<PAGE>
As filed with the Securities and Exchange Commission on January 31, 2000
Securities Act File No. 33-7085
Investment Company Act File No. 811-7681
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
Post-Effective Amendment No. 7 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 8 X
First Choice Funds Trust
(Exact Name of Registrant as Specified in Charter)
4400 Computer Drive
Westborough, Massachusetts 01581
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 573-1224
Name and Address of Agent for Service: Copies to:
Jylanne Dunne, Esq. Steven R. Howard, Esq.
PFPC Inc. Paul, Weiss, Rifkind,
One Exchange Place Wharton & Garrison
Boston, Massachusetts 02109 1285 Avenue of the Americas
New York, NY 10019-6064
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
================================================================================
FIRST CHOICE U.S. TREASURY RESERVE FUND
FIRST CHOICE CASH RESERVE FUND
each a series of
FIRST CHOICE FUNDS TRUST
c/o PFPC, Inc.
4400 Computer Drive
P.O. Box 5176
Westborough, MA 01581-5176
www.firstchoicefunds.com
General and Account Information:
1-888-FIRST16
(1-888-347-7816)
January 31, 2000
An investment in the Funds is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
================================================================================
<PAGE>
Table of Contents
Risk/Return Summary
- --------------------------------------------------------------------------------
Carefully review this # Objective, Principal Investment
important section, which Strategy and Principal Risks
summarizes each Fund's
investments, risks, past
performance and fees.
Investment Objective, Strategies and Risks
- -------------------------------------------------------------------------------
Review this section for # Risk Considerations
information on investment
strategies and their risks.
Fund Management
- -------------------------------------------------------------------------------
Review this section for # The Investment Adviser
details on the people and # The Distributor and
organizations who oversee Administrator
the Fund.
Shareholder Information
- --------------------------------------------------------------------------------
Review this section for # Pricing of Fund Shares
details on how shares are # Purchasing and Adding to Your
valued, how to purchase, Shares
sell and exchange shares, # Selling Your Shares
related charges and Distribution Arrangements/Sales
payments of dividends and Charge
distributions. # Exchanging Your Shares
Dividends, Distributions and
Taxes
Financial Highlights
- --------------------------------------------------------------------------------
Back Cover
- --------------------------------------------------------------------------------
# Where to learn more about these Funds
<PAGE>
Risk/Return Summary
The following is a summary of certain key information about the First
Choice U.S. Treasury Reserve Fund (Treasury Reserve Fund) and the First Choice
Cash Reserve Fund (Cash Reserve Fund). You will find additional information
about the Funds, including a detailed description of the risks of an investment
in the Funds, after this summary.
Investment The Treasury Reserve Fund seeks to provide investors with as
Objectives 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.
The Cash Reserve Fund seeks to provide investors with
current income, liquidity and the maintenance of a stable
$1.00 net asset value per share.
Principal The Funds are "money market" funds that seek to maintain a
Investment stable net asset value of $1.00 per share. Each Fund
Strategies invests primarily in high quality, U.S. dollar-denominated
short-term obligations which present minimal credit risks.
Portfolio investments of the Fund are valued based on the
amortized cost valuation method pursuant to Rule 2a-7 under
the Investment Company Act of 1940. Obligations in which the
Fund invests generally have remaining maturities of 397 days
or less, although upon satisfying certain conditions of Rule
2a-7, the Fund may, to the extent otherwise permissible,
invest in instruments subject to repurchase agreements and
certain variable and floating rate obligations that bear
longer final maturities. The dollar-weighted average
portfolio maturity of the Fund will not exceed 90 days.
U.S. Treasury Reserve Fund invests exclusively in direct
short-term obligations of the U.S. Treasury, which are
backed by the full faith and credit of the United States
Government.
Cash Reserve Fund invests in high quality, U.S. dollar-
denominated short-term obligations which are determined by
the Adviser to present minimal credit risks. The Cash
Reserve Fund will concentrate its investments (25% or more)
in obligations issued by the banking industry.
Principal Risks While all investments in mutual funds involve risk,
investing in money market portfolios like the Funds is
generally less risky than investing in other types of funds.
This is because the Funds invest only in high-quality short
term securities. The Funds may not achieve as high a level
of current income as other funds that do not limit their
investments to the high quality securities in which the
Funds invest. Investors in the Funds should also be aware of
the following risks:
Interest Rate Risk Interest Rate Risk is the chance that the value of the bonds
the
3
<PAGE>
(Both Funds) Funds hold will decline due to rising interest rates. When
interest rates rise, the price of most bonds goes down. The
price of a bond is also affected by its maturity. Bonds
with longer maturities generally have greater sensitivity
to changes in interest rates.
Credit Risk Credit risk is the chance that a bond issuer will fail to
(Cash Reserve Fund) repay interest and principal in a timely manner, reducing
the Fund's returns. Credit risk is somewhat minimized by
the Fund's policies of investing primarily in obligations
rated in the highest short-term categories by two
nationally recognized statistical rating organizations, or
rated in the highest short-term category by one rating
organization if the securities are rated only by one rating
organization; or unrated securities that are determined to
be of comparable quality by the Adviser.
Prepayment Risk The Cash Reserve Fund's investments in mortgage-related
(Cash Reserve Fund) securities are subject to the risk that the principal
amount of the underlying mortgage may be repaid prior to
the bond's maturity date. Such repayments are common when
interest rates decline. When such a repayment occurs, no
additional interest will be paid on the investment.
Prepayment exposes the Cash Reserve Fund to lower return
upon subsequent reinvestment of the principal.
Income Risk Income risk is the chance that falling interest rates
(Both Funds) will cause the Funds' income to decline. Income risk is
generally higher for short-term obligations relative to
long term obligations.
Concentration Risk The Cash Reserve Fund's policy of concentrating in the
banking (Cash Reserve Fund) industry could increase the
Fund's exposure to economic or regulatory developments
relating to or affecting banks. Banks are subject to
extensive governmental regulation which may limit both the
amounts and types of loans and other financial commitments
they can make and the interest rates and fees they can
charge. The financial condition of banks is largely
dependent on the availability and cost of capital funds,
and can fluctuate significantly when interest rates change.
In addition, general economic conditions may affect the
financial condition of banks.
Other important things for you to note:
. Although the Funds seek to preserve the value of your
investment at $1.00 per share, it is possible to lose
money by investing in the Funds.
. An investment in the Funds is not a deposit in a bank
and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Who may want
to invest? Consider investing in the Funds if you:
. are seeking preservation of capital
4
<PAGE>
. have a low risk tolerance
. are investing short-term reserves
These Funds will not be appropriate if you:
. are seeking high total returns
. investing for retirement
. pursuing a long-term goal
U.S. TREASURY RESERVE FUND
Performance Information
The Risk/Return Summary of the Fund includes [INSERT BAR CHART]
tables showing the Fund's annual returns
and average annual returns. The bar chart Year-by-Year Total Returns as
and table provide an indication of the of 12/31/
historical risk for the Fund by showing:
Service Institutional
------- -------------
. changes in the Fund's 1996 1.21 1.25
performance from year to year 1997 5.04 5.05
since the Fund's inception; and 1998 4.68 4.84
1999 4.21 4.47
. the Fund's average annual return
for one year and since its Past performance is not
inception period. necessarily an indication of how
the Fund will perform in the
future.
Best Quarter: 3rd Q 1997 1.27%
Worst Quarter: 1st and
2nd Q 1999 1.04%
If fee waivers or expense reimbursements had
not been reflected in both the chart and the
table, the Fund's performance would have
been lower.
Both the chart and table assume reinvestment
of dividends.
You may obtain current yield information
for any Fund by calling 1-888-FIRST16
(1-888-347-7816). The Fund's yield appears
in the Wall Street Journal each Thursday.
5
<PAGE>
Performance Table
Average Annual Total Returns (for the periods ending December 31, 1999)
<TABLE>
<CAPTION>
Treasury Reserve Fund*
---------------------
Inception Date Past Year Since Inception
-------------- --------- ---------------
<S> <C> <C> <C>
Investment Class(1) April 20, 1998 N/A N/A
Institutional Class October 1, 1996 4.47% 4.81%
Service Class October 1, 1996 4.21% 4.67%
</TABLE>
* As of September 30, 1999 the 7-day yields for the Institutional Class and
Service Class of the Treasury Reserve Fund were 4.86% and 4.61%,
respectively.
1. Performance information is not available for the Investment Class since it
has not been active for a full year.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Treasury Reserve Fund
---------------------
Investment Institutional
Service Shares Shares Shares
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None None None
Maximum deferred sales charge (load) None None None
Redemption Fee/1/ (as a percentage of amount
redeemed) None None None
Annual Fund Operating Expenses (expenses are
deducted from Fund assets)
Management fees 0.30% 0.30% 0.30%
Administrative Services fee .15% .15% .15%
Distribution (12b-1) fee .25% .25% None
Service Organization fee .25% .75% .25%
Other Operating Expenses/2/ .24% .49% .24%
Total Fund Operating expenses 1.19% 1.94% .94%
Fee Waivers/3/,/4/,/5/ .30% .30% .30%
Net Expenses/6/ .89% 1.64% .64%
</TABLE>
/1/ Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
/2/ Individual Retirement Accounts are subject to an establishment fee ($7.50),
annual maintenance and custody fee ($12) and termination fee ($12).
/3/ The Adviser is contractually waiving its Management fee class of shares.
/4/ The Administrator is contractually limiting its Administrative Services fee
to .05% for each class of shares.
6
<PAGE>
/5/ The Service Organization fee is being contractually limited to .25% for the
Service and Institutional class of shares and .75% for the Investment class
of shares.
/6/ The contractual expense limitations are in effect through September 30,
2000.
Example
<TABLE>
<CAPTION>
Treasury Reserve Fund
---------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Use the table to compare fees and expenses
with those of other Funds. It illustrates the
amount of fees and expenses you would Investment $91 $284 $493 $1,096
pay, assuming the following: Class
$40 $125 $219 $493
. $10,000 investment Institutional
. 5% annual return Class $65 $205 $357 $798
. no changes in the Fund's operating
expenses except the expiration of Service Class
the current contractual fee waiver
on September 30, 2000.
. reinvestment of dividends and
distributions
</TABLE>
Because this example is hypothetical and
for comparison only, your actual costs
will be different.
7
<PAGE>
CASH RESERVE FUND
Performance Information
The Risk/Return Summary of the Fund includes [INSERT BAR CHART]
tables showing the Fund's annual returns
and average annual returns. The bar chart Year-by-Year Total Returns as of
and table provide an indication of the 12/31
historical risk for the Fund by showing:
Service Institutional
------- -------------
. changes in the Fund's 1997 5.13 5.17
performance from year to 1998 5.06 5.22
year since the Fund's 1999 4.68 4.95
inception; and
Past performance is not
. the Fund's average annual necessarily an indication of
return for one year and how the Fund will perform in the
since its inception period. future.
Service:
Best Quarter: 3rd Q 1997 1.34%
Worst Quarter: 2nd Q 1999 1.07%
Institutional:
Best Quarter: 3rd Q 1997 1.35%
Worst Quarter: 2nd Q 1999 1.14%
If fee waivers or expense reimbursements
had not been reflected in the chart,
the Fund's performance would have been
lower.
You may obtain current yield information
for any Fund by calling 1-888-FIRST16
(1-888-347-7816). The Fund's yield
appears in the Wall Street Journal each
Thursday.
8
<PAGE>
Performance Table
Average Annual Total Returns (for the year periods December 31, 1999)
Cash Reserve Fund*
-----------------
Inception Date Past Year Since Inception
-------------- --------- ---------------
Investment Class(1) April 20, 1998 N/A N/A
Institutional Class October 1, 1996 4.95% 5.18%
Service Class October 1, 1996 4.68% 5.02%
* As of September 30, 1999 the 7-day yields for the Institutional Class and
Service Class of the Cash Reserve Fund were 5.32% and 5.05%, respectively.
1. Performance information is not available for the Investment Class since it
has not been active for a full year.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
Cash Reserve Fund
-----------------
Investment Institutional
Service Shares Shares Shares
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum sales charge (load) imposed on purchases as a
percentage of offering price) None None None
Maximum deferred sales charge (load) None None None
Redemption Fee /1/ (as a percentage of amount redeemed) None None None
Annual Fund Operating Expenses (expenses are deducted
from Fund assets)
Management fees 0.30% 0.30% 0.30%
Administrative Services fee .15% .15% .15%
Distribution (12b-1) fee .25% .25% None
Service Organization fee .25% .75% .25%
Other Operating Expenses /2/ .26% .51% .26%
Total Fund Operating expenses 1.21% 1.96% .96%
Fee Waivers /3/,/4/ .30% .30% .30%
Net Expense /5/ .89% 1.64% .64%
</TABLE>
/1/ Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
/2/ Individual Retirement Accounts are subject to an establishment fee ($7.50),
annual maintenance and custody fee ($12) and termination fee ($12).
/3/ The Advisor is contractually waiving its Management fee.
/4/ The Administrator is contractually limiting its Administrative Services fee
to .05% for each class of shares.
/5/ The contractual expense limitations are in effect through September 30,
2000.
9
<PAGE>
Example
<TABLE>
<CAPTION>
Cash Reserve Fund
-----------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Use the table to compare fees and expenses with
those of other Funds. It illustrates the amount of
fees and expenses you would pay, assuming the Investment Class $93 $290 $504 $1,120
following:
Institutional Class $42 $132 $230 $518
. $10,000 investment
. 5% annual return Service Class $67 $211 $368 $822
. no changes in the Fund's operating
expenses except the expiration of the
current contractual fee waiver on
September 30, 2000.
. reinvestment of dividends and distributions
</TABLE>
Because this example is hypothetical and for comparison
only, your actual costs will be different.
10
<PAGE>
Investment Objectives, Strategies and Risk
This section of the prospectus provides a more complete description of the
principal investment objectives, policies, and principal risks of the Funds.
Additional descriptions of the Funds' risks, strategies, and investments, as
well as other strategies and investments not described below, may be found in
the Funds' SAI. Of course, there can be no assurance that any Fund will achieve
its investment objective.
Investment Objectives, Policies and Risks
Investment Objectives
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 maintenance of a stable $1.00 net
asset value per share. The Cash Reserve Fund seeks to provide investors with
current income, liquidity and the maintenance of a stable $1.00 net asset value
per share.
Investment Policies and Strategy
As money market funds, both Funds must meet the requirements of SEC Rule
2a-7. This Rule imposes strict requirements on the investment quality, maturity,
and diversification of the Fund's investments. Under Rule 2a-7, both Funds'
investments must have a remaining maturity of no more than 397 days and its
investments must maintain an average weighted maturity that does not exceed 90
days.
Both of the Funds will attempt to increase their yields by trading to take
advantage of short-term market variations. The Funds' Adviser evaluates
investments based on credit analysis and the interest rate outlook.
U.S. Treasury Reserve Fund
--------------------------
Ticker Symbol: FTSXX
The Treasury Reserve Fund invests exclusively in direct short-term
obligations of the United States Treasury, which are backed by the full faith
and credit of the United States Government. The U.S. Treasury Reserve Fund may
also purchase securities on a "when-issued" basis and purchase or sell them on a
"forward commitment" basis.
Cash Reserve Fund
-----------------
Ticker Symbol: FSEXX
The Cash Reserve Fund invests in commercial paper, asset-backed securities,
obligations of financial institutions and other high-quality money market
instruments that mature in thirteen months or less including, but limited to,
the following:
. U.S. Government Obligations
. Commercial Paper
11
<PAGE>
. Domestic and Foreign Bank Obligations
. Corporate Debt Securities
. When Issued Securities
. Repurchase Agreements
. Reverse Repurchase Agreements
. STRIPS and Zero Coupon Securities
. Other Mutual Funds
. Variable Rate Master Demand Obligations
. Other Mutual Funds
Descriptions of these and other securities which the Funds may purchase are
included in the Statement of Additional Information. The Cash Reserve Fund will
only buy securities with the following credit qualities:
. rated in the highest short-term categories by two rating organizations,
such as "A-1" by S&P and "P-1" by Moody's at the time of purchase;
. rated in the highest short-term category by one rating organization if
the securities are rated only by one rating organization; or
. unrated securities that are determined to be of comparable quality by
the Adviser pursuant to guidelines approved by the Board and subject to
ratification by the Board.
The Cash Reserve Fund will concentrate its investments in obligations
issued by the banking industry. Concentration in this context means the
investment of more than 25% of the Fund's assets in such industry. However, for
temporary, defensive purposes during periods when the Adviser believes that
maintaining this concentration may be inconsistent with the best interest of
shareholders, the Fund will not maintain this concentration. The Cash Reserve
Fund's policy of concentration in the banking industry increases its exposure to
market conditions prevailing in that industry.
Risk Considerations
General Risk Factors: All Money Market Funds
The Funds' primary risks are interest rate risk and credit risk. Because
the Funds invest in short-term securities, a decline in interest rates will
affect the Funds' yields as these securities mature or are sold and the Funds
purchase new short-term securities with lower yields. Generally, an increase in
interest rates causes the value of a debt instrument to decrease. The change in
value for shorter-term securities is usually smaller than for securities with
longer maturities. Because the Funds invest in securities with short maturities
and seek to maintain a stable net asset value of $1.00 per share, it is
possible, that an increase in interest rates would change the value of your
investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Funds invest in highly-rated
securities to minimize credit risk. Under Rule 2a-7 of the Investment Company
Act of 1940, as amended, 95% of a money market fund's holdings must be rated in
the highest credit category (e.g., A-1 or A-1+) and the remaining 5% must be
rated no lower than the second highest credit category.
12
<PAGE>
Specific Risk Factors: Cash Reserve Fund
The Cash Reserve Fund's investments in U.S. Dollar-denominated obligations
(or credit and liquidity enhancements) of foreign banks, foreign branches of
U.S. banks, U.S. branches of foreign banks, and commercial paper of foreign
companies may be subject to foreign risk. Foreign securities issuers are usually
not subject to the same degree of regulation as U.S. issuers. Reporting,
accounting, and auditing standards of foreign countries differ, significantly in
some cases, from U.S. standards. Foreign risk includes nationalization,
expropriation or commandeering taxation, political changes or diplomatic
developments that could adversely affect a Fund's investments.
To the extent that the Fund concentrates in the banking industry, both
domestic and foreign, it may be impacted by economic and other factors affecting
that industry unlike other mutual funds which do not concentrate in bank
obligations.
Fund Management
The Investment Adviser
First American Capital Management, Inc. ("First American"), a wholly-owned
subsidiary of The First American Financial Corporation, has agreed to provide
investment advisory services to the Funds pursuant to an advisory agreement with
the Trust (the "Advisory Agreement"). Subject to such policies as the Trust's
Board of Trustees may determine, First American makes investment decisions for
the Funds.
For these advisory services, the Funds paid as follows:
<TABLE>
<CAPTION>
Percentage of average net
assets for the year ended
9/30/99*
<S> <C>
Cash Reserve Fund 0.25%
Treasury Reserve Fund 0.18%
</TABLE>
* If the Adviser had not waived fees, they would have been: Cash Reserve Fund
0.30% and Treasury Reserve Fund 0.30%.
Code of Ethics
- --------------
The Code of Ethics of the Adviser and the Funds prohibits all affiliated
personnel from engaging in personal investment activities which compete with or
attempt to take advantage of a Fund's planned portfolio transactions. Both
organizations maintain careful monitoring with the Code of Ethics.
The Distributor and Administrator
Effective December 1, 1999, First Data Investor Services Group, Inc.
("Investor Services Group"), the Fund's administrator and transfer agent, became
an affiliate of PNC Bank Corp. and changed its name to PFPC Inc. ("PFPC"). On
the same date, Provident Distributors, Inc. replaced First Data Distributors,
Inc. as the Fund's distributor. Its principal
13
<PAGE>
office is at Four Falls Corporate Center, 6th Floor, West Conshokoken, PA 19428-
2961. The Distributor will receive orders for, sell, and distribute shares of
the Fund. The Distributor also serves as distributor of other mutual funds.
