<PAGE> 1
As Filed with the Securities and Exchange Commission on April 30, 1997
Registration Nos. 333-07085
811-7681
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No.1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT [X]
COMPANY ACT OF 1940
AMENDMENT NO. 2 [X]
(Check appropriate box or boxes)
--------------
FIRST CHOICE FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices; Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-454-5104
George Martinez
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
Copy to:
Steven R. Howard, Esq.
Baker & McKenzie
805 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective:
(Check appropriate box)
X immediately upon filing pursuant to paragraph (b)
___ on (date)pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of rule 465
Registrant has elected, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of shares. In accordance
with Rule 24f-2, a registration fee in the amount of $500 has previously been
paid. Registrant intends to file its Rule 24f-2 Notice on or before November 29,
1997.
- --------------------------------------------------------------------------------
Total Pages: ___
Exhibit Index: ___
<PAGE> 2
FIRST CHOICE FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
U.S. TREASURY RESERVE FUND
CASH RESERVE FUND
<TABLE>
<CAPTION>
Part A: Prospectus Prospectus Caption
- ------------------ ------------------
<S> <C> <C>
Item 1. Cover Page................................... Cover Page
Item 2. Synopsis..................................... Fund Expenses; Fee Table
Item 3. Condensed Financial
Information................................ Financial Highlights
Item 4. General Description of
Registrant................................. The Investment Policies and Practices of the
Funds
Item 5. Management of the Fund....................... Management of the Funds
Item 5A. Management's Discussion of
Fund Performance............................ Not Applicable
Item 6. Capital Stock and Other
Securities................................. Dividends, Distributions and Federal Income
Tax; Other Information
Item 7. Purchase of Securities
Being Offered............................... Fund Share Valuation; Pricing and Purchase
of Fund Shares
Item 8. Redemption or
Repurchase................................. Redemption of Fund Shares
Item 9. Legal Proceedings............................ Financial Statements
</TABLE>
- i -
<PAGE> 3
U.S. TREASURY RESERVE FUND
CASH RESERVE FUND
<TABLE>
<CAPTION>
Statement of Additional
Part B: Statement of Additional Information Information Caption
----------------------------------- -------------------
<S> <C> <C>
Item 10. Cover Page................................... Cover Page
Item 11. Table of Contents............................ Table of Contents
Item 12. General Information and
History..................................... Not Applicable
Item 13. Investment Objectives and
Policies.................................... Investment Policies; Investment Restrictions
Item 14. Management of the Fund....................... Management
Item 15. Control Persons and
Principal Holders of
Securities................................. Management
Item 16. Investment Advisory and
Other Services............................. Management; Other Information; Custodian,
Transfer Agent and Dividend Disbursing
Agent; Experts
Item 17. Brokerage Allocation and Other Practices..... Portfolio Transactions
Item 18. Capital Stock and Other
Securities................................. Other Information; Capitalization; Voting
Rights
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.............................. Pricing and Purchase of Fund Shares (Part
A); Redemption of Fund Shares (Part A);
Determination of Net Asset Value
Item 20. Tax Status................................... Taxation
Item 21. Underwriters................................. Management
Item 22. Calculation of Performance
Data....................................... Yield and Performance Information
Item 23. Financial Statements......................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
- ii -
<PAGE> 4
PRELIMINARY NOTE
The Registrant's Prospectus dated October 1, 1996 (Accession Number 0000950112),
to which the interim financial statements contained herein are added by
Post-Effective Amendment No. 1, are incorporated by reference to the
Registrant's filing of definitive copies under Rule 497(c).
- 1 -
<PAGE> 5
U.S. Treasury Reserve Fund
Cash Reserve Fund
portfolios of
FIRST CHOICE FUNDS TRUST
Supplement dated April 30, 1997 to
Prospectus dated October 1, 1996
The table of "Financial Highlights (unaudited) for a share of beneficial
interest outstanding through the period ended March 31, 1997" below supplements
the unaudited financial statements of U.S. Treasury Reserve Fund and the Cash
Reserve Fund (the "Funds") portfolios of First Choice Funds Trust (the "Trust")
contained in the Statement of Additional Information and sets forth certain
information regarding the investment operations of the Funds for the period
presented.
<TABLE>
<CAPTION>
FIRST CHOICE MUTUAL FUNDS
Financial Highlights
(Unaudited) f
U.S. Treasury Cash
Reserve Fund Reserve Fund
------------------------------------ -----------------------------------
Period Period
Ended Ended
March 31, March 31,
1997 (a) 1997 (b)
------------------------------------- -----------------------------------
Service Institutional Serice Institutional
Class Class Class Class
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------- -------------- --------------- ----------
Investment Activities
Net investment income 0.024 0.025 0.011 0.011
Net realized and unrealized gains (losses)
from investments 0.000 0.000 0.000 0.000
--------------- -------------- --------------- ----------
Total from Investment Activities 0.024 0.025 0.011 0.011
--------------- -------------- --------------- ----------
Distributions
Net investment income (0.024) (0.025) (0.011) (0.011)
Net realized gains -- -- -- --
--------------- -------------- --------------- ----------
Total Distributions (0.024) (0.025) (0.011) (0.011)
--------------- -------------- --------------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
=============== ============== =============== ==========
Total Return 2.43%(c) 2.48%(c) 1.08%(c) 1.10%(c)
Ratios/Supplementary Data:
Net Assets at end of period $ 56,926,214 $ 1,526,110 $ 37,946,212 $ 1,007
Ratio of expenses to
average net assets 0.35%(d) 0.35%(d) 0.35%(d) 0.35%(d)
Ratio of net investment income
to average net assets 4.83%(d) 4.83%(d) 5.04%(d) 5.04%(d)
Ratio of expenses to
average net assets* 1.34%(d) 0.84%(d) 1.47%(d) 0.97%(d)
Ratio of net investment income
to average net assets* 3.84%(d) 4.34%(d) 3.92%(d) 4.42%(d)
</TABLE>
__________
* During the period certain expenses were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) Period from commencement of operations, October 1, 1996.
(b) Period from commencement of operations, January 13, 1997.
(c) Not annualized.
(d)Annualized.
<PAGE> 6
FIRST CHOICE FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION: 1-800-93FIRST
----------------------------------------------
FIRST AMERICAN CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
("FIRST AMERICAN" OR "ADVISER")
BISYS FUND SERVICES
ADMINISTRATOR, SPONSOR AND DISTRIBUTOR
("BISYS" OR "ADMINISTRATOR" OR "DISTRIBUTOR")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") describes two money
market funds (each a "Fund," collectively, the "Funds"), both of which are
managed by First American. The Funds are:
U.S. Treasury Reserve Fund
Cash Reserve Fund
Each Fund constitutes a separate investment portfolio of First Choice Funds
Trust (the "Trust"), a Delaware business trust and open-end, diversified
management investment company. Each portfolio has distinct investment objectives
and policies. Each Fund offers two classes of shares--the Institutional Class
and the Service Class. The Service Class shares are available to customers who
desire enhanced shareholder servicing. The Institutional Class shares are
available to all other investors. The Institutional Class and Service Class
shares are identical in all respects except that the Institutional Class shares
do not impose any shareholder servicing or Rule 12b-1 fees. See "Other
Information-- Capitalization" herein.
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the prospectus for the Funds dated October 1, 1996
(the "Prospectus"). This SAI contains additional and more detailed information
than that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus may be obtained without charge by writing or calling
the Funds at the address or information number printed above.
October 1, 1996
Supplemented April 30, 1997
1
<PAGE> 7
TABLE OF CONTENTS
PAGE
----
INVESTMENT POLICIES ...................................................... 3
INVESTMENT RESTRICTIONS .................................................. 7
MANAGEMENT ............................................................... 9
Trustees and Officers .................................................. 9
Investment Adviser ..................................................... 10
Distribution of Fund Shares ............................................ 11
Distribution Plan ...................................................... 11
Administrative Services ................................................ 12
Service Organizations .................................................. 12
EXPENSES AND EXPENSE LIMITS .............................................. 13
DETERMINATION OF NET ASSET VALUE ......................................... 13
PORTFOLIO TRANSACTIONS ................................................... 15
TAXATION ................................................................. 15
OTHER INFORMATION ........................................................ 17
Capitalization ......................................................... 17
Voting Rights .......................................................... 19
Custodian, Transfer Agent and Dividend Disbursing Agent ................ 19
Experts .................................................................. 19
Yield and Performance Information ...................................... 19
Financial Statements ................................................... 21
2
<PAGE> 8
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize, and certain risks attendant to such
investments, policies and strategies.
U.S. Treasury Obligations. Each Fund may invest, and the U.S. Treasury
Reserve Fund invests exclusively, in direct obligations of the United States
Treasury that have remaining maturities not exceeding thirteen months. The
United States Treasury issues various types of marketable securities consisting
of bills, notes and bonds. They are direct obligations of the United States
Government and differ primarily in the length of their maturity. Treasury bills,
the most frequently issued marketable United States Government security, have a
maturity of up to one year and are issued on a discount basis.
U.S. Government Agency Obligations (Cash Reserve Fund Only). The Fund may
invest in obligations of agencies of the United States Government. Such agencies
include, among others, Farmers Home Administration, Federal Farm Credit System,
Federal Housing Administration, Government National Mortgage Association,
Maritime Administration, Small Business Administration, and The Tennessee Valley
Authority. The Fund may purchase securities issued or guaranteed by the
Government National Mortgage Association, which represent participations in
Veterans Administration and Federal Housing Administration backed mortgage
pools. Obligations of instrumentalities of the United States Government include
securities issued by, among others, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Land Banks, Federal National Mortgage Association
and the United States Postal Service. Some of these securities are supported by
the full faith and credit of the United States Treasury (e.g., Government
National Mortgage Association). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation; therefore, in the event of a default prior to
maturity, there might not be a market and thus no means of realizing the value
of the obligation prior to maturity.
Commercial Paper (Cash Reserve Fund Only). Commercial paper includes
short-term unsecured promissory notes, variable rate demand notes and variable
rate master demand notes issued by domestic and foreign bank holding companies,
corporations and financial institutions and similar taxable instruments issued
by government agencies and instrumentalities. All commercial paper purchased by
the Fund is, at the time of investment: (i) rated within the highest rating
category of at least two of the nationally recognized statistical rating
organizations ("NRSROs") that have rated the security; (ii) if rated by only one
such rating organization, rated within the highest rating category of that
rating organization; or (iii) if unrated, determined by the Adviser to be of an
investment quality comparable to the rated securities in which the Fund may
invest pursuant to guidelines established by the Board of Trustees.
