[LOGO OF FIRST CHOICE FUNDS APPEARS HERE]
U.S. TREASURY RESERVE FUND
CASH RESERVE FUND
EQUITY FUND
ANNUAL REPORT TO SHAREHOLDERS
September 30, 1998
Distributed through
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
1-888-FIRST16
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[LOGO APPEARS HERE] 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
Equity Fund:
PAGE 5
Statements of Assets and Liabilities
PAGE 7
Statements of Operations
PAGE 8
Statements of Changes in Net Assets
PAGE 9
Financial Highlights
PAGE 12
Notes to Financial Statements
PAGE 15
Report of Independent Accountants
PAGE 18
Shareholder Information
BACKCOVER
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First Choice Funds Trust [LOGO APPEARS HERE] 1
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Dear First Choice Funds Trust Shareholder:
We are pleased to present to our shareholders the 1998 annual report on the
operations of the Portfolios of the First Choice Funds Trust. The report details
for our shareholders the solid progress the Trust's portfolios have achieved
over the course of the fiscal year ended September 30, 1998, including the short
initial fiscal year for the Equity Fund.
This report provides listings of investment holdings as of September 30, 1998
for the U.S. Treasury Reserve Fund, the Cash Reserve Fund and the Equity Fund
(the "Funds"). Statements of Assets and Liabilities, Operations, Changes in Net
Assets and Financial Highlights also are presented for the U.S. Treasury Reserve
Fund and Cash Reserve Fund, as of and for the year ended September 30, 1998, and
for the Equity Fund for the period since its commencement of operations on June
2, 1998 through September 30, 1998.
A few selected highlights from operations during fiscal year 1998 provide a
glimpse of the continuing positive trends established during 1997. As of
September 30, 1998, total net assets exceeded $217.4 million, an increase of
nearly $84 million, or 63% since the end of the prior fiscal year. On September
30, 1998, the seven-day yields for the U.S. Treasury Reserve Fund's
Institutional Class and Service Class were 4.74% and 4.49%, respectively, and
the effective yields for the Institutional Class and Service Class were 4.85%
and 4.59%, respectively. The seven-day yields for the Cash Reserve Fund's
Institutional Class and Service Class were 5.12% and 4.86%, respectively, on
September 30, 1998, and the effective yields for the Institutional Class and
Service Class were 5.25% and 4.98%, respectively. In just three months, the
Equity Fund has grown to approximately $14.4 million in total net assets, a
favorable signal for a new fund offering. For the period June 2, 1998 through
September 30, 1998, the total return for the Retail Class and Institutional
Class was (5.40)% and (5.30)%, respectively.
We hope that you have found and will continue to find that the First Choice
Funds Trust offers a diversified selection of investment options that meet your
needs. The Trust's money market funds have provided current income, liquidity
and a stable $1.00 net asset value. The Equity Fund offers shareholders
potential for long-term capital growth and income by primarily investing in
common stocks.
Please feel free to call us at 1-888-FIRST16 with any questions about your
account or about this report. 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 or the Federal Deposit Insurance Corporation. Yields may fluctuate
and there can be no assurance that the U.S. Treasury Reserve Fund and Cash
Reserve Fund 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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2 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
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U.S. Treasury Reserve Fund
Schedule of Portfolio Investments -- September 30, 1998
Principal Value
Amount (Note 2)
------ --------
U.S. GOVERNMENT OBLIGATIONS - 98.7%
U.S. Treasury Bills (A) - 19.8%
$ 7,655,000 4.25%, 12/17/1998 ......... $ 7,587,051
105,000 4.79%, 01/28/1999 ......... 103,386
3,330,000 5.14%, 02/11/1999 ......... 3,269,168
353,000 4.65%, 03/04/1999 ......... 346,216
-------------
11,305,821
-------------
U.S. Treasury Notes - 78.9%
13,740,000 7.13%, 10/15/1998 ......... 13,749,552
4,720,000 4.75%, 10/31/1998 ......... 4,716,975
5,890,000 5.88%, 10/31/1998 ......... 5,892,214
5,000,000 5.50%, 11/15/1998 ......... 5,000,120
5,000,000 5.88%, 01/31/1999 ......... 5,009,453
5,500,000 5.00%, 02/15/1999 ......... 5,495,529
4,000,000 6.38%, 04/30/1999 ......... 4,038,256
1,000,000 5.88%, 07/31/1999 ......... 1,003,561
-------------
44,905,660
-------------
Total U.S. Government Obligations ........... 56,211,481
(Cost $56,211,481) -------------
Total Investments - 98.7% ................... 56,211,481
(Cost $56,211,481)* -------------
Net Other Assets and Liabilities - 1.3% ..... 733,830
-------------
Total Net Assets - 100.0% ................... $ 56,945,311
=============
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* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity at time of purchase.
As of September 30, 1998, the Portfolio had a capital loss carryforward of
$2,422 which expires in 2006.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [LOGO APPEARS HERE] 3
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Cash Reserve Fund
Schedule of Portfolio Investments -- September 30, 1998
Principal Value
Amount (Note 2)
--------- --------
COMMERCIAL PAPER (A) - 61.0%
Personal Finance - 14.8%
$ 3,000,000 American Express Credit Corp.
5.28%, 11/20/1998 ......... $ 2,978,458
3,710,000 American Express Credit Corp.
5.68%, 11/20/1998 ......... 3,681,763
5,000,000 American General
Finance Corp.