The Funds have entered into an Administrative Services Contract with PFPC
pursuant to which the Administrator provides certain management and
administrative services necessary for the Funds' operations. For these services,
the Administrator receives from each Fund a fee, payable monthly, at the annual
rate of 0.15% of each Fund's average daily net assets. PFPC receives a separate
fee for providing fund accounting services to the Funds pursuant to the
Administration Agreement.
Shareholder Information
Pricing of Fund Shares
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments
and other assets, subtracting its liabilities and then dividing that figure by
the number of outstanding shares of the Fund:
NAV =
Total Assets-Liabilities
------------------------
Number of Shares
Outstanding
Each of the Funds' net asset value, or NAV, is expected to be constant at $1.00
per share, although this value is not guaranteed. The NAV is determined at 12
noon, Eastern time for the U.S. Treasury Reserve Fund and 3:00 pm for the Cash
Reserve Fund on days the New York Stock Exchange, Funds' custodian and transfer
agent are open. The Funds value their securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount of premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
Your order for purchase, sale or exchange of shares is priced at the next
NAV calculated after your order is accepted by the Fund.
Purchasing and Adding to Your Shares
You may purchase shares through the Distributor or through banks, brokers
and other investment representatives, which may charge additional fees and may
require higher minimum investments or impose other limitations on buying and
selling shares. If you purchase shares through an investment representative,
that party is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
investment representative or institution for specific information.
14
<PAGE>
Minimum Initial Minimum Subsequent
Account type Investment Investment
------------ ---------- ----------
Institutional $50,000 $1,000
Investor & Service Class $ 1,000 $ 50
IRA $ 250 $ 50
The minimum initial investment requirement for the Investor and Service
Classes may be waived if the purchaser has at least $1,000 or more in any of the
First Choice Funds, is a purchaser through a trust or investment account
administered by the advisor, is an employee or ex-employee of First Choice Funds
Trust or is an employee of any of its affiliates, First American, PDI, PFPC, or
any other service provider, or is an employee of any trust customer of First
Choice or any of its affiliates.
Orders will become effective when Federal funds are available to the
Trust's custodian for investment.
By Regular Mail
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and he
or she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial
or subsequent, should be sent to:
First Choice Funds Trust
PO Box 5176
Westborough, MA 01581-5776
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver application and payment to the address above.
Subsequent Investments:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
. Fund
. Amount invested
. Account name and number
15
<PAGE>
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver investment slip and payment to the address above.
By Wire Transfer
Telephone the Transfer Agent at 1-888-FIRST16 (1-888-347-7816) for
instructions. Please note your bank may charge you a fee for handling this
transaction.
You can add to your account by using the convenient options described
below. The Funds reserve the right to change or eliminate these privileges at
any time with 60 days' notice.
Automatic Investment Plan
You can make automatic investments in the Funds from your bank account,
through payroll deduction or from your federal employment, Social Security or
other regular government checks. Automatic investments can be as little as $50,
once you've invested the minimum required to open the account.
To invest regularly from your bank account:
. Complete the Automatic Investment Plan portion on your Account
Application. Make sure you note:
-- Your bank name, address and account number
-- The amount you wish to invest automatically (minimum $50)
-- How often you want to invest (every month, 4 times a year, twice a
year or once a year)
. Attach a voided personal check.
To invest regularly from your paycheck or government check:
Call 1-888-FIRST16 (1-888-3347-7816) for an enrollment form.
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Institutional shares than for Investor and Service
Class shares, because Institutional shares have lower distribution expenses.
Capital gains are distributed at least annually.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
16
<PAGE>
Selling Your Shares
<TABLE>
<S> <C>
You may sell your shares at any Withdrawing Money from Your Fund Investment
time. Your sales price will be the
next NAV after your sell order is As a mutual fund shareholder, you are technically selling
received by the Fund, its transfer shares when you request a withdrawal in cash. This is also
agent, or your investment known as redeeming shares or a redemption of shares.
representative. Normally you
will receive your proceeds within
a week after your request is
received.
Instructions for selling shares
If selling your shares through your financial adviser or
broker, ask him or her for redemption
procedures. Your adviser and/or broker
may have transaction minimums and/or
transaction times which will affect your
redemption. For all other sales
transactions, follow the instructions
below.
By telephone 1. Call 1-888-FIRST16 (1-888-347-7816)
(unless you have declined with instructions as to how you wish to
telephone sales privileges--) receive your funds (mail, wire,
electronic transfer).
By mail 1. Call 1-888-FIRST16 (1-888-347-7816) to request
(See "Selling Your redemption forms or write a letter of instruction indicating:
Shares--Redemptions in Writing . your Fund and account number
Required") . amount you wish to redeem
. address where your check should be sent
. account owner signature
2. Mail to: First Choice Funds Trust
P.O. Box 5176
Westborough, MA 01581-5176
Wire Transfer Call 1-888-FIRST16 (1-888-347-7816) to request a wire
transfer.
You must indicate this option on If you call in your redemption request of $1,000 or more by
your account application. 12:00 noon Eastern time, your payment will normally be
wired to your bank on the same business
day. Otherwise, it will normally be wired
on the next business day after your call.
Your financial institutions may
charge a wire transfer fee.
Electronic Redemptions Call 1-888-FIRST16 to request an electronic redemption.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
Your bank must participate in the If you call by 4 p.m. Eastern time, the NAV of your shares
Automated Clearing House will normally be determined on the same day and the
(ACH) and must be a U.S. bank. proceeds credited withing 7 days.
</TABLE>
Systematic Withdrawal Plan
You can receive automatic payments from your account on a monthly,
quarterly, semi annual basis. The minimum withdrawal is $50. To activate this
feature:
. Make sure you've checked the appropriate box on the Account
Application. Or call 1-888-FIRST16 (1-888-347-7816).
. Include a voided personal check.
. Your account must have a value of $10,000 or more to start
withdrawals.
. If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may
close your account and mail the proceeds to you.
Redemption By Check Writing
You may write checks ($500 minimum for Investment Class and Service Class
and $5,000 for Institutional Class) to make payments to any person or business
from your account. To obtain checks, complete the check writing section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is presented
for payment. You must maintain the minimum required account balance of $500 per
Fund and you may not close your account by writing a check.
Redemptions In Writing Required
You must request redemption in writing in the following situations:
. Redemption requests requiring a signature guarantee which include
each of the following:
. Redemptions over $5,000
. Your account registration or the name(s) in your account has
changed within the last 15 days
. The check is not being mailed to the address on your account o
The check is not being made payable to the owner of the account o
The redemption proceeds are being transferred to another Fund
account with a different registration.
A signature guarantee can be obtained from a financial institution,
such as a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
18
<PAGE>
Verifying Telephone Redemptions
The Funds make every effort to insure that telephone redemptions are
only made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity. Given
these precautions, unless you have specifically indicated on your application
that you do not want the telephone redemption feature, you may be responsible
for any fraudulent telephone orders. If appropriate precautions have not been
taken, the Transfer Agent may be liable for losses due to unauthorized
transactions. Telephone redemption privileges will be suspended for a 30-day
period following a telephone address change.
Redemptions Within 15 Days of Investment
When you have made an investment by check, payment on redemption
requests will be delayed until the Transfer Agent is satisfied that the check
has cleared (which may require up to 15 days from purchase date). You can avoid
this delay by purchasing shares with a certified check.
Redemption in Kind
The Funds reserve the right to make payment in securities rather than
cash, known as "redemption in kind." The could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of a Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
Closing of Small Accounts
If your account falls below $500, the Fund may ask you to increase your
balance. If it is still below $500 after 30 days, the Fund may close your
account and send you the proceeds.
Undeliverable Redemption Checks
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be considered void. The check will be canceled and the money
reinvested in the Fund.
Account Services
All transactions in Fund shares will be reflected in a statement for
each shareholder. In those cases where a nominee is a shareholder of record for
shares purchased for its customer, the nominee decides whether the statement
will be sent to the customer.
Distribution Arrangements/Sales Charges
This section describes the sales charges and fees you will pay as an
investor in different share classes offered by the Funds.
19
<PAGE>
<TABLE>
<CAPTION>
Institutional Class Investment Class
Shares Service Class Shares Shares
------------------------- ---------------------------- --------------------
<S> <C> <C> <C>
Sales Charge None None None
(Load)
Distribution None Subject to annual Subject to annual
(12b-1) Fee distribution fee of up to distribution fees of up
0.25% of the Fund's net to 0.25% of the Fund's
assets. net assets.
Service Subject to annual Subject to annual service Subject to annual
Organization service organization organization fee of up to service organization
Fee fee of up to 0.25% of 0.75% of the Fund's net fee of up to 0.25%
the Fund's net assets. assets. of the Fund's net
assets.
Fund Expenses Lower annual Higher annual expenses Higher annual expenses
expenses than than Institutional Class than Institutional Class
Investor or Service shares shares
Class shares.
</TABLE>
Distribution (12b-1) Fees
The Investment Class shares and the Service Class shares of the Funds
each have adopted a Rule 12b-1 Distribution Plan and Agreement (the "Plan")
pursuant to which the Investment Class shares and the Service Class shares of
the Funds may reimburse the Distributor, or others, on a monthly basis for costs
and expenses incurred by the Distributor in connection with the distribution and
marketing of shares of the Funds. These costs and expenses are subject to a
maximum limit of 0.25% per annum of the average daily net assets of the
Investment Class shares and the Service Class shares of the Fund.
Service Organizations
The Service Class and Institutional Class may pay fees to Service
Organizations (which vary depending upon the services provided) in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund's shares owned
by shareholders with whom the Service Organization has a servicing relationship.
The Investment Class shares may pay fees in amounts up to an annual rate of
0.75% of the daily net asset value of the Fund's shares owned by shareholders
with whom the Service Organization has a servicing relationship for servicing,
recordkeeping, sub-accounting, sub-transfer agency, communicating with and
education of shareholders, fiduciary services (excluding investment management)
and asset allocation services.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
a Fund's minimum initial or subsequent investments or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
20
<PAGE>
Shareholders using Service Organizations are urged to consult with them
regarding any such fees or conditions.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
Exchanging Your Shares
You can exchange your shares that have been held for at least seven
days in the Fund for shares of the same class of another First Choice Fund,
usually without paying additional sales charges (see "Notes on Exchanges"). No
transaction fees are charged for exchanges.
Instructions for exchanging shares
Exchanges made by sending written request to First Choice Funds Trust,
PO Box 5176, Westborough, MA 01581-5176, or by calling 1-888-FIRST16
(1-888-347-7816). Please provide the following information:
. Your name and telephone number
. The exact name on your account and account number Taxpayer
identification number (usually your Social Security number)
. Dollar value or number of shares to be exchanged
. The name of the Fund from which the exchange is to be made.
. The name of the Fund into which the exchange is being made.
You must meet the minimum investment requirements for the Fund into
which you are exchanging. Exchanges from the Fund to another are taxable. You
should review the prospectus of the First Choice Fund before making an exchange.
See "Selling your Shares" for important information about telephone
transactions. The Funds reserve the right to modify or terminate the exchange
privilege upon 60 days' written notice.
To prevent disruption in the management of the Funds, due to market
timing strategies, exchange activity may be limited to 4 exchanges within a
12-month period.
Notes on exchanges
When exchanging from a Fund that has no sales charge or a lower sales
charge to a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts
must be identical.
The Exchange Privilege (including automatic exchanges) may be changed
or eliminated at any time upon a 60-day notice to shareholders.
21
<PAGE>
Be sure to carefully read the Prospectus of any First Choice Fund into
which you wish to exchange shares.
Dividends and Distributions and Taxes
Any income a Fund receives in the form of interest is paid out, less
expenses, to its shareholders as dividends. The Funds will declare distributions
of such income daily and pay dividends monthly. Shares purchased will begin
earning dividends on the day the shares are bought and shares redeemed will earn
dividends through the day before redemption. Net investment income for a
Saturday, Sunday or a holiday will be declared as a dividend on the previous
business day. In the case of the other Funds that declare daily dividends,
shares purchased will begin earning dividends on the day after the shares are
bought, and shares redeemed will earn dividends through the day the redemption
is executed. Capital gains, if any, for the Funds are distributed at least
annually. Dividends and distributions are treated in the same manner for federal
income tax purposes whether you receive them in cash or in additional shares.
Dividends and distributions from a Fund are taxable to shareholders
whether received in additional shares or in cash.
Dividends are taxable as ordinary income. Dividends are taxable in the
year in which they are paid, even if they appear on your account statement the
following year.
You will be notified in January each year about the federal tax status
of distributions made by the Funds. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding
requirements. There is a penalty on certain pre-retirement distributions from
retirement accounts. Consult your tax adviser about the federal, state and local
tax consequences in your particular circumstances.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
The financial highlights table is intended to help you understand the
Funds' financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the annual report and
incorporated by reference in the SAI, which is available upon request.
<TABLE>
<CAPTION>
U.S. Treasury Reserve Fund
--------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
September 30, 1999 September 30, 1998 September 30, 1997(a)
------------------ ------------------ ---------------------
Service Institutional Service Institutional Service Institutional
Class Class Class Class Class Class
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- --------- ------- ---------- --------- --------
Income From Investment Operations:
Net investment income ............... 0.041 0.043 0.048 0.049 0.049 0.050
Net realized and unrealized
gain (loss) on investments ......... --(b) --(b) --(b) --(b) --(b) --(b)
------- --------- ------- ---------- --------- --------
Total from Investment Operations 0.041 0.043 0.048 0.049 0.049 0.050
Less Distributions:
Dividends from net investment income (0.041) (0.043) (0.048) (0.049) (0.049) (0.050)
------- --------- ------- ---------- --------- --------
Net Asset Value, end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ========= ======= ========== ========= ========
Total Return .......................... 4.13% 4.38% 4.88% 4.97% 5.04% 5.08%
Ratios/Supplemental Data:
Net Assets, end of period (000s) ...... $ 6,198 $ 64,600 $ 11,196 $ 45,750 $ 73,581 $ 1,195
Ratios to average net assets:
Net investment income ............... 4.06% 4.31% 4.87% 4.91% 4.93%(c) 4.93%(c)
Operating expenses*................ 0.64% 0.39% 0.47% 0.43% 0.35%(c) 0.35%(c)
Operating expenses excluding
reimbursement, waiver and custody
earnings credits ............... 0.97% 0.72% 0.82% 0.78% 1.36%(c) 0.86%(c)
Net investment income excluding
reimbursements, waiver and custody
earnings credits ................ 3.73% 3.98% 4.52% 4.56% 3.92%(c) 4.42%(c)
</TABLE>
- -----------------------------------------------
* During the periods 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.
(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.
<TABLE>
<CAPTION>
Cash Reserve Fund
--------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
September 30, 1999 September 30, 1998 September 30, 1997(a)
------------------ ------------------ ---------------------
Service Institutional Service Institutional Service Institutional
Class Class Class Class Class Class
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- --------- ------- ---------- --------- --------
Income From Investment Operations:
Net investment income ............... 0.045 0.048 0.051 0.052 0.037 0.038
Net realized and unrealized
gain (loss) on investments ......... --(b) --(b) --(b) --(b) --(b) --(b)
------- --------- ------- ---------- --------- --------
Total from Investment Operations 0.045 0.048 0.051 0.052 0.037 0.038
Less Distributions:
Dividends from net investment income. (0.045) (0.048) (0.051) (0.052) (0.037) (0.038)
------- --------- ------- ---------- --------- --------
Net Asset Value, end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ========= ======= ========== ========= ========
Total Return .......................... 4.59% 4.86% 5.19% 5.29% 3.78%(d) 5.82%(d)
Ratios/Supplemental Data:
Net Assets, end of period (000s) ...... $ 172 $ 77,660 $ 487 $ 145,634 $ 57,947 $ 61
Ratios to average net assets:
Net investment income ............... 4.52% 4.77% 5.15% 5.20% 5.23%(c) 5.23%(c)
Operating expenses*................ 0.66% 0.41% 0.49% 0.44% 0.35%(c) 0.35%(c)
Operating expenses excluding
reimbursement, waiver and custody
earnings credits ............... 0.96% 0.71% 0.78% 0.73% 1.43%(c) 0.93%(c)
Net investment income excluding
reimbursements, waiver and custody
earnings credits ................ 4.22% 4.47% 4.86% 4.91% 4.15%(c) 4.65%(c)
</TABLE>
- ----------------------------------------------
* During the periods 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.
(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.
22
<PAGE>
For more information about the Funds, the following documents are available free
upon request:
Annual/Semi-annual Reports (Reports):
The Funds' annual and semi-annual reports to shareholders contain
detailed information on the Funds' investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during its last fiscal year.
23
<PAGE>
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Funds, including
their operations and investment policies. It is incorporated by reference, and
is legally considered a part of this prospectus. You can get free copies of
Reports and the Prospectuses and SAI of other First Choice Funds, or request
other information and discuss your questions about the Funds by contacting a
broker or bank that sells the Funds. In addition, you may contact the Funds at:
First Choice Funds
P.O. Box 5176
Westborough, MA 01581-5176
Telephone: 1-888-FIRST16 (1-888-347-7816)
You can review and copy the Funds' Reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text-only
copies:
. For a duplicating fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009 or calling 1-800-SEC-
0330.
. Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file number: 811-7681
General and Account Information:
1-888-FIRST16
(1-888-347-7816)
Managed by First American Capital Management, Inc.
<PAGE>
================================================================================
FIRST CHOICE FUNDS TRUST
First Choice Equity Fund
Retail Class
c/o PFPC, Inc.
4400 Computer Drive
P.O. Box 5176
Westborough, MA 01581-5176
www.firstchoicefunds.com
January 31, 2000
An investment in the Fund is not a deposit of the bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or truthful. Any
representation to the contrary is a criminal offense.
===============================================================================
<PAGE>
2
Table of Contents
<TABLE>
Risk/Return Summary
- --------------------------------------------------------------------------------
<S> <C>
Carefully review this 3 Objective, Principal Investment
important section, which Strategies and Principal Risks
summarizes each Fund's
investments, risks, past
performance and fees.
Investment Objectives, Strategies and Risks
- --------------------------------------------------------------------------------
Review this section for 6 Investment Objective
information on investment 6 Investment Policy and Strategy
strategies and their risks. 7 Risk Considerations
Fund Management
- --------------------------------------------------------------------------------
Review this section for 8 The Investment Adviser
details on the people and 9 The Distributor and
organizations who oversee Administrator
the Fund.
Shareholder Information
- --------------------------------------------------------------------------------
Review this section for 9 Pricing of Fund Shares
details on how shares are 10 Purchasing and Adding to Your
valued, how to purchase, Shares
sell and exchange shares, 13 Distribution Arrangements/Sales Charge
related charges and 15 Selling Your Shares
payments of dividends and 18 Exchanging Your Shares
distributions. 19 Dividends, Distributions and Taxes
20 Financial Highlights
- --------------------------------------------------------------------------------
Back Cover
- --------------------------------------------------------------------------------
20 Where to learn more about this Fund
</TABLE>
<PAGE>
3
Risk/Return Summary
The following is a summary of certain key information about the Retail Class
shares of the First Choice Equity Fund. The Fund also has Institutional Class
shares, offered through a separate prospectus, which are subject to a minimum
investment of $50,000. You will find additional information about the Fund,
including a detailed description of the risks of an investment in the Fund,
after this summary.
The Risk/Return Summary describes certain kinds of risks that apply to the Fund.
Investment Objective The Fund is an "equity" fund that seeks long-term
growth of capital and income
Principal Investment
Strategies Under normal circumstances, the Fund invests at least
80% of net assets in a diversified portfolio of equity
securities issued by companies in a variety of
different industries. The Fund's equity investments
consist of common stocks, preferred stocks and
securities convertible into common stocks. The
Fund intends to invest up to 20% of its assests in
ADRs. The Fund intends to achieve its investment
objective through capital appreciation of its
portfolio holdings over time and, to a lesser extent,
dividend income. Current income is a secondary
consideration. The Adviser buys and sells securities
based on their analysis of the industry sectors of the
market and evaluates the companies within each sector.
Principal
Investment Risks The principal risks of investing in the Fund are
market risk, security-specific risk, interest rate
risk and foreign risk.
Market Risk Risk that the value of the Fund's investments will
fluctuate as the stock market fluctuates and that
stock prices overall may decline over short or longer-
term periods.
