<PAGE>
[First Choice Logo]
U.S. TREASURY RESERVE FUND
CASH RESERVE FUND
ANNUAL REPORT TO SHAREHOLDERS
September 30, 1997
Distributed through
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
888-FIRST-16
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[First Choice Logo] First Choice Funds Trust
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TABLE OF CONTENTS
Letter to Our Shareholders
PAGE 1
Schedules of Portfolio Investments
U.S. Treasury Reserve Fund :
PAGE 2
Cash Reserve Fund :
PAGE 3
Statements of Assets and Liabilities
PAGE 5
Statements of Operations
PAGE 6
Statements of Changes in Net Assets
PAGE 7
Financial Highlights
PAGE 8
Notes to Financial Statements
PAGE 9
Report of Independent Accountants
PAGE 11
Shareholder Information
BACK COVER
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First Choice Funds Trust [First Choice Logo]
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October 17, 1997
Dear First Choice Funds Shareholder:
We take pride in presenting to you the First Choice Funds 1997 Annual Report,
marking successful completion of our inaugural year of mutual fund operations.
We are pleased with the Funds' progress during this past year. Since our first
report to you on March 31, 1997, assets under management in the U.S. Treasury
Reserve and Cash Reserve Funds (the "Funds") have increased more than $37
million to total over $133 million at September 31, 1997, a 28% increase over
the course of the six month period.
An increase in net assets is gratifying and contributes to the strength of the
Funds' operations. Perhaps more significant to us is that your consistent
investment in the Funds demonstrates that you share our vision for the important
role the First Choice Funds play in your investment strategy. We created the
Funds because we believe that quality mutual funds, conservatively managed and
focused on selected market sectors fulfill a vital need for individual
shareholders, corporations, charities, foundations, community banks and others.
Providing shareholders access to the short-term investments owned by the Funds
offers an opportunity to invest in securities that are characterized by stable
values and high creditworthiness. Shareholders also benefit by having their
investments selected and managed by the experienced professionals of First
American Capital Management, Inc., the investment advisory affiliate of The
First American Financial Corporation.
Predicting the behavior of investment markets is a difficult, if not impossible,
undertaking, as the turbulent course of world financial markets has reconfirmed
in recent weeks. However, investors must be attentive to "straws in the wind" as
they assess their current investment positions and plan their future strategies.
In recent weeks, observers of the stock market have questioned whether the
market's remarkable rise and the economy's overall performance can be sustained.
Other analysts have noted recent price increases as the potential harbinger of
renewed inflation. Any combination of factors could exert upward pressure on
short-term interest rates, which would bode positively for many money market
investments, including those which comprise the core of the First Choice Funds.
Without making a prediction as to the direction of the economy, and
notwithstanding these current suggestions of uncertainty, investors can expect
that money market investments will continue to offer a unique combination of
safety, liquidity and income -- important components of any investment strategy.
We appreciate your continued participation in our mutual fund family and look
forward to serving your needs in the future.
William C. Conrad
President & CEO
First American Capital Management, Inc.
An investment in the Funds is neither insured nor guaranteed by the U.S.
Government. Yields may fluctuate and there can be no assurance that the Funds
will be able to maintain a stable NAV of $1.00 per share.
This material must be accompanied or preceded by a prospectus.
