Registration Nos. 2-92164 and 811-4066
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. 20 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 19 [ X ]
CASH ASSETS TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[___] on (date) pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[_X_] on (July 31, 1996) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new effec-
tive date for a previous post-effective amendment.
Registrant hereby declares, pursuant to Section (a)(1) of Rule
24f-2 under the Investment Company Act of 1940, that Registrant has
registered an indefinite number of its shares under the Securities
Act of 1933 pursuant to that Section and that the Rule 24f-2 Notice
for Registrant's fiscal year ended March 31, 1996 was filed in May,
1996.
<PAGE>
CASH ASSETS TRUST
Original and Service Classes
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights
4..............Introduction; Investment of the Trust's
Assets; Investment Restrictions; General
Information
5..............Management Arrangements
5A.............*
6..............General Information; Dividend and Tax
Information
7..............Net Asset Value per Share; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Investment
Restrictions; Loans of Portfolio
Securities
14.............Trustees and Officers
15.............General Information (Prospectus caption)
16.............Additional Information as to Management
Arrangements; General Information
17.............Investment of the Trust's Assets (Prospectus
caption)
18.............General Information
19.............Limitation of Redemptions in Kind; Amortized
Cost Valuation; Computation of Daily
Dividends; Automatic Withdrawal Plan
20.............*
21.............How to Invest in the Trust (Prospectus
caption); Distribution Plan; General
Information
22.............Yield Information; Financial Highlights
(Prospectus caption)
*Not applicable or negative answer
<PAGE>
The Pacific Capital Funds
of
Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-CATS-4-YOU (800-228-7496)
212-697-6666
Prospectus
Original Shares July 31, 1996
Cash Assets Trust (the "Trust") is a professionally managed,
open-end investment company consisting of three separate funds:
Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Treasuries Cash Assets Trust
(each a "Fund" and collectively, the "Funds").
There are two classes of shares of each of the Funds:
"Original Shares" and "Service Shares"; see "General Information
- -Description of Classes." Only Original Shares are offered by this
Prospectus. Original shares of the Funds may be purchased and
redeemed at their next determined net asset value, which is
normally the constant price of $1.00 per share; see "Net Asset
Value Per Share." Purchases are made without any sales charge
through Aquila Distributors, Inc., which is the exclusive
Distributor of the Funds' shares. Only certain persons are eligible
to purchase Original Shares. See "How to Invest in the Funds" and
"How to Redeem Your Investment."
This Prospectus concisely states information about the
three Funds that you should know before investing in Original
Shares. A Statement of Additional Information about the Funds dated
July 31, 1996 (the "Additional Statement") has been filed with the
Securities and Exchange Commission and is available without charge
upon written request to Administrative Data Management Corp., the
Funds' transfer agent, at the address given below, or by calling
the telephone number(s) given below. The Additional Statement
contains information about the three Funds and their management not
included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in this Prospectus. Only
when you have read both the Prospectus and the Additional Statement
are all the material facts about the Funds available to you.
AN INVESTMENT IN ANY OF THE FUNDS IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY HAWAIIAN TRUST COMPANY, LIMITED (THE
"ADVISER"), BANK OF HAWAII OR ITS BANK OR NON-BANK AFFILIATES OR BY
ANY OTHER BANK. SHARES OF THE FUNDS ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED
AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN ANY OF THE FUNDS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For General Inquiries & Yield Information, Call 800-228-7496 toll
free or 212-697-6666
For Purchase, Redemption or Account inquiries contact
The Funds' Shareholder Servicing Agent:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-255-2287 toll free or 908-855-5731
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
For your convenience, important matters pertaining solely
to a single Fund are displayed in a distinctive manner below;
however, to obtain all information about that Fund, you must read
the entire Prospectus.
The Pacific Capital Funds of Cash Assets Trust are these three
separate money-market funds:
Pacific Capital Cash Assets Trust (the "Cash Fund") is a
general purpose money market mutual fund which invests in
short-term "money market" securities which meet specific quality,
maturity and diversification standards.
Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free
Fund") is a tax-exempt money market mutual fund which invests in
short-term tax-exempt "money market" securities.
Pacific Capital U.S. Treasuries Cash Assets Trust (the
"Treasuries Fund") is a money market mutual fund which invests
exclusively in short-term direct obligations of the United States
Treasury with remaining maturities of one year or less, and certain
repurchase agreements secured by U.S. Treasury obligations.
All investments must meet specific quality, maturity and
diversification standards. (See "Investment of the Funds' Assets.")
Initial Investment - You may open your account in any Fund
with any purchase of $1,000 or more. There is no sales charge. An
Application is in the back of the Prospectus. (See "How to Invest
in the Funds.")
Additional Investments - There is no minimum on additional
investments and they can be made at any time.
Monthly Income - The securities in which the Funds invest earn
interest which is declared daily as dividends. Dividends are paid
monthly on or about the last day of each month. At your choice,
dividends are paid by check mailed to you, directly deposited into
your financial institution account or automatically reinvested
without sales charge in additional Original Shares. (See "Dividend
and Tax Information.")
Many Different Issues - Even a small investment in any Fund
allows an investor to have the advantages of a portfolio which
consists of a large number of issues. (See "Investment of the
Funds' Assets.")
Exchanges - You may exchange Original Shares of any Fund into
other money market funds and certain bond and equity funds. (See
"Exchange Privileges.")
Portfolio Management - Hawaiian Trust Company, Limited (the
"Adviser") serves as the Funds' Investment Adviser, providing
experienced professional management of each Fund's investments. It
is a subsidiary of Bank of Hawaii, was founded in 1898 and is the
oldest and largest trust company in Hawaii, administering
approximately $10 billion in client assets. The Cash Fund pays
monthly fees to the Adviser and to the Administrator at a total
rate of 0.50 of 1% of average annual net assets. The Tax-Free Fund
and the Treasuries Fund each pay monthly fees to the Adviser and to
the Administrator at a total rate of 0.40 of 1% of average annual
net assets. (See "Table of Expenses" and "Management
Arrangements.")
Investment Quality -
The Cash Fund invests in commercial paper obligations, U.S.
government securities, bank obligations and instruments
secured by them, corporate debt obligations, and certain other
obligations.
The Tax-Free Fund invests in municipal obligations which earn
interest which is exempt from regular Federal income taxes and
a significant portion of those obligations earn interest which
is also exempt from regular State of Hawaii income taxes.
Dividends paid by the Tax-Free Fund are free of both such
taxes to the same extent. It is, however, possible that in
certain circumstances, the Federal alternative minimum tax may
apply (see "Dividend and Tax Information"). Under certain
circumstances, the Tax-Free Fund may invest a portion of its
assets in taxable obligations.
The Treasuries Fund invests only in U.S. Government
securities and certain repurchase agreements secured by U.S.
Treasury obligations.
All of the investments of the Funds must be determined by
the Adviser under an applicable rule of the Securities and Exchange
Commission to be "Eligible Securities" and to present minimal
credit risks. (See "Investment of the Funds' Assets" and "Effect of
the Rule on Portfolio Management" thereunder.)
Constant Share Value - Each Fund's net asset value per
share is determined on a daily basis and is normally constant at
$1.00 per share except under extraordinary circumstances. (See
"Factors Which May Affect the Value of the Funds' Investments and
Their Yields.")
Risk Factors - There can be no assurance that any of the
Funds will be able to maintain a stable net asset value of $1.00
per share. (See "Factors Which May Affect the Value of the Funds'
Investments and Their Yields.") In addition, there may be risks as
to obligations which the Cash Fund and Tax-Free Fund may purchase
such as variable amount master demand notes (see "Variable Amount
Master Demand Notes" in the Prospectus and Additional Statement),
and as to repurchase agreements, in which all Funds may invest (see
"Repurchase Agreements" in the Prospectus). The Tax-Free Fund's
assets, being significantly invested in Hawaiian issues, are
subject to economic and other conditions affecting Hawaii. (See
"Risks and Special Considerations Regarding Investment in Hawaii
Obligations.") Moreover, the Tax-Free Fund is classified as a
"non-diversified" investment company, because it may choose to
invest in the obligations of a relatively limited number of
issuers. (See "Diversity under the 1940 Act" under "General
Information.")