Corporate Debt Securities (Cash Reserve Fund Only). The Fund's investments
in these securities are limited to corporate debt securities (corporate bonds,
debentures, notes and similar corporate debt instruments) which meet the rating
criteria established for the Fund.
3
<PAGE> 9
After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Fund's
Adviser will consider such event in its determination of whether the Fund should
continue to hold the security. To the extent the ratings given by a NRSRO may
change as a result of changes in such organizations or their rating systems, the
Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
SAI.
Bank Obligations (Cash Reserve Fund Only). A description of the bank
obligations which the Fund may purchase is set forth in the Prospectus. These
obligations include, but are not limited to the following domestic, Eurodollar
and Yankee dollar obligations: certificates of deposits, time deposits, bankers'
acceptances, commercial paper, bank deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies.
Certificates of deposit are issued against funds deposited in an eligible bank
(including its domestic and foreign branches, subsidiaries and agencies), are
for a definite period of time, earn a specified rate of return and are normally
negotiable. A bankers' acceptance is a short-term draft drawn on a commercial
bank by a borrower, usually in connection with a commercial transaction. The
borrower is liable for payment, as is the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date. Eurodollar obligations
are U.S. Dollar obligations issued outside the United States by domestic or
foreign entities. Yankee dollar obligations are U.S. dollar obligations issued
inside the United States by foreign entities. Bearer deposit notes are
obligations of a bank, rather than a bank holding company. Similar to
certificates of deposit, deposit notes represent bank level investments and,
therefore, are senior to all holding company corporate debt.
Variable and Floating Rate Demand and Master Demand Obligations (Cash
Reserve Fund Only). The Fund may, consistent with its permitted investment
policies, buy variable rate demand obligations issued by corporations, bank
holding companies and financial institutions, and similar taxable and tax-exempt
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity of 397 days or less, but carry with
them the right of the holder to put the securities to a remarketing agent or
other entity on short notice, typically seven days or less. The obligation of
the issuer of the put to repurchase the securities may or may not be backed by a
letter of credit or other obligation issued by a financial institution. The
purchase price is ordinarily par plus accrued and unpaid interest.
The Fund may also buy variable rate master demand obligations. The terms of
these obligations permit the investment of fluctuating amounts by the Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit weekly, and in some instances daily,
changes in the amounts borrowed. The Fund has the right to increase the amount
under the obligation at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to the full
amount of the obligation without penalty. The obligations may or may not be
backed by bank letters of credit. Because the obligations are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that they will be traded, and there is no secondary market for
them, although they are redeemable (and thus, immediately repayable by the
borrower) at principal amount, plus accrued interest, upon demand. The Fund has
no limitations on the types of issuers from whom such obligations may be
purchased. The Fund will invest in unrated variable rate master demand
obligations only when such obligations are determined by the Adviser or,
pursuant to
4
<PAGE> 10
guidelines established by the Board of Trustees, to be of comparable quality to
rated issuers or instruments eligible for investment by the Fund.
When-Issued and Delayed-Delivery Securities (Both Funds). The Funds may
purchase securities on a when-issued or delayed-delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the transaction. The securities so purchased are subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. To facilitate such acquisitions, the Funds will maintain
with the custodian a separate account with a segregated portfolio of securities
in an amount at least equal to the value of such commitments. On the delivery
dates for such transactions, each Fund will meet obligations from maturities or
sales of the securities held in the separate account and/or from cash flow.
While the Funds normally enter into these transactions with the intention of
actually receiving or delivering the securities, they may sell these securities
before the settlement date or enter into new commitments to extend the delivery
date into the future, if the Adviser considers such action advisable as a matter
of investment strategy. Such transactions have the effect of leverage on the
Funds and may increase the volatility of a Fund's net asset value.
Loans of Portfolio Securities (Both Funds). The Funds may lend their
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or approved bank letters of credit maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned; (2) the Funds may at any time call the loan and obtain
the return of the securities loaned within five business days; (3) the Funds
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets of a particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. A portion of the proceeds from investing cash collateral may be
rebated to the borrower. In connection with lending securities, the Funds may
pay reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
Repurchase Agreements (Cash Reserve Fund Only). The Fund may invest up to
100% of its net assets in repurchase agreements maturing in seven days or less;
however, the Fund may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven business days and in securities for which
market quotations are not readily available. The Fund may enter into agreements
with any bank or registered broker-dealer who, in the opinion of the Trustees,
present a minimal risk of bankruptcy. Such agreements may be considered to be
loans by the Fund for purposes of the Investment Company Act of 1940, as amended
(the "1940 Act"). A repurchase agreement is a transaction in which the seller of
a security commits itself at the time of the sale to repurchase that security
from the buyer at a mutually agreed-upon time and price. The repurchase price
exceeds the sale price, reflecting an agreed-upon interest rate effective for
the period the buyer owns the security subject to repurchase. The agreed-upon
rate is unrelated to the interest rate on that security. The Adviser will
monitor the value of the underlying security at the time the transaction is
entered into and at all times during the term of the repurchase agreement to
insure that the value of the security always equals or exceeds the repurchase
price. In the event of default by the seller under the repurchase agreement, the
Fund may have problems in exercising its rights to the
5
<PAGE> 11
underlying securities and may incur costs and experience time delays in
connection with the disposition of such securities.
Reverse Repurchase Agreements (Both Funds). The Funds may enter into reverse
repurchase agreements to avoid selling securities during unfavorable market
conditions to meet redemptions. Pursuant to a reverse repurchase agreement, a
Fund will sell portfolio securities and agree to repurchase them from the buyer
at a particular date and price. Whenever a Fund enters into a reverse repurchase
agreement, it will establish a segregated account in which it will maintain
liquid assets in an amount at least equal to the repurchase price marked to
market daily (including accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained. The Funds pay
interest on amounts obtained pursuant to reverse repurchase agreements. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Illiquid Securities (Both Funds). Each Fund has adopted a nonfundamental
policy with respect to investments in illiquid securities. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), securities that are
otherwise not readily marketable and repurchase agreements having a maturity
longer than seven days. Securities that have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on the issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
Each Fund may invest in restricted securities issued under Section 4(2) of
the Securities Act, which exempts from registration "transactions by an issuer
not involving any public offering." Section 4(2) instruments are restricted in
the sense that they can only be resold through the issuing dealer and only to
institutional investors; they cannot be resold to the general public without
registration. Restricted securities issued under Section 4(2) of the Securities
Act will be treated as illiquid and subject to the Funds' investment restriction
on illiquid securities.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities otherwise
subject to restrictions on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act
applicable to resales of certain securities to qualified institutional buyers.
It is the intent of the Funds to invest, pursuant to procedures established
6
<PAGE> 12
by the Board of Trustees and subject to applicable investment restrictions, in
securities eligible for resale under Rule 144A which are determined to be liquid
based upon the trading markets for such securities.
Pursuant to guidelines set forth by, and under the supervision of, the Board
of Trustees, the Adviser will monitor the liquidity of restricted securities in
a Fund's portfolio. In reaching liquidity decisions, the Adviser will consider,
among other things, the following factors: (1) the frequency of trades and
quotes for the security over the course of six months or as determined in the
discretion of the Investment Adviser; (2) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers over
the course of six months or as determined in the discretion of the Investment
Adviser; (3) dealer undertakings to make a market in the security; (4) the
nature of the security and the marketplace in which it trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer); and (5) other factors, if any, which the Adviser
deems relevant. The Adviser will also monitor the purchase of Rule 144A
securities to assure that the total of all Rule 144A securities held by a Fund
does not exceed 10% of the Fund's average daily net assets. Rule 144A securities
which are determined to be liquid based upon their trading markets will not,
however, be required to be included among the securities considered to be
illiquid for purposes of Investment Restriction No. 1 set forth below.
Investments in Rule 144A securities could have the effect of increasing Fund
illiquidity.
INVESTMENT RESTRICTIONS
The following restrictions restate or are in addition to those described
under "Investment Restrictions" in the Prospectus. Investment Restrictions Nos.
2, 3, 4, 7, 8, 12, 13 and 14 are fundamental policies of the Funds, which can be
changed only when permitted by law and approved by a majority of the Funds'
outstanding voting securities. A "majority of the outstanding voting securities"
means the lesser of (i) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented in person or by proxy, or
(ii) more than 50% of the outstanding shares. The other investment restrictions
are nonfundamental policies and can be changed by approval of a majority of the
Board of Trustees.
Each Fund, except as indicated, may not:
(1) Invest more than 10% of the value of its net assets in investments
which are illiquid (including repurchase agreements having maturities of more
than seven calendar days, and variable and floating rate demand and master
demand notes not requiring receipt of the principal note amount within seven
days notice);
(2) Borrow money or pledge, mortgage or hypothecate its assets, except
that a Fund may enter into reverse repurchase agreements or borrow from banks up
to 10% of the current value of its net assets for temporary or emergency
purposes, and such borrowings may be secured by the pledge of not more than 15%
of the current value of its total net assets (but investments may not be
purchased by the Fund while any such borrowings exist);
(3) Issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security in connection with any reverse repurchase
agreement or any permitted borrowing;
(4) Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase
7
<PAGE> 13
agreements with respect to its portfolio securities and may purchase the types
of debt instruments described in its Prospectus or the SAI;
(5) Invest in companies for the purpose of exercising control or
management;
(6) Invest more than 10% of its net assets in shares of other
investment companies;
(7) Invest in real property (including limited partnership interests,
but excluding real estate investment trusts and master limited partnerships),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions;
(8) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause it to be considered an underwriter as that term is defined under the
Securities Act;
(9) Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(10) Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(11) Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Trust, the Adviser, the Sponsor, or the
Distributor, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
(12) Purchase a security if, as a result, more than 25% of the value of
its total assets would be invested in securities of one or more issuers
conducting their principal business activities in the same industry (except for
the Cash Reserve Fund, which will concentrate its investments in obligations
issued by the domestic banking industry), provided that this limitation shall
not apply to obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities;
(13) Purchase a security if, as a result, (1) more than 5% of its total
assets would be invested in any one issuer other than the U.S. Government or its
agencies or instrumentalities, or (2) the Fund would own more than 10% of the
outstanding voting securities of such issuer;
(14) Invest more than 5% of its net assets in warrants which are
unattached to securities, nor more than 2% of the value of the Fund's net assets
in warrants which are not listed on the New York or American Stock Exchanges; or
(15) Write, purchase or sell puts, calls or combinations thereof.