Interest Rate Risk Risk that changes in interest rates will affect the
value of the Fund's investments in income-producing or
fixed-income or debt securities. Increases in interest
rates may cause the value of the Fund's investments to
decline.
Security-Specific Risk Risk that the issuer will be unable to achieve its
earnings or growth expectations.
<PAGE>
4
Foreign Risk Depositary Receipts, American Depositary Receipts
("ADRs") are U.S. dollar-denominated receipts
generally issued by domestic banks, which evidence the
deposit with the bank of the common stock of a foreign
issuer and which are publicly traded on exchanges or
over-the-counter in the United States.
The Fund may invest in both sponsored and unsponsored
ADR programs. There are certain risks associated with
investments in unsponsored ADR programs. Because the
non-U.S. company does not actively participate in the
creation of the ADR program, the underlying agreement
for service and payment will be between the depository
and the shareholder. The company issuing the stock
underlying the ADR pays nothing to establish the
unsponsored facility, as fees for ADR issuance and
cancellation are paid by brokers. Investors directly
bear the expenses associated with certificate
transfer, custody and dividend payment.
In an unsponsored ADR program, there also may be
several depositories with no defined legal obligations
to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would
be no central source of information to buyers, sellers
and intermediaries. The efficiency of centralization
gained in a sponsored program can greatly reduce the
delays in delivery of dividends and annual reports. In
addition, with respect to all ADRs there is always the
risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not
typically involved in purely domestic investments,
including future foreign political and economic
developments, and the possible imposition of foreign
governmental laws or restrictions applicable to such
investments. Securities of foreign issuers through
ADRs re subject to different economic, financial,
political and social factors. Individual foreign
economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross
national product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance
of payments position. With respect to certain
countries, there is the possibility of expropriation
of assets, confiscatory taxation, political or social
instability or diplomatic developments which could
adversely affect the value of the particular ADR.
There
<PAGE>
5
may be less may be less publicly available information
about a foreign company than about a U.S. company, and
there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and
listed companies. In addition, such companies may use
different accounting and financial standards (and
certain currencies may become unavailable for transfer
from a foreign currency), resulting in a Fund's
possible inability to convert proceeds realized upon
the sale of portfolio securities of the affected
foreign companies immediately into U.S. currency.
Other important things for you to note:
. Because the value of the Fund's investments will
fluctuate with market conditions, so will the
value of your investment in the Fund.
. You may lose money by investing in the Fund.
Who may want to Consider investing in the Fund if you are:
invest?
. seeking a long-term goal such as retirement
. looking to add a growth component to your
portfolio
. willing to accept higher risks commensurate with
investing in the general "stock market".
This Fund will not be appropriate for anyone:
. seeking monthly income
. pursuing a short-term goal or investing emergency
reserves
. seeking safety of principal
Performance Information
<PAGE>
6
The Risk/Return Summary of the Fund [INSERT BAR CHART]
includes tables showing the Fund's annual
returns and average annual returns. The bar Year-by-Year Total Returns as
chart and table provide an indication of the of 12/31 /1/
historical risk for the Fund by showing:
1998 13.79
. changes in the Fund's 1999 23.30
performance from year to year
since the Fund's inception; and Past performance is not
necessarily an indication of
how the Fund will perform in
the future.
. the Fund's average annual
return for one year and since Best Quarter: 4th Q 1998 20.2%
its inception period. Worst Quarter: 3rd Q 1998 -8.78%
If fee waivers or expense reimbursements had
not been reflected in the chart, the Fund's
performance would have been lower.
Both the chart and table assume reinvestment
of dividends.
You may obtain information for any First
Choice Fund by calling 1-888-FIRST16.
(1-888-347-7816)
Performance Table
Average Annual Total Returns (for the periods ending December 31, 1999)
Inception Date One Year Since Inception
-------------- -------- ---------------
Equity Fund Retail Class 6/2/98 23.30% 23.84%
S&P 500(R) Composite Index N/A 21.03% 22.22%
Lipper Growth and Income N/A 4.86% 9.31%
Fund Index
_________________________
/1/ The Fund's return for the quarter ended December 31, 1999 was ____%.
<PAGE>
7
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (Fees paid directly
from your investment)
Maximum sales charge (load) imposed 4.5%
on purchases (as a percentage of
offering price)
Maximum deferred sales charge (load) None
Redemption Fees/1/ (as a percentage of None
amount redeemed)
Annual Fund Operating Expenses
(expenses are deducted from Fund
assets)
Management fee 1.00%
Administrative Service fee .15%
Distribution (12b-1) fee .25%
Shareholder Servicing Fee .25%
Other Operating Expenses/2/ .84%
Total Fund Operating expenses 2.34%
Fee Waivers/3/ /4/ 1.10%
Net Expenses/5/ 1.24%
1 Shareholders may be charged a wire redemption fee by their bank for receiving
a wire payment on their behalf.
2 Individual Retirement Accounts are subject to annual maintenance and custody
fee ($10) and termination fee ($10).
3 The Adviser is contractually waiving its Management fee.
4 The Administator is contractually limiting its Administrative Service fee to
.05%.
5 The contractual expense limitations are in effect through September 30, 2000.
Example
<PAGE>
8
Use the table to compare fees and 1 Year 3 Years 5 Years 10 Years
expenses with those of other Funds. ------ ------- ------- --------
It illustrates the amount of
fees and expenses you would pay, $546 $751 $972 $1,608
assuming the following:
. $10,000 investment
. 5% annual return
. no changes in the Fund's
operating expenses except the
expiration of the current
contractual fee waivers on
September 30, 2000.
. reinvestment of dividends and
distributions
Because this example is hypothetical and for
comparison only, your actual costs will be
different.
Investment Objectives, Strategies and Risk
Ticker Symbol:
This section of the prospectus provides a more complete description of the
principal investment objectives, policies, and principal risks of the Fund.
Additional descriptions of the Fund's risks, strategies, and investments, as
well as other strategies and investments not described below, may be found in
the Fund's SAI. Of course, there can be no assurance that any Fund will achieve
its investment objective.
Investment Objective, Policies and Risks
Investment Objective
The Fund's investment objective is long-term growth of capital and income.
The Fund seeks to achieve this objective by investing primarily in common
stocks.
Investment Policy and Strategy
Under normal circumstances, the Fund invests at least 80% of its net assets
in a diversified portfolio of equity securities issued by companies in a variety
of different industries.
The Fund's investments will be selected from a large universe of companies
(within the Russell 3000 universe with a market capitalization of $1 billion or
more). In selecting equity investments for the Fund, the Adviser uses numerous
factors in the selection process, including but not limited to, corporate
profitability, earning growth prospects, market share
<PAGE>
9
and valuation. The selection process includes evaluation of both growth and
value characteristics of a stock's relative attractiveness. Each investment is
also evaluated for its fit within the overall portfolio. An optimization process
helps to determine the desired mix of stock holdings. The mix of stock holdings
is determined but may not be limited to, industry exposure, position size,
relative valuation and economic sector allocation. Industry allocation is the
weight of the industry relation to the S&P 500 and the Fund allocation is
adjusted based on industry analysis.
The Fund's equity investments consist of common stocks, preferred stocks
and securities convertible into common stocks. The Fund intends to achieve its
investment objective through capital appreciation of its portfolio holdings over
time and, to a lesser extent, dividend income. Although current income is a
secondary consideration, many of the Fund's investments should provide regular
dividends which are expected to grow over time. The Fund allocates its
investments among different industries and companies and adjusts its portfolio
securities for investment considerations and not for short-term trading
purposes. The Fund may invest up to 15% of its net assets in illiquid and
restricted securities and Rule 144A private placements.
The Fund may also invest up to 20% of its total assets in foreign company
ADR's, including ADRs, which meet its investment objective. ADRs are dollar-
denominated receipts issued by U.S. banks or trust companies with respect to
securities of foreign issuers held on deposit with said banks and trusts in
their respective countries. The Fund may invest in both sponsored and
unsponsored ADR programs. See "Investment Practices" and "Risks of Investing in
the Fund."
In determining whether to dispose of an investment the Adviser will look at
whether or not the security continues to meet or has achieved the Adviser's
expectations that originally identified the investment's above average quality,
growth and valuation characteristics.
Risk Considerations
General Risk Factors
The Fund is subject to market risk - the possibility that its net asset
value will decline with changes in the market value of the Fund's portfolio
securities. The Fund's investments represent proportionate interests in the
issuing companies. Therefore, the Fund participates in the success or failure of
any company in which it holds stock. The market value of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market movements.
Investments in ADRs involve certain risks not typically involved in purely
domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs re subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less may be less publicly available information
about a foreign company than about a U.S. company, and there may be less
governmental regulation and supervision of foreign stock exchanges, brokers and
listed companies. In addition, such companies may use different accounting and
financial standards (and certain currencies may become unavailable for transfer
from a foreign currency), resulting in a Fund's possible inability to convert
proceeds realized upon the sale of portfolio securities of the affected foreign
companies immediately into U.S. currency.
<PAGE>
10
Other Considerations
Portfolio Turnover
The portfolio turnover rate for the Fund is included in the Financial
Highlights section of this Prospectus. The Fund is actively managed and, in some
cases in response to market conditions, the Fund's portfolio turnover, may
exceed 100%. A higher rate of portfolio turnover increases brokerage and other
expenses, which must be borne by the Fund and its shareholders. High portfolio
turnover (over 100%) is likely to generate more taxable short-term gains for
shareholders, which may have an adverse effect on the performance of the Fund.
Temporary Defensive Positions
In order to meet liquidity needs, the Fund may invest up to 100% of its
assets in fixed income securities, money market securities, certificates of
deposit, bankers' acceptances, commercial paper or in equity securities which in
the Adviser's opinion are more conservative than the types of securities that
the Fund typically invests in. To the extent a Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Fund Management
The Investment Adviser
First American Capital Management, Inc. ("First American" or the
"Adviser"), located at 567 San Nichols Drive, Newport, CA 92660, a wholly-owned
subsidiary of The First American Financial Corporation, has agreed to provide
investment advisory services to
<PAGE>
11
the Fund pursuant to an advisory agreement with the Fund (the "Advisory
Agreement"). Subject to such policies as the Trust's Board of Trustees may
determine, First American makes investment decisions for the Fund. For the
advisory services it provides to the Fund, First American receives fees based on
average daily net assets up to the following annualized rates.
For the fiscal year ended September 30, 1999 First American waived
its entire contractual fees with respect to the Fund for the most recent
fiscal year. Contractual fees (without waivers) for the Fund are 1.00%.
From June 2, 1998 through June 30, 1999, the Adviser utilized, as part of
the investment process for the Equity Fund, a quantitative model developed by
Haugen Custom Financial Systems, a registered investment adviser with offices at
4199 Campus Drive, Suite 350, Irvine, CA 92612. The Adviser paid Haugen Custom
Financial Systems a monthly fee at the annual rate of .065% of the Equity Fund's
average daily net assets on the first $100 million; .125% of the Equity Fund's
average daily net assets on the next $100 million and .03% of the Equity Fund's
average daily net assets exceeding $200 million. For the period June 2, 1998
through September 30, 1998, Haugen Custom Financial Systems received fees of
$6,666.67.
Portfolio Managers
The Fund utilizes an Investment Committee to perform the day-to-day
Management of the Fund's Portfolio.
The Distributor and Administrator
Effective December 1, 1999, First Data Investor Services Group, Inc.
("Investor Services Group"), the Fund's administrator and transfer agent, became
an affiliate of PNC Bank Corp. and changed its name to PFPC Inc. ("PFPC"). On
the same date, Provident Distributors, Inc. replaced First Data Distributors,
Inc. as the Fund's distributor. Its principal office is at Four Falls Corporate
Center, 6th Floor, West Conshohoken, Pa. 19428-2961. The Distributor will
receive orders for, sell, and distribute shares of the Fund. The Distributor
also serves as distributor of other mutual funds.
The Fund has entered into an Administrative Services Contract with PFPC,
Inc. pursuant to which the Administrator provides certain management and
administrative services necessary for the Fund's operations. For these services,
the Administrator receives from the Fund a fee, payable monthly, at the annual
rate of 0.15% of the Fund's average daily net assets. PFPC Inc. receives a
separate fee for providing fund accounting services to the Fund pursuant to the
Administration Agreement.
<PAGE>
12
Shareholder Information
Pricing of Fund Shares
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments
and other assets, subtracting its liabilities and then dividing that figure by
the number of outstanding shares of the Fund:
Total Assets Liabilities
------------------------
NAV = Number of Shares Outstanding
Per share net asset value (NAV) is determined and its shares are priced at
the close of regular trading on the New York Stock Exchange, normally at 4:00
p.m. Eastern time on days the Exchange is open. Your order for purchase, sale or
exchange of shares is priced at the next NAV calculated after your order is
accepted by the Fund. The Fund's securities are generally valued at current
market prices. If market quotations are not available, prices will be based on
fair value as determined by the Fund's Trustees.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the Funds may value the security at its fair value as determined in
good faith by or under the supervision of the Board of Trustees. The effect of
using fair value pricing is that a Fund's net asset value will be subject to the
judgment of the Board of Trustees or its designee instead of being determined by
the market. Because some of the Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those Funds' shares may
change on days when you will not be able to purchase or redeem shares.
Purchasing and Adding To Your Shares
Initial Purchase
All funds received are invested in full and fractional shares of the Fund.
Certificates for shares are not issued. The Fund reserves the right to reject
any purchase. The Fund will not accept any third party or foreign checks.
All initial investments should be accompanied by a completed Purchase
Application. A Purchase Application accompanies this Prospectus and a separate
application is required for IRA investments. The Fund reserves the right to
reject purchase orders.
<PAGE>
13
<TABLE>
<S> <C>
o Minimum Initial Investment............ $1,000
o Minimum Initial Investment for IRAs... $ 250
o Minimum Subsequent Investment......... $ 50
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks
that do not clear. Third-party checks are not accepted.
Through an Authorized Broker,
Investment Adviser or Service Organization
Shares are available to new and existing shareholders through authorized
brokers, investment advisers and Service Organizations who may charge additional
fees or impose other limitations on buying and selling shares. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker, investment adviser or Service
Organization will then contact the Distributor to place the order on your behalf
on that day. Orders for the Fund received prior to 4:00 p.m. Eastern time will
become effective that day. Brokers who receive orders are obligated to transmit
them promptly. You should receive written confirmation of your order within a
few days of receipt of instructions from your broker.
By Regular Mail
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Fund and he
or she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial
or subsequent, should be sent to:
First Choice Funds Trust
PO Box 5176
Westborough, MA 01581-5776
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
<PAGE>
14
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver application and payment to the address above.
Subsequent Investments:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
. Fund
. Amount invested
. Account name and number
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver investment slip and payment to the address above.
By Wire Transfer
Telephone the Transfer Agent at 1-888-FIRST16 (1-888-347-7816) for
instructions. Please note your bank may charge you a fee for handling this
transaction.
You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges at
any time with 60 days' notice.
Federal Funds purchases will be accepted only on a day on which the
relevant Fund and the custodian bank are open for business.
Automatic Investment Program
You can make automatic investments in the Fund from your bank account,
through payroll deduction or from your federal employment, Social Security or
other regular government checks. For more information about automatic
investments, call 1-888-FIRST16 (1-888-347-7816).
<PAGE>
15
To invest regularly from your bank account:
. Complete the Automatic Investment Plan portion on your Account
Application. Make sure you note:
-- Your bank name, address and account number
-- The amount you wish to invest automatically (minimum $50)
-- How often you want to invest (every month, 4 times a year,
twice a year or once a year)
. Attach a voided personal check
To invest regularly from your paycheck or government check:
Call 1-888-FIRST16 (1-888-347-7816) for an enrollment form.
Distribution Arrangements/Sales Charges
Distribution Plan
The Fund has adopted a Rule 12b-1 Distribution Plan and Agreement (the
"Plan") pursuant to which the Retail Class shares of the Fund may reimburse the
Distributor, or others, on a monthly basis for costs and expenses incurred by
the Distributor in connection with the distribution and marketing of shares of
the Fund. These costs and expenses, are subject to a maximum limit of 0.25% per
annum of the average daily net assets of the Retail Class shares of the Fund.
The Fund also offers an Institutional class of shares which are offered in
a separate prospectus. The Institutional Class shares are sold at net asset
value without a sales load only to certain institutional investors who invest a
minimum of $50,000 in the Fund.
Sales Charge
The Fund shares will be sold at the net asset value next determined subject to a
sales charge as follows:
<TABLE>
<CAPTION> Reallowance to
Sales Charge as a Sales Charge as a Broker - Dealers
% of the Offering Price % of the Amount Invested (% of the Offering Price)
----------------------- ------------------------ -------------------------
<S> <C> <C>
4.5% 4.71% 4.5%
</TABLE>
Service Organizations
<PAGE>
16
Various banks, trust companies, broker-dealers (other than the Distributor)
and other financial organizations ("Service Organizations") may provide certain
administrative services for its customers who invest in the Fund through
accounts maintained at that Service Organization. The Fund will pay the Service
Organization a fee at an annual rate of up to .25% of the average daily net
asset value of shares for which the Service Organization from time to time
performs these services. The services provided include:
. receiving and processing shareholder orders
. performing the accounting for the customers' sub-accounts
. maintaining retirement plan accounts
. answering questions and handling correspondence for individual accounts
. acting as the sole shareholder of record for its customers' accounts
. issuing shareholder reports and transaction confirmations
. performing daily "sweep" functions
Investors who purchase, sell or exchange shares for the Fund through a
customer account maintained at a Service Organization may be charged extra for
other services which are not specified in the servicing agreement with the Fund
but are covered under separate fee schedules provided by the Service
Organization to their customers. Customers with accounts at Service
Organizations should consult their Service Organization for information
concerning their sub-accounts. The Adviser or Administrator also may pay
Service Organizations for rendering services to shareholders' sub-accounts.
Individual Retirement Accounts
The Fund may be used to invest your IRA assets. Shares may also be
purchased for IRAs established with First American or any of its affiliates or
other authorized custodians. Completion of a special application is required in
order to create such an account, and the minimum initial investment for an IRA
is $250. Contributions to IRAs are subject to prevailing amount limits set by
the Internal Revenue Service and there are various types of IRAs available,
including Individual, Spousal, Rollover, Roth-Contributory and Roth-Conversion.
A $7.50 establishment fee and an annual $15 maintenance and custody fee is
payable with respect to each IRA, and there will be a $12 termination fee when
the account is closed. For more information concerning investments by IRAs, call
the Funds at 1-888-FIRST16 (1-888-347-7816).
<PAGE>
17
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise on your application. There are no sales charges for
reinvested distributions. Capital gains are distributed at least annually.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
SELLING YOUR SHARES
You may sell your shares at Withdrawing Money from Your Fund Investment
any time. Your sales price will
be the next NAV after your sell As a mutual fund shareholder, you are
order is received by the Fund, technically selling shares when you request
its transfer agent, or your a withdrawal in cash. This is also known as
investment representative. redeeming shares or a redemption of
Normally you will receive your shares.
proceeds within a week after
your request is received.
Instructions for Selling Shares
If selling your shares through your
financial adviser or your broker,
ask him or her for redemption
procedures. Your adviser and
/or broker may have transaction
minimums and/or transaction times
which will affect your redemption.
For all other sales transactions,
follow the instructions below.
By Telephone 1. Call 1-888-FIRST16 (1-888-347-7816)
(unless you have declined with instructions as to how you wish to
telephone sales privileges on your receive your funds (mail, wire,
application) electronic transfer).
<PAGE>
18
By Mail 1. Call 1-888-FIRST16 (1-888-347-7816) to request
(See "Selling Your redemption forms or write a letter of instruction
Shares--Redemptions in indicating:
Writing Required")
. your Fund and account number
. amount you wish to redeem
. address where your check should be sent
. account owner signature
2. Mail to:
First Choice Funds Trust
P.O. Box 5176
Westborough, MA 01581-5176
3. If redemption proceeds that are to be sent to
an address other than the registered address or
if the redemption proceeds exceed $50,000, a
signature guarantee is required
A signature guarantee can be obtained from a financial institution, such as
a bank, broker-dealer, or credit union, or from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program) or SEMP (Stock Exchanges Medallion Program). Members are
subject to dollar limitations which must be considered when requesting their
guarantee. The Transfer Agent may reject any signature guarantee if it believes
the transaction would otherwise be improper.