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[First Choice Logo] First Choice Funds Trust
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U.S. TREASURY RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1997
Principal Value
Amount (Note 2)
--------- --------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS - 98.7%
U.S Treasury Bills (A) - 11.2%
$2,840,000 4.82%, 11/06/1997 ................................... $ 2,826,311
5,630,000 5.07%, 11/13/1997 ................................... 5,595,855
-----------
8,422,166
__________
U.S. Treasury Notes - 87.5%
3,235,000 8.75%, 10/15/1997 ................................... 3,239,264
6,165,000 5.63%, 10/31/1997 ................................... 6,166,225
3,760,000 5.75%, 10/31/1997 ................................... 3,761,667
11,130,000 7.38%, 11/15/1997 ................................... 11,154,624
5,170,000 8.88%, 11/15/1997 ................................... 5,191,037
7,395,000 5.38%, 11/30/1997 ................................... 7,394,164
4,870,000 6.00%, 11/30/1997 ................................... 4,874,584
2,330,000 5.00%, 01/31/1998 ................................... 2,325,314
9,490,000 7.25%, 02/15/1998 ................................... 9,545,331
9,300,000 5.13%, 02/28/1998 ................................... 9,287,819
3,200,000 6.13%, 03/31/1998 ................................... 3,211,685
-----------
66,151,714
-----------
TOTAL INVESTMENTS - 98.7% ........................................ 74,573,880
(Cost $74,573,880)* -----------
NET OTHER ASSETS AND LIABILITIES - 1.3% .......................... 1,001,724
-----------
TOTAL NET ASSETS - 100.0% ........................................ $75,575,604
===========
* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity
at time of purchase.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [First Choice Logo]
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CASH RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1997
Principal Value
Amount (Note 2)
- --------- --------
COMMERCIAL PAPER (A) - 52.3%
FINANCE - 33.4%
$1,600,000 American Express Credit Corp. 5.50%, 11/14/1997 ...... $1,589,244
1,045,000 American Express Credit Corp. 5.49%, 01/08/1998 ...... 1,029,223
1,700,000 American General Finance Corp. 5.52%, 11/14/1997 ..... 1,688,531
1,100,000 American General Finance Corp. 5.55%, 02/05/1998 ..... 1,078,463
1,500,000 Associates Corp. of North America 5.50%, 11/14/1997 .. 1,489,917
1,260,000 Associates Corp. of North America 5.50%, 12/01/1997 .. 1,248,258
1,305,000 Ford Motor Credit Co. 5.51%, 10/17/1997 .............. 1,301,804
1,500,000 Ford Motor Credit Co. 5.50%, 12/05/1997 .............. 1,485,104
2,750,000 General Electric Capital Corp. 5.56%, 10/10/1997 ..... 2,746,178
3,290,000 International Business Machine Credit Corp. ..........
5.50%, 11/20/1997 .................................... 3,264,866
2,500,000 International Lease Finance Corp. 5.52%, 02/02/1998 .. 2,452,467
----------
19,374,055
----------
SECURITY BROKERS AND DEALERS - 14.6%
2,650,000 Bear Stearns Cos., Inc. 5.51%, 10/06/1997 ............ 2,647,963
3,320,000 Merrill Lynch & Co., Inc. 5.56%, 01/28/1998 .......... 3,258,982
2,600,000 Smith Barney Holdings, Inc. 5.52%, 10/20/1997 ........ 2,592,422
----------
8,499,367
----------
CONSUMER GOODS - 4.3%
$2,500,000 PepsiCo, Inc. 5.55%, 10/03/1997 ...................... $2,499,229
----------
TOTAL COMMERCIAL PAPER ............................... 30,372,651
(Cost $30,372,651) ----------
BANKERS ACCEPTANCES (A) - 37.1%
1,578,330 BankBoston 5.72%, 10/21/1997 ......................... 1,573,305
1,250,000 BankBoston 5.70%, 10/24/1997 ......................... 1,245,448
1,000,000 Bank of America 5.55%, 10/24/1997 .................... 996,454
1,500,000 Bank of America 5.52%, 11/18/1997 .................... 1,488,960
3,000,000 Bank of New York 5.55%, 10/24/1997 ................... 2,989,363
2,000,000 Bankers Trust Co. 5.48%, 10/08/1997 .................. 1,997,869
1,182,642 Bankers Trust Co. 5.56%, 11/26/1997 .................. 1,172,414
2,828,375 Chase Manhattan Bank 5.48%, 10/08/1997 ............... 2,825,361
2,835,070 Corestates Bank of North America
5.50%, 03/18/1998 .................................... 2,762,303
1,000,000 First National Bank of Chicago
5.50%, 10/21/1997 .................................... 996,944
1,000,000 Republic National Bank of New York 5.55%, 12/09/1997 . 989,363
1,000,000 Union Bank of California 5.51%, 01/26/1998 ........... 982,093
500,000 Union Bank of California 5.55%, 11/07/1997 ........... 497,148
1,000,000 Union Bank of California 5.54%, 11/24/1997 ........... 991,690
----------
TOTAL BANKERS ACCEPTANCES ............................ 21,508,715
(Cost $21,508,715) ----------
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [First Choice Logo]
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CASH RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- SEPTEMBER 30, 1997 (CONTINUED)
Principal Value
Amount (Note 2)
- --------- --------
U.S. AGENCY OBLIGATIONS (A) - 10.9%
FEDERAL HOME LOAN MORTGAGE
CORPORATION DISCOUNT NOTES - 8.1%
$2,270,000 5.43%, 10/07/1997 ................................... $ 2,267,946
946,000 5.47%, 10/14/1997 ................................... 944,131
1,510,000 5.42%, 10/15/1997 ................................... 1,506,820
-----------
4,718,897
-----------
FEDERAL HOME LOAN BANK
DISCOUNT NOTES - 2.8%
$1,612,000 5.43%, 11/14/1997 ................................... $1,601,302
-----------
TOTAL U.S. AGENCY
OBLIGATIONS ......................................... 6,320,199
(Cost $6,320,199) -----------
TOTAL INVESTMENTS - 100.3% ....................................... 58,201,565
(Cost $58,201,565)* -----------
NET OTHER ASSETS AND LIABILITIES - (0.3%) ........................ (193,578)
-----------
TOTAL NET ASSETS - 100.0% ........................................ $58,007,987
===========
* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity at time of purchase.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [First Choice Logo]
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<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 1997