Liquidity - Redemptions - You may redeem any amount of your
Original Share account in any Fund on any business day by
telephone, fax or mail request by using the Funds' Expedited
Redemption procedure, with proceeds being sent to a predesignated
financial institution. If the amount of your redemption proceeds is
$1,000 or more, the proceeds will, wherever possible, be wired or
transferred through the facilities of the Automated Clearing House;
otherwise they will be mailed. You may also write checks for any
purpose in amounts of $500 or more. There are no penalties or
redemption fees. See "How to Redeem Your Investment" for these and
other redemption methods.
Statements and Reports - For each Fund in which you invest,
you will receive statements of your Original Share account monthly
as well as each time you add to your account or take money out.
Additionally, you will receive a Semi-Annual Report and an audited
Annual Report.
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST - ORIGINAL SHARES
TABLE OF EXPENSES
Cash Tax-Free Treasuries
Shareholder Transaction Expenses Fund Fund Fund
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases 0% 0% 0%
Maximum Sales Charge
Imposed on Reinvested Dividends 0% 0% 0%
Deferred Sales Charge 0% 0% 0%
Redemption Fees 0% 0% 0%
Exchange Fee 0% 0% 0%
Annual Fund Operating Expenses*
(as a percentage of average net assets)
Investment Advisory Fee 0.35% 0.29% 0.28%
12b-1 Fees** 0% 0% 0%
All Other Expenses 0.26% 0.25% 0.35%
Administration Fee 0.15% 0.11% 0.12%
Other Expenses 0.11% 0.14% 0.23%
Total Fund Operating Expenses 0.61% 0.54% 0.63%
Example+
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period
<CAPTION>
Cash Tax-Free Treasuries
Time Period Fund Fund Fund
<S> <C> <C> <C>
1 year $ 6 $ 6 $ 6
3 years $20 $17 $20
5 years $34 $30 $35
10 years $76 $68 $79
<FN>
*Based upon amounts incurred during the most recent fiscal year
of each Fund restated to reflect a change in current arrangements.
The respective rates for the investment advisory fee and the
administration fee shown in the table represent the effective
rates, taking into consideration the breakpoint in net assets
used in the calculation of fees. For the portion of net assets
above and below each breakpoint, the aggregate rate of fees is the
same but is allocated differently to the Adviser and the Administrator
so that Total Fund Operating Expenses shown remains unchanged.
(See "Management Arrangements".)
Other expenses for the Cash Fund and the Treasuries Fund do not
reflect a 0.01% expense offset in custodian fees received for
uninvested cash balances. Reflecting this offset, other expenses,
all other expenses, and total Fund operating expenses for the Cash
Fund would have been 0.10%, 0.25% and 0.60%, respectively; for the
Treasuries Fund, these expenses would have been 0.22%, 0.34% and
0.62%, respectively.
</FN>
<FN>
** No payments designed to recognize sales of shares or to pay
advertising expenses out of the assets or income of any Fund are
permitted under the 12b(1) Plans for Original Shares. The Plans
authorize certain payments for such purposes to be made by the
Administrator, not any of the Funds. See "Distribution Plan."
</FN>
<FN>
+ The expense example is based upon an amount at the beginning of
each year which includes the prior year's assumed results. A year's
results consist of an assumed 5% annual return less operating expenses
as shown above; the expense ratio was applied to an assumed average
balance (the year's starting investment plus one-half the year's
results). Each column represents the cumulative expenses so
determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT
ALL MUTUAL FUNDS USE THE 5% RATE FOR PURPOSES OF PREPARING THE
ABOVE EXAMPLE.
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in
Original Shares of each Fund will bear directly or indirectly.
(See "Management Arrangements" for a more complete description of
the various investment advisory and administration fees.)