8
<PAGE> 14
MANAGEMENT
TRUSTEES AND OFFICERS
The names, ages and the principal occupations for the past five years of the
Trustees and executive officers of the Trust, are listed below. The address of
each, unless otherwise indicated, is 3435 Stelzer Road, Columbus, Ohio 43219.
JOHN J. PILEGGI, Age: 37, Chairman of the Board of Trustees. Director of
Furman Selz LLC since 1994; Senior Managing Director of Furman Selz LLC
(1992-1994); Managing Director of Furman Selz LLC (1984-1992). His address
is Furman Selz LLC, 237 Park Avenue, Suite 910, New York, NY 10017.
DENNIS W. DRAPER, Age: 47, Trustee. Associate Professor of Finance at
University of Southern California since 1978; Director of Data Analysis,
Inc. (financial services); and Editorial Board of Chicago Board of Trade.
His address is University of Southern California, School of Business,
Hoffman 701-F, Los Angeles, California 90089.
JOSEPH N. HANKIN, Age: 56, Trustee. President, Westchester Community
College since 1971; President of Hartford Junior College from 1967 to 1971;
Adjunct Professor of Columbia University Teachers College since 1976. His
address is 75 Grasslands Road, Valhalla, NY 10595.
RICHARD WEDEMEYER, Age: 60, Trustee. Vice President, The Channel
Corporation since July 1996; Vice President of Performance Advantage, Inc.
1992 to July 1996; Vice President of Jim Henson Productions from 1979 to
1992; Author of In Transition (Harper Collins); co-founder and co-conductor
of Harvard Business School Club of New York Career Seminar; Trustee of Jim
Henson Legacy trust. His address is 5 High Ridge Park, Stamford, Connecticut
06878.
IRIMGA MCKAY, Age: 35, President. Senior Vice President, BISYS Fund
Services, since July 1993; First Vice President of the Administrator and
Distributor of BISYS Fund Services, Inc., November 1988 to July 1993.
MILT EMERINE, Age 40, Vice President and Treasurer. Employee of BISYS
Fund Services, November 1996 to present; Senior Specialist, Lockheed Martin,
October 1994 to November 1996; Owner, Milt Emerine, Public Accounting,
1991-1994.
FRANK DEUTCHKI, Age: 43, Assistant Treasurer. Employee of BISYS Fund
Services, Inc., April 1996 to present; Vice President, Chase Global Funds
Service, September 1995 to April 1996; Vice President, Mutual Funds Service
Company, 1989 to September 1995.
WARREN LESLIE, Age 35, Assistant Treasurer. Employee of BISYS Fund
Services, May 1995 to present; Financial Adviser, Mutual Fund Sales
1986-1995.
9
<PAGE> 15
ALAINA METZ, Age 28, Assistant Secretary. Chief Administrator,
Administrative and Regulatory Services, BISYS Fund Services, Inc., June 1995
to present; Supervisor, Mutual Fund Legal Department, Alliance Capital
Management, May 1989 to June 1995.
COMPENSATION TABLE*
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Aggregate Benefits Accrued as Estimated Annual from Trust and Fund
Compensation part of Fund Benefits upon Complex Paid to
from the Fund Expenses Retirement Trustees
------------- -------- ---------- --------
Name of Trustee
- ---------------
<S> <C> <C> <C> <C>
John J. Pileggi, Trustee None 0 N/A None
Dennis W. Draper, Trustee $7,000 0 N/A $7,000
Joseph N. Hankin, Trustee $7,000 0 N/A $7,000
Richard Wedemeyer, Trustee $7,000 0 N/A $7,000
</TABLE>
- ----------
* Represents the total compensation estimated to be paid for a full fiscal year.
Trustees of the Trust not affiliated with the Sponsor 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. Trustees who are affiliated with the Sponsor do not receive
compensation from the Trust.
Officers and Trustees of the Trust, as a group, own less than 1% of the
outstanding shares of the Funds.
INVESTMENT ADVISER
FIRST AMERICAN CAPITAL MANAGEMENT, INC.
First American Capital Management, Inc. ("First American") has provided
investment advisory services to the Funds since inception pursuant to an
advisory agreement with the Trust (the "Advisory Agreement"). Subject to such
policies as the Trust's Board of Trustees may determine, First American makes
investment decisions for the Funds. The Advisory Agreement provides that, as
compensation for its services thereunder, First American is entitled to receive
from each Fund a monthly fee at an annual rate based upon average daily net
assets of the Fund as set forth in the table of Fund Expenses in the Prospectus.
First American is located at 567 San Nicholas Drive, Suite 101, Newport
Beach, California 92660, is a wholly-owned subsidiary of The First American
Financial Corporation, and was organized on December 1, 1995, to provide
business management, advisory, administrative and asset management consulting
services. First American has no
10
<PAGE> 16
prior experience as an adviser to an investment company.
The Investment Advisory Contracts for the Funds will continue in effect for
a period beyond two years from the date of their execution only as long as such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Contracts may be terminated without penalty by vote of the Trustees or the
shareholders of the Funds, or by the Adviser, on 60 days written notice by
either party to the Contract and will terminate automatically if assigned.
DISTRIBUTION OF FUND SHARES
The Trust retains BISYS to serve as principal underwriter for the shares of
the Funds pursuant to a Distribution Contract. The Distribution Contract
provides that the Distributor will use its best efforts to maintain a broad
distribution of the Funds' shares among bona fide investors and may enter into
selling group agreements with responsible dealers and dealer managers as well as
sell the Funds' shares to individual investors. The Distributor is not obligated
to sell any specific amount of shares.
DISTRIBUTION PLAN
The Trustees of the Fund have voted to adopt a Master Distribution Plan (the
"Plan") pursuant to Rule l2b-1 of the 1940 Act for the Service Class shares of
the Funds after having concluded that there is a reasonable likelihood that the
Plan will benefit the Service Class shares of the Funds and their shareholders.
The Plan provides for a monthly payment by the Service Class shares of the Funds
to the Distributor in such amounts that the Distributor may request, or for
direct payment by the Fund, for certain costs incurred under the Plan, subject
to periodic Board approval, provided that each such payment is based on the
average daily value of the net assets of the Funds' Service Class Shares during
the preceding month and is calculated at an annual rate not to exceed 0.25%.
(Certain expenses of the Fund may be reduced in accordance with applicable state
expense limitations. See "Expenses and Expense Limits"). The Distributor will
use all amounts received under the Plan for payments to broker-dealers or
financial institutions (but not including banks) for their assistance in
distributing shares of the Service Class and otherwise promoting the sale of
Service Class shares, including payments in amounts based on the average daily
value of Service Class shares owned by shareholders in respect of which the
broker-dealer or financial institution has a distributing relationship. The
Distributor may also use all or any portion of such fees to pay Fund expenses
such as the printing and distribution of prospectuses sent to prospective
investors or the preparation, printing and distribution of sales literature and
expenses associated with media advertisements.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear pursuant to the Plan without shareholder approval and that other
material amendments of the Plan must be approved by the Board of Trustees, and
by the Trustees who neither are "interested persons" (as defined in the 1940
Act) of the Trust nor have any direct or indirect financial interest in the
operation of the Plan or in any related agreement, by vote cast in person at a
meeting called for the purpose of considering such amendments. The selection and
nomination of the Trustees of
11
<PAGE> 17
the Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan and the related Administrative
Services Contract between the Trust and the Sponsor have been approved, and are
subject to annual approval, by the Board of Trustees and by the Trustees who
neither are "interested persons" nor have any direct or indirect financial
interest in the operation of the Plan or in the Administrative Services
Contract, by vote cast in person at a meeting called for the purpose of voting
on the Plan. The Board of Trustees and the Trustees who are not "interested
persons" and who have no direct or indirect financial interest in the operation
of the Plan or in the Administrative Services Contract voted to approve the Plan
at a meeting held on August 23, 1996. The Plan was submitted to the shareholders
of the Funds' Service Class shares and approved at a special meeting held on
August 23, 1996. The Plan is terminable with respect to the Funds' Service Class
shares at any time by a vote of a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in the Administrative Services Contract
or by vote of the holders of a majority of the shares of the Fund.
ADMINISTRATIVE SERVICES
BISYS provides management and administrative services necessary for the
operation of the Funds, including, among other things: (i) preparation of
shareholder reports and communications; (ii) regulatory compliance, such as
reports to and filings with the SEC and state securities commissions; and (iii)
general supervision of the operation of the Funds, including coordination of the
services performed by the Adviser, the Distributor, transfer agent, custodians,
independent accountants, legal counsel and others. In addition, BISYS furnishes
office space and facilities required for conducting the business of the Funds
and pays the compensation of the Funds' officers, employees and Trustees
affiliated with BISYS . For these services, BISYS receives from each Fund a fee,
payable monthly, at the annual rate of 0.15% of each Fund's average daily net
assets.
The Administrative Services Contract is for a one year term and is subject
to annual approval by a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Administrative Services Contract. The Administrative
Services Contract will terminate automatically in the event of its assignment.
SERVICE ORGANIZATIONS
The Trust also contracts with banks, trust companies, broker-dealers (other
than BISYS) or other financial organizations ("Service Organizations") to
provide certain administrative services for the Service Class shares of the
Funds. Services provided by Service Organizations may include, among other
things: providing necessary personnel and facilities to establish and maintain
certain shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with shareholders' orders to purchase or redeem
shares; verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in shareholders' designating
accounts; providing periodic statements showing a shareholder's account balance
and, to the extent practicable, integrating such information with other client
transactions; furnishing periodic and annual statements and confirmations of all
purchases and redemptions of shares in a shareholder's account; transmitting
proxy statements, annual reports, and updating prospectuses and other
communications from the Service Class shares of the Funds to shareholders; and
providing such other services as the
12
<PAGE> 18
Service Class shares of the Funds or a shareholder reasonably may request, to
the extent permitted by applicable statute, rule or regulation. Neither the
Administrator nor the Distributor will be a Service Organization or receive fees
for servicing.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Funds or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law.
If a bank were prohibited from so acting, its shareholder clients would be
permitted to remain shareholders of the Trust and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Trust might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
EXPENSES
Except for the expenses paid by the Adviser and BISYS, the Funds bear all
costs of their operations.