<CAPTION>
U. S. Treasury Cash
Reserve Fund Reserve Fund
-------------- ------------
<S> <C> <C>
ASSETS:
Investments at value (Amortized cost $74,573,880
and $58,201,565, respectively) (Note 2) ................................ $74,573,880 $58,201,565
Cash ..................................................................... 1,536 --
Interest receivable ...................................................... 1,226,042 --
Unamortized organization costs (Note 2) .................................. 51,074 54,709
Prepaid expenses ......................................................... 5,747 6,873
Receivable from Investment Adviser (Note 4) .............................. 72,732 74,316
----------- -----------
Total Assets ........................................................... 75,931,011 58,337,463
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LIABILITIES:
Payable to Custodian ..................................................... -- 414
Dividends payable ........................................................ 265,515 250,666
Investment advisory fee payable (Note 4) ................................. 2,715 2,359
Administration and accounting fee payable (Note 4) ....................... 5,705 5,316
Transfer agent fee payable (Note 4) ...................................... 10,031 5,426
Registration and filing fee payable ...................................... 22,901 17,578
Trustee fee payable (Note 4) ............................................. 5,308 4,659
Accrued expenses and other payables ...................................... 43,232 43,058
----------- -----------
Total Liabilities ...................................................... 355,407 329,476
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NET ASSETS ................................................................. $75,575,604 $58,007,987
----------- -----------
NET ASSETS consist of:
Par Value (Note 3) ....................................................... $ 75,575 $ 58,008
Paid-in Capital (Note 3) ................................................. 75,499,071 57,950,369
Accumulated undistributed net realized gain (loss)
on investments sold .................................................... 958 (390)
----------- -----------
TOTAL NET ASSETS ......................................................... $75,575,604 $58,007,987
___________ ___________
___________ ___________
Assets
Service Class ............................................................ $73,580,674 $57,946,635
Institutional Class ...................................................... 1,994,930 61,352
----------- -----------
Total .................................................................... $75,575,604 $58,007,987
___________ ___________
Shares Outstanding
Service Class ............................................................ 73,579,703 57,947,025
Institutional Class ...................................................... 1,994,943 61,352
_________ __________
Total .................................................................. 75,574,646 58,008,377
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Net Asset Value, offering and redemption price per share
Service Class ............................................................ $ 1.00 $ 1.00
=========== ===========
Institutional Class ...................................................... $ 1.00 $ 1.00
=========== ===========
</TABLE>
Please see the accompanying notes to financial statements.
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[First Choice Logo] First Choice Funds Trust
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STATEMENTS OF OPERATIONS -- FOR THE PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
U. S. TREASURY CASH
RESERVE FUND* RESERVE FUND**
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<S> <C> <C>
INVESTMENT INCOME:
Interest income (Note 2) ................................................. $ 2,959,123 $ 2,103,563
__________ _________
EXPENSES:
Investment advisory fees (Note 4) ........................................ 168,045 113,162
Administration fees (Note 4) ............................................. 82,241 55,140
Distribution fees - Service Class ........................................ 137,590 94,336
Shareholder services fees - Service Class ................................ 137,590 94,336
Accounting fees (Note 4) ................................................. 30,427 22,216
Custodian fees ........................................................... 19,543 15,715
Legal and audit fees ..................................................... 49,707 43,419
Amortization of organization costs (Note 2) .............................. 12,759 9,124
Trustees' fees and expenses (Note 4) ..................................... 24,197 16,609
Transfer agent fees (Note 4) ............................................. 21,728 11,315
Registration and filing fees ............................................. 48,485 42,790
Printing fees ............................................................ 16,845 11,028
Miscellaneous and Other Expenses ......................................... 9,896 9,599
----------- -----------
Total Gross Expenses ..................................................... 759,053 538,789
Less: Fee waivers and expense reimbursements (Note 4) .................... (564,206) (406,073)
----------- -----------
Total Expenses ........................................................... 194,847 132,716
Less: Custody earnings credits (Note 2) .................................. (807) (623)
----------- -----------
Net Expenses ............................................................. 194,040 132,093
----------- -----------
NET INVESTMENT INCOME .................................................... 2,765,083 1,971,470
----------- -----------
REALIZED GAIN (LOSS) FROM INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ............................. 958 (390)
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................................ $ 2,766,041 $ 1,971,080
=========== ===========
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* The Fund commenced operations on October 1, 1996.