<PAGE>
[CAPTION]
<TABLE>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
CASH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights as it relates to
the five years ended March 31, 1996 for the Original Shares of the
Funds has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon is included in the Funds' financial
statements contained in its Annual Report, which are incorporated
by reference into the Additional Statement. The information
provided in the table should be read in conjunction with the
financial statements and related notes. On March 23, 1990,
Aquila Management Corporation, originally the Funds' Sub-Adviser
and Administrator, became Administrator only.
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income 0.05 0.04 0.03
Less distributions:
Dividends from net
investment income (0.05) (0.04) (0.03)
Net Asset Value, End
of Period $1.00 $1.00 $1.00
Total Return 5.32% 4.40% 2.74%
Ratios/Supplemental
Data Net Assets,
End of Period (in thousands) $308,667 $486,655 $407,088
Ratio of Expenses to Average
Net Assets 0.60% 0.59% 0.59%
Average Net Assets 5.24% 4.40% 2.71%
For the year 1996, net investment income per share and the ratios of
income and expenses to average net assets without the expense offset
in custodian fees for uninvested cash balances would have been:
Net investment income $0.05
Ratio of Expenses to Average
Net Assets 0.61%
Ratio of Net Investment Income
to Average Net Assets 5.23%
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
<C> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
0.03 0.05 0.07 0.08 0.08 0.07 0.06
(0.03) (0.05) (0.07) (0.08) (0.08) (0.07) (0.06)
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
3.15% 5.20% 7.73% 8.84% 7.95% 6.74% 5.93%
$267,968 $275,684 $367,308 $382,726 $247,880 $195,246 $124,586
0.61% 0.60% 0.58% 0.57% 0.58% 0.60% 0.69%
3.13% 5.19% 7.51% 8.47% 7.74% 6.73% 5.57%
The Trust's "current yield" for the seven days ended March 31,
1996 was 4.73% and its "compounded effective yield" for that period
was 4.84%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights as it relates to
the five years ended March 31, 1996 for the Original Shares of the
Funds has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon is included in the Funds' financial
statements contained in its Annual Report, which are incorporated
by reference into the Additional Statement. The information
provided in the table should be read in conjunction with the
financial statements and related notes. On March 23, 1990,
Aquila Management Corporation, originally the Funds' Sub-Adviser
and Administrator, became Administrator only.
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income 0.03 0.03 0.02
Less distributions:
Dividends from net
investment income (0.03) (0.03) (0.02)
Net Asset Value, End
of Period $1.00 $1.00 $1.00
Total Return 3.37% 2.74% 2.02%
Ratios/Supplemental
Data Net Assets,
End of Period (in thousands) $125,178 $138,335 $113,893
Ratio of Expenses to Average
Net Assets 0.54% 0.55% 0.56%
Average Net Assets 3.32% 2.74% 1.99%
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees and for the year 1996, without the expense
offset in custodian fees for uninvested cash balances would have been:
Net investment income $0.03 $0.03 $0.02
Ratio of Expenses to Average
Net Assets 0.54% 0.55% 0.58%
Ratio of Net Investment Income
to Average Net Assets 3.32% 2.74% 1.97%
<CAPTION>
1993 1992 1991 1990**
<C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00
0.02 0.04 0.05 0.06
(0.02) (0.04) (0.05) (0.06)
$1.00 $1.00 $1.00 $1.00
2.52% 3.91% 5.55% 6.07%+
$69,252 $99,955 $85,751 $70,937
0.54% 0.42% 0.32% 0.26%*
2.52% 3.89% 5.44% 5.94%*
$0.02 $0.04 $0.05 $0.06
0.59% 0.56% 0.55% 0.56%*
2.47% 3.75% 5.21% 5.64%*
<FN>
**For the period from April 4, 1989 (commencement of operations)
to March 31, 1990.
</FN>
<FN>
+Not annualized.
</FN>
<FN>
*Annualized.