Wire Transfer Call 1-888-FIRST16 (1-888-347-7816) to
request a wire transfer.
You must indicate this option If you call in your redemption request of
on your account application. $1,000 or more by 12:00 noon Eastern time,
your payment will normally be wired to your
bank on the same business day. Otherwise,
it will normally be wired on the next
business day after your call.
Your financial institution may
charge a wire transfer fee.
<PAGE>
19
Electronic Redemptions Call 1-888-FIRST16 to request an electronic
redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. determined on the same day and the
bank. proceeds credited within 7 days.
Systematic Withdrawal Plan
You can receive automatic payments from your account on a monthly,
quarterly, semi annual basis. The minimum withdrawal is $50. To activate this
feature:
. Make sure you've checked the appropriate box on the Account
Application. Or call 1-888-FIRST16.
. Include a voided personal check.
. Your account must have a value of $10,000 or more to start
withdrawals.
. If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may
close your account and mail the proceeds to you.
Verifying Telephone Redemptions
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity. Given
these precautions, unless you have specifically indicated on your application
that you do not want the telephone redemption feature, you may be responsible
for any fraudulent telephone orders. If appropriate precautions have not been
taken, the Transfer Agent may be liable for losses due to unauthorized
transactions. Telephone redemption privileges will be suspended for a 30-day
period following a telephone address change.
Redemptions Within 15 Days of Investment
When you have made an investment by check, payment on redemption requests
will be delayed until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 days from purchase date). You can avoid this delay
by purchasing shares with a certified check.
<PAGE>
20
Redemption in Kind
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." The could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
Closing of Small Accounts
If your account falls below $500, the Fund may ask you to increase your
balance. If it is still below $500 after 30 days, the Fund may close your
account and send you the proceeds.
Undeliverable Redemption Checks
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be considered void. The check will be canceled and the money
reinvested in the Fund.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
EXCHANGING YOUR SHARES
Instructions for Exchanging Shares
Exchanges made by sending written request to First Choice Funds Trust, PO
Box 5176, Westborough, MA 01581-5176, or by calling 1-888-FIRST16 (1-888-347-
7816). Please provide the following information:
. Your name and telephone number
. The exact name on your account and account number Taxpayer
identification number (usually your Social Security number)
. Dollar value or number of shares to be exchanged
<PAGE>
21
. The name of the Fund from which the exchange is to be made
. The name of the Fund into which the exchange is being made
You must meet the minimum investment requirements for the Fund into which
you are exchanging. Exchanges from the Fund to another are taxable. You should
review the prospectus of the First Choice Fund before making an exchange.
See "Selling your Shares" for important information about telephone
transactions. The Fund reserves the right to modify or terminate the exchange
privilege upon 60 days' written notice.
To prevent disruption in the management of the Fund, due to market timing
strategies, exchange activity may be limited to 4 exchanges within a 12-month
period.
Notes on Exchanges
When exchanging from a Fund that has no sales charge or a lower sales
charge to a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
Be sure to read the Prospectus carefully of any First Choice Fund into
which you wish to exchange shares.
Dividends, Distributions and Taxes
Any income the Fund receives in the form of interest or dividends is paid
out, less expenses, to its shareholders as dividends. Income dividends on the
Fund are paid quarterly. Shares purchased will begin earning dividends on the
day the shares are bought and shares redeemed will earn dividends through the
day before redemption. Capital gains, if any, for the Fund are distributed at
least annually. Taxes on capital gains will vary with the length of time the
Fund has held the security, not how long you have invested in the Fund.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
Dividends and distributions from the Fund are taxable to shareholders
whether received in additional shares or in cash.
<PAGE>
22
Dividends are taxable as ordinary income. Dividends are taxable in the year
in which they are paid, even if they appear on your account statement the
following year.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
The financial highlights table is intended to help you understand the
Fund's financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the annual report which is
available upon request.
<PAGE>
23
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S>............................................ <C> <C>
Net Asset Value, Beginning of Year............. $ 9.46 $10.00
Investment Activities
Net investment income........................ -- --
Net realized and unrealized gains (losses)..... 2.61 (.54)
from investment transactions................. ------
Total from Investment Activities............... 2.61 (.54)
Distributions
From net investment income
From net realized gains...................... (.04) --
In excess of net realized gains.............. -- --
--------- --------
Total Distributions.......................... (.04) --
--------- --------
Net Asset Value, End of Year................... $12.03 $ 9.46
Total Return.................................. 27.59% (5.40%)
Net Assets at end of period (000)............ 77 126
Ratio of expenses to average net assets...... .93% 1.50%
Ratio of net investment income to average net.. .75% .05%
assets
Ratio of expenses to average net assets*..... 2.03% 2.69%
Portfolio Turnover Rate...................... 110% 47%
</TABLE>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the ratios
would have been as indicated.
** In addition to the net realized and unrealized gains from investment
transactions, this amount includes a decrease in net asset value per share
resulting from the timing of issuances and redemptions of Fund shares in
relation to fluctuating market values for the portfolio.
For more information about the Fund, the following documents are available free
upon request:
Annual/Semi-annual Reports (Reports):
The Fund's annual and semi-annual reports to shareholders contain detailed
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
<PAGE>
Statement of Additional Information:
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus. You can get free copies of Reports
and the SAI, Prospectuses of other First Choice Funds, or request other
information and discuss your questions about the Fund by contacting a broker or
bank that sells the Fund. Or contact the Fund at:
First Choice Funds
P.O. Box 5176
Westborough, MA 01581-5176
Telephone: 1-888-FIRST16
(1-888-347-7816)
You can review and copy the Fund's reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
. For a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-0102 or by electronic request at
[email protected]. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 202-942-
8090.
. Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file number: 811-7681
General and Account Information:
1-888-FIRST16
1-888-347-7816
FIRST AMERICAN CAPITAL MANAGEMENT, INC.
Investment Adviser
PFPC, INC.
Administrator and Transfer Agent
PROVIDENT DISTRIBUTORS, INC.
Distributor
<PAGE>
================================================================================
FIRST CHOICE FUNDS TRUST
First Choice Equity Fund
Institutional Class
c/o PFPC, Inc.
4400 Computer Drive
P.O. Box 5176
Westborough, MA 01581-5176
www.firstchoicefunds.com
January 31, 2000
An investment in the Fund is not a deposit of the bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or truthful. Any
representation to the contrary is a criminal offense.
================================================================================
<PAGE>
2
Table of Contents
Risk/Return Summary
- --------------------------------------------------------------------------------
Carefully review this 3 Objective, Principal Investment
important section, which Strategy and Principal Risks
summarizes each Fund's
investments, risks, past
performance and fees.
Investment Objective, Strategies and Risks
- --------------------------------------------------------------------------------
Review this section for 7 Investment Objective
information on investment 8 Investment Policy and Strategy
strategies and their risks. 8 Risk Considerations
Fund Management
- --------------------------------------------------------------------------------
Review this section for 10 The Investment Adviser
details on the people and 11 The Distributor and
organizations who oversee Administrator
the Fund.
Shareholder Information
- --------------------------------------------------------------------------------
Review this section for 12 Pricing of Fund Shares
details on how shares are 12 Purchasing and Adding to Your
valued, how to purchase, Shares
sell and exchange shares, 15 Selling Your Shares
related charges and 18 Exchanging Your Shares
payments of dividends and 18 Dividends, Distributions and
distributions. Taxes
Financial Highlights
- --------------------------------------------------------------------------------
Back Cover
- --------------------------------------------------------------------------------
# Where to learn more about this Fund
<PAGE>
3
Risk/Return Summary
The following is a summary of certain key information about the Institutional
Class shares of the First Choice Equity Fund. The Fund also has Retail Class
shares, offered through a separate prospectus. You will find additional
information about the Fund, including a detailed description of the risks of an
investment in the Fund, after this summary.
The Risk/Return Summary describes certain kinds of risks that apply to the Fund.
Investment Objective The Fund is an "equity" fund that seeks long-term
growth of capital and income.
Principal Investment
Strategies Under normal circumstances, the Fund invests at least
80% of its net assets in a diversified portfolio of
equity securities issued by companies in a variety of
different industries. The Fund's equity investments
consist of common stocks, preferred stocks and
securities convertible into common stocks. The Fund
intends to invest up to 20% of its assets in ADRs.
The Fund intends to achieve its investment objective
through capital appreciation of its portfolio
holdings over time and, to a lesser extent, dividend
income. Current income is a secondary consideration.
The Adviser buys and sells securities based on their
analysis of the industry sectors of the market and
evaluates the companies within each sector.
Principal
Investment Risks The principal risks of investing in the Fund are
market risk, security-specific risk, interest rate
risk and foreign risk.
Market Risk Risk that the value of the Fund's investments will
fluctuate as the stock market fluctuates and that
stock prices overall may decline over short or
longer-term periods.
Interest Rate Risk Risk that changes in interest rates will affect the
value of the Fund's investments in income-producing
or fixed-income or debt securities. Increases in
interest rates may cause the value of the Fund's
investments to decline.
Security-Specific Risk Risk that the issuer will be unable to achieve its
earnings or growth expectations.
<PAGE>
4
Foreign Risk Depositary Receipts, American Depositary Receipts
("ADRs") are U.S. dollar-denominated receipts
generally issued by domestic banks, which evidence
the deposit with the bank of the common stock of a
foreign issuer and which are publicly traded on
exchanges or over-the-counter in the United States.
The Funds may invest in both sponsored and
unsponsored ADR programs. There are certain risks
associated with investments in unsponsored ADR
programs. Because the non-U.S. company does not
actively participate in the creation of the ADR
program, the underlying agreement for service and
payment will be between the depository and the
shareholder. The company issuing the stock underlying
the ADR pays nothing to establish the unsponsored
facility, as fees for ADR issuance and cancellation
are paid by brokers. Investors directly bear the
expenses associated with certificate transfer,
custody and dividend payment.
In an unsponsored ADR program, there also may be
several depositories with no defined legal
obligations to the non-U.S. company. The duplicate
depositories may lead to marketplace confusion
because there would be no central source of
information to buyers, sellers and intermediaries.
The efficiency of centralization gained in a
sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In
addition, with respect to all ADRs there is always
the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not
typically involved in purely domestic investments,
including future foreign political and economic
developments, and the possible imposition of foreign
governmental laws or restrictions applicable to such
investments. Securities of foreign issuers through
ADRs re subject to different economic, financial,
political and social factors. Individual foreign
economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance
of payments position. With respect to certain
countries, there is the possibility of expropriation
of assets, confiscatory taxation, political or social
instability or diplomatic developments which could
adversely affect the value of the particular ADR.
There may be less
<PAGE>
5
publicly available information about a foreign
company than about a U.S. company, and there may be
less governmental regulation and supervision of
foreign stock exchanges, brokers and listed
companies. In addition, such companies may use
different accounting and financial standards (and
certain currencies may become unavailable for
transfer from a foreign currency), resulting in a
Fund's possible inability to convert proceeds
realized upon the sale of portfolio securities of the
affected foreign companies immediately into U.S.
currency.
Other important things for you to note:
. Because the value of the Funds' investments will
fluctuate with market conditions, so will the
value of your investment in the Fund.
. You may lose money by investing in the Fund.
Who may want to Consider investing in the Fund if you are:
invest? . seeking a long-term goal such as retirement
. looking to add a growth component to your
portfolio
. willing to accept higher risks commensurate with
investing in the general stock market
This Fund will not be appropriate for anyone:
. seeking monthly income
. pursuing a short-term goal or investing
emergency reserves
. seeking safety of principal
Performance Information
<PAGE>
6
<TABLE>
<S> <C>
The Risk/Return Summary of the Fund [INSERT BAR CHART]
includes tables showing the Fund's annual
returns and average annual returns. The bar Year-by-Year Total Returns as of 12/31 /1/
chart and table provide an indication of the
historical risk for the Fund by showing:
1998 13.95%
. changes in the Fund's 1999 23.52%
performance from year to year
since the Fund's Past performance is not necessarily an indication
inception; and of how the Funds will perform in the future.
. the Fund's average annual Best Quarter: 4th Q 1998 20.33%
return for one year and since Worst Quarter: 3rd Q 1998 -8.77%
its inception period.
If fee waivers or expense reimbursements
had not been reflected in the chart,
the Fund's performance would have been
lower.
Both the chart and table assume
reinvestment of dividends.
You may obtain information for any First
Choice Fund by calling 1-888-FIRST16
(1-888-347-7816).
</TABLE>
Performance Table
Average Annual Total Returns (for the periods ending December 31, 1999)
<TABLE>
<CAPTION>
Since
Inception Date Past Year Inception
------------------ ----------------- ------------------
<S> <C> <C> <C>
Equity Fund Institutional Class 6/2/98 23.52% 24.10%
S&P 500(R) Composite Index N/A 21.03% 22.22%
Lipper Growth & Income N/A 11.86% 9.31%
Fund Index
</TABLE>
________________________________
/1/ The Fund's return for the quarter ended December 31, 1999 was _____%.
<PAGE>
7
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (fees paid directly
from your investment)
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price) None
Maximum deferred sales charge
(load) None
Redemption Fees/1/ (as a percentage of None
amount redeemed)
Annual Fund Operating Expenses
(expenses are deducted from Fund
assets)
Management fee 1.00%
Administrative service fee .15%
Distribution (12b-1) fee None
Shareholder Servicing Fee .25%
Other Operating Expenses /2/ .84%
Total Fund Operating Expenses 2.09%
Fee Waivers /3/,/4/ 1.10%
Net Expenses /5/ .99%
1. Shareholders may be charged a wire redemption fee by their bank for
receiving a wire payment on their behalf.
2. Individual Retirement Accounts are subject to an annual maintenance and
custody fee ($10) and termination fee ($10).
3. The Adviser is contractually waiving its Management fee.
4. The Administrator is contractually limiting its Administrative Service fee
to .05%.
5. The contractual expense limitations are in effect through September 30,
2000.
<PAGE>
8
Example
Use the table to compare fees and 1 Year 3 Years 5 Years 10 Years
expenses with those of other Funds. It ------ ------- ------- --------
illustrates the amount of fees and $76 $237 $411 $918
expenses you would pay, assuming the
following:
. $10,000 investment
. 5% annual return
. no changes in the Fund's
operating expenses except the
expiration of the current
contractual fee waiver on
September 30, 2000.
. reinvestment of dividends and
distributions
Because this example is hypothetical and
for comparison only, your actual costs may
be different.
Investment Objectives, Strategies and Risk
Ticker Symbol:
This section of the prospectus provides a more complete description of the
principal investment objectives, policies, and principal risks of the Funds.
Additional descriptions of the Funds' risks, strategies, and investments, as
well as other strategies and investments not described below, may be found in
the Funds' SAI. Of course, there can be no assurance that any Fund will achieve
its investment objective.
Investment Objective, Policies And Risks
Investment Objective
The Fund's investment objective is long-term growth of capital and income.
The Fund seeks to achieve this objective by investing primarily in common
stocks.
Investment Policy and Strategy
Under normal circumstances, the Fund invests at least 80% of its net
assets in a diversified portfolio of equity securities issued by companies in a
variety of different industries.
<PAGE>
9
The Fund's investments will be selected from a large universe of companies
(within the Russell 3000 universe with a market capitalization of $1 billion or
more). In selecting equity investments for the Fund, the Adviser uses numerous
factors in the selection process, including but not limited to, corporate
profitability, earning growth prospects, market share and valuation. The
selection process includes evaluation of both growth and value characteristics
of a stock's relative attractiveness. Each investment is also evaluated for its
fit within the overall portfolio. An optimization process helps to determine the
desired mix of stock holdings. The mix of stock holdings is determined but may
not be limited to, industry exposure, position size, relative valuation and
economic sector allocation. Industry allocation is the weight of the industry
relation to the S&P 500 and the Fund allocation is adjusted based on industry
analysis.
The Fund's equity investments consist of common stocks, preferred stocks
and securities convertible into common stocks. The Fund intends to achieve its
investment objective through capital appreciation of its portfolio holdings over
time and, to a lesser extent, dividend income. Although current income is a
secondary consideration, many of the Fund's investments should provide regular
dividends which are expected to grow over time. The Fund allocates its
investments among different industries and companies and adjusts its portfolio
securities for investment considerations and not for short-term trading
purposes. The Fund may invest up to 15% of its net assets in illiquid and
restricted securities and Rule 144A private placements.
The Fund may also invest up to 20% of its total assets in foreign company
ADR's, including ADRs, which meet its investment objective. ADRs are dollar-
denominated receipts issued by U.S. banks or trust companies with respect to
securities of foreign issuers held on deposit with said banks and trusts in
their respective countries. The Fund may invest in both sponsored and
unsponsored ADR programs. See "Investment Practices" and "Risks of Investing
in the Fund."
In determining whether to dispose of an investment the Adviser will look at
whether or not the security continues to meet or has achieved the Adviser's
expectations that originally identified the investment's above average quality,
growth and valuation characteristics.
Risk Considerations
General Risk Factors:
The Fund is subject to market risk--the possibility that its net asset
value will decline with changes in the market value of the Fund's portfolio
securities. The Fund's investments represent proportionate interests in the
issuing companies. Therefore, the Fund participates in the success or failure
of any company in which it holds stock. The market value of
<PAGE>
10
common stock can fluctuate significantly, reflecting the business performance of
the issuing company, investor perception and general economic or financial
market movements. Investments in ADRs involve certain risks not typically
involved in purely domestic investments, including future foreign political and
economic developments, and the possible imposition of foreign governmental laws
or restrictions applicable to such investments. Securities of foreign issuers
through ADRs re subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards (and certain currencies may become unavailable for transfer
from a foreign currency), resulting in a Fund's possible inability to convert
proceeds realized upon the sale of portfolio securities of the affected foreign
companies immediately into U.S. currency.
Other Considerations
Portfolio Turnover
The portfolio turnover rate for the Fund is included in the Financial
Highlights section of this Prospectus. The Fund is actively managed and, in some
cases in response to market conditions, the Fund's portfolio turnover, may
exceed 100%. A higher rate of portfolio turnover increases brokerage and other
expenses, which must be borne by the Fund and its shareholders. High portfolio
turnover (over 100%) is likely to generate more taxable short-term gains for
shareholders which may have an adverse effect on performance of Fund.
Temporary Defensive Positions
In order to meet liquidity needs, the Fund may invest up to 100% of its
assets in fixed income securities, money market securities, certificates of
deposit, bankers' acceptances, commercial paper or in equity securities which in
the Adviser's opinion are more conservative than the types of securities that
the Fund typically invests in. To the extent a Fund is engaged in temporary
defensive investments, it will not be pursuing its investment objective.
Fund Management
The Investment Adviser
First American Capital Management, Inc. ("First American" or the "Adviser")
located at 567 San Nichols Drive, Newport, CA 92660, a wholly-owned subsidiary
of The First
<PAGE>
11
American Financial Corporation, has agreed to provide investment advisory
services to the Funds pursuant to an advisory agreement with the Fund (the
"Advisory Agreement"). Subject to such policies as the Trust's Board of Trustees
may determine, First American makes investment decisions for the Funds. For the
advisory services it provides to the Funds, First American receives fees based
on average daily net assets up to the following annualized rates.
For fiscal year ended September 30, 1999 First American waived its
contractual fees with respect to the Fund for the most recent fiscal year.
Contractual fees (without waivers) for the Fund are 1.00%.
From June 2, 1998 through June 30, 1999, the Adviser utilized, as part of
the investment process for the Equity Fund, a quantitative model developed by
Haugen Custom Financial Systems, a registered investment adviser with offices at
4199 Campus Drive, Suite 350, Irvine, CA 92612. The Adviser paid Haugen Custom
Financial Systems a monthly fee at the annual rate of .065% of the Equity Fund's
average daily net assets on the first $100 million; .125% of the Equity Fund's
average daily net assets on the next $100 million and .03% of the Equity Fund's
average daily net assets exceeding $200 million. For the period June 2, 1998
through September 30, 1998, Haugen Custom Financial Systems received fees of
$6,666.67.