DETERMINATION OF NET ASSET VALUE
As indicated under "Fund Share Valuation" in the Prospectus, the Funds will
use the amortized cost method to
13
<PAGE> 19
determine the value of their portfolio securities pursuant to Rule 2a-7 under
the 1940 Act. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity regardless
of the impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation, it may result in periods
during which the value, as determined by amortized cost, is higher or lower than
the price which the Funds would receive if the security were sold. During these
periods, the yield to a shareholder may differ somewhat from that which could be
obtained from a similar fund which utilizes a method of valuation based upon
market prices. Thus, during periods of declining interest rates, if the use of
the amortized cost method resulted in lower value of a Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, each Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities of
397 days or less and invest only in U.S. dollar denominated eligible securities
determined by the Trust's Board of Trustees to be of minimal credit risks and
which: (1) have received one of the two highest short-term rating by at least
two Nationally Recognized Statistical Rating Organizations ("NRSROs"), such as
"A-1" by Standard & Poor's Corporation and "P-1" by Moody's Investors Service,
Inc.; (2) are single rated and have received the highest short-term rating by a
NRSRO; or (3) are unrated, but are determined to be of comparable quality by the
Adviser pursuant to guidelines approved by the Board.
In addition, a Fund will not invest more than 5% of its total assets in the
securities (including the securities collateralizing a repurchase agreement) of
a single issuer, except that a Fund may invest in U.S. Government securities or
repurchase agreements that are collateralized by U.S. Government securities
without any such limitation. Furthermore, the limitation does not apply with
respect to conditional and unconditional puts issued by a single issuer,
provided that no more than 10% of a Fund's total assets are invested in
securities issued or guaranteed by the issuer of the put. Investments in rated
securities not rated in the highest category by at least two rating
organizations (or one rating organization if the instrument was rated by only
one such organization), and unrated securities not determined by the Board of
Trustees to be comparable to those rated in the highest rating category, will be
limited to 5% of a Fund's total assets, with investment in any one such issuer
being limited to no more than the greater of 1% of a Fund's total assets or
$1,000,000.
Pursuant to Rule 2a-7, the Board of Trustees is also required to establish
procedures designed to stabilize, to the extent reasonably possible, the price
per share of the Funds, as computed for the purpose of sales and redemptions, at
$1.00. Such procedures include review of the Fund's portfolio holdings by the
Board of Trustees, at such intervals as it may deem appropriate, to determine
whether the net asset value of the Funds calculated by using available market
quotations deviates from $l.00 per share based on amortized cost. The extent of
any deviation will be examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if
any, will be initiated. In the event the Board of Trustees determines that a
deviation exists that may result in material dilution or other unfair results to
investors or existing shareholders, the Board of Trustees will take such
corrective action as it regards as necessary and appropriate, which may include
selling portfolio instruments prior to maturity to
14
<PAGE> 20
realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Trust's Board of Trustees, First American is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Trust to obtain the best results,
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors, such as the dealer's risk in
positioning the securities involved. While First American generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available. The policy of each Fund of
investing in securities with short maturities may result in high portfolio
turnover.
Purchases and sales of securities will usually be principal transactions.
Portfolio securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price. Generally, money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing portfolio securities
transactions for the Funds primarily consists of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with the Trust or First
American are prohibited from dealing with the Trust as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC.
First American may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to First American. By allocating
transactions in this manner, First American is able to supplement its research
and analysis with the views and information of securities firms.
TAXATION
The Funds intend to qualify, and elect annually to be treated, as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must:
(a) distribute to shareholders at least 90% of its investment company taxable
income (which includes, among other items, dividends, taxable interest and the
excess of net short-term capital gains over net long-term capital losses); (b)
derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies; (c) derive less than 30% of its gross income from the sale or other
disposition of certain assets (namely, (i) stock or securities; (ii) options,
futures, and forward contracts (other than those on foreign currencies); and
(iii) foreign currencies (including options, futures, and forward contracts on
such currencies) not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to stocks
or securities)) held less than 3 months; and (d) diversify its holdings so that,
at the end of each quarter of the taxable year, (x) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. Government securities,
15
<PAGE> 21
the securities of other regulated investment companies and other securities,
with such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and not greater than 10% of the outstanding voting securities of such
issuer, and (y) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies). In addition, a Fund
earning tax-exempt interest must, in each year, distribute at least 90% of its
net tax-exempt income. By meeting these requirements, the Funds generally will
not be subject to Federal income tax on their investment company taxable income
and net capital gains which are distributed to shareholders. If the Funds do not
meet all of these Code requirements, they will be taxed as ordinary corporations
and their distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gains net
income (adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution, including an "exempt-interest
dividend," will be treated as paid on December 31 of a calendar year if it is
declared by a Fund during October, November or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions of net long-term capital gains,
if any, designated by the Funds as long-term capital gain dividends are taxable
to shareholders as long-term capital gain, regardless of the length of time the
Funds' shares have been held by a shareholder. All distributions are taxable to
the shareholder in the same manner, whether reinvested in additional shares or
received in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
Upon the taxable disposition (including a sale or redemption) of shares of a
Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholder's hands. Such gain or loss will
be long-term or short-term, generally depending upon the shareholder's holding
period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. A loss realized on the redemption, sale or exchange of Fund
shares will be disallowed to the extent an exempt-interest dividend was received
with respect to those shares if the shares have been held by the shareholder for
six months or less. Further, a loss realized on a disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the disposal of the shares. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the Funds on the reinvestment date.
16
<PAGE> 22
The Funds are required to report to the Internal Revenue Service ("IRS") all
distributions except in the case of certain exempt shareholders. All such
distributions generally are subject to withholding of Federal income tax at a
rate of 31% ("backup withholding") in the case of nonexempt shareholders if (1)
the shareholder fails to furnish the Funds with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Funds or a shareholder that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions, whether reinvested in
additional shares or taken in cash, will be reduced by the amounts required to
be withheld. Backup withholding is not an additional tax. Any amount withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the U.
S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U. S. Persons should consult their tax
advisers regarding U. S. And foreign tax consequences of ownership of share of
the Funds, including the likelihood that distributions to them would be subject
to withholding of U. S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
CAPITALIZATION
The Trust is a Delaware business trust established under a Declaration of
Trust dated June 5, 1996 and currently consists of two separately managed
portfolios. The capitalization of the Trust consists solely of an unlimited
number of shares of beneficial interest with a par value of $0.001 each. The
Board of Trustees may establish additional Funds (with different investment
objectives and fundamental policies) at any time in the future. Establishment
and offering of additional Funds will not alter the rights of the Trust's
shareholders. When issued, shares are fully paid, non-assessable, redeemable and
freely transferable. Shares do not have preemptive rights or subscription
rights. In any liquidation of a Fund, each shareholder is entitled to receive
his pro rata share of the net assets of that Fund.
Each Fund offers, and the SAI relates to, two classes of shares--the
Institutional and the Service classes of shares. The Service Class shares are
available to customers who desire enhanced shareholder servicing. The
Institutional Class shares are available to all other investors. The Fund's
Service Class shares are subject to a Rule 12b-1 fee and a shareholder service
fee.
Expenses incurred in connection with each Fund's organization and the public
offering of its shares have been deferred and are being amortized on a
straight-line basis over a period of not more than five years.
17
<PAGE> 23
As of April 24, 1997, no person owned of record, or to the knowledge of
management beneficially owned five percent or more of the outstanding shares of
the respective Funds or classes except as set forth below:
<TABLE>
<CAPTION>
U.S. Treasury Fund
<S> <C>
First American Trust Company Owns 80.6% of the Service Class
Managed Omnibus Account and 78.49% of the Fund.
421 North Main Street
Santa Ana, CA 92701
First American Trust Company Owns 6.64% of the Service Class
99 Bank - 20 and 6.46% of the Fund.
421 North Main Street
Santa Ana, CA 92701
Trustmark National Bank Owns 7.71% of the Service Class
Trust Department Room 580 and 7.50% of the Fund.
Financial Services Operations
P.O. Box 291
Jackson, MS 39205
Cash Reserve
Land Title Insurance Company Owns 78.70% of the Institutional Class
7600 Forsyth Boulevard and 2.0% of the Fund.
Clayton, MO 63105
The Trust Company of St. Louis County Owns 21.22% of the Institutional Class
7600 Forsyth Boulevard and 0.56% of the Fund.
Clayton, MO 63105
First American Trust Company Owns 99.9% of the Service Class
Managed Omnibus Account and 99.9% of the Fund.
421 North Main Street
Santa Ana, CA 92701
Furman Selz Mutual Funds Owns 100% of the Institutional Class
Attn: Fund Administration and 0% of the Fund.
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
18
<PAGE> 24
Beneficial ownership of the Shares listed above for First American Trust
Company is disclaimed by First American Trust Company. The Funds do not know the
extent to which other holders of record were beneficial owners of shares
indicated.
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of each Fund's shareholders to elect Trustees or for other purposes. It
is not anticipated that the Trust will hold shareholder meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove persons serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting for
the purpose of considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. To the extent required by applicable law, the
Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
The Trust's shares do not have cumulative voting rights, so that the holders
of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company acts as custodian of the Trust's assets.
BISYS acts as transfer agent for the Funds. The Trust compensates BISYS for
providing personnel and facilities to perform transfer agency related services
for the Trust at a rate intended to represent the cost of providing such
services.
EXPERTS
Price Waterhouse LLP has been selected as the independent accountants for
the Trust. Price Waterhouse LLP provides audit services, tax return preparation
and assistance and consultation in connection with certain SEC filings. Price
Waterhouse LLP is located at 1177 Avenue of the Americas, New York, New York
10036.
YIELD AND PERFORMANCE INFORMATION
The Funds may, from time to time, include their yield and effective yield in
advertisements or reports to shareholders or prospective investors.
Current yield for the Funds will be based on the change in the value of a
hypothetical investment (exclusive of capital changes such as gains or losses
from the sale of securities and unrealized appreciation and depreciation) over a
particular seven-day period, less a pro-rata share of each Fund's expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period
19
<PAGE> 25
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent. "Effective
yield" for the Funds assumes that all dividends received during the base period
have been reinvested. Calculation of "effective yield" begins with the same
"base period return" used in the calculation of yield, which is then annualized
to reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)365/7]-1.
For the seven day period ended March 31, 1997, yields for the Funds were:
<TABLE>
<CAPTION>
Yield Effective Yield
----- ---------------
<S> <C> <C>
U.S. Treasury Reserve Fund
(Service Class) 4.90% 5.02%
(Institutional Class) 4.90% 5.02%
Cash Reserve Fund
(Service Class) 5.08% 5.21%
(Institutional Class) 5.13% 5.26%
</TABLE>
Quotations of yield will reflect only the performance of a hypothetical
investment in the Funds during the particular time period shown. Yield for the
Funds will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating its yields to current or prospective unit
holders, the Funds also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indices, which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutul
funds by overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (ii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment of
dividends but this Index generally does not reflect deductions for
administrative and management costs and expenses.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Service Organization may be charged one or more of the
following types of fees as agreed upon by the Service Organization and the
investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
20
<PAGE> 26
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors. Investors who maintain
accounts with the Trust as transfer agent will not pay these fees.