</FN>
The Trust's "current yield" for the seven days ended March 31,
1996 was 2.83% and its "compounded effective yield" for that period
was 2.87%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
TREASURIES FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights as it relates to
the five years ended March 31, 1996 for the Original Shares of the
Funds has been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon is included in the Funds' financial
statements contained in its Annual Report, which are incorporated
by reference into the Additional Statement. The information
provided in the table should be read in conjunction with the
financial statements and related notes. On March 23, 1990,
Aquila Management Corporation, originally the Funds' Sub-Adviser
and Administrator, became Administrator only.
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income 0.05 0.04 0.03
Less distributions:
Dividends from net
investment income (0.05) (0.04) (0.03)
Net Asset Value, End
of Period $1.00 $1.00 $1.00
Total Return 5.20% 4.20% 2.59%
Ratios/Supplemental
Data Net Assets,
End of Period (in thousands) $74,036 $64,034 $91,742
Ratio of Expenses to Average
Net Assets 0.54% 0.54% 0.52%
Average Net Assets 5.07% 4.04% 2.58%
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees and for the year 1996, without the expense
offset in custodian fees for uninvested cash balances would have been:
Net investment income $0.05 $0.04 $0.03
Ratio of Expenses to Average
Net Assets 0.63% 0.59% 0.52%
Ratio of Net Investment Income
to Average Net Assets 4.98% 3.99% 2.58%
<CAPTION>
1993 1992 1991 1990**
<C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00
0.03 0.05 0.07 0.08
(0.03) (0.05) (0.07) (0.08)
$1.00 $1.00 $1.00 $1.00
2.90% 5.20% 7.56% 8.50%+
$26,131 $40,349 $40,550 $11,233
0.61% 0.34% 0.23% 0.33%*
2.96% 5.28% 7.10% 8.19%*
$0.03 $0.05 $0.07 $0.08
0.66% 0.60% 0.63% 0.73%*
2.90% 5.01% 7.05% 7.79%*
<FN>
**For the period from April 4, 1989 (commencement of operations)
to March 31, 1990.
</FN>
<FN>
+Not annualized.
</FN>
<FN>
*Annualized.
</FN>
The Trust's "current yield" for the seven days ended March 31,
1996 was 4.64% and its "compounded effective yield" for that period
was 4.75%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
INTRODUCTION
Cash Assets Trust (the "Trust") is a professionally managed,
open-end investment company formed in 1984 as a Massachusetts
business trust. The Trust consists of three separate funds: Pacific
Capital Assets Trust, (the "Cash Fund"), Pacific Capital Tax-Free
Cash Assets Trust (the "Tax-Free Fund"), and Pacific Capital U.S.
Treasuries Cash Assets Trust (the "Treasuries Fund") .
Cash of investors may be invested in shares of each Fund as an
alternative to idle funds, direct investments in savings deposits
or short-term debt securities. Each Fund offers the opportunity to
keep cash reserves fully invested and provides you with a
professionally managed portfolio of money market instruments which
may be more diversified, higher yielding, more stable and more
liquid than you might be able to obtain on an individual basis.
Through the convenience of an investment in shares of a Fund, you
are also relieved of the inconvenience of making multiple direct
investments, including the selection, purchasing and handling of
various securities.
INVESTMENT OF THE FUNDS' ASSETS
Each Fund's investment objective is as follows:
The investment objective of the Cash Fund is to achieve a high
level of current income, stability and liquidity for investors'
cash assets by investing in a diversified portfolio of short-term
"money market" securities meeting specific quality standards.
The investment objective of the Tax-Free Fund is to provide
safety of principal while achieving as high a level as possible of
liquidity and of current income exempt from Federal and Hawaii
income taxes. It seeks to attain this objective by investing
primarily in municipal obligations, which have remaining maturities
not exceeding one year, of Hawaii issuers or, if obligations of the
desired quality, maturity and interest rate are not available, in
similar obligations of non-Hawaii issuers.
The investment objective of the Treasuries Fund is to provide
safety of principal while achieving as high a level as possible of
liquidity and of current income. It seeks to attain this objective
by investing exclusively in short-term direct obligations of the
United States Treasury with remaining maturities of one year or
less, and certain repurchase agreements secured by U.S. Treasury
obligations.