5.62%, 10/15/1998 ......... 4,989,286
5,000,000 Associates Corp.
of North America
5.62%, 10/21/1998 ......... 4,984,722
5,000,000 Household Finance Co.
5.55%, 11/13/1998 ......... 4,967,571
------------
21,601,800
------------
Security Brokers and Dealers - 15.9%
1,400,000 Bear Stearns Co., Inc.
5.73%, 12/11/1998 ......... 1,384,842
5,000,000 Bear Stearns Co., Inc.
5.49%, 01/15/1999 ......... 4,921,678
200,000 Merrill Lynch & Co., Inc.
5.64%, 10/01/1998 ......... 200,000
5,000,000 Merrill Lynch & Co., Inc.
5.73%, 01/05/1999 ......... 4,926,667
6,000,000 Morgan Stanley, Dean Witter
5.49%, 02/12/1999 ......... 5,881,633
6,000,000 Salomon-Smith Barney
Holdings, Inc.
5.51%, 01/19/1999 ......... 5,902,283
------------
23,217,103
------------
Automobile Financing - 11.5%
3,000,000 Ford Motor Credit Co.
5.64%, 10/09/1998 ......... 2,996,320
3,500,000 Ford Motor Credit Co.
5.27%, 01/21/1999 ......... 3,444,358
3,000,000 General Motors
Acceptance Corp.
5.61%, 10/26/1998 ......... 2,988,542
2,000,000 General Motors
Acceptance Corp.
5.70%, 12/04/1998 ......... 1,980,551
5,500,000 Toyota Motor Credit Corp.
5.68%, 12/28/1998 ......... 5,426,728
------------
16,836,499
------------
Business Finance and Leasing - 13.5%
3,500,000 CIT Group Holdings, Inc.
5.34%, 10/30/1998 ......... 3,485,226
3,000,000 CIT Group Holdings, Inc.
5.66%, 10/30/1998 ......... 2,986,684
5,000,000 General Electric Capital Corp.
5.45%, 01/25/1999 ......... 4,915,094
5,500,000 International Business Machine
Credit Corp.
5.55%, 01/14/1999 ......... 5,413,856
3,000,000 International Lease
Finance Corp.
5.67%, 10/07/1998 ......... 2,997,270
------------
19,798,130
------------
Petroleum - 3.4%
5,000,000 Texaco, Inc.
5.52%, 01/12/1999 ......... 4,923,608
------------
Letter of Credit - 1.9%
2,800,000 Chase Manhattan Bank
(Somerset Railroad)
5.64%, 10/09/1998 ......... 2,796,558
------------
Total Commercial Paper..... 89,173,698
(Cost $89,173,698) ------------
BANKERS ACCEPTANCES (A) - 7.5%
5,000,000 BankBoston
5.61%, 11/03/1998 ......... 4,974,974
1,000,000 Bank of America
5.29%, 11/30/1998 ......... 991,383
5,000,000 Bank of New York
5.32%, 12/16/1998 ......... 4,945,322
------------
Total Bankers Acceptances.. 10,911,679
(Cost $10,911,679) ------------
Please see the accompanying notes to financial statements.
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4 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
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Cash Reserve Fund
Schedule of Portfolio Investments -- September 30, 1998 (continued)
Principal Value
Amount (Note 2)
------ --------
U.S. AGENCY OBLIGATIONS (A) - 10.9%
Federal Home Loan Mortgage
Corporation Discount Notes
$ 6,805,000 5.54%, 10/08/1998 ......... $ 6,797,789
6,875,000 5.55%, 10/09/1998 ......... 6,866,674
1,070,000 5.54%, 10/20/1998 ......... 1,066,928
1,150,000 5.22%, 11/24/1998 ......... 1,141,203
-------------
Total U.S. Agency
Obligations 15,872,594
(Cost $15,872,594) -------------
YANKEE CERTIFICATES OF DEPOSITS
AND DEPOSIT NOTES (A) - 19.2%
2,000,000 Abbey National Bank
5.72%, 01/20/1999 ......... 1,998,372
5,000,000 Abbey National Bank
5.79%, 06/11/1999 ......... 5,000,033
5,000,000 Deutsche Bank
5.67%, 10/23/1998 ......... 5,000,266
6,000,000 National Australia Bank
5.73%, 10/13/1998 ......... 5,999,837
5,000,000 Rabobank Nederland NV
5.82%, 04/20/1999 ......... 4,998,921
5,000,000 Westpac Bank
5.68%, 11/19/1998 ......... 5,000,413
-------------
Total Certificates of
Deposits 27,997,842
(Cost $27,997,842) -------------
Medium Term Notes - 1.0%
1,500,000 Xerox Credit Corp.
10.0%, 04/01/99 ........... 1,530,490
-------------
Total Medium Notes ........ 1,530,490
(Cost $1,530,490) -------------
Total Investments - 99.6% ................... 145,486,303
(Cost $145,486,303)* -------------
Net Other Assets and Liabilities - 0.4% ..... 635,170
-------------
Total Net Assets - 100.0% ................... $ 146,121,473
=============
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* Aggregate cost for Federal tax purposes.
(A) The rates shown represent annualized yield to maturity
at time of purchase.