FINANCIAL STATEMENTS
The financial Statements for the period ended March 31, 1997 set forth below
are unaudited.
21
<PAGE> 27
FIRST CHOICE MUTUAL FUNDS
CASH RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Principal Security
Amount Description Value
------ ----------- -----
<S> <C> <C>
BANKERS ACCEPTANCES (30.8%):
$2,000,000 Bank of New York
5.30%, 5/5/97 $ 1,989,989
2,300,000 Republic National Bank of New York
5.28%, 5/23/97 2,282,459
2,000,000 Bank of America, N.T. & S.A
5.31%, 6/17/97 1,977,285
1,495,000 Chase Manhattan
5.26%, 4/29/97 1,488,884
2,000,000 First National Bank of Chicago
5.29%, 7/28/97 1,965,321
1,000,000 Union Bank of California
5.28%, 5/20/97 992,813
1,000,000 Union Bank of California
5.37%, 8/4/97 981,354
-----------
Total Bankers Acceptances 11,678,105
-----------
COMMERCIAL PAPER (56.7%):
Broker (13.1%):
1,500,000 Bear Stearns & Co.
5.34%, 5/5/97 1,492,435
2,000,000 Merrill Lynch & Co.
5.42%, 7/14/97 1,968,685
1,500,000 Smith Barney Inc.
5.29%, 4/3/97 1,499,559
-----------
Total 4,960,679
-----------
Equipment Rental & Leasing Services (4.4%):
1,700,000 International Lease Finance Corp.
5.24%, 7/28/97 1,670,802
-----------
Finance Lessors (10.8%):
2,300,000 General Electric Capital Corp.
5.31%, 4/3/97 2,299,322
1,800,000 International Business Machine Credit Corp.
5.35%, 4/7/97 1,798,395
-----------
Total 4,097,717
-----------
Personal Credit (17.3%):
1,500,000 American Express Credit
5.31%, 5/9/97 1,491,593
1,500,000 American General Finance
5.32%, 4/23/97 1,495,123
1,800,000 Ford Motor Credit
5.29% 4/15/97 1,796,297
1,800,000 TransAmerica Finance
5.27%, 4/17/97 1,795,784
-----------
Total 6,578,797
-----------
Recreation & Amusement Services (6.1%):
2,300,000 Walt Disney
5.28%, 4/21/97 2,293,253
-----------
Tobacco (5.0%):
1,900,000 Phillip Morris, Inc.
5.65%, 4/4/97 1,899,105
-----------
Total Commercial Paper 21,500,353
-----------
</TABLE>
<PAGE> 28
FIRST CHOICE MUTUAL FUNDS
CASH RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Principal Security
Amount Description Value
------ ----------- -----
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (12.8%):
Federal Agricultural Mortgage Corp.:
$545,000 5.34%, 4/9/97 $ 544,353
245,000 5.37%, 4/9/97 244,708
-----------
Total 789,061
-----------
Federal Home Loan Mortgage Corp.:
1,640,000 5.21%, 4/15/97 1,636,677
1,295,000 5.49%, 4/15/97 1,292,235
1,150,000 5.20%, 4/18/97 1,147,176
-----------
Total U.S. Government Agency 4,865,149
-----------
Total (Amortized cost-$38,043,607) (a) $38,043,607
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $37,947,219.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
<PAGE> 29
FIRST CHOICE MUTUAL FUNDS
U.S. TREASURY RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Principal Security
Amount Description Value
------ ----------- -----
<S> <C> <C>
U.S. Treasury Bills (51.9%):
$360,000 5.11%, 4/17/97 $ 359,184
200,000 5.12%, 4/17/97 199,545
15,100,000 5.15%, 4/17/97 15,065,403
710,000 5.02%, 5/29/97 704,258
555,000 5.04%, 5/29/97 550,493
4,500,000 5.07%, 5/29/97 4,463,279
465,000 5.14%, 5/29/97 461,149
800,000 5.19%, 5/29/97 793,311
5,800,000 5.03%, 7/24/97 5,707,708
880,000 5.11%, 7/24/97 865,760
695,000 5.16%, 7/24/97 683,643
495,000 5.23%, 7/24/97 486,802
-----------
Total U.S. Treasury Bills 30,340,535
-----------
U.S. Treasury Notes (47.4%):
1,180,000 6.50%, 4/30/97 1,180,903
6,045,000 6.88%, 4/30/97 6,052,481
10,425,000 6.50%, 5/15/97 10,439,780
6,200,000 6.13%, 5/31/97 6,206,698
3,800,000 6.38%, 6/30/97 3,809,533
-----------
Total U.S. Treasury Notes 27,689,395
-----------
Total (Amortized cost-$58,029,930)(a) $58,029,930
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $58,452,324.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
<PAGE> 30
FIRST CHOICE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Fund Reserve Fund
------------- ------------
Period Period
Ended Ended
March 31, March 31,
1997* 1997**
------------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,292,251 $ 428,382
Net realized gains (losses) from
investment transactions 759 (280)
-------------- ------------
Change in net assets
resulting from operations 1,293,010 428,102
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Service Class (1,285,321) (428,371)
Institutional Class (6,930) (11)
-------------- ------------
Change in net assets from
shareholder distributions (1,292,251) (428,382)
-------------- ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 135,993,239 72,806,494
Dividends reinvested 3,015 325
Cost of shares redeemed (77,544,689) (34,859,320)
-------------- ------------
Change in net assets
from capital transactions 58,451,565 37,947,499
-------------- ------------
Change in net assets 58,452,324 37,947,219
NET ASSETS:
Beginning of period -- --
-------------- ------------
End of period $ 58,452,324 $ 37,947,219
============== ============
</TABLE>
* Commencement of operations of the Fund began October 1, 1996
** Commencement of operations of the Fund began January 13, 1997
See notes to financial statements.
<PAGE> 31
FIRST CHOICE MUTUAL FUNDS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
March 31, 1997
(Unaudited)
U.S. Treasury Cash
Reserve Reserve
Fund Fund
--------------- ---------------
<S> <C> <C>
ASSETS:
Investments, at value (Amortized cost $58,029,930,
and $38,043,607, respectively) $ 58,029,930 $ 38,043,607
Cash -- 1,953
Interest receivable 650,825 --
Unamortized organization costs 54,896 61,259
Prepaid expenses 10,017 16,490
Expense reimbursement receivable 23,141 14,332
------------ ------------
Total Assets 58,768,809 38,137,641
------------ ------------
LIABILITIES:
Dividends Payable 265,913 172,682
Accrued expenses and other payables:
Investment advisory fees 2,719 --
Transfer agent fees 6,573 4,128
Legal and audit fees 18,290 4,843
Custodian and accounting fees 7,177 4,869
Printing costs 14,902 3,666
Other 911 234
------------ ------------
Total Liabilities 316,485 190,422
------------ ------------
NET ASSETS:
Capital 58,451,565 37,947,499
Accumulated undistributed net realized gains (losses)
from investment transactions 759 (280)
------------ ------------
Net Assets $ 58,452,324 $ 37,947,219
============ ============
Net Assets
Service Class 56,926,214 37,946,212
Institutional Class 1,526,110 1,007
------------ ------------
Total 58,452,324 37,947,219
============ ============
Shares of capital stock
Service Class 56,925,439 37,946,492
Institutional Class 1,526,126 1,007
------------ ------------
Total 58,451,565 37,947,499
============ ============
Net asset value, offering and redemption price per share
Service Class $ 1.00 $ 1.00
Institutional Class $ 1.00 $ 1.00
</TABLE>
See Notes to financial statements.
<PAGE> 32
FIRST CHOICE MUTUAL FUNDS
Statements of Operations
For the period ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Reserve
Fund * Fund **
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,383,518 $ 458,120
----------- -----------
Total Income 1,383,518 458,120
----------- -----------
EXPENSES:
Investment advisory fees 80,074 25,490
Administration fees 40,037 12,745
Distribution fees -- Service class 66,375 21,241
Shareholder Servicing -- Service class 66,375 21,241
Custodian and accounting fees 24,567 11,388
Legal and audit fees 23,041 9,594
Organization costs 8,937 2,574
Trustees' fees and expenses 7,608 1,794
Transfer agent fees 10,143 4,446
Registration and filing fees 13,061 8,034
Printing costs 15,152 3,666
Other 4,763 2,574
----------- -----------
Total expenses 360,133 124,787
Less: Fee waivers and expense reimbursements (268,866) (95,049)
----------- -----------
Net Expenses 91,267 29,738
----------- -----------
Net Investment Income 1,292,251 428,382
----------- -----------
REALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions 759 (280)
----------- -----------
Change in net assets resulting
from operations $ 1,293,010 $ 428,102
=========== ===========
</TABLE>
* Commencement of operations of the Fund began October 1, 1996
** Commencement of operations of the Fund began January 13, 1997
See Notes to financial statements.
<PAGE> 33
FIRST CHOICE MUTUAL FUNDS
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Fund Reserve Fund
------------------------------------ -----------------------------------
Period Period
Ended Ended
March 31, March 31,
1997 (a) 1997 (b)
------------------------------------- -----------------------------------
Service Institutional Serice Institutional
Class Class Class Class
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------- -------------- --------------- ----------
Investment Activities
Net investment income 0.024 0.025 0.011 0.011
Net realized and unrealized gains (losses)
from investments 0.000 0.000 0.000 0.000
--------------- -------------- --------------- ----------
Total from Investment Activities 0.024 0.025 0.011 0.011
--------------- -------------- --------------- ----------
Distributions
Net investment income (0.024) (0.025) (0.011) (0.011)
Net realized gains -- -- -- --
--------------- -------------- --------------- ----------
Total Distributions (0.024) (0.025) (0.011) (0.011)
--------------- -------------- --------------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
=============== ============== =============== ==========
Total Return 2.43%(c) 2.48%(c) 1.08%(c) 1.10%(c)
Ratios/Supplementary Data:
Net Assets at end of period $ 56,926,214 $ 1,526,110 $ 37,946,212 $ 1,007
Ratio of expenses to
average net assets 0.35%(d) 0.35%(d) 0.35%(d) 0.35%(d)
Ratio of net investment income
to average net assets 4.83%(d) 4.83%(d) 5.04%(d) 5.04%(d)
Ratio of expenses to
average net assets* 1.34%(d) 0.84%(d) 1.47%(d) 0.97%(d)
Ratio of net investment income
to average net assets* 3.84%(d) 4.34%(d) 3.92%(d) 4.42%(d)
</TABLE>
__________
* During the period certain expenses were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) Period from commencement of operations, October 1, 1996.