** The Fund commenced operations on January 13, 1997.
</TABLE>
Please see the accompanying notes to financial statements.
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FIRST CHOICE FUNDS TRUST [First Choice Logo]
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U. S. TREASURY RESERVE FUND CASH RESERVE FUND
--------------------------- --------------------
FOR THE PERIOD ENDED FOR THE PERIOD ENDED
SEPTEMBER 30, 1997* SEPTEMBER 30, 1997**
-------------------- --------------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ........................................ $ 50,000(a) $ 50,000(a)
----------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income .................................................... 2,765,083 1,971,470
Net realized gain (loss) on investments sold ............................. 958 (390)
----------- -----------
Net increase in net assets
resulting from operations .......................................... 2,766,041 1,971,080
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income:
Service Class ......................................................... (2,714,132) (1,971,126)
Institutional Class ................................................... (50,951) (344)
----------- -----------
Total Distributions to shareholders ................................ (2,765,083) (1,971,470)
----------- -----------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS (NOTE 3) ........................................... 75,524,646 57,958,377
----------- -----------
Net increase in net assets ............................................... 75,525,604 57,957,987
----------- -----------
NET ASSETS AT END OF PERIOD .............................................. $75,575,604 $58,007,987
=========== ===========
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* The Fund commenced operations on October 1, 1996.
** The Fund commenced operations on January 13, 1997.
(a) Amount represents initial sale of shares to the Distributor (original seed money).
</TABLE>
Please see the accompanying notes to financial statements.
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[First Choice Logo] First Choice Funds Trust
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FINANCIAL HIGHLIGHTS -- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
U. S. TREASURY RESERVE FUND CASH RESERVE FUND
--------------------------- ---------------------------
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, 1997(A) SEPTEMBER 30, 1997(B)
--------------------------- ---------------------------
SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.049 0.050 0.037 0.038
Net realized and unrealized
gain (loss) on investments .......................... --(c) --(c) --(c) --(c)
------- ------- ------- -------
Total from Investment Operations .................. 0.049 0.050 0.037 0.038
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.049) (0.050) (0.037) (0.038)
------- ------- ------- -------
Net Asset Value, end of period ........................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= =======
Total Return ............................................. 5.04% 5.08% 3.78% 3.82%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s) ......................... $73,581 $ 1,995 $57,947 $ 61
Ratios to average net assets:
Net investment income ................................. 4.93% 4.93% 5.23%(d) 5.23%(d)
Operating expenses* ................................... 0.35% 0.35% 0.35%(d) 0.35%(d)
Operating expenses excluding
reimbursement, waiver and
custody earnings credits ............................ 1.36% 0.86% 1.43%(d) 0.93%(d)
Net investment income excluding
reimbursements, waiver and
custody earnings credits ............................ 3.92% 4.42% 4.15%(d) 4.65%(d)
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* During the period certain expenses were reduced for credits earned at Custodian bank. If such credits had not occurred,
the ratios would have been as indicated. Impact of Custody earnings credits was less than 0.01% and $0.001 per share at
September 30, 1997.
(a) The Fund commenced operations on October 1, 1996.
(b) The Fund commenced operations on January 13, 1997.
(c) Amounts were less than $0.001 per share.
