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[Logo]
U.S. TREASURY RESERVE FUND
CASH RESERVE FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
March 31, 1998
Distributed through
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
1-888-FIRST16
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[Logo] First Choice Funds Trust
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TABLE OF CONTENTS
Letter to Our Shareholders
PAGE 1
Schedules of Portfolio Investments
U.S. Treasury Reserve Fund :
PAGE 2
Cash Reserve Fund :
PAGE 3
Statements of Assets and Liabilities
PAGE 5
Statements of Operations
PAGE 6
Statements of Changes in Net Assets
PAGE 7
Financial Highlights
PAGE 8
Notes to Financial Statements
PAGE 10
Shareholder Information
BACK COVER
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First Choice Funds Trust [Logo]
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May 15, 1998
Dear First Choice Funds Shareholder:
We are pleased to present to our shareholders the 1998 semi-annual report on the
operations of the money market funds of the First Choice Funds Trust: the U.S.
Treasury Reserve Fund and Cash Reserve Fund (the "Funds"). As you will see by
reviewing the schedules of portfolio investments and financial statements that
follow, the Funds have had a substantial increase in assets since commencing
operations just over 17 months and 15 months ago, respectively.
We would like to note a few select highlights from operations during the
preceding six months. At March 31, 1998, the Funds totalled over $152 million in
net assets, an increase of nearly $19 million or about 13% from September 30,
1997. During the six month period ended March 31, 1998, the Funds distributed
nearly $4 million to shareholders. The U.S. Treasury Reserve Fund invests its
assets in U.S. Treasury Bills and Notes backed by the full faith and credit of
the United States Government. The Cash Reserve Fund was fully invested at March
31, 1998 in high quality short-term obligations issued by such well known
corporations as American Express, Ford Motor Company, General Electric and IBM,
as well as issues of agencies of the United States Government.
For the period ended March 31, 1998, the seven-day yields for the U.S. Treasury
Reserve Fund Institutional Class and Service Class were 4.97%, respectively. For
the same seven-day period, the effective yields for the Institutional Class and
Service Class were 5.09%, respectively.
For the period ended March 31, 1998, the seven-day yields for the Cash Reserve
Fund Institutional Class and Service Class were 5.15%, respectively. For the
same seven-day period, the effective yields for the Institutional Class and
Service Class were 5.28%, respectively.
We hope that you have found in the First Choice Funds Trust's money market funds
the investment vehicle that best delivers current income, liquidity and the
security of a stable $1.00 net asset value. We trust that you will find your
investment in the Funds to be a fundamentally important part of your investment
portfolio. If, at any time, we can offer you information about your investment
or about this report, please do not hesitate to call on us at 1-888-FIRST16. We
appreciate your continued participation in our mutual fund family and look
forward to serving your needs in the future.
William C. Conrad
President & CEO
First American Capital Management, Inc.
An investment in the Funds is neither insured nor guaranteed by the U.S.
Government. Yields may fluctuate and there can be no assurance that the Funds
will be able to maintain a stable NAV of $1.00 per share.
This material must be accompanied or preceded by a current prospectus.
