities, a governmental issuer may be unwilling to repay
principal and interest when due, and may require that the conditions for payment
be renegotiated. These factors could make foreign investments, especially those
in developing countries, more volatile. Highland considers these factors in
making foreign investments for the Portfolio.

The Portfolio may also enter into currency forward contracts (agreements to
exchange one currency for another at a future date) to manage currency risks and
to facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Portfolio from adverse exchange rate
changes, they involve a risk of loss if Highland fails to predict foreign
currency values correctly or employs a strategy that does not correlate well
with a Portfolio's investments. A loss to the Portfolio may also result if the
counterparty to a transaction fails to perform as obligated. Please see
discussion under "Forwards" below.

FORWARDS. A forward represents a contract that obligates the counterparty to
buy, and the other to sell, a specific underlying asset at a specific price,
amount, and date in the future. Forwards are similar to futures except that
forwards are privately negotiated. The most common type of forward contracts are
foreign currency exchange contracts.

RESTRICTED SECURITIES. The Portfolio may purchase securities which cannot be
sold to the public without registration under the Securities Act of 1933
(restricted securities). Unless registered for sale, these securities can only
be sold in privately negotiated transactions or pursuant to an exemption from
registration. Provided that the security has a demand feature of seven days or
less, or a dealer or institutional trading market exists, these restricted
securities are not treated as illiquid securities for the purposes of the
Portfolio's investment limitations. Investing in Restricted Securities could
have the effect of increasing the level of Portfolio illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.

ILLIQUID SECURITIES. Under guidelines established by the Trustees, Highland
determines the liquidity of the Portfolio's investments. The absence of a
trading market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments or securities subject to legal
restrictions may involve time-consuming negotiation and legal expenses. It may
be difficult or impossible for the Portfolio to sell illiquid or restricted

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<PAGE> 74

securities promptly at an acceptable price. The Portfolio may invest up to 15%
of its net assets in illiquid investments.

MONEY MARKET INSTRUMENTS. Money Market Instruments are high quality instruments
that present minimal credit risk. They may include U.S. government obligations,
commercial paper and other short-term corporate obligations, and certificates of
deposit, bankers' acceptances, bank deposits and other financial institution
obligations. These instruments may carry fixed or variable rates.

To the extent it invests in securities denominated in foreign currencies, the
Portfolio may also buy and sell options contracts to manage exposure to currency
exchange rates. Some option strategies, including buying puts and writing calls,
tend to hedge the Portfolio's investments against price fluctuations. Other
strategies, including writing puts and buying calls, tend to increase market
exposure. Options may be combined with each other in order to adjust the risk
and return characteristics of the overall strategy. The Portfolio may enter into
forward contracts for settlement or hedging purposes. The Portfolio may invest
in options based on any type of security, index, or currency, including options
traded on foreign exchanges and options not traded on exchanges.

Options can be volatile investments and involve certain risks. If Highland
applies a hedge at an inappropriate time or judges market conditions
incorrectly, options strategies may result in a loss and lower the Portfolio's
return. The Portfolio could also experience losses if the prices of its options
positions were poorly correlated with its other investments, or if it could not
close out its positions because of an illiquid secondary market. The use of
options may increase the volatility of the Portfolio and may involve the
investment of a small amount of cash relative to the risk assumed.

U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations purchased by the
Portfolio are debt obligations issued or guaranteed by the U.S. Treasury or by
an agency or instrumentality of the U.S. Government. Not all U.S. Government
obligations are backed by the full faith and credit of the United States. For
example, obligations issued by the Federal Farm Credit Bank or by the Federal
National Mortgage Association are supported by the agency's right to borrow
money from the U.S. Treasury under certain circumstances. Obligations issued by
the Federal Home Loan Bank are supported only by the credit of the agency. There
is no guarantee that the Government will support these types of obligations, and
therefore they involve more risk than other Government obligations.

U.S. TREASURY OBLIGATIONS. U.S. Treasury obligations purchased by the Portfolio
are obligations issued by the United States and backed by its full faith and
credit.

ZERO COUPON BONDS. Zero coupon bonds purchased by the Portfolio do not make
regular interest payments; instead they are sold at a deep discount from their
face value and are redeemed at face value when they mature. Because zero coupon
bonds do not pay current income, their prices can be very volatile when interest
rates change. In calculating its daily dividend, the Portfolio takes into
account as income a portion of the difference between a zero coupon bond's
purchase price and its face value.

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================================================================================

[FIRST FUNDS LETTERHEAD]

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

If you would like more information about the Portfolio, the following documents
are available free upon request.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

ANNUAL AND SEMI-ANNUAL REPORTS

Investment Company Act File No. 811-6589

FIRST FUNDS

o Are NOT insured by the FDIC or
any other governmental agency.

o Are NOT bank deposits or other
obligations of or guaranteed
by First Tennessee Bank
National Association or any of
its affiliates.

o Involve investment risks,
including the possible loss of
the principal amount invested.

[FIRST TENNESSEE LOGO]

[ALPS MUTUAL FUNDS SERVICES LOGO]

================================================================================
<PAGE> 79

[FIRST FUNDS LOGO]

INTERMEDIATE BOND PORTFOLIO

PROSPECTUS
DATED OCTOBER 28, 2000

CLASS I
CLASS II
CLASS III

[PHOTO]
[PHOTO]
[PHOTO]

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus. Any
representation to the contrary is a criminal offense.

[GRAPHIC]

<PAGE> 80

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----

<S> <C>
Investment Objective, Principal Strategies and Risks........................................................................1