(d) Annualized
</TABLE>
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [First Choice Logo]
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NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1997
1. ORGANIZATION
First Choice Funds Trust (the "Trust") is an open-end management investment
company established as a Delaware business trust under a Declaration of Trust
dated June 5, 1996, and is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act"). The Trust currently consists of the U.S. Treasury
Reserve Fund and the Cash Reserve Fund (individually a "Fund", collectively the
"Funds"). Between the date of organization and commencement of operations, the
Funds had no operations other than the initial sale of $100,000 of shares to the
distributor (original seed money).
The investment objective of the U.S. Treasury Reserve Fund is to provide
investors with as high a level of current income as is consistent with
liquidity, maximum safety of principal and the maintenance of a stable $1.00 net
asset value per share by investing in U.S. Treasury securities. The investment
objective of the Cash Reserve Fund is to provide investors with current income,
liquidity and the maintenance of a stable $1.00 net asset value per share by
investing in high quality, U.S. dollar-denominated short-term obligations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION: Securities are valued utilizing the amortized cost method
permitted by Rule 2a-7 under the 1940 Act. Under the amortized cost method, a
security is initially valued at cost. Each day thereafter, the security value is
adjusted on a constant basis for any discount or premium until maturity.
Amortized cost approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME: Security transactions are accounted
for on trade date, the date the security is purchased or sold. Interest income
is recorded on the accrual basis and includes, where applicable, the
amortization of premium or accretion of discount based on the straight line
method. Gains or losses realized on the sale of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income are declared
daily and paid monthly. Distributable net realized capital gains, if any, will
be declared and distributed at least annually.
The amount and character of distributions from net investment income and from
net realized capital gains are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
FEDERAL INCOME TAXES: It is the policy of each Fund to qualify as a regulated
investment company by complying with the applicable provisions of the Internal
Revenue Code. It is also the policy of the Funds to make distributions of net
investment income and net realized capital gains sufficient to relieve it from
all, or substantially all, Federal income and excise taxes.
ORGANIZATION COSTS: Costs incurred by the Trust in connection with its
organization and registration of shares have been deferred and are being
amortized using the straight-line method over a period of five years from the
commencement of Fund operations. In the event that any of the initial shares of
the Funds are redeemed during the amortization period by any holder thereof, the
redemption proceeds will be reduced by any unamortized organizational costs of
the Trust in the same proportion as the number of said shares of the Fund being
redeemed bears to the number of initial shares of that Fund that are outstanding
at the time of redemption.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a Fund are charged to
the Fund, while the expenses which are attributable to more than one Fund of the
Trust are allocated among the respective Funds.
In addition, expenses of a Fund not directly attributable to the operations of a
particular class of shares of the Fund are allocated to the separate class based
upon the net assets of each class. Operating expenses directly attribtuable to a
class of shares of a Fund are charged to the operations of that class.
OTHER: Each Fund maintains a cash balance with its custodian and receives a
reduction of their custody fees and expenses for the amounts earned on such
uninvested cash balance. For the period ended September 30, 1997, custodian fees
were reduced by $807 and $623 for the U.S. Treasury Reserve Fund and the Cash
Reserve Fund, respectively.
3. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares, each with a par value of $0.001. Shares of the Trust are
currently classified into two classes of shares - the Institituional Class and
the Service Class. Each share represents an equal proportionate interest in the
respective Fund, bears the same fees and expenses (except the Fund's Service
Class Shares are subject to a Rule 12b-1 fee and a Shareholder Service fee) and
are entitled to such dividends and distributions of income earned as are
declared at the discretion of the Trust's Board of Trustees.
The following is a summary of transactions in portfolio shares, by class for
each Fund, for the period ended September 30, 1997:
DOLLAR AMOUNTS AND SHARE ACTIVITY:
U.S. TREASURY CASH RESERVE
RESERVE FUND* FUND*
------------- -------------
SERVICE SHARES
Net proceeds from sale
of shares ................... $ 214,827,431 $ 185,569,980
Issued to shareholders in
reinvestment of dividends .. 2,468 1,858
Cost of shares repurchased .... (141,299,196) (127,673,813)
------------- -------------
Net change resulting from
Fund share transactions .... $ 73,530,703 $ 57,898,025
============= =============
INSTITUTIONAL SHARES
Net proceeds from sale
of shares ................... $ 1,943,095 $ 60,000
Issued to shareholders as
reinvestment of dividends .. 50,848 352
Cost of shares repurchased .... -- --
------------- -------------
Net change resulting from
Fund share transactions .... $ 1,993,943 $ 60,352
============= =============
- ----------
* The U.S. Treasury Fund commenced operations on October 1, 1996. The Cash
Reserve Fund commenced operations on January 13, 1997.