Portfolio Managers
The Fund utilizes an Investment Committee to perform the day-to-day
Management of the Fund's Portfolio.
The Distributor and Administrator
Effective December 1, 1999, First Data Investor Services Group, Inc.
("Investor Services Group"), the Funds' administrator and transfer agent, became
an affiliate of PNC Bank Corp. and changed its name the PFPC Inc. ("PFPC"). On
the same date, Provident Distributors, Inc. replaced First Data Distributors,
Inc. as the Funds' distributor. Its principal office is at Four Falls Corporate
Center, 6th Floor, West Conshohoken, PA 19428-2961. The Distributor will
receive orders for, sell, and distribute shares of the Fund. The Distributor
also serves as distributor of other mutual funds.
The Funds have entered into an Administrative Services Contract with
PFPC pursuant to which the Administrator provides certain management and
administrative services necessary for the Fund's operations. For these services,
the Administrator receives from the Fund a fee, payable monthly, at the annual
rate of 0.15% of the Fund's average daily net assets. PFPC receives a separate
fee for providing fund accounting services to the Fund pursuant to the
Administration Agreement.
<PAGE>
12
Shareholder Information
Pricing of Fund Shares
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments
and other assets, subtracting its liabilities and then dividing that figure by
the number of outstanding shares of the Fund:
Total Assets Liabilities
------------------------
NAV = Number of Shares Outstanding
Per share net asset value (NAV) is determined and its shares are priced at
the close of regular trading on the New York Stock Exchange, normally at 4:00
p.m. Eastern time on days the Exchange is open. Your order for purchase, sale or
exchange of shares is priced at the next NAV calculated after your order is
accepted by the Fund. The Fund's securities are generally valued at current
market prices. If market quotations are not available, prices will be based on
fair value as determined by the Funds' Trustees.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the Funds may value the security at its fair value as determined in
good faith by or under the supervision of the Board of Trustees. The effect of
using fair value pricing is that a Fund's net asset value will be subject to the
judgment of the Board of Trustees or its designee instead of being determined by
the market. Because some of the Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those Funds' shares may
change on days when you will not be able to purchase or redeem shares.
Purchasing and Adding To Your Shares
Initial Purchase
The Institutional Class shares offered in this prospectus are sold at net
asset value without a sales load only to certain institutional investors who
invest a minimum of $50,000 in the Fund. All funds received are invested in
full and fractional shares of the Fund. Certificates for shares are not
issued. The Fund reserves the right to reject any purchase. The Fund will not
accept any third party or foreign checks.
<PAGE>
13
All initial investments should be accompanied by a completed Purchase
Application. A Purchase Application accompanies this Prospectus and a separate
application is required for IRA investments. The Fund reserves the right to
reject purchase orders.
. Minimum Initial Investment.......................... $50,000
. Minimum Initial Investment for IRAs.....................N/A
. Minimum Subsequent Investment........................ $1,000
All purchases must be in U.S. dollars. A fee will be charged for any
checks that do not clear. Third-party checks are not accepted.
Through an Authorized Broker,
Investment Adviser or Service Organization.
Shares are available to new and existing shareholders through authorized
brokers, investment advisers and Service Organizations who may charge additional
fees or impose other limitations on buying and selling shares. To make an
investment using this method, simply complete a Purchase Application and contact
your broker, investment adviser or Service Organization with instructions as to
the amount you wish to invest. Your broker, investment adviser or Service
Organization will then contact the Distributor to place the order on your behalf
on that day. Orders for the Fund received prior to 4:00 p.m. Eastern time will
become effective that day. Brokers who receive orders are obligated to transmit
them promptly. You should receive written confirmation of your order within a
few days of receipt of instructions from your broker.
By Regular Mail
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Fund and he
or she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
All investments made by regular mail or express delivery, whether initial
or subsequent, should be sent to:
First Choice Funds Trust
PO Box 5176
Westborough, MA 01581-5776
<PAGE>
14
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver application and payment to the address above.
Subsequent Investments:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
. Fund
. Amount invested
. Account name and number
2. Make check, bank draft or money order payable to "First Choice Funds
Trust."
3. Mail or deliver investment slip and payment to the address above.
By Wire Transfer
Telephone the Transfer Agent at 1-888-FIRST16 (1-888-347-7816) for
instructions. Please note your bank may charge you a fee for handling this
transaction.
You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges at
any time with 60 days' notice.
Federal Fund purchases will be accepted only on a day on which the relevant
Fund and the custodian bank are open for business.
Automatic Investment Program
You can make automatic investments in the Fund from your bank account,
through payroll deduction or from your federal employment, Social Security or
other regular government checks. For more information about automatic
investments, call 1-888-347-7816.
<PAGE>
15
To invest regularly from your bank account:
. Complete the Automatic Investment Plan portion on your Account
Application. Make sure you note:
-- Your bank name, address and account number
-- The amount you wish to invest automatically (minimum $50)
-- How often you want to invest (every month, 4 times a year, twice a
year or once a year)
. Attach a voided personal check.
To invest regularly from your paycheck or government check:
Call 1-888-FIRST16 (1-888-347-7816) for an enrollment form.
Service Organizations
Various banks, trust companies, broker-dealers (other than the Distributor)
and other financial organizations ("Service Organizations") may provide certain
administrative services for its customers who invest in the Fund through
accounts maintained at that Service Organization. The Fund will pay the Service
Organization a fee at an annual rate of up to .25% of the average daily net
asset value of shares for which the Service Organization from time to time
performs these services. The services provided include:
. receiving and processing shareholder orders
. performing the accounting for the customers' sub accounts
. maintaining retirement plan accounts
. answering questions and handling correspondence for individual accounts
. acting as the sole shareholder of record for its customers' accounts
. issuing shareholder reports and transaction confirmations
. performing daily "sweep" functions
Investors who purchase, sell or exchange shares for the funds through a
customer account maintained at a Service Organization may be charged for other
services which are not specified in the servicing agreement with the Fund but
are covered under separate fee schedules provided by the Service Organization to
their customers. Customers with accounts at Service Organizations should
consult their Service Organization for information concerning their sub-
accounts. The Adviser or Administrator also may pay Service Organizations for
rendering services to shareholders sub-accounts.
<PAGE>
16
Dividends and Distributions
All dividends and distributions will be automatically reinvested unless you
request otherwise on your application. There are no sales charges for
reinvested distributions. Capital gains are distributed at least annually.
SELLING YOUR SHARES
Question?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
Selling Your Shares
You may sell your shares at Withdrawing Money from Your Fund Investment
any time. Your sales price
will be the next NAV after As a mutual fund shareholder, you are
representative. Normally technically your sell order is received
you will receive your selling shares when you request a
proceeds within a week after withdrawal in by the Fund, its transfer
your request is received. cash.This is also known as redeeming
shares or a agent, or your investment
redemption of shares.
Instructions for selling shares
If selling your shares through your
financial adviser or broker, ask him or her
for redemption procedures. Your adviser
and/or broker may have transaction minimums
and/or transaction times which will affect
your redemption. For all other sales
transactions, follow the instructions
below.
By telephone
(unless you have declined 1. Call 1-888-FIRST16 (1-888-347-7816)
telephone sales privileges on with instructions as to how you wish to
your application) receive your funds (mail, wire, electronic
transfer).
<PAGE>
17
By mail 1. Call 1-888-FIRST16 (1-888-347-7816) to
(See "Selling Your request redemption forms or write a
Shares--Redemptions in letter of instruction indicating:
Writing Required") . your Fund and account number
. amount you wish to redeem
. address where your check should be sent
. account owner signature
2. Mail to:
First Choice Funds Trust
P.O. Box 5176
Westborough, MA 01581-5176
3. If redemption proceeds that are to be
sent to an address other than the
registered address or if the redemption
proceeds exceed $50,000, a signature
guarantee is required.
4. A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.
Wire Transfer Call 1-888-FIRST16 (1-888-347-7816) to
You must indicate this option request a wire transfer.
on your account application.
If you call in your redemption request of
$1,000 or more by 12:00 noon Eastern time,
your payment will normally be wired to your
bank on the same business day. Otherwise,
it will normally be wired on the next
business day after your call.
Your financial institution may
charge a wire transfer fee.
<PAGE>
18
Electronic Redemptions Call 1-888-FIRST16 (1-888-347-7816) to
request an electronic redemption.
Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. determined on the same day and the
bank. proceeds credited within 7 days.
Systematic Withdrawal Plan
You can receive automatic payments from your account on a monthly,
quarterly or semi-annual basis. The minimum withdrawal is $50. To activate
this feature:
. Make sure you've checked the appropriate box on the Account
Application. Or call 1-888-FIRST16 (1-888-347-7816).
. Include a voided personal check.
. Your account must have a value of $10,000 or more to start
withdrawals.
. If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may
close your account and mail the proceeds to you.
Verifying Telephone Redemptions
The Funds make every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity. Given
these precautions, unless you have specifically indicated on your application
that you do not want the telephone redemption feature, you may be responsible
for any fraudulent telephone orders. If appropriate precautions have not been
taken, the Transfer Agent may be liable for losses due to unauthorized
transactions. Telephone redemption privileges will be suspended for a 30-day
period following a telephone address change.
Redemptions Within 15 Days of Investment
When you have made an investment by check, payment on redemption requests
will be delayed until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 days from purchase date). You can avoid this delay
by purchasing shares with a certified check.
<PAGE>
19
Redemption in Kind
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." The could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of a Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you will pay brokerage charges.
Closing of Small Accounts
If your account falls below the amount of the initial investment, the Fund
may ask you to increase your balance. If it is still below the amount of the
initial investment after 30 days, the Fund may close your account and send you
the proceeds.
Undeliverable Redemption Checks
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain
uncashed for six months will be considered void. The check will be canceled and
the money reinvested in the Fund.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
EXCHANGING YOUR SHARES
Instructions for exchanging shares
Exchanges made by sending written request to First Choice Funds Trust, PO
Box 5176, Westborough, MA 01581-5176, or by calling 1-888-FIRST16 (1-888-347-
7816). Please provide the following information:
. Your name and telephone number
. The exact name on your account and account number Taxpayer
identification number (usually your Social Security number)
. Dollar value or number of shares to be exchanged
<PAGE>
20
. The name of the Fund from which the exchange is to be made.
. The name of the Fund into which the exchange is being made.
You must meet the minimum investment requirements for the Fund into which
you are exchanging. Exchanges from the Fund to another are taxable. You should
review the prospectus of the First Choice Fund before making an exchange.
See "Selling your Shares" for important information about telephone
transactions. The Funds reserve the right to modify or terminate the exchange
privilege upon 60 days' written notice.
To prevent disruption in the management of the Fund, due to market timing
strategies, exchange activity may be limited to 4 exchanges within a 12-month
period.
Notes on exchanges
The registration and tax identification numbers of the two account must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
Be sure to read the Prospectus carefully of any First Choice Fund into
which you wish to exchange shares.
Dividends and Distributions and Taxes
Any income the Fund receives in the form of interest or dividends is paid
out, less expenses, to its shareholders as dividends. Income dividends on the
Fund are paid quarterly. Shares purchased will begin earning dividends on the
day the shares are bought and shares redeemed will earn dividends through the
day before redemption. Capital gains, if any, for the Fund are distributed at
least annually. Taxes on capital gains will vary with the length of time the
fund has held the security, not how long you have invested in the Fund.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
Dividends and distributions from a Fund are taxable to shareholders whether
received in additional shares or in cash.
Dividends are taxable as ordinary income. Dividends are taxable in the
year in which they are paid, even if they appear on your account statement the
following year.
<PAGE>
21
You will be notified in January each year about the federal tax status of
distributions made by the Funds. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
Questions?
Call 1-888-FIRST16 (1-888-347-7816) or your investment representative.
The financial highlights table is intended to help you understand the
Funds' financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the annual report which is
available upon request.
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Year............. $ 9.47 $ 10.00
Investment Activities
Net investment income........................ 0.11 0.01
Net realized and unrealized gains
(losses) from investment transactions...... 2.56 (0.54)
------- -------
Total from Investment Activities............... $ 2.67 $ (0.63)
Distributions
From net investment income
From net realized gains...................... ($0.11) --
In excess of net realized gains.............. -- --
------- -------
Total Distributions.......................... ($0.11) --
======= =======
Net Asset Value, End of Year................... 12.03 9.47
Total Return................................... 28.29% (5.3%)
Net Assets at end of period (000)............ 18,251 14,226
Ratio of expenses to average net asset....... .74% 1.25%
Ratio of net investment income to average net.. .94% .30%
assets
Ratio of expenses to average net assets*..... 1.84% 2.44%
Portfolio Turnover Rate...................... 110% 47%
</TABLE>
<PAGE>
22
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** In addition to the net realized and unrealized gains from investment
transactions, this amount includes a decrease in net asset value per share
resulting from the timing of issuances and redemptions of Fund shares in
relation to fluctuating market values for the portfolio.
For more information about the Funds, the following documents are available free
upon request:
Annual/Semi-annual Reports (Reports):
The Funds' annual and semi-annual reports to shareholders contain detailed
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during its last fiscal year.
<PAGE>
Statement of Additional Information (SAI):
The SAI provides more detailed information about the Funds, including their
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus. You can get free copies of Reports
and the SAI, Prospectuses of other First Choice Funds, or request other
information and discuss your questions about the Funds by contacting a broker or
bank that sells the Funds. Or contact the Funds at:
First Choice Funds
P.O. Box 5176
Westborough, MA 01581-5176
Telephone: 1-888-FIRST16 (1-888-347-7816)
You can review and copy the Fund's reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get text-only copies:
. For a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-0102 or by electronic request at
[email protected]. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 202-942-
8090.
. Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file number: 811-7681
General and Account Information:
1-888-347-7816
FIRST AMERICAN CAPITAL MANAGEMENT, INC.
Investment Adviser
PFPC, Inc.
Administrator and Transfer Agent
PROVIDENT DISTRIBUTORS, INC.
Distributor
<PAGE>
FIRST CHOICE FUNDS TRUST
4400 COMPUTER DRIVE, WESTBOROUGH, MA 01581
GENERAL AND ACCOUNT INFORMATION: 1-888-FIRST16 (1-888-347-7816)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") describes the three
existing series of First Choice Funds Trust (each a "Fund," collectively, the
"Funds"). The Funds are:
. First Choice U.S. Treasury Reserve Fund
. First Choice Cash Reserve Fund
. First Choice Equity Fund
Each Fund constitutes a separate investment portfolio of First Choice Funds
Trust (the "Trust"), a Delaware business trust and open-end, investment
management company. Each portfolio has distinct investment objectives and
policies.
First Choice U.S. Treasury Reserve Fund and First Choice Cash Reserve Fund
(collectively, the "Money Market Funds") are money market funds managed by First
American Capital Management Inc. ("First American" or the "Adviser"). Each of
the Money Market Funds offers three classes of shares --the Investment Class,
the Institutional Class and the Service Class. Investment Class shares are
available through authorized financial services companies which provide to
investors various administrative services including shareholder servicing, sub-
accounting and sub-transfer agency services. The Service Class shares are
available to customers who require shareholder servicing. The Institutional
Class shares are available to institutional investors. The Investment Class
shares impose shareholder servicing, administrative and Rule 12b-1 fees. The
Service Class shares impose shareholder servicing and Rule 12b-1 fees. The
Institutional Class shares are subject to a minimum investment of $50,000 and do
not impose any administrative, shareholder servicing or Rule 12b-1 fees.
First Choice Equity Fund (the "Equity Fund") is an equity fund managed by
First American. The Equity Fund offers two classes of shares -- the
Institutional Class and the Retail Class. The Retail Class shares are available
to customers through authorized banks, trust companies, broker-dealers or other
financial organizations at a sales charge of 4.5% (4.71% of the amount
invested). The Institutional Class shares are subject to a minimum investment of
$50,000 and are available to institutional investors without a sales charge. The
Retail Class shares and the Institutional Class shares are identical in all
other respects, with the exception that the Institutional Class shares do not
impose any Rule 12b-1 fees. See "Other Information -- Capitalization" herein.
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the respective prospectuses for the Funds each dated
____________, 2000 (the "Prospectus"). This SAI contains additional and more
detailed information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus. The Prospectus may be obtained without charge
by writing or calling the Funds at the address or information number printed
above.
January, 31, 2000
<PAGE>
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT POLICIES................................................. 3
INVESTMENT RESTRICTIONS............................................. 14
MANAGEMENT.......................................................... 17
Trustees and Officers............................................... 17
Investment Adviser.................................................. 18
Distribution of Fund Shares......................................... 20
Distribution Plan................................................... 20
Administrative Services............................................. 21
Service Organizations............................................... 22
DETERMINATION OF NET ASSET VALUE.................................... 24
PORTFOLIO TRANSACTIONS.............................................. 26
TAXATION............................................................ 29
OTHER INFORMATION................................................... 32
Capitalization...................................................... 32
Voting Rights....................................................... 34
Custodian, Transfer Agent and Dividend Disbursing Agent............. 35
Experts............................................................. 35
Counsel to the Trust................................................ 35
Performance Information............................................. 35
FINANCIAL STATEMENTS................................................ 40
APPENDIX A - RATINGS OF DEBT SECURITIES............................. 41
</TABLE>
<PAGE>
3
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize, and certain risks attendant to such
investments, policies and strategies.
U.S. Treasury Obligations (All Funds). Each Fund may invest, and the U.S.
Treasury Reserve Fund invests exclusively (except due to emergency conditions
causing disruption of business at the Adviser in which case, in accordance with
the procedures adopted by the Board of Trustees, the Fund may temporarily invest
in repurchase agreements), in direct obligations of the United States Treasury
that have remaining maturities not exceeding thirteen months (397 days). The
United States Treasury issues various types of marketable securities consisting
of bills, notes and bonds. They are direct obligations of the United States
Government and differ primarily in the length of their maturity. Treasury bills,
the most frequently issued marketable United States Government security, have a
maturity of up to one year and are issued on a discount basis.
U.S. Government Agency Obligations (Cash Reserve Fund and Equity Fund
Only). Each Fund may invest in obligations of agencies of the United States
Government. Such agencies include, among others, Farmers Home Administration,
Federal Farm Credit System, Federal Housing Administration, Government National
Mortgage Association, Maritime Administration, Small Business Administration,
and The Tennessee Valley Authority. Each Fund may purchase securities issued or
guaranteed by the Government National Mortgage Association, which represent
participations in Veterans Administration and Federal Housing Administration
backed mortgage pools. Obligations of instrumentalities of the United States
Government include securities issued by, among others, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal Land Banks, Federal National
Mortgage Association and the United States Postal Service. Some of these
securities are supported by the full faith and credit of the United States
Treasury (e.g., Government National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation; therefore, in the event
of a default prior to maturity, there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.
Commercial Paper (Cash Reserve Fund and Equity Fund Only). Commercial paper
includes short-term unsecured promissory notes, variable rate master notes
issued by domestic and foreign bank holding companies, corporations and
financial institutions. All commercial paper purchased by a Fund is, at the time
of investment: (i) rated within the highest rating category of at least two of
the Nationally
<PAGE>
4
Recognized Statistical Rating Organizations ("NRSROs") that have rated the
security; (ii) if rated by only one such rating organization, rated within the
highest rating category of that rating organization; or (iii) if unrated,
determined by the Adviser to be of an investment quality comparable to the rated
securities in which the Fund may invest pursuant to guidelines established by
the Board of Trustees.
Convertible Securities (Equity Fund Only). Convertible securities are
bonds, notes, debentures, preferred stocks and other securities which may be
converted or exchanged at a stated or determinable exchange ratio into shares of
common stock. Convertible securities rank senior to common stock in an issuer's
capital structure and are consequently of higher quality and entail less risk
than the issuer's common stock. As with all debt securities, the market value of
convertible securities tends to increase when interest rates decline and
conversely, tends to decline when interest rates increase. In addition, the
prices of convertible securities often reflect changes in the value of the
underlying common stock.
Debt Securities (Cash Reserve Fund and Equity Fund Only). Each Fund's
investments in these securities are limited to corporate debt securities
(corporate bonds, debentures, notes and similar corporate debt instruments)
which meet the rating criteria established for the Fund. The Cash Reserve Fund
may invest only in high quality debt securities as described in the Prospectus.