As of September 30, 1998, the Portfolio had capital loss carryforwards which
expire as follows: $390 in 2005; and $1,171 in 2006. During 1998, the Portfolio
did not utilize any of its capital loss carryforward.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 5
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Equity Fund
Schedule of Portfolio Investments -- September 30, 1998
Value
Shares (Note 2)
------ --------
Common Stocks - 98.6%
Aerospace & Defense - 2.5%
3,300 Raytheon Co., Class B...... $ 177,994
2,400 United Technologies Corp... 183,450
-------------
361,444
-------------
Airlines - 1.1%
2,800 AMR Corp.*................. 155,225
-------------
Automotive - 5.1%
15,700 Ford Motor Corp............ 736,919
-------------
Basic Materials - 0.7%
1,400 Aluminum Co. of America.. 99,400
-------------
Business Services - 2.4%
4,600 Automatic Data
Processing, Inc. .......... 343,850
-------------
Chemicals - 0.8%
800 Dow Chemical Co............ 68,350
900 PPG Industries, Inc........ 49,106
-------------
117,456
-------------
Computers - 9.9%
1,050 Cisco Systems, Inc.*....... 64,903
1,400 Dell Computer Corp.*....... 92,050
3,600 EMC Corp.*................. 205,875
1,900 Honeywell, Inc............. 121,719
6,100 Microsoft Corp.*........... 671,381
9,000 Oracle Corp.*.............. 262,125
-------------
1,418,053
-------------
Conglomerate - 3.7%
6,700 General Electric Co........ 533,069
-------------
Consumer Products - 5.8%
4,500 Colgate - Palmolive Co..... 308,250
3,800 Mattel, Inc................ 106,400
6,800 Unilever NV, ADR........... 416,500
-------------
831,150
-------------
Electronics - 0.8%
3,000 Rockwell International Corp. 108,375
-------------
Entertainment - 1.8%
2,400 The Walt Disney Co......... 60,750
3,500 Viacom, Inc., Class B*..... 203,000
-------------
263,750
-------------
Financial - 10.2%
1,900 American Express Co........ 147,488
1,800 BankBoston Corp............ 59,400
1,500 Bankers Trust Corp......... 88,500
4,000 Fannie Mae................. 257,000
900 First Chicago NBD Corp..... 61,650
6,700 Keycorp.................... 193,463
7,600 MBNA Corp.................. 217,550
2,900 Merrill Lynch & Co......... 137,388
4,700 PNC Bank Corp.............. 211,500
1,100 Wachovia Corp.............. 93,775
-------------
1,467,714
-------------
Food and Beverages - 5.2%
9,135 Archer-Daniels-Midland Co.. 153,011
6,700 Campbell Soup Co........... 336,256
5,500 Pepsico, Inc............... 161,906
3,500 Seagram Ltd................ 100,406
-------------
751,579
-------------
Insurance - 4.3%
1,200 Aetna, Inc................. 83,400
2,600 AON Corp................... 167,700
1,400 Chubb Corp................. 88,200
3,300 Cigna Corp................. 218,213
2,000 Conseco, Inc............... 61,125
-------------
618,638
-------------
Machinery - 2.0%
5,600 Caterpillar, Inc........... 249,550
2,300 Thermo Electron Corp.*..... 34,644
-------------
284,194
-------------
Please see the accompanying notes to financial statements.
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<PAGE>
[LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
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Equity Fund
Schedule of Portfolio Investments -- September 30, 1998 (continued)
Value
Shares (Note 2)
------ --------
Manufacturing - 0.8%
2,300 Illinois Tool Works, Inc. . $ 125,350
-------------
Office Products - 1.8%
3,000 Xerox Corp. ............... 254,250
-------------
Oil,Gas, and Petroleum - 5.4%
1,400 Enron Corp. ............... 73,938
3,000 Schlumberger Ltd. ......... 150,938
6,200 Texaco, Inc. .............. 388,663
4,400 USX-Marathon Group ........ 155,925
-------------
769,464
-------------
Paper and Allied Products - 2.0%
2,000 Fort James Corp. .......... 65,625
2,000 International Paper Co. ... 93,250
3,000 Weyerhaeuser Co. .......... 126,563
-------------
285,438
-------------
Pharmaceuticals - 9.2%
5,500 Merck & Co., Inc. ......... 712,594
3,600 Pfizer, Inc. .............. 381,375
4,500 Pharmacia & Upjohn, Inc. .. 225,844
-------------
1,319,813
-------------
Restaurants - 1.5%
3,700 McDonald's Corp. .......... 220,844
-------------
Retail - 3.0%
3,800 Penny (J.C.) Co. .......... 170,763
5,800 Sears Roebuck & Co. ....... 256,288
-------------
427,051
-------------
Special Products and Services - 0.5%
2,100 Service Corp. International 66,930
-------------
Supermarkets - 2.5%
3,100 Albertson's, Inc. ......... 167,788
3,700 Kroger Co.* ............... 185,000
-------------
352,788
-------------
Telecommunications - 11.8%
6,000 AT&T Corp. ................ 350,625
7,300 BellSouth Corp. ........... 549,325
12,400 SBC Communications, Inc.... 551,025
4,700 U.S. West, Inc. ........... 246,456
-------------
1,697,431
-------------
Utilities - 3.8%
2,700 Consolidated Edison, Inc. . 140,738
600 Duke Energy Co. ........... 39,713
5,700 PG & E Corp. .............. 182,044
3,800 Texas Utilities Co. ....... 176,938
-------------
539,433
-------------
Total Common Stocks ....... 14,149,608
(Cost $14,888,400) -------------
Investment Company (A) - 1.4%
198,673 State Street Global Advisers
Money Market Fund, 5.23% .. 198,673
-------------
Total Investment Company . 198,673
(Cost $198,673) -------------
Total Investments - 100.0%................... 14,348,281
(Cost $15,087,073)** -------------
Net Other Assets and Liabilities - 0.0% 3,518
-------------
Total Net Assets - 100.0% .................. $ 14,351,799
=============
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* Non-income producing security.