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U.S. TREASURY RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- MARCH 31, 1998 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U. S. GOVERNMENT AND
AGENCY OBLIGATIONS - 99.2%
U.S. TREASURY BILLS (A) - 27.2%
$13,942,000 5.47%, 04/16/1998 .................... $13,911,016
5,036,000 5.40%, 04/23/1998 .................... 5,019,775
1,475,000 5.31%, 05/28/1998 .................... 1,462,926
-----------
20,393,717
-----------
U.S. TREASURY NOTES - 72.0%
10,035,000 7.87%, 04/15/1998 .................... 10,044,011
10,000,000 5.87%, 04/30/1998 .................... 10,003,419
1,990,000 9.00%, 05/15/1998 .................... 1,998,351
370,000 6.12%, 05/15/1998 .................... 370,350
8,925,000 6.00%, 05/31/1998 .................... 8,931,264
600,000 8.25%, 07/15/1998 .................... 604,983
15,650,000 5.87%, 08/15/1998 .................... 15,672,439
6,305,000 6.12%, 08/31/1998 .................... 6,322,281
-----------
53,947,098
-----------
TOTAL INVESTMENTS - 99.2% ................................. 74,340,815
(Cost $74,340,815)* -----------
NET OTHER ASSETS AND LIABILITIES - 0.8% ................... 630,213
-----------
TOTAL NET ASSETS - 100.0% ................................. $74,971,028
===========
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* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity at the time of
purchase.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [Logo]
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CASH RESERVE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- MARCH 31, 1998 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
COMMERCIAL PAPER (A) - 57.0%
SECURITY BROKERS AND DEALERS - 19.5%
$3,750,000 Bear Stearns Cos., Inc., Dcp.
5.65%, 04/14/1998 ......................... $ 3,742,498
2,400,000 Merrill Lynch & Co., Inc.
5.62%, 05/08/1998 ......................... 2,386,532
1,500,000 Merrill Lynch & Co., Inc.
5.68%, 09/18/1998 ......................... 1,461,467
800,000 Morgan Stanley, Dean Witter
5.61%, 05/15/1998 ......................... 794,671
2,000,000 Morgan Stanley, Dean Witter
5.61%, 05/29/1998 ......................... 1,982,503
1,000,000 Morgan Stanley, Dean Witter
5.70%, 09/29/1998 ......................... 972,498
2,750,000 Salomon-Smith Barney Holdings, Inc.
5.62%, 04/17/1998 ......................... 2,743,290
1,000,000 Salomon-Smith Barney Holdings, Inc.
5.67%, 09/11/1998 ......................... 975,324
-----------
15,058,783
-----------
FINANCE - 19.2%
1,000,000 American Express Credit Corp.
5.59%, 04/02/1998 ......................... 999,848
2,750,000 American Express Credit Corp.
5.63%, 04/14/1998 ......................... 2,744,518
1,500,000 American General Finance Corp.
5.61%, 04/16/1998 ......................... 1,496,581
1,300,000 American General Finance Corp.
5.61%, 04/24/1998 ......................... 1,295,457
1,000,000 Associates Corp. of North America
5.61%, 06/16/1998 ......................... 988,537
2,200,000 Beneficial Corp.
5.62%, 05/22/1998 ......................... 2,182,952
1,500,000 Beneficial Corp.
5.61%, 06/03/1998 ......................... 1,485,746
2,500,000 CIT Group Holdings Inc.
5.62%, 04/02/1998 ......................... 2,499,619
1,200,000 CIT Group Holdings Inc.
5.66%, 07/27/1998 ......................... 1,178,628
-----------
14,871,886
-----------
AUTOMOBILE FINANCING - 8.7%
1,000,000 Ford Motor Credit Co.
5.63%, 06/04/1998 ......................... 990,276
2,000,000 Ford Motor Credit Co.
5.64%, 06/25/1998 ......................... 1,974,169
3,750,000 Toyota Motor Credit Co.
5.63%, 04/09/1998 ......................... 3,745,400
-----------
6,709,845
-----------
TECHNOLOGY- 8.3%
3,000,000 General Electric Capital Corp.
5.61%, 04/10/1998 ......................... 2,995,890
3,400,000 International Business Machine Credit Corp.
5.58%, 04/24/1998 ......................... 3,388,161
-----------
6,384,051
-----------
RECREATION - 1.3%
1,000,000 Disney (Walt) Co.