The Equity Fund may invest in investment grade debt securities rated Baa or
better by Moody's Investors Services, Inc. ("Moody's") or BBB or better by
Standard & Poor's Ratings Group ("S&P", a division of McGraw Hill Companies,
Inc.) or, if unrated, judged by the Adviser to be of comparable quality. If the
rating of a security falls below investment grade, management will consider
appropriate action consistent with the Fund's investment objective and policies.
See Appendix A to the SAI for a discussion of rating categories. Investment in
debt securities by the Equity Fund is limited to periods when, in the opinion of
the Adviser, a temporary defensive position is consistent with the best interest
of shareholders. After purchase by a Fund, a security may cease to be rated or
its rating may be reduced below the minimum required for purchase by such Fund.
Neither event will require a sale of such security by a Fund. However, the
Fund's Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by a NRSRO
may change as a result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
SAI.
Bank Obligations (Cash Reserve Fund and Equity These Fund Only).
obligations include, but are not limited to the following domestic, Eurodollar
<PAGE>
5
and Yankeedollar obligations: certificates of deposits, time deposits, bankers'
acceptances, commercial paper, bank deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies.
Certificates of deposit are issued against funds deposited in an eligible bank
(including its domestic and foreign branches, subsidiaries and agencies), are
for a definite period of time, earn a specified rate of return and are normally
negotiable. A bankers' acceptance is a short-term draft drawn on a commercial
bank by a borrower, usually in connection with a commercial transaction. The
borrower is liable for payment, as is the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date. Eurodollar obligations
are U.S. Dollar obligations issued outside the United States by domestic or
foreign entities. Yankeedollar obligations are U.S. dollar obligations issued
inside the United States by foreign entities. Bearer deposit notes are
obligations of a bank, rather than a bank holding company. Similar to
certificates of deposit, deposit notes represent bank level investments and,
therefore, are senior to all holding company corporate debt, except certificates
of deposit.
Variable and Floating Rate Demand and Master Demand Obligations (Cash
Reserve Fund and Equity Fund Only). Each Fund may, consistent with its permitted
investment policies, buy variable rate demand obligations issued by
corporations, bank holding companies and financial institutions, and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity of 397 days
or less, and will carry with them the right of the holder to put the securities
to a remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities may
or may not be backed by a letter of credit or other obligation issued by a
financial institution. The purchase price is ordinarily par plus accrued and
unpaid interest. Alternatively, the variable rate note may reset at periodic
rates such as monthly, quarterly or semi-annually and is considered to be
amortized out to the date of the reset pursuant to SEC Rule 2a-7.
Each Fund may also buy variable rate master demand obligations. The terms
of these obligations permit the investment of fluctuating amounts by a Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit weekly, and in some instances daily,
changes in the amounts borrowed. A Fund has the right to increase the amount
under the obligation at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to the full
amount of the obligation without penalty. The obligations may or may not be
backed by bank letters of credit. Because the obligations are direct lending
<PAGE>
6
arrangements between the lender and the borrower, it is not generally
contemplated that they will be traded, and there is no secondary market for
them, although they are redeemable (and thus, immediately repayable by the
borrower) at principal amount, plus accrued interest, upon demand. Each Fund has
no limitations on the types of issuers from whom such obligations may be
purchased. The Funds will invest in unrated variable rate master demand
obligations only when such obligations are determined by the Adviser or,
pursuant to guidelines established by the Board of Trustees, to be of comparable
quality to rated issuers or instruments eligible for investment by a Fund.
When-Issued and Delayed-Delivery Securities (All Funds). The Funds may
purchase securities on a when-issued or delayed-delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the transaction. The securities so purchased are subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. To facilitate such acquisitions, the Funds will maintain
with the custodian a separate account with a segregated portfolio of securities
in an amount at least equal to the value of such commitments. On the delivery
dates for such transactions, each Fund will meet obligations from maturities or
sales of the securities held in the separate account and/or from cash flow.
While the Funds normally enter into these transactions with the intention of
actually receiving or delivering the securities, they may sell these securities
before the settlement date or enter into new commitments to extend the delivery
date into the future, if the Adviser considers such action advisable as a matter
of investment strategy. Such transactions have the effect of leverage on the
Funds and may increase the volatility of a Fund's net asset value.
Investment in Other Mutual Funds (Cash Reserve Fund and Equity Fund Only).
Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of the Investment Company Act of 1940, as
amended (the "1940 Act") and subject to such investments being consistent with
the overall objective and policies of such Fund, provided that any such
purchases will be limited to short-term investments in shares of investment
companies, and will not, in the aggregate, exceed 10% of a Fund's net assets.
The purchase of securities of other mutual funds results in duplication of
expenses such that investors indirectly bear a proportionate share of the
expenses of such mutual funds including operating costs and investment advisory
and administrative fees.
Loans of Portfolio Securities (All Funds). The Funds may lend their
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or approved bank letters of credit maintained on a daily
<PAGE>
7
mark-to-market basis in an amount at least equal to the current market value of
the securities loaned; (2) the Funds may at any time call the loan and obtain
the return of the securities loaned within five business days; (3) the Funds
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets of a particular Fund. The Funds will earn income for
lending their securities because cash collateral pursuant to these loans will be
invested in short-term money market instruments. A portion of the proceeds from
investing cash collateral may be rebated to the borrower. In connection with
lending securities, the Funds may pay reasonable finders, administrative and
custodial fees. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral.
Repurchase Agreements (Cash Reserve Fund and Equity Fund Only). The Cash
Reserve Fund may invest up to 100% of its net assets in repurchase agreements
maturing in seven days or less, however, the Fund may not invest more than 10%
of its net assets in repurchase agreements maturing in more than seven business
days and in securities for which market quotations are not readily available.
The Equity Fund may invest in repurchase agreements for cash reserves or for
temporary defensive or emergency purposes. The Equity Fund may not invest more
than 15% of its net assets in repurchase agreements maturing in more than seven
business days and in securities for which market quotations are not readily
available. The Funds may enter into agreements with any bank or registered
broker-dealer which presents a minimal risk of bankruptcy. Such agreements may
be considered to be loans by a Fund for purposes of the 1940 Act. A repurchase
agreement is a transaction in which the seller of a security commits itself at
the time of the sale to repurchase that security from the buyer at a mutually
agreed-upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. The Adviser will monitor the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to insure that the value of the
security always equals or exceeds the repurchase price. In the event of default
by the seller under the repurchase agreement, the Fund may have problems in
exercising its rights to the underlying securities and may incur costs and
experience time delays in connection with the disposition of such securities.
Reverse Repurchase Agreements (All Funds). The Funds may enter into reverse
repurchase agreements to avoid selling securities during unfavorable market
conditions to meet redemptions. Pursuant to a reverse repurchase agreement, a
Fund will sell portfolio securities and agree to repurchase them from the buyer
at a particular date and price. Whenever a Fund enters into a reverse repurchase
<PAGE>
8
agreement, it will establish a segregated account in which it will maintain
liquid assets in an amount at least equal to the repurchase price marked to
market daily (including accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained. The Funds pay
interest on amounts obtained pursuant to reverse repurchase agreements. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Illiquid Securities (All Funds). Each Fund has adopted a nonfundamental
policy with respect to investments in illiquid securities. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), securities that are
otherwise not readily marketable and repurchase agreements having a maturity
longer than seven days. Securities that have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on the issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
Each Fund may invest in restricted securities issued under Section 4(2) of
the Securities Act, which exempts from registration "transactions by an issuer
not involving any public offering." Section 4(2) instruments are restricted in
the sense that they can only be resold through the issuing dealer and only to
institutional investors; they cannot be resold to the general public without
registration. Restricted securities issued under Section 4(2) of the Securities
<PAGE>
9
Act will be treated as illiquid and subject to the Funds' investment restriction
on illiquid securities.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities otherwise
subject to restrictions on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act
applicable to resales of certain securities to qualified institutional buyers.
It is the intent of the Funds to invest, pursuant to procedures established by
the Board of Trustees and subject to applicable investment restrictions, in
securities eligible for resale under Rule 144A which are determined to be liquid
based upon the trading markets for such securities.
Pursuant to guidelines established by, and under the supervision of, the
Board of Trustees, the Adviser will monitor the liquidity of restricted
securities in a Fund's portfolio. In reaching liquidity decisions, the Adviser
will consider, among other things, the following factors: (1) the frequency of
trades and quotes for the security over the course of six months or as
determined in the discretion of the Adviser; (2) the number of dealers wishing
to purchase or sell the security and the number of other potential purchasers
over the course of six months or as determined in the discretion of the Adviser;
(3) dealer undertakings to make a market in the security; (4) the nature of the
security and the marketplace in which it trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer); and (5) other factors, if any, which the Adviser deems relevant.
The Adviser will also monitor the purchase of Rule 144A securities to assure
that the total of all Rule 144A securities held by a Fund does not exceed 10% of
the Fund's average daily net assets (except that the Equity Fund may not exceed
15% of its average daily net assets). Rule 144A securities which are determined
to be liquid based upon their trading markets will not, however, be required to
be included among the securities considered to be illiquid for purposes of
nonfundamental Investment Restriction No. 1 set forth below. Investments in Rule
144A securities could have the effect of increasing Fund illiquidity.
Options on Securities Indices (Equity Fund only). The Fund may purchase and
sell call and put options on securities indices and in so doing can achieve many
of the same objectives it would achieve through the sale or purchase of options
on individual securities or other instruments. Options on securities indices
settle by cash settlement, i.e., an option on an index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
(except if, in the case of an OTC option, physical delivery is specified). This
<PAGE>
10
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss on an option on an index depends
on price movements in the instruments making up the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.
A European style put or call option may be exercised only upon expiration
or during a fixed period prior thereto while an American style put or call
option may be exercised at any time during the option period. The Fund is
authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below regarding exchange listed options uses the OCC as a paradigm,
but is also applicable to other financial intermediaries.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
<PAGE>
11
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund may lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with United
States government securities dealers recognized by the Federal Reserve Bank of
New York as "primary dealers," or broker dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any other NRSRO.
If the Fund sells (i.e., issues) a call option, the premium that it
receives may serve as a partial hedge, to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments in
its portfolio, or will increase the Fund's income. The sale of put options can
also provide income.
All calls sold by the Fund must be "covered" (i.e., the Fund must own the
futures contract subject to the calls) or must meet the asset segregation
requirements described below as long as the call is outstanding. Even though the
Fund will receive the option premium to help protect it against loss, a call
sold by the Fund exposes it during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying or
instrument and may require the Fund to hold a security or instrument which it
might otherwise have sold.
General Characteristics of Futures (Equity Fund only). The Fund may enter
into financial futures contracts or purchase or sell put and call options on
such futures as a hedge against anticipated market changes and for risk
management purposes. Futures are generally bought and sold on the commodities
exchanges where they are listed with payment of initial and variation margin as
described below. The sale of a futures contract creates a firm obligation by the
Fund, as seller, to deliver to the buyer the specific type of financial
instrument called for in the contract at a specific future time for a specified
<PAGE>
12
price (or, with respect to index futures and Eurodollar instruments, the net
cash amount). Options on futures contracts give the purchaser the right in
return for the premium paid to assume a position in a futures contract and
obligates the seller to deliver such position.
The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the CFTC and will be entered into only for bona fide
hedging, risk management or other portfolio management purposes. Typically,
maintaining a futures contract or selling an option thereon requires the Fund to
deposit with a financial intermediary as security for its obligations an amount
of cash or other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited thereafter on a daily basis as the mark to market value of the
contract fluctuates. The purchase of an option on financial futures involves
payment of a premium for the option without any further obligation on the part
of the purchaser. If the Fund exercises an option on a futures contract, it will
be obligated to post initial margin (and potential subsequent variation margin)
for the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur.
The Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of that Fund's total assets (taken at current value); however,
in the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Short Sales Against the Box (Equity Fund only). The Fund may sell
securities "short against the box." While a short sale is the sale of a security
that the Fund does not own, it is "against the box" if at all times when the
short position is open the Fund owns an equal amount of securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issuer as the securities sold short.
To secure its obligations to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with the Fund's custodian an amount
<PAGE>
13
at least equal to the securities sold short or securities convertible into, or
exchangeable for, the securities sold short. The Fund may close out a short
position by purchasing and delivering an equal amount of securities sold short,
rather than by delivering securities already held by the Fund, because the Fund
may want to continue to receive interest and dividend payments on securities in
its portfolio that are convertible into the securities sold short.
Use of Segregated and Other Special Accounts (Equity Fund only). Many
Strategic Transactions, in addition to other requirements, require that the Fund
segregate liquid assets with its custodian to the extent the Fund's obligations
are not otherwise "covered" through ownership of the underlying security or
financial instrument. Liquid assets include equity and debt securities so long
as they are readily marketable. The Adviser, subject to oversight by the Board
of Trustees, is responsible for determining and monitoring the liquidity of
securities in segregated accounts on a daily basis. In general, either the full
amount of any obligation by the Fund to pay or deliver securities or assets must
be covered at all times by the securities, instruments or currency required to
be delivered, or, subject to any regulatory restrictions, an amount of cash or
liquid securities at least equal to the current amount of the obligation must be
segregated with the custodian. The segregated account may consist of notations
on the books of the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option sold by the Fund
on an index will require the Fund to own portfolio securities which correlate
with the index or to segregate liquid assets equal to the excess of the index
value over the exercise price on a current basis. A put option written by a Fund
requires the Fund to segregate liquid assets equal to the exercise price.
OTC options entered into by the Fund and OCC issued and exchange listed
options, will generally provide for cash settlement. As a result, when the Fund
sells these instruments, the Fund will only segregate an amount of assets equal
to its accrued net obligations, as there is no requirement for payment or
delivery of amounts in excess of the net amount. When the Fund sells a call
option on an index at a time when the in-the-money amount exceeds the exercise
price, the Fund will segregate, until the option expires or is closed out, cash
or cash equivalents equal in value to such excess. OCC issued and exchange
listed options sold by the Fund other than those above generally settle with
physical delivery, and the Seller will segregate an amount of assets equal to
the full value of the option. OTC options settling with physical delivery, or
with an election of either physical delivery or cash settlement will be treated
the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
<PAGE>
14
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. In the case of portfolio securities which are
loaned, collateral values of the loaned securities will be continuously
maintained at not less than 100% by "marking to market" daily. The Fund may also
enter into offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in related options
and Strategic Transactions. For example, the Fund could purchase a put option if
the strike price of that option is the same or higher than the strike price of a
put option sold by the Fund. Moreover, instead of segregating assets if the Fund
held a futures contract, it could purchase a put option on the same futures
contract with a strike price as high or higher than the price of the contract
held. Other Strategic Transactions may also be offset in combinations. If the
offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
The Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code for qualification
as a regulated investment company (see "TAXATION").
INVESTMENT RESTRICTIONS
The following restrictions restate or are in addition to those described
under "Investment Restrictions" in the Prospectus. The following Investment
Restrictions are fundamental policies of the Funds, which can be changed only
when permitted by law and approved by a majority of the Funds' outstanding
voting securities. A "majority of the outstanding voting securities" means the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented in person or by proxy, or (ii) more
than 50% of the outstanding shares.
The Equity Fund will invest at least 65% of its total assets in equity
securities.
Each Fund, except as indicated, may not:
<PAGE>
15
(1) Borrow money or pledge, mortgage or hypothecate its assets, except
that a Fund may enter into reverse repurchase agreements or borrow from banks up
to 10% (33% with respect to the Equity Fund) of the current value of its net
assets for temporary or emergency purposes, and such borrowings may be secured
by the pledge the Fund's assets (limited with respect to the Money Market Funds
to not more than 15% of the current value of total net assets) (but investments
may not be purchased by the Fund while any such borrowings exist);
(2) Issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security in connection with any reverse repurchase
agreement or any permitted borrowing;
(3) Make loans, except loans of portfolio securities and except that a
Fund may enter into repurchase agreements with respect to its portfolio
securities and may purchase the types of debt instruments described in its
Prospectus or the SAI;
(4) Invest in real property (including limited partnership interests, but
excluding real estate investment trusts and master limited partnerships),
commodities, commodity contracts, or oil, gas and other mineral resource,
exploration, development, lease or arbitrage transactions (except with respect
to the Equity Fund to the extent permitted with regard to its nonfundamental
policy #7 below);
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause it to be considered an underwriter as that term is defined under the
Securities Act;
(6) Purchase a security if, as a result, more than 25% of the value of its
total assets would be invested in securities of one or more issuers conducting
their principal business activities in the same industry (except for the Cash
Reserve Fund, which will concentrate its investments in obligations issued by
the banking industry, both domestic and foreign), provided that this limitation
shall not apply to obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities;
(7) Purchase a security if, as a result, (1) more than 5% of its total
assets would be invested in any one issuer other than the U.S. Government or its
agencies or instrumentalities (except that the Cash Reserve Fund may invest up
to 25% of its total assets in the first tier securities of a single issuer for
up to three business days), or (2) the Fund would own more than 10% of the
outstanding voting securities of such issuer (except that with respect to the
<PAGE>
16
Equity Fund, this restriction shall apply only with respect to 75% of its total
assets); or
(8) Invest more than 5% of its net assets in warrants which are unattached
to securities, nor more than 2% of the value of the Fund's net assets in
warrants which are not listed on the New York or American Stock Exchanges.
The following investment restrictions are nonfundamental policies which may
be changed by approval of a majority of the Board of Trustees:
Each Fund, except as indicated, may not:
(1) Invest more than 10% (15% with respect to the Equity Fund) of the
value of its net assets in investments which are illiquid (including repurchase
agreements having maturities of more than seven calendar days, and variable and
floating rate demand and master demand notes not requiring receipt of the
principal note amount within seven days notice);
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 10% of its net assets in shares of other investment
companies;
(4) Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(5) Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(6) Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Trust, the Adviser or the Distributor, each owning
beneficially more than 1/2 of 1% of the securities of such issuer, together own
more than 5% of the securities of such Issuer; or
(7) Write, purchase or sell puts, calls or combinations thereof except the
Equity Fund may purchase or sell financial futures contracts, options on
financial futures contracts and options on securities indices, as permitted by
applicable law.
<PAGE>
17
In addition, a Fund will not invest more than 5% of its total assets in the
securities (including the securities collateralizing a repurchase agreement) of
a single issuer, except that a Fund may invest in U.S. Government securities or
repurchase agreements that are collateralized by U.S. Government securities
without any such limitation and except that the Cash Reserve Fund may invest up
to 25% of its total assets in the first tier securities of a single issuer for
up to three business days pursuant to the safe harbor available in Rule 2a-7.
Furthermore, the limitation does not apply with respect to conditional and
unconditional puts issued by a single issuer, provided that no more than 10% of
a Fund's total assets are invested in securities issued or guaranteed by the
issuer of the put. Investments in rated securities not rated in the highest
category by at least two rating organizations (or one rating organization if the
instrument was rated by only one such organization), and unrated securities not
determined by the Board of Trustees to be comparable to those rated in the
highest rating category, will be limited to 5% of a Fund's total assets, with
investment in any one such issuer being limited to no more than the greater of
1% of a Fund's total assets or $ 1,000,000.
MANAGEMENT
TRUSTEES AND OFFICERS
The names, ages and the principal occupations for the past five years of
the Trustees and executive officers of the Trust, are listed below. All of the
Trustees are deemed to be "non-interested persons" of the Trust for purposes of
the 1940 Act.
<TABLE>
<CAPTION>
Principal Occupation
Name and Address, Age Position Held with the Trust (during past 5 years)
- --------------------- ---------------------------- --------------------
<S> <C> <C>
RICHARD WEDEMEYER Chairman Vice President, The Channel
5 High Ridge Park Corporation since July 1996; Vice
Stamford, CT 06878 President of Performance Advantage,
Age 64 Inc. 1992 to July 1996; Vice
President of Jim Henson Productions
from 1979 to 1992; Author of In Transition
(Harper Collins); co-founder and co-
conductor of Harvard Business School
Club of New York Career Seminar;
Trustee of Jim Henson Legacy trust.