** Aggregate cost for Federal tax purposes.
(A) The rate shown represents the seven day yield
at September 30, 1998.
For the period ended September 30, 1998, the portfolio has elected to defer
$82,192 of capital losses attributable to post-October losses.
Please see the accompanying notes to financial statements.
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First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 7
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Statements of Assets and Liabilities -- September 30, 1998
<TABLE>
<CAPTION>
U. S. Treasury Cash Equity
Reserve Fund Reserve Fund Fund
------------------ ---------------- ----------
<S> <C> <C> <C>
ASSETS:
Investments at value (Amortized cost $56,211,481,
$145,486,303 and cost $15,087,073 respectively) (Note 2) $ 56,211,481 $ 145,486,303 $ 14,348,281
Cash....................................................... 1,131 3,706 --
Dividends and interest receivable.......................... 993,932 1,255,237 22,017
Unamortized organization costs (Note 2).................... 38,314 41,949 7,614
Prepaid expenses........................................... 5,839 12,568 16,038
Receivable from Investment Adviser (Note 4)................ -- -- 4,172
------------ ------------- ------------
Total Assets............................................. 57,250,697 146,799,763 14,398,122
------------ ------------- ------------
LIABILITIES:
Dividends payable.......................................... 212,284 567,973 --
Investment advisory fee payable (Note 4)................... 2,368 11,134 --
Administration and accounting fee payable (Note 4)......... 7,044 18,091 3,788
Transfer agent fee payable (Note 4)........................ 10,015 6,554 745
Trustee fee payable (Note 4)............................... 3,223 7,076 811
Distribution fee payable................................... 22,440 22,984 52
Accrued expenses and other payables........................ 48,012 44,478 40,927
------------ ------------- ------------
Total Liabilities........................................ 305,386 678,290 46,323
------------ ------------- ------------
NET ASSETS................................................... $ 56,945,311 $ 146,121,473 $ 14,351,799
============ ============= ============
NET ASSETS consist of:
Par Value (Note 3)......................................... $ 56,947 $ 146,123 $ 1,516
Paid-in Capital (Note 3)................................... 56,890,786 145,976,911 15,156,413
Undistributed net investment income........................ -- -- 14,854
Accumulated net realized loss
on investments sold...................................... (2,422) (1,561) (82,192)
Unrealized depreciation on investments..................... -- -- (738,792)
------------ ------------- ------------
TOTAL NET ASSETS.............................................. $ 56,945,311 $ 146,121,473 $ 14,351,799
============ ============= ============
Net Assets
Service Class.............................................. $ 11,195,795 $ 487,377 $ N/A
Retail Class............................................... N/A N/A 126,037
Institutional Class........................................ 45,749,506 145,634,086 14,225,762
Investment Class........................................... 10 10 N/A
------------ ------------- ------------
Total.................................................... $ 56,945,311 $ 146,121,473 $ 14,351,799
============ ============= ============
Shares Outstanding
Service Class.............................................. 11,194,690 488,054 N/A
Retail Class............................................... N/A N/A 13,323
Institutional Class........................................ 45,752,075 145,634,970 1,502,536
Investment Class........................................... 10 10 N/A
------------ ------------- ------------
Total.................................................... 56,946,775 146,123,034 1,515,859
============ ============= ============
Net Asset Value, offering and redemption price per share
Service Class.............................................. $ 1.00 $ 1.00 N/A
============ ============= ============
Retail Class............................................... N/A N/A $ 9.46*
============ ============= ============
Institutional Class........................................ $ 1.00 $ 1.00 $ 9.47
============ ============= ============
Investment Class........................................... $ 1.00 $ 1.00 N/A
============ ============= ============
</TABLE>
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* Maximum offering price per share ($9.46 / 0.955 = $9.91)
Please see the accompanying notes to financial statements.