5.70%, 07/17/1998 ......................... 983,772
-----------
TOTAL COMMERCIAL PAPER .................... 44,008,337
(Cost $44,008,337) -----------
BANKERS ACCEPTANCES (A) - 25.0%
1,000,000 BankBoston
5.52%, 04/03/1998 ......................... 999,699
1,000,000 BankBoston
5.75%, 04/15/1998 ......................... 997,853
2,000,000 Bank of America
5.59%, 04/16/1998 ......................... 1,995,417
1,000,000 Bank of America
5.55%, 04/23/1998 ......................... 996,688
1,513,323 Chase Manhattan Bank
5.56%, 04/01/1998 ......................... 1,513,323
2,000,000 Chase Manhattan Bank
5.54%, 05/11/1998 ......................... 1,988,022
1,000,000 Corestates Bank, N.A.
5.64%, 09/14/1998 ......................... 975,054
1,000,000 Corestates Bank, N.A.
5.64%, 09/23/1998 ......................... 973,701
2,500,000 First National Bank of Chicago
5.74%, 04/20/1998 ......................... 2,492,730
1,000,000 First National Bank of Chicago
5.55%, 04/22/1998 ......................... 996,821
1,000,000 Republic National Bank of New York
5.53%, 04/20/1998 ......................... 997,150
2,000,000 Republic National Bank of New York
5.52%, 05/04/1998 ......................... 1,990,155
1,124,727 Union Bank of California
5.56%, 04/24/1998 ......................... 1,120,818
1,273,739 Union Bank of California
5.56%, 04/30/1998 ......................... 1,268,178
-----------
TOTAL BANKERS ACCEPTANCES ................. 19,305,609
(Cost $19,305,609) -----------
U.S. AGENCY OBLIGATIONS (A) - 12.7%
FEDERAL HOME LOAN
MORTGAGE CORPORATION
DISCOUNT NOTES - 7.7%
5,950,000 5.55%, 04/06/1998 ......................... 5,945,488
-----------
FEDERAL FARM CREDIT BANK CONSOLIDATED
DISCOUNT NOTES - 2.5%
2,000,000 5.61%, 10/26/1998 ......................... 1,938,062
-----------
FEDERAL HOME LOAN BANK
DISCOUNT NOTES - 1.8%
1,370,000 5.56%, 04/13/1998 ......................... 1,367,507
-----------
FEDERAL AGRICULTURAL
MORTGAGE CORPORATION
DISCOUNT NOTES - 0.6%
445,000 5.56%, 04/01/1998 ......................... 445,000
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION DISCOUNT NOTE - 0.1%
70,000 5.56%, 04/13/1998 ......................... 69,869
-----------
TOTAL U.S. AGENCY
OBLIGATIONS ............................... 9,765,926
(Cost $9,765,926) -----------
CERTIFICATES OF DEPOSIT - 4.3%
1,000,000 ABN AMRO Bank
5.82%, 07/17/1998 ......................... 1,000,369
1,300,000 Bankers Trust Co.
5.94%, 09/10/1998 ......................... 1,299,585
1,000,000 Corestates Bank, N.A.