(b) Period from commencement of operations, January 13, 1997.
(c) Not annualized.
(d)Annualized.
See Notes to financial statements.
<PAGE> 34
FIRST CHOICE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. ORGANIZATION:
The 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 6, 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 the date of commencement of
operations, the Funds had no operations.
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 Company in the preparation of its financial statements. The
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 in accordance with Rule 2a-7 under the 1940 Act. Under
the amortized cost method, discount or premium is amortized on a
constant basis to the maturity of the security. In addition, the
Funds may not (a) purchase any instrument with a remaining
maturity greater than 397 days unless such instrument is subject
to a demand feature, or (b) maintain a dollar-weighted average
maturity which exceeds 90 days.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security
is purchased or sold (trade date). Interest income is recognized
on the accrual basis and includes, where applicable, the
amortization of premium or accretion of discount based on the
effective interest method. Gains or losses realized on sales of
securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS:
The Cash Reserve Fund only, may acquire repurchase agreements
from any bank or broker-dealer which the adviser deems
creditworthy under guidelines approved by the Board of Trustees,
subject to the seller's agreement to repurchase such securities
at a mutually agreed-upon date and price. The repurchase price
generally equals the price paid by a Fund plus interest
negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio
securities. The seller, under a repurchase agreement, is required
to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements
are held by the Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system.
<PAGE> 35
FIRST CHOICE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 1997
(UNAUDITED)
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for temporary purposes by entering into
reverse repurchase agreements. Pursuant to such agreements, a
Fund would sell portfolio securities to financial institutions
such as banks and broker/dealers, and agree to repurchase them at
a mutually agreed-upon date and price. At the time a Fund enters
into a reverse repurchase agreement, it places in a segregated
custodial account assets having a value equal to the repurchase
price (including accrued interest), and will continually monitor
the account to ensure such equivalent value is maintained at all
times. Reverse repurchase agreements are considered to be
borrowing by the Funds under the 1940 act.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid
monthly for the U.S. Treasury Reserve Fund and Cash Reserve Fund,
and distributable net realized capital gains, if any, are
declared and distributed at least annually.
Dividends 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. These differences are primarily due to differing
treatments of mortgage-backed securities, expiring capital loss
carry-forwards and deferrals of certain losses.
FEDERAL INCOME TAXES:
It is the policy of each Fund to qualify as a regulated
investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections
of the Internal Revenue Code, and to make distributions of net
investment income and net realized capital gains sufficient to
relieve it from all, or substantially all, Federal income taxes.
ORGANIZATION COSTS:
Costs incurred by the Trust in connection with its organization
and registration of shares have been deferred and are amortized
using the straight-line method over a period of five years from
the commencement of the public offering of shares of the Funds.
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 expenses 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
time of redemption.
OTHER:
Each Fund maintains a cash balance with its custodian and
receives a reduction of their custody fees and expenses for the
amounts of interest earned on such uninvested cash balance. For
financial reporting purposes for the period ended March 31, 1997,
custodian fees and expenses were reduced by $407 for the U.S.
Treasury Reserve Fund. There was no effect on net investment
income. The Fund could have invested such cash amounts in an
income producing asset if they had not agreed to a reduction of
fees or expenses under the expense offset arrangement with their
custodian.
<PAGE> 36
FIRST CHOICE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 1997
(UNAUDITED)
3. SHARES OF BENEFICIAL INTEREST
Transactions in Fund Shares were as follows:
SERVICE SHARES
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Fund Reserve Fund
Period Period
Ended Ended
3/31/97 * 3/31/97 *
------------- ------------
<S> <C> <C>
Shares sold 134,469,144 72,805,494
Shares issued to shareholders
in payment of distributions declared 984 318
Shares Redeemed (77,544,689) (34,859,320)
---------- ----------
Net Change resulting from
Fund share Transactions 56,925,439 37,946,492
---------- ----------
</TABLE>
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Reserve
Period Period
Ended Ended
3/31/97 * 3/31/97 *
-------------- ----------
<S> <C> <C>
Shares sold 1,524,095 1,000
Shares issued to shareholders
in payment of distributions declared 2,031 7
Shares Redeemed -- --
---------- ----------
Net Change resulting from
Fund share Transactions 1,526,126 1,007
---------- ----------
Total Increase in Fund Shares 58,451,565 37,947,499
========== ==========
</TABLE>
* Commencement of operations of the U.S. Treasury Reserve Fund and the Cash
Reserve Fund are October 1, 1996 and January 13, 1997, respectively.
4. Related Party Transactions:
Investment advisory services are provided to the Funds by First American
Capital Management, Inc. Under the terms of the investment advisory
agreement, First American Capital Management, Inc. is entitled to receive
fees, on an annualized basis, of 0.30% of the average daily net assets of
each Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS
L.P."), an Ohio limited partnership, and BISYS Fund Services, Inc.
("BISYS") are subsidiaries of The BISYS Group, Inc.
BISYS L.P. serves the Trust as administrator. Under the terms of the
administration agreement, BISYS L.P. receives fees, on an annualized basis,
of 0.15% that are computed daily as a percentage of the average daily net
assets of each of Fund.
BISYS L.P. also serves as Fund distributor. BISYS L.P. receives fees for
providing distribution services under the Distribution Service Plan (the
"Plan") pursuant to Rule 12b-1 of the 1940 Act. Under the Plan, each Fund
pays BISYS L.P. a fee not to exceed, on an annual basis, 0.25% of the
average daily net asset value of each Fund for payments made to banks,
broker/dealers and other institutions, including affiliates of the Adviser,
and for expenses BISYS L.P. and any of its affiliates or subsidiaries incur
for providing distribution or shareholder service assistance.
<PAGE> 37
FIRST CHOICE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 1997
(UNAUDITED)
BISYS serves each Fund as transfer agent and fund accountant. For transfer
agent services, BISYS is entitled to receive fees based upon the number of
shareholders. For fund accounting services, BISYS is entitled to receive
annual fees of $30,000 per fund. In addition, BISYS is reimbursed for
certain out-of-pocket expenses incurred in providing such transfer agency
and fund accounting services. Fees received for transfer agent and fund
accounting services are as follows:
<TABLE>
<CAPTION>
U.S Treasury Cash
Reserve Reserve
Fund Fund
------------ -------
<S> <C> <C>
Transfer Agent $10,143 $4,446
Fund Accounting $17,654 $9,204
</TABLE>
Certain officers of the Trust are affiliated with BISYS and/or First
American Management, Inc. Such officers are not paid any fees directly by
the Funds for serving as officers of the Trust.
Fees may be voluntarily reduced or reimbursed to assist the Funds in maintaining
competitive expense ratios. Information regarding these transactions are as
follows for the period ended March 31, 1997:
<TABLE>
<CAPTION>
U.S. Treasury Cash
Reserve Reserve
Fund Fund
------------- -------
<S> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary reductions
(Percentage of average net assets) 0.30% 0.30%
Voluntary fee reductions $72,938 $25,490
ADMINISTRATION FEES:
Annual fee before voluntary reductions
(Percentage of average net assets) 0.15% 0.15%
Voluntary fee reduction $40,037 $12,745
DISTRIBUTION FEES (SERVICE CLASS):
Annual fee before voluntary reductions
(Percentage of average net assets) 0.25% 0.25%
Voluntary fee reductions $66,375 $21,241
SHAREHOLDER SERVICING FEES (SERVICE CLASS):
Annual fee before voluntary reductions
(Percentage of average net assets) 0.25% 0.25%
Voluntary fee reductions $66,375 $21,241
EXPENSES ABOVE VOLUNTARY EXPENSE CAP:
Voluntary fee reimbursements $23,141 $14,332
</TABLE>
<PAGE> 38
FIRST CHOICE FUNDS TRUST
STATEMENT OF ASSETS AND LIABILITIES
September 12,1996
<TABLE>
<CAPTION>
U S Treasury Cash Reserves
Reserve Fund Fund
-------- --------
<S> <C> <C>
Assets
Cash $ 50,000 $ 50,000
Deferred organization expenses 85,000 85,000
-------- --------
Total Assets 135,000 135,000
Liabilities
Organizational Expenses Payable 85,000 85,000
-------- --------
Total Liabilities 85,000 85,000
-------- --------
Net Assets $ 50,000 $ 50,000
-------- --------
Shares Outstanding 50,000 50,000
-------- --------
($0.001 Par Value)
Net Asset Value per share $ 1.00 $ 1.00
-------- --------
Composition of net assets
Capital stock $ 50 $ 50
Paid-in capital $ 49,950 $ 49,950
-------- --------
Net Assets $ 50,000 $ 50,000
======== ========
</TABLE>
See notes to the Statement of Assets and Liabilities
22
<PAGE> 39
FIRST CHOICE FUNDS TRUST
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
September 12, 1996
1. Description and Organization. First Choice Funds Trust (the "Trust")
is registered under the Investment Company Act of 1940 as amended, as an
open-end management investment company. The Trust was organized as a Delaware
business trust on June 5, 1996. The capital of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of $0.001
each. The Trust currently consists of two separate portfolios or series: U.S.
Treasury Reserve Fund and the Cash Reserve Fund (collectively the "Funds"), each
with two (2) classes of shares known as the Service Class (offered to
shareholders who require a higher level of shareholder servicing) and the
Institutional Class (available to all other investors). The Funds have had no
operations other than organizational matters and the sale to BISYS Fund Services
("BISYS"), the Administrator and Distributor, of 100,000 shares of capital stock
representing the initial capital of the Funds as shown on the Statement of
Assets and Liabilities.
BISYS has agreed to pay the costs of organization and initial
registration of the Trust. The Funds have agreed to reimburse BISYS after each
fund's commencement of operations. Costs incurred in connection with such
organization and initial registration of the Trust, aggregating approximately
$170,000, have been allocated equally to each Fund, have been deferred and will
be amortized over a sixty month period beginning with each Fund's commencement
of operations.
In the event any of the initial shares of the Funds owned by BISYS
are redeemed during the amortization period, the redemption proceeds will be
reduced by a pro rata portion of any unamortized deferred organization expenses
in the same proportion as the number of initial shares outstanding being
redeemed bears to the number of initial shares outstanding at the time of
redemption.