</TABLE>
<PAGE>
18
<TABLE>
<S> <C> <C>
JOHN J. PILEGGI Trustee President and Chief ExecutiveOfficer
ING Mutual Funds ING Mutual Funds Management Co. LLC,(since
Management Co. LLC August 1998); Director, Furman Selz LLC
18 Campus Boulevard, Suite 200 (since 1994); Senior Managing
Newtown Square, PA 19073 Director, Furman Selz LLC (1992-1994).
Age 41
DENNIS W. DRAPER Trustee Associate Professor of Finance at
University of Southern California University of Southern California
School of Business, since 1978; Director of Data
Hoffman, 701F Analysis, Inc. (financial services);
Los Angeles, CA 90089 and Editorial Board of Chicago Board
Age 50 of Trade.
JOSEPH N. HANKIN Trustee President, Westchester Community
75 Grasslands Road College since 1971; AdjunctProfessor
Valhalla, NY 10595 of Columbia University College since 1976.
Teachers
Age 60
JYLANNE DUNNE President of Vice President of Client Services of
PFPC, Inc.("PFPC") the Trust PFPC, Inc. (formerly First Data Investor
4400 Computer Drive Inc.("FDISG")) since 1988.
Westborough, MA 01581
Age 39
BRIAN O'NEILL Treasurer Manager of PFPC (formerly FDISG)
PFPC, Inc. Financial Reporting Department since 1994.
3200 Horizon Drive Supervisor in Accounting Services Unit of
King of Prussia, PA 19406-0903 Investor Services Group from 1992-1994.
Age 31
Linda Hoard Secretary
PFPC, Inc.
4400 Computer Drive
Westborough, MA 01581
</TABLE>
The following table sets forth certain information regarding the
compensation paid to the Trustees for the fiscal year ended September 30, 1999.
No officer of the Trust receives compensation from the Funds. No Trustee
<PAGE>
19
receives pension or retirement benefits from the Funds.
Aggregate Total Compensation
Compensation from from the Fund
the Trust Complex
John J. Pileggi, Trustee $6,000 $6,000
Dennis W. Draper, Trustee $6,000 $6,000
Joseph N. Hankin, Trustee $6,000 $6,000
Richard Wedemeyer, Trustee $8,250 $8,250
Trustees of the Trust receive from the Trust an annual retainer of $1,000
and a fee of $1,000 for each Board of Trustees meeting attended 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.
Officers and Trustees of the Trust, as a group, own less than 1% of the
outstanding shares of the Funds.
INVESTMENT ADVISER
First American has provided investment advisory services to the Funds since
inception pursuant to an advisory agreement with the Trust (the "Advisory
Agreement"). Subject to such policies as the Trust's Board of Trustees may
determine, First American makes investment decisions for the Funds. The Advisory
Agreement provides that, as compensation for its services thereunder, First
American is entitled to receive from each Fund a monthly fee at an annual rate
based upon average daily net assets of the Fund as set forth in the table of
Fund Expenses in the Prospectus. For the fiscal year ended September 30, 1998,
First American earned $225,778 from the U. S. Treasury Reserve Fund, $269,075
from the Cash Reserve Fund, $47,754 from the Equity Fund. Of those amounts
$188,149, $207,365 and $49,754 were waived. In addition, First American
Capital Management, Inc. reimbursed the Equity Fund $4,172. For the fiscal
year ended September 30, 1999, First American received $189,751 from the U.S.
Treasury Reserve Fund, $316,982 from the Cash Reserve Fund and $177,160 from the
Equity Fund. Of those amounts $146,768 and $256,953, and $177,160 were waived
and $0, $0 and $0 were reimbursed.
First American has contractually agreed to waive or reimburse .20% of the
Money Market advisory fee, 1.00% of the Equity Fund advisory fee and/or to
assume certain expenses of the Funds to the extent necessary to maintain the
total expense ratio of each Fund at no more than as set forth in the table of
Fund Expenses in the Prospectus.
<PAGE>
20
First American is located at 567 San Nicolas Drive, Suite 101, Newport
Beach, California 92660 and is a wholly-owned subsidiary of The First American
Financial Corporation. First American was organized on December 1, 1995, to
provide business management, advisory, administrative and asset management
consulting services and is a registered investment adviser.
The Advisory Agreements for the Funds will continue in effect for a period
beyond two years from the date of their execution only as long as such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Advisory Agreements may be terminated without penalty by vote of the Trustees or
the shareholders of the Funds, or by the Adviser, on 60 days written notice by
either party to the Contract and will terminate automatically if assigned.
DISTRIBUTION OF FUND SHARES
The Trust retains Provident Distributors Inc. ("PDI") to serve as principal
underwriter for the shares of the Funds pursuant to a Distribution Agreement.
The Distribution Agreement provides that the Distributor will use efforts it
deems appropriate to solicit orders for the sale of shares and may enter into
sales or servicing agreements with securities dealers, financial institutions
and other industry professionals as well as sell the Funds' shares to individual
investors. The Distributor is not obligated to sell any specific amount of
shares.
DISTRIBUTION PLAN
The Trustees of the Trust have voted to adopt a Master Distribution Plan
(the "Plan") pursuant to Rule 12b-1 of the 1940 Act for the Investment Class and
the Service Class shares of the Money Market Funds and the Retail Class shares
of the Equity Fund after having concluded that there is a reasonable likelihood
that the Plan will benefit the Investment Class, Service Class and Retail Class
shares of the respective Funds and their shareholders. The Plan provides for a
monthly payment by the Investment Class, Service Class and Retail Class shares
of the respective Funds to the Distributor in such amounts that the Distributor
may request, or for direct payment by the Fund, for certain costs incurred under
the Plan, subject to periodic Board approval, provided that each such payment is
based on the average daily value of the net assets of the Investment Class,
Service Class and the Retail Class shares during the preceding month and is
calculated at an annual rate not to exceed 0.25%. The Distributor will use all
amounts received under the Plan for payments to
<PAGE>
21
broker-dealers or financial institutions (not including banks) for their
assistance in distributing shares of the Investment Class, Service Class and the
Retail Class and otherwise promoting the sale of Investment Class, Service Class
and Retail Class shares, including payments in amounts based on the average
daily value of Investment Class, Service Class and Retail Class shares owned by
shareholders in respect of which the broker-dealer or financial institution has
a distributing relationship. The Distributor may also use all or any portion of
such fees to pay Fund expenses such as the printing and distribution of
prospectuses sent to prospective investors or the preparation, printing and
distribution of sales literature and expenses associated with media
advertisements.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear pursuant to the Plan without shareholder approval and that other
material amendments of the Plan must be approved by the Board of Trustees, and
by the Trustees who neither are "interested persons" (as defined in the 1940
Act) of the Trust nor have any direct or indirect financial interest in the
operation of the Plan or in any related agreement, by vote cast in person at a
meeting called for the purpose of considering such amendments. The selection and
nomination of the Trustees of the Trust has been committed to the discretion of
the Trustees who are not "interested persons" of the Trust. The Plan has been
approved, and is subject to annual approval, by the Board of Trustees and by the
Trustees who neither are "interested persons" nor have any direct or indirect
financial interest in the operation of the Plan, by vote cast in person at a
meeting called for the purpose of voting on the Plan. The Board of Trustees and
the Trustees who are not "interested persons" and who have no direct or indirect
financial interest in the operation of the Plan last voted to approve the Plan
at a meeting held on August 28, 1999. The Plan was submitted to the shareholders
of the Investment Class, the Service Class and the Retail Class and approved at
a special meeting of shareholders held on August 23, 1996 with respect to the
Service Class shares and a consent of sole shareholder dated April 20, 1998 with
respect to the Investment Class shares and the Retail Class shares. The Plan is
terminable with respect to each Class at any time by a vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or in the
Administration Agreement or by vote of the holders of a majority of the shares
of the Funds.
<PAGE>
22
For the fiscal year ended September 30, 1999, $20,716 in 12b-1 fees
was paid to the Distributor pursuant to the 12b-1 plan.
ADMINISTRATIVE SERVICES
On September 22, 1997, First Data Investor Services Group, Inc. (the
"Administrator") replaced BISYS Fund Services ("BISYS") as administrator of the
Trust. The Administrator provides management and administrative services
necessary for the operation of the Funds, including, among other things: (i)
preparation of shareholder reports and communications; (ii) regulatory
compliance, such as reports to and filings with the SEC and state securities
commissions; and (iii) general supervision of the operation of the Funds. In
addition, the Administrator furnishes office space and facilities required for
conducting the business of the Funds and pays the compensation of the Funds'
officers, employees and Trustees affiliated with the Administrator. For these
services, the Administrator receives from each Fund a fee, payable monthly, at
the annual rate of 0.15% of each Fund's average daily net assets. The
Administrator receives a separate fee for providing fund accounting services
pursuant to the Administration Agreement.
The Administration Agreement is for a three-year term and renewal thereof
is subject to approval by a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Administration Agreement. The Administration Agreement may
be terminated in the event the Administrator has failed to meet the performance
standards set forth therein or pursuant to a breach of performance under the
Transfer Agency and Service Agreement.
For the period October 1, 1996 through September 21, 1997, BISYS earned
$81,351 and $54,419 for the U.S. Treasury Reserve Fund and Cash Reserve Fund of
which $70,042 and $42,564 were waived. For the period September 22, 1997 through
September 30, 1997, the Administrator earned $890 and $721 for the U.S. Treasury
Reserve Fund and Cash Reserve Fund. For the fiscal year ended September 30,
1998, the Administrator earned $112,889 and $134,538 for the U.S. Treasury
Reserve Fund and Cash Reserve Fund and for the period June 2, 1998 through
September 30, 1998, the Administrator earned $7,463 for the Equity Fund, of
those amounts $68,757, $52,753 and $4,975 were waived. For the fiscal year ended
September 30, 1999, the Administrator earned $95,134, $158,494 and $26,574 for
the U.S. Treasury Reserve Fund, the Cash Reserve Fund and the Equity Fund,
respectively. Of those amounts $63,373, $62,770 and $17,716, respectively, were
waived.
SERVICE ORGANIZATIONS
<PAGE>
23
The Trust also contracts with banks, trust companies, broker-dealers or
other financial organizations ("Service Organizations") to provide certain
services for the Investment Class, the Service Class, Institutional Class and
the Retail Class.Services provided by Service Organizations may include, among
other things: providing necessary personnel and facilities to establish and
maintain certain shareholder accounts and records; assisting in processing
purchase and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with shareholders' orders to
purchase or redeem shares; verifying and guaranteeing client signatures in
connection with redemption orders, transfers among and changes in shareholders'
designating accounts; providing periodic statements showing a shareholder's
account balance and, to the extent practicable, integrating such information
with other client transactions; furnishing periodic and annual statements and
confirmations of all purchases and redemptions of shares in a shareholder's
account; transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Investment Class, the Service
Class or the Retail Class to the respective shareholders; and providing such
other services as the Investment Class, the Service Class or the Retail Class or
a shareholder reasonably may request, to the extent permitted by applicable
statute, rule or regulation. In addition, with respect to the Investment Class
and Service Class shares, a Service Organization may provide recordkeeping, sub-
accounting, sub-transfer agency, communicating with and education of
shareholders, fiduciary services (excluding investment management) and asset
allocation services. Neither the Administrator nor the Distributor will be a
Service Organization or receive additional fees for administration or servicing.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Funds or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
If a bank were prohibited from so acting, its shareholder clients would be
permitted to remain shareholders of the Trust and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Trust might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
<PAGE>
24
DETERMINATION OF NET ASSET VALUE
Money Market Funds
The Money Market Funds will use the amortized cost method to determine the
value of their portfolio securities pursuant to Rule 2a-7 under the 1940 Act.
The amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity regardless of the impact
of fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
which the Funds would receive if the security were sold. During these periods,
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund which utilizes a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in lower value of a Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, each Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities of
397 days or less and invest only in U.S. dollar denominated eligible securities
determined by the Trust's Board of Trustees to be of minimal credit risks and
which: (1) have received one of the two highest short-term ratings by at least
two NRSROs, such as "A-l" by S&P and "P-1" by Moody's; (2) are single rated and
have received the highest short-term rating by a NRSRO; or (3) are unrated, but
are determined to be of comparable quality by the Adviser pursuant to guidelines
approved by the Board.
Pursuant to Rule 2a-7, the Board of Trustees is also required to establish
procedures designed to stabilize, to the extent reasonably possible, the price
per share of the Funds, as computed for the purpose of sales and redemptions, at
$ 1.00. Such procedures include review of the Fund's portfolio holdings by the
Board of Trustees, at such intervals as it may deem appropriate, to determine
whether the net asset value of the Funds calculated by using available market
quotations deviates from $1.00 per share based on amortized cost. The extent of
any deviation will be examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if
any, will be initiated. In the event the Board of Trustees
<PAGE>
25
determines that a deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, the Board of Trustees will
take such corrective action as it regards as necessary and appropriate, which
may include selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding dividends
or establishing a net asset value per share by using available market
quotations.
Equity Fund
In valuing the Equity Fund's assets, a security listed on an exchange or
through any system providing for daily publication of actual prices (and not
subject to restrictions against sale by the Fund on such exchange or system)
will be valued at its last sale price prior to the close of regular trading.
Lacking any sales, the security will be valued at the mean between the last
asked price and the last bid price prior to the close of regular trading.
Securities for which daily publication of actual prices is not available
and for which bid and asked quotations are readily available will be valued at
the mean between the current bid and asked prices for such securities in the
over-the-counter market. Other securities will be valued at their fair value as
determined in good faith by or under the direction of the Trustees. Open futures
contracts are valued at the most recent settlement price, unless such price does
not reflect the fair value of the contract, in which case such positions will be
valued by or under the direction of the Trustees.
The value of a security which is not readily marketable and which
accordingly is valued by or under the direction of the Trustees is valued
periodically on the basis of all relevant factors which may include the cost of
such security to the Fund, the market price of unrestricted securities of the
same class at the time of purchase and subsequent changes in such market price,
potential expiration or release of the restrictions affecting such security, the
existence of any registration rights, the fact that the Fund may have to bear
part or all of the expense of registering such security, any potential sale of
such security by or to another investor as well as traditional methods of
private security analysis.
Following the calculation of security values in terms of the currency in
which the market quotation used is expressed ("local currency"), the valuing
agent will calculate these values in terms of United States dollars on the basis
of the conversion of the local currencies (if other than U.S.) into U.S. dollars
at the rates of exchange prevailing at the value time as determined by the
valuing agent.
<PAGE>
26
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the Exchange is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which the Equity Fund's net asset value is not calculated. The Equity
Fund generally calculates net asset value per share, and therefore effects
sales, redemptions and repurchases of its shares, as of the regular close of the
Exchange on each day on which the Exchange is open. Such calculation does not
take place contemporaneously with the determination of the prices of some of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Equity Fund's net asset value is calculated,
such securities will be valued at fair value as determined in good faith by or
under the direction of the Board of Trustees.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the Adviser's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Funds' Boards of Trustees, the Adviser is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds to obtain the best results
taking into account the broker-dealer's general execution and operational
<PAGE>
27
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available. The reasonableness of such
spreads or brokerage commissions will be evaluated by comparing spreads or
commissions among brokers or dealers in consideration of the factors listed
immediately above and research services described below.
Money Market Funds
Purchases and sales of securities will usually be principal transactions.
Portfolio securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price. Generally, money market securities are traded on a net basis and do not
involve brokerage commissions. The cost of executing portfolio securities
transactions for the Funds primarily consists of dealer spreads and underwriting
commissions. Under the 1940 Act, persons affiliated with the Trust or First
American are prohibited from dealing with the Trust as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC. The policy of each Money Market Fund of
investing in securities with short maturities may result in high portfolio
turnover. For the fiscal year ended September 30, 1999, the Money Market Funds
did not pay any brokerage commissions.
First American may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to First American. By allocating
transactions in this manner, First American is able to supplement its research
and analysis with the views and information of securities firms.
Equity Fund
First American conducts all of the trading operations for the Equity Fund.
First American places portfolio transactions with or through issuers,
underwriters and other brokers and dealers and expects to use its affiliated
broker-dealer, Pacific American Securities LLC, for a significant portion of the
Equity Fund's brokerage transactions. First American owns a minority interest in
Pacific American Securities. Pacific American Securities receives commissions
and it reserves the right to receive a ticket charge from the Fund although it
currently does not engage in this practice. A ticket charge involves the pass-
through by Pacific American of any costs incurred to complete a trade.
<PAGE>
28
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for the Equity Fund's portfolio is to obtain the most
favorable net results, taking into account such factors as price, commission,
where applicable, (which is negotiable in the case of U.S. national securities
exchange transactions but which is generally fixed in the case of foreign
exchange transactions), size of order, difficulty of execution and skill
required of the executing broker/dealer. The Adviser reviews on a routine basis
commission rates, execution and settlement services performed, making internal
and external comparisons.
The Adviser may, in circumstances in which two or more broker-dealers are
in a position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. These items, which
in some cases may also be purchased for cash, include such matters as general
economic and security market reviews, industry and company reviews, evaluations
of securities and recommendations as to the purchase and sale of securities.
Some of these services are of value to the Adviser in advising various of its
clients (including the Funds), although not all of these services are
necessarily useful and of value in managing the Funds. The management fee paid
by the Funds is not reduced because the Sub-Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), the Adviser may cause the Funds to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to the Adviser an
amount of disclosed commission for effecting a securities transaction for the
Funds in excess of the commission which another broker-dealer would have charged
for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds. For the
fiscal year ended September 30, 1999, the Equity Fund paid $25,005 for
brokerage commissions, of which $25,005 was indirectly paid to Pacific
American Securities LLC.
Annual portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding from both the numerator and the denominator all securities
<PAGE>
29
with maturities at the time of acquisition of one year or less. The Equity
Fund's portfolio turnover rate for the fiscal year ended September 30, 1999 was
110%.
TAXATION
Each Fund has qualified and elected to be treated for its most recent
fiscal year and each Fund intends to continue to qualify and elect to be
treated, as regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify as a regulated
investment company, an electing Fund must: (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stock,
securities or foreign currencies or other income derived with respect to its
business of investing in such stock, securities or currencies; (b) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items (including receivables), U.S. Government securities, the securities of
other regulated investment companies and other securities, except that such
other securities of any one issuer must be limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and not greater than 10% of the outstanding voting securities of such
issuer), and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies), or of two or more
issuers which the taxpayer controls and which are determined to be engaged in
the same or similar trades or businesses or related trades or businesses.
The Funds generally will not be subject to Federal income tax on their
investment company taxable income and net capital gains which are distributed to
shareholders provided that they distribute to their shareholders at least 90% of
their net investment income and tax-exempt income earned in each year. If the
Funds do not meet all of these Code requirements, they will be taxed as ordinary
corporations and their distributions will be taxed to shareholders as ordinary
income.
Amounts, other than tax-exempt interest, not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
<PAGE>
30
October 31 of such year, and (3) all ordinary income and capital gains net
income (adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution, including an "exempt-interest
dividend," will be treated as paid on December 31 of a calendar year if it is
declared by a Fund during October, November or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions of net long-term capital gains,
if any, designated by the Funds as long-term capital gain dividends are taxable
to shareholders as long-term capital gain, regardless of the length of time the
Funds' shares have been held by a shareholder. All distributions are taxable to
the shareholder in the same manner, whether reinvested in additional shares or
received in cash. Shareholders will be notified annually as to the Federal tax
status of distributions.
Upon the taxable disposition (including a sale or redemption) of shares of
a Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholder's hands. Such gain or loss will
be long-term or short-term, generally depending upon whether the shareholder's
holding period for the shares is more than one year. However, a loss realized by
a shareholder on the disposition of Fund shares with respect to which capital
gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held by
the shareholder for six months or less. A loss realized on the redemption, sale
or exchange of Fund shares will be disallowed to the extent an exempt-interest
dividend was received with respect to those shares if the shares have been held
by the shareholder for six months or less. Further, a loss realized on a
disposition will be disallowed to the extent the shares disposed of are replaced
(whether by reinvestment of distributions or otherwise) within a period
beginning 30 days before and ending 30 days after the disposal of the shares. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Shareholders receiving distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share
received equal to the net asset value of a share of the Funds on the
reinvestment date.