5.50%, 04/01/1998 ......................... 1,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT ............. 3,299,954
(Cost $3,299,954) -----------
CORPORATE BONDS - 1.3%
1,000,000 BankBoston
5.65%, 04/06/1998 ......................... 1,000,007
-----------
TOTAL CORPORATE BONDS ..................... 1,000,007
(Cost $1,000,007) -----------
TOTAL INVESTMENTS - 100.3% - ................................. 77,379,833
(Cost $77,379,833)* -----------
NET OTHER ASSETS AND LIABILITIES - (0.3)% .................... (240,903)
-----------
TOTAL NET ASSETS - 100.00% ................................... $77,138,930
===========
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* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity at the time of
purchase.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [Logo]
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STATEMENTS OF ASSETS AND LIABILITIES -- MARCH 31, 1998 (UNAUDITED)
U. S. TREASURY CASH
RESERVE FUND RESERVE FUND
-------------- ------------
ASSETS:
Investments at value (Amortized cost $74,340,815
and $77,379,833, respectively) (Note 2) ......... $74,340,815 $77,379,833
Interest receivable ............................... 1,024,245 103,177
Unamortized organization costs (Note 2) ........... 44,712 48,347
Prepaid expenses .................................. 2,625 3,139
----------- -----------
Total Assets .................................... 75,412,397 77,534,496
----------- -----------
LIABILITIES:
Payable to Custodian .............................. 2,671 1,300
Dividends payable ................................. 330,386 329,594
Investment advisory fee payable (Note 4) .......... 3,440 3,219
Administration and accounting fee payable (Note 4) 10,335 9,986
Transfer agent fee payable (Note 4) ............... 12,143 7,161
Trustee fee payable (Note 4) ...................... 5,234 3,455
Accrued expenses and other payables ............... 77,160 40,851
----------- -----------
Total Liabilities ............................... 441,369 395,566
----------- -----------
NET ASSETS .......................................... $74,971,028 $77,138,930
=========== ===========
NET ASSETS CONSIST OF:
Par Value (Note 3) ................................ $ 74,968 $ 77,140
Paid-in Capital (Note 3) .......................... 74,893,051 77,062,815
Accumulated undistributed net realized gain (loss)
on investments sold ............................. 3,009 (1,025)
----------- -----------
TOTAL NET ASSETS .................................... $74,971,028 $77,138,930
=========== ===========
NET ASSETS
Service Class ..................................... $72,843,114 $76,421,794
Institutional Class ............................... 2,127,914 717,136
----------- -----------
Total ........................................... $74,971,028 $77,138,930
=========== ===========
SHARES OUTSTANDING
Service Class ..................................... 72,840,138 76,422,820
Institutional Class ............................... 2,127,881 717,135
----------- -----------
Total ........................................... 74,968,019 77,139,955
=========== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Service Class ..................................... $ 1.00 $ 1.00
=========== ===========
Institutional Class ............................... $ 1.00 $ 1.00
=========== ===========
Please see the accompanying notes to financial statements.
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STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
U. S. TREASURY CASH
RESERVE FUND RESERVE FUND
-------------- ------------
INVESTMENT INCOME:
Interest income (Note 2) .......................... $ 2,385,826 $ 1,623,233
----------- -----------
EXPENSES:
Investment advisory fees (Note 4) ................. 133,426 86,407
Administration fees (Note 4) ...................... 66,713 43,204
Accounting fees (Note 4) .......................... 17,739 17,766
Legal fees ........................................ 32,340 24,132
Amortization of organization costs (Note 2) ....... 6,362 6,362
Trustees' fees and expenses (Note 4) .............. 14,405 8,810
Transfer agent fees (Note 4) ...................... 7,818 7,147
Registration and filing fees ...................... 21,232 26,697
Miscellaneous and Other Expenses .................. 42,817 6,367
----------- -----------
Total Gross Expenses ............................ 342,852 226,892
Less: Fee waivers (Note 4) .................... (149,161) (100,809)
----------- -----------
Total Expenses .............................. 193,691 126,083
Less: Custody earnings credits (Note 2) ....... (166) (698)
----------- -----------
Net Expenses ................................ 193,525 125,385
----------- -----------
NET INVESTMENT INCOME ............................... 2,192,301 1,497,848
----------- -----------
REALIZED GAIN (LOSS) FROM INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold ...... 2,051 (635)
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ......................... $ 2,194,352 $ 1,497,213
=========== ===========
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [Logo]
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STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
U. S. TREASURY RESERVE FUND CASH RESERVE FUND
------------------------------------ -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1998 PERIOD ENDED MARCH 31, 1998 PERIOD ENDED
(UNAUDITED SEPTEMBER 31, 1997* (UNAUDITED) SEPTEMBER 31, 1997**
------------ ------------------ ------------ ------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ............ $ 75,575,604 $ 50,000(a) $ 58,007,987 $ 50,000(a)
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income ...................... 2,192,301 2,765,083 1,497,848 1,971,470
Net realized gain (loss) on investments sold 2,051 958 (635) (390)
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations ............... 2,194,352 2,766,041 1,497,213 1,971,080
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income:
Service Class ............................ (2,141,784) (2,714,132) (1,495,149) (1,971,126)
Institutional Class ...................... (50,517) (50,951) (2,699) (344)
------------ ------------ ------------ ------------
Total Distributions to shareholders .... (2,192,301) (2,765,083) (1,497,848) (1,971,470)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS (NOTE 3) ................ (606,627) 75,524,646 19,131,578 57,958,377
------------ ------------ ------------ ------------
Net increase (decrease) in net assets .... (604,576) 75,525,604 19,130,943 57,957,987
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD .................. $ 74,971,028 $ 75,575,604 $ 77,138,930 $ 58,007,987
============ ============ ============ ============
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* The Fund commenced operations on October 1, 1996.