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8 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
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Statements of Operations -- For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
U. S. Treasury Cash Equity
Reserve Fund Reserve Fund Fund*
---------------- -------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income (Note 2)................................... $ 4,022,025 $ 5,053,635 $ 2,185
Dividend income (Note 2)................................... -- -- 74,996
----------- ------------ ------------
Total Investment Income.................................. 4,022,025 5,053,635 77,181
EXPENSES:
Investment advisory fees (Note 4).......................... 225,778 269,075 49,754
Administration fees (Note 4)............................... 112,889 134,538 7,463
Distribution fees (Note 4) ................................ 22,714 24,160 52
Accounting fees (Note 4)................................... 35,530 35,742 12,775
Custodian fees............................................. 21,100 27,656 2,100
Legal and Audit fees....................................... 90,330 88,936 17,640
Amortization of organization costs (Note 2)................ 12,760 12,760 540
Trustees' fees and expenses (Note 4)....................... 21,637 28,412 2,003
Transfer agent fees (Note 4)............................... 15,140 18,380 2,846
Registration and filing fees............................... 42,232 30,607 24,548
Other expenses............................................. 7,699 6,392 1,536
----------- ------------ ------------
Total Gross Expenses..................................... 607,809 676,658 121,257
Less: Adviser fee waiver (Note 4)...................... (188,149) (207,365) (49,754)
Administration fee waiver (Note 4)............... (68,757) (52,753) (4,975)
Expense reimbursement (Note 4)................... -- -- (4,172)
----------- ------------ ------------
Total Expenses....................................... 350,903 416,540 62,356
Less: Custody earnings credits (Note 2)................ (1,043) (1,169) (29)
----------- ------------ ------------
Net Expenses......................................... 349,860 415,371 62,327
----------- ------------ ------------
NET INVESTMENT INCOME........................................ 3,672,165 4,638,264 14,854
----------- ------------ ------------
REALIZED AND UNREALIZED LOSS
FROM INVESTMENTS (Note 2):
Net realized loss on investments sold...................... (2,422) (1,171) (82,192)
Net change in unrealized appreciation/(depreciation)
on investments........................................... -- -- (738,792)
----------- ------------ ------------
Net loss on investments.................................... (2,422) (1,171) (820,984)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................................. $ 3,669,743 $ 4,637,093 $ (806,130)
=========== ============ ============
</TABLE>
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* The Fund commenced operations on June 2, 1998.
Please see the accompanying notes to financial statements.
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<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 9
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Statements of Changes in Net Assets
<TABLE>
<CAPTION>
U.S. Treasury Reserve Fund
----------------------------------------------------
Year Ended Year Ended
September 30, 1998 September 30, 1997*
------------------ -------------------
<S> <C> <C>
NET ASSETS at beginning of period...................... $ 75,575,604 $ 50,000(a)
------------- --------------
Increase in Net Assets
resulting from operations:
Net investment income............................... 3,672,165 2,765,083
Net realized gain (loss) on investments sold........ (2,422) 958
------------- --------------
Net increase in net assets
resulting from operations....................... 3,669,743 2,766,041
------------- --------------
Distributions to shareholders from:
Net Investment Income:
Service Class..................................... (2,845,671) (2,714,132)
Institutional Class............................... (826,494) (50,951)
------------- --------------
Total distributions to shareholders............. (3,672,165) (2,765,083)
------------- --------------
Net increase (decrease) from capital
share transactions.................................. (18,627,871) 75,524,646
------------- --------------
Net increase (decrease) in net assets............. (18,630,293) 75,525,604
------------- --------------
NET ASSETS at end of period (including line A)........ $ 56,945,311 $ 75,575,604
============= ==============
(A) Undistributed Net Investment Income................ $ -- $ --
============= ==============
Capital Stock Dollar Amounts and Share Activity:
Service Class
Net proceeds from sale of shares.................. $ 164,339,426 $ 214,827,431
Issued to shareholders in reinvestment of
dividends........................................ 12,238 2,468
Cost of shares repurchased........................ (226,736,677) (141,299,196)
------------- --------------
Net change resulting from share transactions...... $ (62,385,013) $ 73,530,703
============= ==============
Institutional Class
Net proceeds from sale of shares.................. $ 78,846,714 $ 1,943,095
Issued to shareholders in reinvestment of
dividends........................................ 103,772 50,848
Cost of shares repurchased........................ (35,193,354) --
------------- --------------
Net change resulting from share transactions...... $ 43,757,132 $ 1,993,943
============= ==============
Investment Class**
Net proceeds from sale of shares.................. $ 10 N/A
------------- --------------
Net change resulting from share transactions...... $ 10 N/A
============= ==============
</TABLE>
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* The Fund commenced operations on October 1, 1996.
** The Investment Share Class was seeded on April 20, 1998.
(a) Original seed money.
Please see the accompanying notes to financial statements.
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10 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
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<TABLE>
<CAPTION>
Cash Reserve Fund
---------------------------------------------------
Year Ended Period Ended
September 30, 1998 September 30, 1997*
------------------ -------------------
<S> <C> <C>
NET ASSETS at beginning of period...................... $ 58,007,987 $ 50,000(a)
------------- --------------
Increase in Net Assets
resulting from operations:
Net investment income............................... 4,638,264 1,971,470
Net realized loss on investments sold............... (1,171) (390)
------------- --------------
Net increase in net assets
resulting from operations....................... 4,637,093 1,971,080
------------- --------------
Distributions to shareholders from:
Net Investment Income:
Service Class .................................... (2,395,822) (1,971,126)
Institutional Class............................... (2,242,442) (344)
------------- --------------
Total distributions to shareholders............. (4,638,264) (1,971,470)
------------- --------------
Net increase (decrease) from capital
share transactions ................................. 88,114,657 57,958,377
------------- --------------
Net increase (decrease) in net assets............. 88,113,486 57,957,987
------------- --------------
NET ASSETS at end of period (including line A)......... $ 146,121,473 $ 58,007,987
============= ==============
(A) Undistributed Net Investment Income................ $ -- $ --
============= ==============
Capital Stock Dollar Amounts and Share Activity:
Service Class
Net proceeds from sale of shares.................. $ 181,368,693 $ 185,569,980
Issued to shareholders in reinvestment of
dividends........................................ 6,104 1,858
Cost of shares repurchased........................ (238,833,768) (127,673,813)
------------- --------------
Net change resulting from share transactions...... $ (57,458,971) $ 57,898,025
============= ==============
Institutional Class
Net proceeds from sale of shares.................. $ 268,373,189 $ 60,000
Issued to shareholders in reinvestment of
dividends........................................ 27,028 352
Cost of shares repurchased........................ (122,826,599) --
------------- --------------
Net change resulting from share transactions...... $ 145,573,618 $ 60,352
============= ==============
Investment Class**
Net proceeds from sale of shares.................. $ 10 N/A
------------- --------------
Net change resulting from share transactions...... $ 10 N/A
============= ==============
</TABLE>
- -----------------------------------------------------------------
* The Fund commenced operations on January 13, 1997.