There is no assurance that any Fund will achieve its
objective, which is a fundamental policy of the Fund.
In addition to the requirements of the Funds' management
policies, all obligations and instruments purchased by any Fund
must meet the requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission under the Investment Company Act
of 1940 (the "1940 Act"). The provisions of the Rule that affect
portfolio management are summarized under "Effect of the Rule on
Portfolio Management," below. In brief, the Rule's provisions for
quality, diversity and maturity require each Fund to limit its
investments to those instruments which Hawaiian Trust Company,
Limited, the Funds' investment adviser (the "Adviser"), determines
(pursuant to procedures approved by the Board of Trustees) present
minimal credit risks and which at the time of purchase are Eligible
Securities. In general, the Rule defines as Eligible Securities
those that at the time of purchase are rated in the two highest
rating categories for short-term securities by any two of the
nationally recognized statistical rating organizations ("NRSROs")
or unrated securities determined by the Board of Trustees to be of
comparable quality. See Appendix A to the Additional Statement for
a description of the NRSROs and the factors considered by them in
determining ratings. Eligible Securities so rated in the highest
rating category (or unrated securities of comparable quality) are
called "First Tier Securities"; all other Eligible Securities are
called "Second Tier Securities." The Rule also requires that the
dollar-weighted average maturity of each Fund's portfolio cannot
exceed 90 days and that each Fund cannot purchase any security
having a remaining maturity in excess of 397 days. The Rule also
contains limits on the percentage of each Fund's assets that can be
invested in the securities of any issuer. See "Effect of the Rule
on Portfolio Management," below.
Management Policies: Each Fund seeks to achieve its investment
objective through investments in the types of instruments described
in the management policies listed below. Except for policies
designated as fundamental, shareholder approval is not required to
change any of the foregoing management policies.
THE CASH FUND AND ITS INVESTMENTS
Management Policies of the Cash Fund
Under current management policies, the Cash Fund invests only
in the following types of obligations:
(1) U.S. Government Securities: Obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities; these obligations are referred to in this
Prospectus as "U.S. Government Securities"; see "Information On
U.S. Government Securities" below.
(2) Bank Obligations and Instruments Secured by Them: Bank
obligations that are First Tier Securities including time deposits,
certificates of deposit, bankers' acceptances and other bank (see
below for definition) obligations, and which are (i) obligations of
banks subject to regulation by the U.S. Government having total
assets of at least $1.5 billion, which may be obligations issued by
domestic banks, by foreign branches of such banks or by U.S.
subsidiaries of foreign banks; (ii) obligations of any foreign bank
having total assets equivalent to at least $1.5 billion; or (iii)
obligations ("insured bank obligations") if such obligations are
fully insured as to principal by the Federal Deposit Insurance
Corporation (see "Information on Insured Bank Obligations" in the
Additional Statement); the Cash Fund may also invest in obligations
secured by any obligations set forth in (i) or (ii) above if such
investment meets the requirements of (6) below. (In this Prospectus
and in the Additional Statement, a bank includes commercial banks,
savings banks and savings and loan associations.)
(3) Commercial Paper Obligations: Commercial paper obligations
that are First Tier Securities; see "Effect of the Rule on
Portfolio Management," below.
(4) Corporate Debt Obligations: Corporate debt obligations
(for example, bonds and debentures) which are First Tier Securities
and which at the time of purchase have a remaining maturity of not
more than 397 days. See "Effect of the Rule on Portfolio
Management." See Appendix A to the Additional Statement for
information about bond ratings.
(5) Variable Amount Master Demand Notes: Variable amount
master demand notes that are First Tier Securities and which are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time on not more than thirty
days' notice. Variable amount master demand notes may or may not be
backed by bank letters of credit. (Because variable amount master
demand notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that they will be
traded, and there is no secondary market for them; see the
Additional Statement for further information on these notes.)
Variable amount master demand notes repayable in more than seven
days are securities which are not readily marketable, and fall
within the Cash Fund's overall 10% limitation on securities which
are illiquid. (See the Additional Statement.)