** The Fund commenced operations on January 13, 1997.
(a) Amount represents initial sale of shares to the Distributor (original seed money).
Please see the accompanying notes to financial statements.
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FINANCIAL HIGHLIGHTS -- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<CAPTION>
U. S. TREASURY RESERVE FUND
------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 1998 PERIOD ENDED
(UNAUDITED) SEPTEMBER 30, 1997(A)
--------------------------------- --------------------------------
SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.025 0.025 0.049 0.050
Net realized and unrealized gain (loss)
on investments ........................... --(b) --(b) --(b) --(b)
------------ ------------ ------------ ------------
Total from Investment Operations ......... 0.025 0.025 0.049 0.050
LESS DISTRIBUTIONS:
Dividends from net investment income ....... (0.025) (0.025) (0.049) (0.050)
------------ ------------ ------------ ------------
Net Asset Value, end of period .............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============
Total Return ................................. 2.46%(d) 2.45%(d) 5.04%(d) 5.08%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s) ............. $ 72,843 $ 2,128 $ 73,581 $ 1,995
Ratios to average net assets:
Net investment income ...................... 4.93%(c) 4.93%(c) 4.93%(c) 4.93%(c)
Operating expenses* ........................ 0.44%(c) 0.44%(c) 0.35%(c) 0.35%(c)
Operating expenses excluding reimbursement,
waiver and custody earnings credits ...... 0.77%(c) 0.77%(c) 1.38%(c) 0.86%(c)
Net investment income excluding
reimbursements, waiver and custody
earnings credits ......................... 4.59%(c) 4.59%(c) 3.92%(c) 4.42%(c)
- ----------
* During the period certain expenses were reduced for credits earned at Custodian bank. If such credits had not occurred, the
ratios would have been as indicated. Impact of Custody earnings credits was less than 0.01% and $0.001 per share at
September 30, 1997.
(a) The Fund commenced operations on October 1, 1996.
(b) Amounts were less than $0.001 per share.
(c) Annualized
(d) Not annualized
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First Choice Funds Trust [Logo]
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FINANCIAL HIGHLIGHTS -- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<CAPTION>
CASH RESERVE FUND
------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 1998 PERIOD ENDED
(UNAUDITED) SEPTEMBER 30, 1997(A)
-------------------------------- --------------------------------
SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.026 0.026 0.037 0.038
Net realized and unrealized gain (loss) on
investments .............................. --(b) --(b) --(b) --(b)
------------ ------------ ------------ ------------
Total from Investment Operations ......... 0.026 0.026 0.037 0.038
LESS DISTRIBUTIONS:
Dividends from net investment income ......... (0.026) (0.026) (0.037) (0.038)
------------ ------------ ------------ ------------
Net Asset Value, end of period ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============
Total Return ................................. 2.60%(d) 2.60%(d) 3.78%(d) 3.82%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s) ............. $ 76,423 $ 717 $ 57,947 $ 61
Ratios to average net assets:
Net investment income ...................... 5.20%(c) 5.20%(c) 5.23%(c) 5.23%(c)
Operating expenses* ........................ 0.44%(c) 0.44%(c) 0.35%(c) 0.35%(c)
Operating expenses excluding reimbursement,
waiver and custody earnings credits ...... 0.79%(c) 0.79%(c) 1.43%(c) 0.93%(c)
Net investment income excluding
reimbursements, waiver and custody
earnings credits ......................... 4.85%(c) 4.85%(c) 4.15%(c) 4.65%(c)
- ----------
* During the period certain expenses were reduced for credits earned at Custodian bank. If such credits had not occurred, the
ratios would have been as indicated. Impact of Custody earnings credits was less than 0.01% and $0.001 per share at
September 30, 1997.