2. Advisor. The Trust has entered into an Advisory Contract with First
American Capital Management Inc. ("First American"), a wholly owned subsidiary
of The First American Financial Corporation. Under the Advisory Contract, First
American is responsible for managing the investments of the Funds and
continually reviewing, supervising and administering the Funds' investments. For
the advisory services it provides to the Funds, First American will receive
monthly fees at up to 0.30%, annually, of the average daily net assets of each
Fund.
3. Administrator and Distributor. The Trust has entered into
Administrative Service Contracts with BISYS. Under the Administrative Services
Contract, BISYS supplies office space and facilities, prepares reports to
shareholders of the Funds, and performs administrative services necessary for
the operation of the Funds. For these services, BISYS is paid a monthly fee at
the annual rate of 0.15% of the average daily net assets of each Fund.
BISYS serves as Distributor of the shares of the Funds. The Trust
has adopted a Rule 12b-1 Distribution Plan and Agreement (the "Distribution
Plan"). Pursuant to the Distribution Plan, BISYS will be reimbursed each month
from the Service Class shares of each Fund for certain expenses related to
activities performed by BISYS intended to result in the sale of Service Class
shares. Such reimbursement will not exceed 0.25%, on an annualized basis, of the
23
<PAGE> 40
average daily net assets of the Service Class shares of each Fund.
4. Service Organizations. 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 the Funds, such as maintaining shareholder accounts and
records. The Service Class shares of the Funds may pay 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 Service Organizations.
5. Other transactions with Affiliates. Pursuant to a Fund Accounting
Agreement between the Trust and BISYS, BISYS assists the Trust in calculating
net asset values and provides certain other accounting services for each Fund,
for an annualized fee of $30,000 per Fund, plus out-of-pocket expenses.
BISYS also acts as transfer agent and provides personnel necessary
to perform shareholder servicing functions. Pursuant to a Shareholder Servicing
Agreement between the Trust and BISYS, BISYS receives a fee of $15.00 per
account per year, and reimbursement for certain expenses.
6. Federal Income Taxes. It is the Funds' intention to qualify as
"regulated investment companies" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, the Funds will not be subject to Federal
income taxes to the extent that they distribute taxable and tax-exempt income
for their fiscal year. The Funds also intend to meet the distribution
requirements to avoid the payment of Federal income and excise taxes.
24
<PAGE> 41
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in the Prospectus:
(1) Financial Highlights for the period ended March
31, 1997 (unaudited).
Included in Statement of Additional Information:
(1) Schedule of Portfolio Investments, Cash Reserve
Fund, dated March 31, 1997 (unaudited).
(1) Schedule of Portfolio Investments, U.S. Treasury
Reserve Fund, dated March 31, 1997 (unaudited).
(2) Statement of Changes in Net Assets for the
period ended March 31, 1997 (unaudited).
(3) Statements of Assets and Liabilities dated March
31, 1997 (unaudited).
(4) Statement of Operations for the period ended
March 31, 1997 (unaudited).
(5) Financial Highlights for the period ended March
31, 1997 (unaudited).
(6) Notes to Financial Statements dated March 31,
1997 (unaudited).
(7) Statement of Assets and Liabilities and notes
thereto dated September 12, 1996.
(8) Auditors Report.
(b) Exhibits:
(1) Trust Instrument(1)
(2) ByLaws of Registrant(1)
(3) None.
(4) None.
(5)(a) Form of Master Investment Advisory Agreement
and Supplements between Registrant and
Adviser.(2)
(5)(b) Form of Master Administration Agreement and
Supplements between Registrant and
Administrator.(2)
(6) Form of Master Distribution Contract and
Supplements between Registrant and
Distributor.(2)
(7) None.
(8) Form of Custodian Contract between Registrant
and Custodian.(2)
C-1
<PAGE> 42
(9)(a) Form of Transfer Agency and Service Agreement
between Registrant and Transfer Agent.(2)
(10) Consent of Baker & McKenzie, counsel to
Registrant.
(11) Consent of Independent Accountants.
(12) None.
(13) Subscription Agreement.(2)
(14) None.
(15) Form of Rule 12b-1 Distribution Plan and
Agreement between Registrant and Distributor.
(2)
(16) Schedule of Computation of Performance
Calculation.
(17) Financial Data Schedule.
(18) Rule 18f-3 Plan.(2)
Other Exhibits
(A) Power of Attorney (2)
(1) Previously filed with the initial registration statement on
June 26, 1996 and incorporated by reference herein.
(2) Previously filed with Pre-Effective Amendment No.1 on
September 12, 1996 and incorporated by reference herein.
Item 25. Persons Controlled by or under Common Control with
Registrant. None.
Item 26. Number of Holders of Securities at April 1, 1997.
U.S. Treasury Reserve Fund 8
Cash Reserve Fund 3
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment
Company Act of 1940 (the "1940 Act") and pursuant to Article X of the
Registrant's Trust Instrument (Exhibit 1 to the Registration
Statement), Section 4 of the Master Investment Advisory Contract
between Registrant and the Adviser (Exhibit 5(a) to this Registration
Statement), Section 9 of the Investment Advisory Agreement between
Registrant and the Adviser and Section 9 of the Master Distribution
Contract between Registrant and the Distributor (Exhibit 6 to this
Registration Statement), officers, trustees, employees and agents of
the Registrant will not be liable to the Registrant, any shareholder,
officer, trustee, employee, agent or other person for any action or
failure to act, except for bad faith, willful
C-2
<PAGE> 43
misfeasance, gross negligence or reckless disregard of duties, and
those individuals may be indemnified against liabilities in connection
with the Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
trustees, officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant understands
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its
officers and trustees against liabilities, and certain costs of
defending claims against such officers and trustees, to the extent such
officers and trustees are not found to have committed conduct
constituting willful misfeasance, bad faith, gross negligence or
reckless disregard in the performance of their duties. The insurance
policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 4 of the Master Investment Advisory Contract between
Registrant and the Adviser Section 9 of the Investment Advisory
Agreement between Registrant and the Adviser and Section 9 of the
Master Distribution Contract between Registrant and the Distributor,
limit the liability of the Adviser and the Distributor to liabilities
arising from willful misfeasance, bad faith or gross negligence in the
performance of their respective duties or from reckless disregard by
them of their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws,
Investment Advisory Contracts and Distribution Contract in a manner
consistent with Release No. 11330 of the Securities and Exchange
Commission under the 1940 Act so long as the interpretations of Section
17(h) and 17(i) of such Act remain in effect and are consistently
applied.
Item 28. Business and Other Connections of the Adviser.
First American Capital Management, Inc. ("First American"), is
a subsidiary of The First American Financial Corporation, which is
headquartered in Santa Ana, California, and is a provider of real
estate related financial and information services to real property
buyers and mortgage lenders and trust services through its subsidiary
First American Trust Company.
The executive officers of First American and such executive
officers' positions during the past two fiscal years are as follows:
<TABLE>
<CAPTION>
Name Position and Offices
---- --------------------
<S> <C>
William C. Conrad Director, President &
Chief Executive Officer of the
Adviser since December 1995; Chief
Investment Officer of First American
Trust Company, 2161 San Joaquin
Hills Road, Newport Beach,
California, since August 1994;
Chairman, First Interstate
Securities, San Diego California,
from January 1994 to July 1994;
President & Chief Executive Officer
of San Diego Capital Management,
Inc., San Diego, California, from
January 1990 to January 1994.
</TABLE>
C-3
<PAGE> 44
<TABLE>
<S> <C>
Mark R Arnesen Director, Secretary & Corporate
Counsel of the Adviser since
December 1995; Vice President,
Secretary & Corporate Counsel of The
First American Financial
Corporation, 114 East Fifth Street,
Santa Ana, California, since April
1992; Vice President, Secretary &
Corporate Counsel of First American
Title Insurance Company, 114 East
Fifth Street, Santa Ana, California,
since April 1992.
Thomas A. Klemens Director, Chief Financial Officer of
the Adviser since December 1995,
Executive Vice President & Chief
Financial Officer of The First
American Financial Corporation, 114
East Fifth Street, Santa Ana,
California, since February 1996;
Vice President, Chief Financial
Officer of said Company from 1993 to
1996; Vice President & Chief
Financial Officer of First American
Title Insurance Company since
September 1993.
Gary Alan Pulford Senior Portfolio Manager of the
Adviser since December 1995; Vice
President of First American Trust
Company, 2161 San Joaquin Hills
Road, Newport Beach, California,
since January 1995; President,
Pinnacle Asset Management, Inc. ,
575 Anton Blvd., Suite 300,
Glendale, California, from November
1991 to June 1995.
Deborah Ann Castellani Chief Operating Officer of the
Adviser since December 1995; Vice
President of First American Trust
Company, 2161 San Joaquin Hills
Road, Newport Beach, California,
since April 1989.
Randall L. Zaharia Senior Portfolio Manager of the
Adviser since December 1995; Vice
President of First American Trust
Company, 2161 San Joaquin Hills
Road, Newport Beach, California,
since March 1995. Investment
Analyst, Los Angeles County M.T.A. ,
Los Angeles, California, from
November 1988 to March 1995.
Steven Neal Huntsinger Senior Portfolio Manager of the
Adviser since December 1995; Vice
President of First American Trust
Company, 2161 San Joaquin Hills
Road, Newport Beach, California,
since September 1995; Portfolio
Manager, Analytical Investment
Management, 2222 Martin St., Suite
230, Irvine, California, from
November 1983 to July 1995.
</TABLE>
Item 29. Principal Underwriter
(a) The Distributor acts as Distributor/Underwriter for a
number of other registered investment companies.
(b) Officers and Directors
<TABLE>
<CAPTION>
Positions Positions
Name and and Offices and
Principal Business with Offices with
Address Registrant Underwriter
------------------------ ---------- ------------
<S> <C> <C>
BISYS Fund Services, Inc. None Sole
3435 Stelzer Road General
Columbus, Ohio 43219 Partner
</TABLE>
C-4
<PAGE> 45
<TABLE>
<S> <C> <C>
WC Subsidiary Corporation None Sole
150 Clove Road Limited
Little Falls, New Jersey 07424 Partner
The BISYS Group, Inc. None Sole
150 Clove Road Shareholder
Little Falls, New Jersey 07424
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained at the offices of BISYS.
Item 31. Management Services
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the removal of a trustee
if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares.
(b) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders upon request and
without charge.
(c) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940 Act
as though that section applied to the Registrant.