4. INVESTMENT ADVISORY, ADMINISTRATION, SHAREHOLDER SERVICES, DISTRIBUTION
AND OTHER FEES
Investment advisory services are provided to the Funds by First American Capital
Management, Inc. ("First American"). Under the terms of the investment advisory
agreement, First American is entitled to receive fees, calculated daily and
payable monthly at the annual rate of of 0.30% of the average daily net assets
of each Fund.
First Data Investor Services Group, Inc. ("Investor Service Group"), a
wholly-owned subsidiary of First Data Corporation, serves the Trust as
Administrator. In addition, Investor Services Group also provides certain fund
accounting and transfer agency services.
First Data Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of
Investor Services Group and an indirect wholly-owned subsidiary of First Data
Corporation, serves as distributor of the Funds. The Distributor receives fees
for providing distribution services under the Distribution Service Plan (the
"Plan") pursuant to Rule 12b-1 of the 1940 Act with respect to the Service
Class. Under the Plan each Fund pays the Distributor a fee not to exceed 0.25%,
on an annual basis, of the average daily net assets of each Fund for payments
made to banks, broker/dealers and other institutions, including affiliates of
the Adviser, and for expenses the Distributor and any of its affiliates or
subsidiaries incur for providing distribution or shareholder service assistance.
Prior to September 22, 1997, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS L.P."), a subsidiary of The BISYS Group, Inc. served the
Trust as Administrator. BISYS L.P. received fees on an annualized basis of 0.15%
computed daily as a percentage of the average daily net assets of each Fund.
Also, prior to September 22, 1997, BISYS Fund Services, also a subsidiary of The
BISYS Group, Inc. served each Fund as transfer agent and fund accountant.
The Trust may contract with various banks, trust companies, broker/dealers, or
other financial organizations (collectively, the "Service Organizations") to
provide certain administrative services for the Service Class shares of each
Fund, such as maintaining shareholder accounts and records. The Service Class
shares of the Funds may pay Shareholder Servicing fees to Service Organizations
in amounts up to 0.25% of the average daily net assets of the Service Class
shares owned by shareholders serviced by the Service Organizations.
Certain officers of the Trust are affiliated with Investor Services Group and/or
First American. Such officers are not paid any fees directly by the Funds for
serving as officers of the Trust.Trustees of the Trust not affiliated with
Investor Services Group and/or First American receive from the Trust an annual
retainer of $1,000 and a fee of $1,000 for each Board of Trustees meeting and
$1,000 for each Board committee meeting of the Trust attended and are reimbursed
for all out-of-pocket expenses relating to attendance at such meetings.
Fees may be voluntarily waived or reimbursed to assist the Funds in maintaining
competitive expense ratios. Information regarding these transaction are as
follows for the period ended September 30, 1997:
U.S. TREASURY CASH RESERVE
RESERVE FUND* FUND*
------------- ------------
INVESTMENT ADVISORY FEES:
Voluntary fee waived ........................... $146,252 $100,521
Voluntary fee reimbursed ....................... $ 72,732 $ 74,316
ADMINISTRATION FEES:
Voluntary fee waived
BISYS L.P. ................................... $ 70,042 $ 42,564
DISTRIBUTION FEES (SERVICE CLASS):
Voluntary fee waived ........................... $137,590 $ 94,336
Shareholder Servicing Fees (Service Class):
Voluntary fee waived ........................... $137,590 $ 94,336
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* The U.S. Treasury Fund commenced operations on October 1, 1996. The Cash
Reserve Fund commenced operations on January 13, 1997.
<PAGE>
First Choice Funds Trust [First Choice Logo]
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders
of the First Choice Funds Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the U.S. Treasury Reserve Fund and
Cash Reserve Fund, (each a series of the First Choice Funds Trust, hereafter
referred to as the "Trust") at September 30, 1997, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period October 1, 1996 (commencement of operations) through September 30, 1997
for the U.S. Treasury Reserve Fund, and January 13, 1997 (commencement of
operations) through September 30, 1997 for the Cash Reserve Fund, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at September 30, 1997 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 7, 1997
<PAGE>
[First Choice Logo] First Choice Funds Trust
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INVESTMENT ADVISER
First American Capital Management, Inc.
567 San Nicolas Drive
Suite 101
Newport Beach, California 92660
ADMINISTRATOR
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