(a) The Fund commenced operations on January 13, 1997.
(b) Amounts were less than $0.001 per share.
(c) Annualized
(d) Not annualized
Please see the accompanying notes to financial statements.
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[Logo] First Choice Funds Trust [Logo]
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NOTES TO FINANCIAL STATEMENTS -- MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION
First Choice Funds Trust (the "Trust") is an open-end management investment
company established as a Delaware business trust under a Declaration of Trust
dated June 5, 1996, and is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act"). The Trust currently consists of the U.S. Treasury
Reserve Fund and the Cash Reserve Fund (individually a "Fund", collectively the
"Funds"). Between the date of organization and commencement of operations, the
Funds had no operations other than the initial sale of $100,000 of shares to the
distributor (original seed money).
The investment objective of the U.S. Treasury Reserve Fund is to provide
investors with as high a level of current income as is consistent with
liquidity, maximum safety of principal and the maintenance of a stable $1.00 net
asset value per share by investing in U.S. Treasury securities. The investment
objective of the Cash Reserve Fund is to provide investors with current income,
liquidity and the maintenance of a stable $1.00 net asset value per share by
investing in high quality, U.S. dollar-denominated short-term obligations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION: Securities are valued utilizing the amortized cost method
permitted by Rule 2a-7 under the 1940 Act. Under the amortized cost method, a
security is initially valued at cost. Each day thereafter, the security value is
adjusted on a constant basis for any discount or premium until maturity.
Amortized cost approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME: Security transactions are accounted
for on trade date, the date the security is purchased or sold. Interest income
is recorded on the accrual basis and includes, where applicable, the
amortization of premium or accretion of discount based on the straight line
method. Gains or losses realized on the sale of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income are declared
daily and paid monthly. Distributable net realized capital gains, if any, will
be declared and distributed at least annually.
The amount and character of distributions from net investment income and from
net realized capital gains are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
FEDERAL INCOME TAXES: It is the policy of each Fund to qualify as a regulated
investment company by complying with the applicable provisions of the Internal
Revenue Code. It is also the policy of the Funds to make distributions of net
investment income and net realized capital gains sufficient to relieve it from
all, or substantially all, Federal income and excise taxes.
ORGANIZATION COSTS: Costs incurred by the Trust in connection with its
organization and registration of shares have been deferred and are being
amortized using the straight-line method over a period of five years from the
commencement of Fund operations. In the event that any of the initial shares of
the Funds are redeemed during the amortization period by any holder thereof, the
redemption proceeds will be reduced by any unamortized organizational costs of
the Trust in the same proportion as the number of said shares of the Fund being
redeemed bears to the number of initial shares of that Fund that are outstanding
at the time of redemption.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a Fund are charged to
the Fund, while the expenses which are attributable to more than one Fund of the
Trust are allocated among the respective Funds.
In addition, expenses of a Fund not directly attributable to the operations of a
particular class of shares of the Fund are allocated to the separate class based
upon the net assets of each class. Operating expenses directly attributable to a
class of shares of a Fund are charged to the operations of that class.