(6) Certain Other Obligations: Obligations other than those
listed in 1 through 5 above if such other obligations are
guaranteed as to principal and interest by either a bank in whose
obligations the Cash Fund may invest (see 2 above) or a corporation
in whose commercial paper the Cash Fund may invest (see 3 above).
See "Effect of the Rule on Portfolio Management." If the Cash Fund
invests more than 5% of its net assets in such other obligations,
the Prospectus will be supplemented to describe them. See the
Additional Statement.
(7) Repurchase Agreements: The Cash Fund may purchase
securities subject to repurchase agreements provided that such
securities consist entirely of U.S. Government Securities or
securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by the requisite
NRSROs. Repurchase agreements may be entered into only with
commercial banks or broker-dealers. Subject to the control of the
Board of Trustees, the Adviser will regularly review the financial
strength of all parties to repurchase agreements with the Cash
Fund. (See "Repurchase Agreements" under the caption "Matters
Applicable to All Funds" below.)
(8) When-Issued or Delayed Delivery Securities: The Cash Fund
may buy securities on a when-issued or delayed delivery basis; the
securities so purchased are subject to market fluctuation and no
interest accrues to the Cash Fund until delivery and payment take
place; their value at the delivery date may be less than the
purchase price. The Cash Fund may enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
its total assets, less liabilities other than the obligations
created by when-issued commitments. See the Additional Statement
for further information.
Other Information about the Cash Fund's Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Cash Fund will purchase only those issues that will enable it to
achieve and maintain the highest rating for a mutual fund by at
least one NRSRO. There is no assurance that it will be able to
maintain such rating. As a result of this policy, the range of
obligations in which the Cash Fund can invest is reduced and the
yield obtained on such obligations may be less than would be the
case if this policy were not in force.
Information On U.S. Government Securities
U.S. Government Securities (i.e., obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S.
Government, which in turn include Treasury Bills (which mature
within one year of the date they are issued) and Treasury Notes and
Bonds (which are issued with longer maturities). All Treasury
securities are backed by the full faith and credit of the United
States.
U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the Farmers
Home Administration, Federal Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal National Mortgage Association, Financing
Corporation, Government National Mortgage Association, Resolution
Funding Corporation, Small Business Administration, Student Loan
Marketing Association and the Tennessee Valley Authority.
Securities issued or guaranteed by U.S. Government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States. Some, such as securities issued by
the Federal Home Loan Banks, are backed by the right of the agency
or instrumentality to borrow from the U.S. Treasury. Others, such
as securities issued by the Federal National Mortgage Association,
are supported only by the credit of the instrumentality and not by
the U.S. Treasury. If the securities are not backed by the full
faith and credit of the United States, the owner of the securities
must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United
States in the event that the agency or instrumentality does not
meet its commitment. The Cash Fund will invest in government
securities, including securities of agencies and instrumentalities,
only if the Adviser (pursuant to procedures approved by the Board
of Trustees) is satisfied that these obligations present minimal
credit risks. See "Effect of the Rule on Portfolio Management"
below for a discussion of the determination of minimal credit risks
in connection with the purchase of portfolio securities.
Information On Foreign Bank Obligations
Investments, which must be denominated in U.S. dollars, in
foreign banks and foreign branches of United States banks involve
certain risks in addition to those involved with investment in
domestic banks. While domestic banks are required to maintain
certain reserves and are subject to other regulations, such
requirements and regulations may not apply to foreign branches of
domestic banks. Investments in foreign banks and foreign branches
of domestic banks may also be subject to other risks, including
future political and economic developments, the possible imposition
of withholding taxes on interest income, the seizure or
nationalization of foreign deposits and the establishment of
exchange controls or other restrictions.
Investment Restrictions of the Cash Fund
The following restrictions on the Cash Fund's investments are
fundamental policies and cannot be changed without approval of the
shareholders of the Cash Fund.
1. The Cash Fund has diversification and anti-concentration
requirements.
The Cash Fund cannot buy the securities of any issuer if it
would then own more than 10% of the total value of all of the
issuer's outstanding securities.