** The Investment Share Class was seeded on April 20, 1998.
(a) Original seed money.
Please see the accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 11
- --------------------------------------------------------------------------------
Equity Fund
-------------------
Period Ended
September 30, 1998*
-------------------
NET ASSETS at beginning of period...................... $ --
--------------
Increase in Net Assets
resulting from operations:
Net investment income............................... 14,854
Net realized loss on investments sold............... (82,192)
Net change in unrealized appreciation/(depreciation)
on investments.................................... (738,792)
--------------
Net decrease in net assets
resulting from operations....................... (806,130)
--------------
Distributions to shareholders from:
Net Investment Income:
Retail Class...................................... --
Institutional Class............................... --
--------------
Total distributions to shareholders............. --
--------------
Net increase from capital
share transactions ................................. 15,157,929
--------------
Net increase in net assets........................ 14,351,799
--------------
NET ASSETS at end of period (including line A)......... $ 14,351,799
=============
(A) Undistributed Net Investment Income................ $ 14,854
=============
Capital Stock Dollar Activity:
Retail Class
Net proceeds from sale of shares.................. $ 132,919
Issued to shareholders in reinvestment of
dividends........................................ --
Cost of shares repurchased........................ --
--------------
Net change resulting from share transactions...... $ 132,919
=============
Institutional Class
Net proceeds from sale of shares.................. $ 15,025,010
Issued to shareholders in reinvestment of
dividends........................................ --
Cost of shares repurchased........................ --
--------------
Net change resulting from share transactions...... $ 15,025,010
=============
Capital Stock Share Activity:
Retail Class
Shares sold....................................... 13,323
Shares issued in reinvestment of dividends........ --
Shares repurchased................................ --
--------------
Net change resulting from share transactions...... 13,323
=============
Institutional Class
Shares sold....................................... 1,502,536
Shares issued in reinvestment of dividends........ --
Shares repurchased................................ --
--------------
Net change resulting from share transactions...... 1,502,536
=============
- -------------------------------------------------------------
* The Fund commenced operations on June 2, 1998.
Please see the accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE>
12 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
- --------------------------------------------------------------------------------
Financial Highlights -- For a share outstanding throughout the period
<TABLE>
<CAPTION>
U. S. Treasury Reserve Fund
---------------------------------------------------------------
Year Ended Year Ended
September 30, 1998 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.................... 0.048 0.049 0.049 0.050
Net realized and unrealized
gain (loss) on investments............. --(b) --(b) --(b) --(b)
-------------- ------------- ---------- -------------
Total from Investment Operations..... 0.048 0.049 0.049 0.050
Less Distributions:
Dividends from net investment income..... (0.048) (0.049) (0.049) (0.050)
-------------- ------------- ---------- -------------
Net Asset Value, end of period............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
============== ============= ========== =============
Total Return............................... 4.88% 4.97% 5.04% 5.08%
Ratios/Supplemental Data:
Net Assets, end of period (000s)............ $ 11,196 $ 45,750 $ 73,581 $ 1,995
Ratios to average net assets:
Net investment income* .................. 4.87% 4.91% 4.93%(c) 4.93%(c)
Operating expenses*...................... 0.47% 0.43% 0.35%(c) 0.35%(c)
Operating expenses excluding
reimbursement, waiver and
custody earnings credits............... 0.82% 0.78% 1.36%(c) 0.86%(c)
Net investment income excluding
reimbursements, waiver and
custody earnings credits............... 4.52% 4.56% 3.92%(c) 4.42%(c)
</TABLE>
- -----------------------------------------------------------------
* 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, 1998.
+ The Investment Share Class was seeded on April 20, 1998. At September 30,
1998 no investment activity has occurred.
(a) The Fund commenced operations on October 1, 1996.
(b) Amounts were less than $0.001 per share.
(c) Annualized
Please see the accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 13
- --------------------------------------------------------------------------------
Financial Highlights -- For a share outstanding throughout the period
<TABLE>
<CAPTION>
Cash Reserve Fund
-------------------------------------------------------------------
Year Ended Period Ended
September 30, 1998 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.................... 0.051 0.052 0.037 0.038
Net realized and unrealized
gain (loss) on investments............. --(b) --(b) --(b) --(b)
-------------- ------------- ---------- ------------
Total from Investment Operations..... 0.051 0.052 0.037 0.038
============== ============= ========== ============
Less Distributions:
Dividends from net investment income..... (0.051) (0.052) (0.037) (0.038)
Net Asset Value, end of period............. $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return............................... 5.19% 5.29% 3.78%(d) 3.82%(d)
Ratios/Supplemental Data:
Net Assets, end of period (000s)........... $ 487 $ 145,634 $ 57,947 $ 61
Ratios to average net assets:
Net investment income*................... 5.15% 5.20% 5.23%(c) 5.23%(c)
Operating expenses*...................... 0.49% 0.44% 0.35%(c) 0.35%(c)
Operating expenses excluding
reimbursement, waiver and
custody earnings credits............... 0.78% 0.73% 1.43%(c) 0.93%(c)
Net investment income excluding
reimbursements, waiver and
custody earnings credits............... 4.86% 4.91% 4.15%(c) 4.65%(c)
</TABLE>
- -----------------------------------------------------------------
* 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, 1998.