OTHER: Each Fund maintains a cash balance with its custodian and receives a
reduction of their custody fees and expenses for the amounts earned on such
uninvested cash balance. For the six months ended March 31, 1998, custodian fees
were reduced by $166 and $698 for the U.S. Treasury Reserve Fund and the Cash
Reserve Fund, respectively.
3. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares, each with a par value of $0.001. Shares of the Trust are
currently classified into two classes of shares - the Institutional Class and
the Service Class. Each share represents an equal proportionate interest in the
respective Fund, bears the same fees and expenses (except the Fund's Service
Class Shares are subject to a Rule 12b-1 fee and a Shareholder Service fee) and
are entitled to such dividends and distributions of income earned as are
declared at the discretion of the Trust's Board of Trustees.
The following is a summary of transactions in portfolio shares, by class for
each Fund, for the six months ended March 31, 1998:
DOLLAR AMOUNTS AND SHARE ACTIVITY:
U.S. TREASURY CASH RESERVE
RESERVE FUND FUND
------------- -------------
SERVICE SHARES
Net proceeds from sale
of shares ................ $ 115,180,786 $ 117,968,050
Issued to shareholders in
reinvestment of dividends 1,277 1,579
Cost of shares repurchased (115,921,628) (99,493,834)
------------- -------------
Net change resulting from
Fund share transactions . $ (739,565) $ 18,475,795
============= =============
INSTITUTIONAL SHARES
Net proceeds from sale
of shares ................ $ 82,335 $ 797,958
Issued to shareholders as
reinvestment of dividends 50,603 2,322
Cost of shares repurchased -- (144,497)
------------- -------------
Net change resulting from
Fund share transactions . $ 132,938 $ 655,783
============= =============
The following is a summary of transactions in portfolio shares, by class for
each Fund, for the period ended September 31, 1997*:
DOLLAR AMOUNTS AND SHARE ACTIVITY:
U.S. TREASURY CASH RESERVE
RESERVE FUND* FUND*
------------- -------------
SERVICE SHARES
Net proceeds from sale
of shares ................ $ 214,827,431 $ 185,569,980
Issued to shareholders in
reinvestment of dividends 2,468 1,858
Cost of shares repurchased (141,299,196) (127,673,813)
------------- -------------
Net change resulting from
Fund share transactions . $ 73,530,703 $ 57,898,025
============= =============
INSTITUTIONAL SHARES
Net proceeds from sale
of shares ................ $ 1,943,095 $ 60,000
Issued to shareholders as
reinvestment of dividends 50,848 352
Cost of shares repurchased -- --
------------- -------------
Net change resulting from
Fund share transactions . $ 1,993,943 $ 60,352
============= =============
- ------------------------------------------------
* The U.S. Treasury Fund commenced operations on October 1, 1996. The Cash
Reserve Fund commenced operations on January 13, 1997.
4. INVESTMENT ADVISORY, ADMINISTRATION, SHAREHOLDER SERVICES, DISTRIBUTION AND
OTHER FEES
Investment advisory services are provided to the Funds by First American Capital
Management, Inc. ("First American"). Under the terms of the investment advisory
agreement, First American is entitled to receive fees, calculated daily and
payable monthly at the annual rate of of 0.30% of the average daily net assets
of each Fund.
First Data Investor Services Group, Inc. ("Investor Services Group"), a
wholly-owned subsidiary of First Data Corporation, serves the Trust as
Administrator. In addition, Investor Services Group also provides certain fund
accounting and transfer agency services.
First Data Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary of
Investor Services Group and an indirect wholly-owned subsidiary of First Data
Corporation, serves as distributor of the Funds. The Distributor receives fees
for providing distribution services under the Distribution Service Plan (the
"Plan") pursuant to Rule 12b-1 of the 1940 Act with respect to the Service
Class. Under the Plan each Fund pays the Distributor a fee not to exceed 0.25%,
on an annual basis, of the average daily net assets of each Fund for payments
made to banks, broker/dealers and other institutions, including affiliates of
the Adviser, and for expenses the Distributor and any of its affiliates or
subsidiaries incur for providing distribution or shareholder service assistance.