The Funds are required to report to the Internal Revenue Service ("IRS")
all distributions except in the case of certain exempt shareholders. All
<PAGE>
31
such distributions generally are subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of nonexempt shareholders if
(1) the shareholder fails to furnish the Funds with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Funds or a shareholder that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions, whether
reinvested in additional shares or taken in cash, will be reduced by the amounts
required to be withheld. Backup withholding is not an additional tax. Any amount
withheld may be credited against the shareholder's U.S. Federal income tax
liability. Investors may wish to consult their tax advisers about the
applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisers regarding U.S. and foreign tax consequences of ownership of shares of
the Funds, including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
OTHER INFORMATION
CAPITALIZATION
The Trust is a Delaware business trust established under a Declaration of
Trust dated June 5, 1996 and currently consists of three separately managed
portfolios. The capitalization of the Trust consists solely of an unlimited
number of shares of beneficial interest with a par value of $0.001 each. The
Board of Trustees may establish additional Funds (with different investment
objectives and fundamental policies) at any time in the future. Establishment
and offering of additional Funds will not alter the rights of the Trust's
shareholders. When issued, shares are fully paid, non-assessable, redeemable and
freely transferable. Shares do not have preemptive rights or subscription
<PAGE>
32
rights. In any liquidation of a Fund, each shareholder is entitled to receive
his pro rata share of the net assets of that Fund.
Each of the Money Market Funds offers three classes of shares - the
Investment, the Institutional and the Service classes of shares. The Investment
Class shares are available through authorized financial services companies which
provide to investors various administrative services including shareholder
servicing, sub-accounting and sub-transfer agency services. The Service Class
shares are available to customers who require shareholder servicing. The
Institutional Class shares are subject to a minimum investment of $50,000 and do
not impose any administrative, servicing or Rule 12b-1 fees. The Investment
Class shares are subject to administrative fees and the Investment Class shares
and the Service Class shares are subject to Rule 12b-1 fees and shareholder
service fees.
The Equity Fund offers two classes of shares --the Institutional Class and
the Retail Class. The Retail Class shares are available to customers through
authorized banks, trust companies, broker-dealers or other financial
organizations at a sales charge of 4.5% (4.71% of the amount invested). The
Institutional Class shares are subject to a minimum investment of $50,000 and
are available to investors without a sales charge. The Retail Class shares and
the Institutional Class shares are identical in all other respects, except that
the Institutional Class shares do not impose any Rule 12b-1 fees.
Expenses incurred in connection with each Fund's organization and the
public offering of its shares have been deferred and are being amortized on a
straight-line basis over a period of not more than five years.
As of January 28, 2000, the following shareholders owned 5% or more of the
Funds:
U.S. Treasury Reserve Fund - TrustMark National Bank 46.11%
Service Class Trust Dept., Room 1030
P.O. Box 291
Jackson, MS 39205
TrustMark National Bank 48.64%
248 E. Capitol Street, Room 1030
Jackson, MS 39205
U.S. Treasury Reserve Fund First American Trust Company 96.04%
- -Institutional Class 421 North Main Street
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33
Santa Ana, CA 92701
U.S. Treasury Reserve Fund First Data Distributors Inc. 100.00%
- -Investment Class 4400 Computer Drive
Westborough, MA 01581
Cash Reserve Fund - Maxine S. Haun 51.48%
Service Class 1630 S. Pomona Avenue, C26
Fullerton, CA 92832
Furman Selz Mutual Funds 45.91%
3435 Stelzer Road
Columbus, OH 43219
Cash Reserve Fund - First American Trust Company 97.97%
Institutional Class 421 North Main Street
Santa Ana, CA 92701
Cash Reserve Fund - First Data Distributors Inc. 100.00%
Investment Class 4400 Computer Drive
Westborough, MA 01581
Equity Fund - Josephine Castellani 37.65%
Retail Class 2070 Arbor Circle
Brea, CA 92821
Semper Trust 19.29%
5315 Brockwood Street
Long Beach, CA 90808
Deborah A. Castellani 5.06%
2070 Arbor Circle
Brea, CA 92821
CIBC OppenheimerCust 11.48%
FBO William Conrad ARA Rollover
249 E Avenue
Coronado, CA 92116
John J. Pileggi 7.97%
PO Box 4570
Grand Central Sta.
New York, NY 10163
Equity Fund - First American Trust Company 98.89%
Institutional Class 421 North Main Street
<PAGE>
34
Santa Ana, CA 92701
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold
annual meetings of each Fund's shareholders to elect Trustees or for other
purposes. It is not anticipated that the Trust will hold shareholder meetings
unless required by law or the Declaration of Trust. In this regard, the Trust
will be required to hold a meeting to elect Trustees to fill any existing
vacancies on the Board if, at any time, fewer than a majority of the Trustees
have been elected by the shareholders of the Trust. In addition, the Declaration
of Trust provides that the holders of not less than two-thirds of the
outstanding shares of the Trust may remove persons serving as Trustee either by
declaration in writing or at a meeting called for such purpose. The Trustees are
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust. To the extent required by
applicable law, the Trustees shall assist shareholders who seek to remove any
person serving as Trustee.
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company acts as custodian of the Trust's
assets. First Data Investor Services Group, Inc. acts as transfer agent and
dividend disbursing agent for the Funds.
EXPERTS
PricewaterhouseCoopers LLP has been selected as the independent
accountants for the Trust. PricewaterhouseCoopers LLP provides audit and tax
services and assistance in connection with certain SEC filings.
PricewaterhouseCoopers LLP is located at 160 Federal Street, Boston, MA
02110.
COUNSEL TO THE TRUST
Paul, Weiss, Rifkind, Wharton & Garrison serves as counsel to the
Trust.
<PAGE>
35
PERFORMANCE INFORMATION
From time to time each Fund may calculate its performance for inclusion
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated by the Funds as described
below.
The Money Market Funds may, from time to time, include their yield and
effective yield in advertisements or reports to shareholders or prospective
investors.
Current yield for the Money Market Funds will be based on the change in
the value of a hypothetical investment (exclusive of capital changes such as
gains or losses from the sale of securities and unrealized appreciation and
depreciation) over a particular seven-day period, less a pro-rata share of each
such Fund's expenses accrued over that period (the "base period"), and stated as
a percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Funds assumes that all dividends
received during the base period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" used in the calculation of
yield, which is then annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return + 1)365/7]-1.
Quotations of yield will reflect only the performance of a hypothetical
investment in the Money Market Funds during the particular time period shown.
Yield for the Money Market Funds will vary based on changes in market conditions
and the level of the Fund's expenses, and no reported performance figure should
be considered an indication of performance which may be expected in the future.
For the period ended ________, 1999, the seven-day yield for U.S.
Treasury Reserve Fund Institutional Class, Service Class and Investment Class
was ____%, ____% and ____%, respectively. For the same seven-day period, the
effective yield for the Institutional Class, Service Class and Investment Class
was ____%, ____% and _____%, respectively.
For the period ended ________, 1999, the seven-day yield for U.S.
<PAGE>
36
Cash Reserve Fund Institutional Class, Service Class and Investment Class was
____%, ____% and ____%, respectively. For the same seven-day period, the
effective yield for the Institutional Class, Service Class and Investment Class
was ____%, ____% and _____%, respectively.
In connection with communicating its yields to current or prospective
shareholders, the Money Market Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices, which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of return
for the periods of one year and the life of the Equity Fund, each ended on the
last day of a recent calendar quarter. Average annual total return quotations
reflect changes in the price of the Equity Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in the Equity Fund's shares. Average annual total return is
calculated by computing the average annual compound rates of return of a
hypothetical investment over such periods, according to the following formula
(average annual total return is then expressed as a percentage):
T = (ERV/P)/1/n /- 1
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
<PAGE>
37
total return quotations reflect changes in the price of the Equity Fund's shares
and assume that all dividends and capital gains distributions during the period
were reinvested in the Equity Fund's shares. Cumulative total return is
calculated by computing the cumulative rates of return of a hypothetical
investment over such periods, according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
Total Return
Total Return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return. The
total return for the fiscal year ended September 30, 1999 for the U.S. Treasury
Reserve Fund Institutional Class and Service Class was 4.47% and 4.41%,
respectively. The total return for the fiscal year ended September 30, 1999 for
the Cash Reserve Fund Institutional Class and Service Class was 4.95% and 4.68%,
respectively. The annualized total return for the fiscal year ended September
30, 1998 for the Equity Fund Institutional Class and Retail Class was 23.57% and
23.30%, respectively.
Capital Change
Capital Change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
Quotations of the Equity Fund's performance are historical, show the
performance of a hypothetical investment, and are not intended to indicate
future performance. An investor's shares when redeemed may be worth more or less
than their original cost. Performance of the Equity Fund will vary based on
changes in market conditions and the level of the Equity Fund's expenses.
<PAGE>
38
Comparison of Portfolio Performance
Comparison of the quoted non-standardized performance of various
investments is valid only if performance is calculated in the same manner or the
differences are understood. Investors should consider the methods used to
calculate performance when comparing the performance of a Fund with the
performance of other investment companies or other types of investments.
In connection with communicating performance to current or prospective
shareholders, the Funds also may compare these figures (a) to unmanaged indices
which may assume reinvestment of dividends or interest but generally do not
reflect deductions for operational, administrative and management costs or (b)
to the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment of dividends but this Index generally does not reflect
deductions for administrative and management costs and expenses.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations. When
these organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.
Since the assets in funds are always changing, a Fund may be ranked
within one asset-size class at one time and in another asset-size class at some
other time. In addition, the independent organization chosen to rank a Fund in
fund literature may change from time to time depending upon the basis of the
independent organization's categorizations of mutual funds, changes in a Fund's
investment policies and investments, the Fund's asset size and other factors
deemed relevant. Footnotes in advertisements and other marketing literature will
include the organization issuing the ranking, time period and asset-size class,
as applicable, for the ranking in question.
Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning that Fund, including reprints of, or
selections from, editorials or articles about the Fund.
<PAGE>
39
FINANCIAL STATEMENTS
The financial statements for the Trust including the notes thereto,
dated____________, 1999 have been audited by PricewaterhouseCoopers LLP and are
incorporated by reference in their entirety into this Statement of Additional
Information from the Annual Report of the Trust dated_____________, 1999.
<PAGE>
40
APPENDIX A
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds S&P:
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. Debt rated AA
has a very strong capacity to pay interest and repay principal and differs from
the highest rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
<PAGE>
41
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned and actual or
implied B or B- rating. The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
<PAGE>
42
characterizes bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or maintenance of other terms of the contract over any long period of
time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
to a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
PART C. OTHER INFORMATION
- -------
Item 23. Exhibits:
(a) Trust Instrument. (1)
(b) By-Laws of Registrant. (1)
(c) None.
(d)(1) Form of Master Investment Advisory
Agreement and Supplements between
Registrant (on behalf of U.S.
Treasury Reserve Fund and Cash
Reserve Fund) and the Adviser. (2)
(d)(2) Investment Advisory Contract
Supplement with respect to the Equity
Fund. (3)
(d)(3) Consultant Agreement with respect to
the the Equity Fund. (3)
(e)(1) Form of Distribution Agreement
between Registrant and First Data
Distributors, Inc. (4)
(e)(2) Amendments to Distribution Agreement
between Registrant and First Data
Distributors, Inc. (3)
(f) None.
(g) Form of Custodian Contract between
Registrant and Custodian. (2)
(h)(1) Form of Transfer Agency and Service
Agreement between Registrant and
First Data Investor Services Group,
Inc. (4)
(h)(2) Amendment to Transfer Agency and
Service Agreement between Registrant
and First Data Investor Services
Group, Inc. (3)
(h)(3) Administration Agreement between
Registrant and First Data Investor
Services Group, Inc. (4)
(h)(4) Amendment to Administration Agreement
between Registrant and First Data
Investor Services Group, Inc. (3)
(i) Consent of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to
Registrant.*
<PAGE>
(j) Consent of PricewaterhouseCoopers LLP.*
(k) None.
(l) None.
(m)(1) Form of Rule 12b-1 Distribution Plan
and Agreement and Supplement between
Registrant and Distributor. (2)
(m)(2) Rule 12b-1 Distribution Plan and
Agreement between Registrant and
First Data Distributors, Inc. (4)
(m)(3) Rule 12b-1 Distribution Plan and
Agreement Supplement. (3)
(n) Rule 18f-3 Plan. (3)
______________________
* Attached.
(1) Previously filed with the initial registration statement on June 26, 1996
and incorporated by reference herein.
(2) Previously filed with Pre-Effective Amendment No. 1 on September 12, 1996,
and incorporated by reference herein.
(3) Previously filed with Post-Effective Amendment No. 5 on November 27, 1998,
and incorporated by reference herein.
(4) Previously filed with Post-Effective Amendment No. 2 on December 15, 1997,
and incorporated by reference herein.
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940, as amended (the " 1940 Act) and pursuant to Article X of the Registrant's
Trust Instrument, Section 4 of the Master Investment Advisory Agreement between
Registrant and the Adviser, Section 9 of the Master Investment Advisory
Agreement between Registrant and the Adviser and Section 3 of the Distribution
Agreement between Registrant and First Data Distributors, Inc. ("FDDI"),
officers, trustees, employees and agents of the Registrant will not be liable to
the Registrant, any shareholder, officer, trustee, employee, agent or other
person for any action or failure to act, except for bad faith, willful
misfeasance, gross negligence or reckless disregard of duties, and those
<PAGE>
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its officers and
trustees against liabilities, and certain costs of defending claims against such
officers and trustees, to the extent such officers and trustees are not found to
have committed conduct constituting willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 4 of the Master Investment Advisory Agreement between Registrant
and the Adviser Section 9 of the Master Investment Advisory Agreement between
Registrant and the Adviser and Section 3 of the Distribution Agreement between
Registrant and FDDI, limit the liability of the Adviser and FDDI to liabilities
arising from willful misfeasance, bad faith or gross negligence in the
performance of their respective duties or from reckless disregard by them of
their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Declaration of Trust, By-laws, Master Investment Advisory
Agreement and Distribution Agreement in a manner consistent with Release No.
11330 of the Securities and Exchange Commission under the 1940 Act so long as
the interpretations of Section 17(h) and 17(i) of such Act remain in effect and
are consistently applied.
Item 26. Business and Other Connections of the Investment Adviser
First American Capital Management, Inc. ("First American"), is a subsidiary of
The First American Financial Corporation, which is headquartered in Santa Ana,
California, and is a provider of real estate related financial and information
services to real property buyers and mortgage lenders and trust services through
its subsidiary First American Trust Company.
The executive officers of First American and such executive officers' positions
during the past two fiscal years are as follows:
<PAGE>
Name Position and Offices
- ---- --------------------
William C. Conrad Director, President - Chief Executive Officer of
the Adviser since December 1995; Chief Investment
Officer of First American Trust Company, 2161 San
Joaquin Hills Road, Newport Beach, California,
since August 1994.
Mark R. Arnesen Director, Secretary & Corporate Counsel of the
Adviser since December 1995; vice-president,
Secretary & Corporate Counsel of The First American
Financial Corporation, 114 East Fifth Street, Santa
Ana, California, since April 1992; Vice President,
Secretary & Corporate Counsel of First American
Title Insurance Company, 114 East Fifth Street,
Santa Ana, California, since April 1992.
Thomas A. Klemens Director, Chief Financial Officer of the Adviser
since December 1995, Executive Vice President &
Chief Financial Officer of The First American
Financial Corporation, 114 East Fifth Street, Santa
Ana, California, since February 1996; Vice
President & Chief Financial Officer of First
American Title Insurance Company since September
1993.
Deborah A. Castellani Chief Operating Officer of the Adviser since
December 1995; Vice President of First American
Trust Company, 2161 San Joaquin Hills Road, Newport
Beach, California, since April 1989.
Randall L. Zaharia Senior Portfolio Manager of the Adviser since
December 1995; Vice President of First American
Trust Company, 2161 San Josquin Hills Road, Newport
Beach, California, since March 1995.
Steven Neal Huntsinger Senior Portfolio Manager of the Adviser since
December 1995; Vice President of First American
Trust Company, 2161 San Joaquin Hills Road, Newport
Beach, California, since September 1995.
Daniel Ast Senior Portfolio Manager of the Adviser since
November 1996;
John A. Flom Senior Portfolio Manager of the Adviser since May
1997.
Minnie L. Giles Portfolio Administrator of the Adviser since
April 1996.
Steven D. Hollenbeck Senior Securities Trader of the Adviser since
October 1997; Senior Trader of Fixed Income
Securities Inc., 7220 Trade Street, #315, San
Diego, California,from January 1996 to October
1997.
Jerald P. Lewis Director, President - Chief Executive Officer of
the Adviser since March 1994.
Item 27. Principal Underwriter
<PAGE>
(a) BISYS acts as Distributor/Underwriter for other
registered investment companies:
BISYS FUND SERVICES LIMITED PARTNERSHIP
-----------------------
Alpine Equity Trust
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Governor Funds
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
The Kent Funds
Magna Funds
Meyers Investment Trust
Mercantile Mutual Funds
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
The Parkstone Advantage Funds
Puget Sound Alternative Investment Series Trust
Republic Advisor Funds Trust
Republic Funds Trust
Sefton Funds Trust
SSgA Liquidity Fund
Summit Investment Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
(b) Officers and Directors.
Name and Principal Positions and Position
Business Address Offices with Registrant with Underwriter
- ------------------ ----------------------- ----------------
BISYS Fund Services, Inc. None Sole General Partner
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation None Sole Limited Partner
150 Clove Road
Little Falls, New Jersey 07424
<PAGE>
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts books and other documents required to be maintained by
Registrant by Section 31(a) of the 1940 Act and the Rules thereunder will be
maintained at the offices of:
(1) First American Capital Management, Inc.
567 San Nicolas Drive
Suite 101
Newport Beach, California 92660
(2) First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581
(3) Investors Fiduciary Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105-1716
(4) First Data Investor Services Group, Inc.
One Exchange Place
Boston, MA 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
has duly caused this Post-Effective Amendment No. 7 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on this 31st day of January 2000.
FIRST CHOICE FUNDS TRUST
By:________*___________
Jylanne Dunne, President
* By:
/s/ Jylanne Dunne, Esq.
-----------------------
as Attorney-in-Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
* President November 29, 1999
- -----------------
Jylanne Dunne
* Treasurer November 29, 1999
- -----------------
Diana Tarnow
* Trustee November 29, 1999
- -----------------
John J. Pileggi
* Trustee November 29, 1999
- -----------------
Dennis W. Draper
* Trustee November 29, 1999
- -----------------
Joseph N. Hankin
* Trustee November 29, 1999
Richard Wedemeyer
* By:
/s/ Jylanne Dunne, Esq.
-----------------------
as Attorney-in-Fact
<PAGE>
Exhibit I
January 31, 2000
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: First Choice Funds Trust (File Nos., 33-7085 and 811-7681)
-----------------------------------------------------------
Dear Sir/Madam:
As counsel to First Choice Funds Trust (the "Trust"), we have reviewed
Post-Effective Amendment No. 7 to the Trust's Registration Statement on Form
N-lA (the "Amendment"). The Amendment is being filed pursuant to Rule 485 of the
1933 Act to respond to the Staff's comments on the Trust's 485(a) filings on
November 29, 1999 and to update the Trust's financial information. It is
proposed that it will become effective on January 31, 2000 pursuant to paragraph
(b).
Based upon our review, we advise you that the Amendment does not include
disclosure which we believe would render it ineligible to become effective under
paragraph (b) of Rule 485.
If you have any questions or comments concerning the enclosed, please
telephone Thomas Majewski at (212) 373-3539.
Sincerely,
PAUL, WEISS, RIFKIND
WHARTON & GARRISON
<PAGE>
Exhibit J
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 30, 1999, relating to the financial
statements and financial highlights appearing in the September 30, 1999 Annual
Report to Shareholders of First Choice Funds Trust, which is also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the headings "Financial Highlights" in the Prospectuses and under
the headings "Experts" and Financial Statements" in the Statement of Additional
Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 31, 2000