+ The Investment Share Class was seeded on April 20, 1998. At September 30,
1998 no investment activity has occurred.
(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.
- --------------------------------------------------------------------------------
<PAGE>
14 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
- --------------------------------------------------------------------------------
Financial Highlights -- For a share outstanding throughout the period
<TABLE>
<CAPTION>
Equity Fund
--------------------------------------------
Period Ended
September 30, 1998(a)
--------------------------------------------
Retail Institutional
Class Class
--------------- ----------------
<S> <C> <C>
Net Asset Value, beginning of period.......... $ 10.00 $ 10.00
--------------- ----------------
Income from Investment Operations:
Net investment income...................... 0.00 0.01
Net realized and unrealized
gain (loss) on investments............... (0.54) (0.54)
--------------- ----------------
Total from Investment Operations....... (0.54) (0.53)
Less Distributions:
Dividends from net investment income....... -- --
--------------- ----------------
Net Asset Value, end of period................ $ 9.46 $ 9.47
=============== ================
Total Return.................................. (5.40)%(c) (5.30)%(c)
Ratios/Supplemental Data:
Net Assets, end of period (000s).............. $ 126 $ 14,226
Ratios to average net assets:
Net investment income*..................... 0.05%(b) 0.30%(b)
Operating expenses*........................ 1.50%(b) 1.25%(b)
Operating expenses excluding
reimbursement, waiver and
custody earnings credits................. 2.69%(b) 2.44%(b)
Net investment income excluding
reimbursements, waiver and
custody earnings credits................. (1.13)%(b) (0.88)%(b)
Portfolio Turnover Rate.................... 47% 47%
</TABLE>
- --------------------------------------------------------------
* 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, 1998.
(a) The Fund commenced operations on June 2, 1998.
(b) Annualized
(c) Not annualized
Please see the accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 15
- --------------------------------------------------------------------------------
Notes to Financial Statements -- September 30, 1998
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 consists of the U.S. Treasury Reserve
Fund, Cash Reserve Fund and the Equity Fund (individually a "Fund", collectively
the "Funds"). Between the date of organization and commencement of operations,
the U.S. Treasury Reserve and Cash Reserve Funds had no operations other than
the initial sale of $100,000 of shares to the distributor (original seed money
for the U.S. Treasury Reserve Fund and the Cash Reserve Fund). The Equity Fund
commenced operations on June 2, 1998.
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. The
investment objective of the Equity Fund is to provide long-term capital growth
and income by investing primarily in common stocks.
From time to time, for temporary defensive or emergency purposes, the Equity
Fund may invest a portion of its assets in cash, cash equivalents and debt
securities when First American Capital Management, Inc., (the "Adviser" or
"First American") deems such a position advisable in light of economic or market
conditions. The Equity Fund may invest a portion of its assets in foreign
securities and in equity securities of smaller companies, engage in short
selling, invest in futures and options and invest in convertible debt or
preferred securities. In addition, the Equity Fund may invest to a limited
extent in illiquid or restricted securities.
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: Money market 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. Investments in equity securities which are traded on a recognized
stock exchange or for which price quotations are available will normally be
valued on the basis of market quotations furnished by a pricing service which
has been approved by The Board of Trustees.
Securities Transactions and Related Income: Security transactions are accounted
for on trade date for the U.S. Treasury Reserve Fund and Cash Reserve Fund.
Security transactions for the Equity Fund, are accounted for on trade date +1.
Interest income is recorded on the accrual basis and includes, where applicable,
the amortization of premium or accretion of discount. Dividend income is
recorded on ex-dividend date. Gains or losses realized on the sale of securities
are determined by using the specific identification cost method.
Distributions to Shareholders: Dividends from net investment income are declared
daily and paid monthly for the U.S. Treasury Reserve Fund and Cash Reserve Fund.
The Equity Fund declares dividends from net investment income, if any, quarterly
and pays such amounts quarterly. Distributable net realized capital gains for
the Funds, if any, will be declared and distributed at least annually.
Income distributions and capital gain distributions 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
income and gains on various investment securities held by the Funds, timing
differences and differing characterization of distributions made by each Fund as
a whole.
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 and Offering Costs: Costs incurred by the Trust in connection with
its organization and offering of shares have been deferred and are being
amortized using the straight-line method over a period of five years and one
year period, respectively, 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 Fund 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.
- --------------------------------------------------------------------------------
<PAGE>
16 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements -- September 30, 1998 (continued)
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 based on relative average net
assets.
In addition, expenses of a Fund not directly attributable to the operations of a
particular class of shares of the Fund are allocated to each class based on
relative average net assets. 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 its custody fees and expenses for the amounts earned on such
uninvested cash balances. For the year ended September 30, 1998, custodian fees
were reduced by $1,043, $1,169 and $29 for the U.S. Treasury Reserve Fund, Cash
Reserve Fund and Equity Fund, respectively.
3. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration 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 four classes of shares - the Institutional Class, Service Class,
Retail Class and the Investment Class. Each share represents an equal
proportionate interest in the respective Fund, bears the same fees and expenses
(except the Service Class and Retail Class are subject to a Rule 12b-1 fee and
the Investment Class is 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. As of September
30, 1998, First American Trust Company, an affiliate of First American, held 69%
of the U.S. Treasury Reserve Fund, 99% of the Cash Reserve Fund and 99% of the
Equity Fund. Trustmark National Bank held 19% of the U.S. Treasury Reserve Fund.
If a large redemption occurred, the Funds could be impacted because of the
concentration of the Funds' outstanding shares amongst a limited number of
shareholders.
4. INVESTMENT ADVISORY, ADMINISTRATION, SHAREHOLDER SERVICES, DISTRIBUTION AND
OTHER FEES
Investment advisory services are provided to the Funds by 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 0.30%
of the average daily net assets of the U.S. Treasury Reserve Fund and Cash
Reserve Fund and 1.00% of the average daily net assets of the Equity Fund. For
the Equity Fund, First American has entered into an agreement with Haugen Custom
Financial Systems (the "Sub-Adviser"), a registered investment adviser, under
which First American utilizes a quantitative model developed by the Sub-Adviser.
The Adviser pays the Sub-Adviser a monthly fee at an annual rate of 0.065% of
the first $100 million of the Equity Fund's average daily net assets, 0.125% of
the next $100 million of the average daily net assets and 0.03% of the average
daily net assets in excess of $200 million. The Equity Fund is not responsible
for payment of the Sub-Adviser's fee.
The Trust and First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly-owned subsidiary of First Data Corporation, are parties to an
agreement under which Investor Services Group provides administration services
for a fee calculated daily and paid monthly at the annual rate of 0.15% of the
average daily net assets of each Fund. 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
and Investment Class of the U.S. Treasury Reserve Fund and Cash Reserve Fund and
the Retail Class of the Equity Fund. Under the Plan, each Fund pays the
Distributor a fee not to exceed 0.25%, on an annual basis, of its average daily
net assets 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. There were no 12b-1 fees for the period from October 1, 1997
through April 30, 1998 for the U.S. Treasury Reserve Fund or Cash Reserve Fund.
Effective May 1, 1998, the U.S. Treasury Reserve Fund and the Cash Reserve Fund
began incurring 12b-1 fees. The Plan may be terminated at any time without the
payment of any penalties, by the vote of the majority of the Trustees, or the
vote of the holders of a majority of the outstanding shares.
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 and Investment
Class of the U.S. Treasury Reserve Fund and the Cash Reserve Fund, such as
maintaining shareholder accounts and records. The Service Class may pay
shareholder servicing fees to Service Organizations in amounts up to 0.25% of
its average daily net assets of the Service Class and 0.75% of its average daily
net assets of the Investment Class owned by shareholders serviced by the Service
Organizations. The Equity Fund may pay shareholder servicing fees to Service
Organizations in amounts up to 0.25% of the average daily net assets of the
Retail Class owned by shareholders serviced by the Service Organizations. As of
September 30, 1998, there were no arrangements with Service Organizations in
place.
<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] 17
- --------------------------------------------------------------------------------
Notes to Financial Statements -- September 30, 1998 (continued)
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 an annual retainer of
$1,000, a fee of $1,000 for each Board of Trustees meeting attended, $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 or performance ratios. Information regarding these
transactions are as follows for the year ended September 30, 1998:
U.S. Treasury Cash Reserve Equity
Reserve Fund Fund Fund
------------- ------------ --------
First American:
Advisory fees waived $ 188,149 $ 207,365 $ 49,754
Additional fees reimbursed -- -- 4,172
Investor Services Group:
Fees waived $ 68,757 $ 52,753 $ 4,975
---------- --------- --------
$ 256,906 $ 260,118 $ 58,901
========== ========= ========
Pacific American Securities LLC, an affiliate to First American, provided
brokerage services to the Equity Fund. For the period ended September 30, 1998,
the Equity Fund incurred $17,904 in brokerage commissions with Pacific American
Securities LLC.
5. SECURITY TRANSACTIONS
For the period from commencement of the Equity Fund's operations on June 2, 1998
through September 30, 1998, aggregate cost of purchases and proceeds from sales
of securities, other than short-term investments, were as follows:
Purchases Sales
------------ -----------
U.S Government Securities $ -- $ --
Other Investment Securities 20,268,922 5,298,330
At September 30, 1998, the aggregate gross unrealized appreciation
(depreciation) and net unrealized appreciation (depreciation) for all securities
as computed on a federal income tax basis for the Equity Fund were as follows:
Appreciation............. $ 838,177
Depreciation............. (1,576,969)
-----------
Net...................... (738,792)
===========
- --------------------------------------------------------------------------------
<PAGE>
18 [LOGO OF FIRST CHOICE FUNDS APPEARS HERE] First Choice Funds Trust
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders
of First Choice Funds Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the U.S. Treasury Reserve Fund, the
Cash Reserve Fund and the Equity Fund (each a series of the First Choice Funds
Trust, hereafter referred to as the "Trust") at September 30, 1998, the results
of each of their operations, the changes in each of their net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
First Choice Funds Trust [LOGO OF FIRST CHOICE FUNDS APPEARS HERE]
- --------------------------------------------------------------------------------
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
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