As of March 31, 1998, there were no expenses incurred by the Distributor.
Prior to September 22, 1997, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS L.P."), a subsidiary of The BISYS Group, Inc. served the
Trust as Administrator. BISYS L.P. received fees on an annualized basis of 0.15%
computed daily as a percentage of the average daily net assets of each Fund.
Also, prior to September 22, 1997, BISYS Fund Services, also a subsidiary of The
BISYS Group, Inc. served each Fund as transfer agent and fund accountant.
The Trust may contract with various banks, trust companies, broker/dealers, or
other financial organizations (collectively, the "Service Organizations") to
provide certain administrative services for the Service Class shares of each
Fund, such as maintaining shareholder accounts and records. The Service Class
shares of the Funds may pay Shareholder Servicing fees to Service Organizations
in amounts up to 0.25% of the average daily net assets of the Service Class
shares owned by shareholders serviced by the Service Organizations. As of March
31, 1998, there were no arrangements with Service Organizations currently in
place.
Certain officers of the Trust are affiliated with Investor Services Group and/or
First American. Such officers are not paid any fees directly by the Funds for
serving as officers of the Trust. Trustees of the Trust not affiliated with
Investor Services Group and/or First American receive from the Trust an annual
retainer of $1,000 and a fee of $1,000 for each Board of Trustees meeting and
$1,000 for each Board committee meeting of the Trust attended and are reimbursed
for all out-of-pocket expenses relating to attendance at such meetings.
Fees may be voluntarily waived or reimbursed to assist the Funds in maintaining
competitive expense ratios. Information regarding these transaction are as
follows for the six months ended March 31, 1998:
U.S. TREASURY CASH RESERVE
RESERVE FUND FUND
------------- -------------
FIRST AMERICAN:
Advisory fees waived $ 111,188 $ 72,006
INVESTOR SERVICES GROUP:
Fees waived $ 37,973 $ 28,803
------------- -------------
$ 149,161 $ 100,809
============= =============
5. SPECIAL MEETING OF SHAREHOLDERS
On March 30, 1998, the Trust held a special meeting of Shareholders to (1) elect
four Trustees of the Trust; (2) ratify the selection of Price Waterhouse LLP as
independent accountants for the Trust for the fiscal year ending September 30,
1998; and (3) to approve an amendment to the First Choice Cash Reserve Fund's
fundamental investment restrictions regarding (a) investments in securities
issued by a single issuer and (b) concentration in the banking industry. The
results of each proposal are as follows:
PROPOSAL 1: Election of Trustees.
John J. Pileggi
Dennis W. Draper
Joseph N. Hankin
Richard Wedemeyer
FOR WITHHELD
88,424,201.72 0
PROPOSAL 2: Ratification of selection of Price Waterhouse LLP as independents
accountants.
Shares voted FOR 88,424,201.72
Shares voted AGAINST 0
Shares voted ABSTAINED 0
PROPOSAL 3: Approval of an amendment to the First Choice Cash Reserve Fund's
fundamental investment restrictions regarding (a) investments in
securities by a single issuer and (b) concentration in the banking
industry
INVESTMENTS IN
SECURITIES ISSUED
BY A SINGLE ISSUER
------------------
Shares voted FOR 47,011,836.03
Shares voted AGAINST 0
Shares voted ABSTAINED 0
CONCENTRATION
IN THE
BANKING INDUSTRY
------------------
Shares voted FOR 47,011,836.03
Shares voted AGAINST 0
Shares voted ABSTAINED 0
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[Logo] First Choice Funds Trust
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INVESTMENT ADVISER
First American Capital Management, Inc.
567 San Nicolas Drive
Suite 101
Newport Beach, California 92660
ADMINISTRATOR
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
Investors Fiduciary Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
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First Choice Funds Trust [Logo]
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