C-5
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement
pursuant to Rule 485 (b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on April 30, 1996.
FIRST CHOICE FUNDS TRUST
By: /s/ Irimga McKay
----------------------
Irimga McKay, President
C-6
<PAGE> 47
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Irimga McKay President April 30, 1997.
-----------------------
Irimga McKay
/s/ Milt Emerine (Principal Financial April 30, 1997.
----------------------- Accounting Officer)
Milt Emerine
/s/ John J. Pileggi Trustee April 30, 1997.
-----------------------
John J. Pileggi
DENNIS W. DRAPER* Trustee April 30, 1997.
-----------------------
Dennis W. Draper
JOSEPH N. HANKIN* Trustee April 30, 1997.
-----------------------
Joseph N. Hankin
RICHARD WEDEMEYER* Trustee April 30, 1997.
-----------------------
Richard Wedemeyer
</TABLE>
* Pursuant to Power of Attorney filed with Pre-Effective Amendment to
Registration Statement Nos. 33-7085 and 811-7681.
<PAGE> 48
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------------------------------
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY ACT OF 1940
-------------------------------------------------------------------
FIRST CHOICE FUNDS TRUST
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document
------ --------
<S> <C>
10(a) Consent of Baker & McKenzie, counsel to Registrant.
11 Consent of Independent Accountants.
16 Schedule of Computation of Performance Calculation.
27(a) Financial Data Schedule.
27(b) Financial Data Schedule.
27(c) Financial Data Schedule.
27(d) Financial Data Schedule.
</TABLE>
<PAGE> 1
LETTERHEAD OF BAKER & McKENZIE
April 29, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: First Choice Funds Trust (Registration No. 333-07085)
Dear Sir/Madam:
As counsel to First Choice Funds Trust (the "Trust"), we have reviewed
Post-Effective Amendment No. 1 to the Trust's Registration Statement on Form
N-1A (the "Amendment"). The Amendment is being filed pursuant to Rule 485 of
the 1933 Act and it is proposed that it will become effective immediately upon
filing pursuant to paragraph (b).
Based on our review, it is our view that the Amendment does not include
disclosure which we believe would render it ineligible to become effective
under paragraph (b) of Rule 485. We hereby consent to the reference to our
firm as Counsel in this Amendment.
If you have any questions or comments concerning the enclosed, please telephone
Scott R. MacLeod at (212)891-3947.
Sincerely,
/s/ BAKER & McKENZIE
- --------------------
Baker & McKenzie
SRM/ear
Enclosures
<PAGE> 1
Consent of Independent Accountants
We hereby consent to the use in the Sstatement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 13, 1996, relating to the statement of assets and liabilities of U.S.
Treasury Reserve Fund and Cash Reserve Fund (two portfolios constituting First
Choice Funds Trust), which appears in such Statement of Additional Information
and to the incorporation by reference of our report into the Prospectus dated
October 1, 1996, which is also incorporated by reference into this Registration
Statement. We also consent ot the references to us under the heading "Experts"
in such Statemnt of Additional Information and under the heading "Independent
Accountants" appearing on the cover of such Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 30, 1997
<PAGE> 1
FIRST CHOICE FUNDS
SERVICE CLASS
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (including capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income and capital gain distributions)
P = Net Asset Value at end of 6 month period
EXAMPLES (09/30/96 TO 03/31/97)
U.S. TREASURY RESERVE FUND 0.0241 / 1.00 = 2.41%
DISTRIBUTION RATE (excluding capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income distributions only)
P = Net Asset Value at end of 6 month period
EXAMPLES (09/30/96 TO 03/31/97)
U.S. TREASURY RESERVE FUND 0.0241 / 1.00 = 2.41%
<PAGE> 2
FIRST CHOICE FUNDS
SERVICE CLASS
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (including capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income and capital gain distributions)
P = Net Asset Value at end of 6 month period
EXAMPLES (01/12/97 TO 03/31/97)
CASH RESERVE FUND 0.0108 / 1.00 = 1.08%
DISTRIBUTION RATE (excluding capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income distributions only)
P = Net Asset Value at end of 6 month period
EXAMPLES (01/12/97 TO 03/31/97)
CASH RESERVE FUND 0.0108 / 1.00 = 1.08%
<PAGE> 3
FIRST CHOICE FUNDS
INSTITUTIONAL CLASS
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (including capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income and capital gain distributions)
P = Net Asset Value at end of 6 month period
EXAMPLES (01/12/97 TO 03/31/97)
CASH RESERVE FUND 0.0110 / 1.00 = 1.10%
DISTRIBUTION RATE (excluding capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income distributions only)
P = Net Asset Value at end of 6 month period
EXAMPLES (01/12/97 TO 03/31/97)
CASH RESERVE FUND 0.0110 / 1.00 = 1.10%
<PAGE> 4
FIRST CHOICE FUNDS
INSTITUTIONAL CLASS
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (including capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income and capital gain distributions)
P = Net Asset Value at end of 6 month period
EXAMPLES (09/30/96 TO 03/31/97)
U.S. TREASURY RESERVE FUND 0.0245 / 1.00 = 2.45%
DISTRIBUTION RATE (excluding capital gains)(no load)
DISTRIBUTION RATE = D/P
WHERE: D = Distributions per share over a 6 month period
(income distributions only)
P = Net Asset Value at end of 6 month period
EXAMPLES (09/30/96 TO 03/31/97)
U.S. TREASURY RESERVE FUND 0.0245 / 1.00 = 2.45%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001017176
<NAME> FIRST CHOICE FUNDS TRUST
<SERIES>
<NUMBER> 011
<NAME> THE FIRST CHOICE U.S. TREASURY RESERVE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 58,029,930
<INVESTMENTS-AT-VALUE> 58,029,930
<RECEIVABLES> 673,966
<ASSETS-OTHER> 64,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,768,809
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 316,485
<TOTAL-LIABILITIES> 316,485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,451,565
<SHARES-COMMON-STOCK> 56,925,439<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 58,452,324
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,383,518
<OTHER-INCOME> 0
<EXPENSES-NET> 91,267
<NET-INVESTMENT-INCOME> 1,292,251
<REALIZED-GAINS-CURRENT> 759
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,293,010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,285,321<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 135,993,239
<NUMBER-OF-SHARES-REDEEMED> 77,544,689
<SHARES-REINVESTED> 3,015
<NET-CHANGE-IN-ASSETS> 58,451,565
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 80,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 360,133
<AVERAGE-NET-ASSETS> 53,265,386<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> .024<F1>
<PER-SHARE-GAIN-APPREC> .000<F1>
<PER-SHARE-DIVIDEND> .024<F1>
<PER-SHARE-DISTRIBUTIONS> .000<F1>
<RETURNS-OF-CAPITAL> .000<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> .350<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001017176
<NAME> FIRST CHOICE FUNDS TRUST
<SERIES>
<NUMBER> 012
<NAME> THE FIRST CHOICE U.S. TREASURY RESERVE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-03-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 58,029,930
<INVESTMENTS-AT-VALUE> 58,029,930
<RECEIVABLES> 673,966
<ASSETS-OTHER> 64,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,768,809
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 316,485
<TOTAL-LIABILITIES> 316,485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,451,565
<SHARES-COMMON-STOCK> 1,526,110<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 58,452,324
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,383,518
<OTHER-INCOME> 0
<EXPENSES-NET> 91,267
<NET-INVESTMENT-INCOME> 1,292,251
<REALIZED-GAINS-CURRENT> 759
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,293,010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,930<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 135,993,239
<NUMBER-OF-SHARES-REDEEMED> 77,544,689
<SHARES-REINVESTED> 3,015
<NET-CHANGE-IN-ASSETS> 58,451,565
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 80,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 360,133
<AVERAGE-NET-ASSETS> 284,344<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> .025<F1>
<PER-SHARE-GAIN-APPREC> .000<F1>
<PER-SHARE-DIVIDEND> .025<F1>
<PER-SHARE-DISTRIBUTIONS> .000<F1>
<RETURNS-OF-CAPITAL> .000<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> .350<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001017176
<NAME> THE FIRST CHOICE CASH RESERVE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-13-1997
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 38,043,607
<INVESTMENTS-AT-VALUE> 38,043,607
<RECEIVABLES> 14,332
<ASSETS-OTHER> 77,749
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,137,641
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 190,422
<TOTAL-LIABILITIES> 190,422
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,947,499
<SHARES-COMMON-STOCK> 37,946,492<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 280
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,947,219
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 458,120
<OTHER-INCOME> 0
<EXPENSES-NET> 29,738
<NET-INVESTMENT-INCOME> 428,382
<REALIZED-GAINS-CURRENT> (280)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 428,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 428,371<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 72,806,494
<NUMBER-OF-SHARES-REDEEMED> 34,859,320
<SHARES-REINVESTED> 325
<NET-CHANGE-IN-ASSETS> 37,947,499
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,490
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 124,787
<AVERAGE-NET-ASSETS> 39,758,669<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> .011<F1>
<PER-SHARE-GAIN-APPREC> .000<F1>
<PER-SHARE-DIVIDEND> .011<F1>
<PER-SHARE-DISTRIBUTIONS> .000<F1>
<RETURNS-OF-CAPITAL> .000<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> .350<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001017176
<NAME> FIRST CHOICE FUNDS TRUST
<SERIES>
<NUMBER> 022
<NAME> THE FIRST CHOICE CASH RESERVE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-13-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 38,043,607
<INVESTMENTS-AT-VALUE> 38,043,607
<RECEIVABLES> 14,332
<ASSETS-OTHER> 77,749
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,137,641
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 190,422
<TOTAL-LIABILITIES> 190,422
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,947,499
<SHARES-COMMON-STOCK> 1,007<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 280
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,947,219
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 458,120
<OTHER-INCOME> 0
<EXPENSES-NET> 29,738
<NET-INVESTMENT-INCOME> 428,382
<REALIZED-GAINS-CURRENT> (280)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 428,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 72,806,494
<NUMBER-OF-SHARES-REDEEMED> 34,859,320
<SHARES-REINVESTED> 325
<NET-CHANGE-IN-ASSETS> 37,947,499
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,490
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 124,787
<AVERAGE-NET-ASSETS> 1,004<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> .011<F1>
<PER-SHARE-GAIN-APPREC> .000<F1>
<PER-SHARE-DIVIDEND> .011<F1>
<PER-SHARE-DISTRIBUTIONS> .000<F1>
<RETURNS-OF-CAPITAL> .000<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> .350<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A Shares
</FN>
</TABLE>