The Cash Fund cannot buy the securities (not including U.S.
Government Securities) of any issuer if more than 5% of its total
assets (valued at market value) would then be invested in
securities of that issuer. In addition, the Rule limits investment
in Second Tier Securities to 5% of the Cash Fund's assets in the
aggregate, and to no more than the greater of 1% of the Cash Fund's
assets or $1,000,000 in the securities of any one issuer.
The Cash Fund cannot buy the securities of issuers in any one
industry if more than 25% of its total assets would then be
invested in securities of issuers in that industry (see the
Additional Statement); U.S. Government Securities and those
domestic bank obligations and instruments of domestic banks which
the Cash Fund may purchase (see "Investment of the Funds' Assets")
are considered as not included in this limit; however, obligations
of foreign banks and of foreign branches of domestic banks are
considered as included in this limit.
2. The Cash Fund can make loans only by lending securities or
entering into repurchase agreements.
The Cash Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Cash Fund can lend its portfolio
securities on a collateralized basis up to 10% of the value of its
total assets to specified borrowers (broker-dealers, banks and
certain other financial institutions) to increase its income (see
the Additional Statement) and enter into repurchase agreements (see
"Repurchase Agreements" above). The Cash Fund may be considered as
the beneficial owner of the loaned securities in that any gain or
loss in their market price during the loan inures to the Cash Fund
and its shareholders; thus, when the loan is terminated, the value
of the securities may be more or less than their value at the
beginning of the loan.
3. The Cash Fund can borrow only in limited amounts for
special purposes.
The Cash Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage or
pledge its assets only in connection with such borrowing and only
up to the lesser of the amounts borrowed or 5% of the value of its
total assets. Interest on borrowings would reduce the Cash Fund's
income. The Cash Fund will not purchase any securities while it has
any outstanding borrowings which exceed 5% of the value of its
assets. Except in connection with borrowings, the Cash Fund will
not issue senior securities.
THE TAX-FREE FUND AND ITS INVESTMENTS
Management Policies of the Tax-Free Fund
The Tax-Free Fund invests primarily in Municipal Obligations
(as defined below). Under current management policies, it invests
only in Municipal Obligations and in shares of investment companies
with money market portfolios consisting only of Municipal
Obligations, except for certain temporary investments in taxable
obligations described below ("Taxable Obligations").
Information about the Tax-Free Fund's Municipal Obligations
As used in this Prospectus and the Additional Statement, the
term "Municipal Obligations" means obligations with maturities of
397 days or less paying interest which, in the opinion of bond
counsel or other appropriate counsel, is exempt from regular
Federal income taxes. "Hawaiian Obligations" are Municipal
Obligations, including those of certain non-Hawaii issuers, paying
interest which, in the opinion of bond counsel or other appropriate
counsel, is also exempt from Hawaii state income taxes. The
non-Hawaiian bonds or other obligations the interest on which is
exempt from Hawaii state income tax under present law are the bonds
or other obligations issued by or under the authority of Guam, the
Northern Mariana Islands, Puerto Rico and the Virgin Islands. If
Hawaiian Obligations of the desired quality, maturity and interest
rate are not available, the Tax-Free Fund will invest in other
Municipal Obligations.
Although the portion of dividends of the Tax-Free Fund paid
from interest on Hawaiian Obligations will be free of Hawaii state
income tax, that paid from interest on other Municipal Obligations
will not. Since it is not possible to predict the extent to which
suitable Hawaiian Obligations will be available for investment,
the Tax-Free Fund has no investment restriction limiting the
proportion of its portfolio which it may invest in other Municipal
Obligations. See "Dividend and Tax Information." The
diversification requirements of the Rule may also restrict the Tax-
Free Fund's investment in Hawaiian Obligations. See "Effect of the
Rule on Portfolio Management."
Although exempt from regular Federal income tax, interest paid
on certain types of Municipal Obligations, and dividends which the
Tax-Free Fund might pay from this interest, are preference items as
to the Federal alternative minimum tax. As a fundamental policy, at
least 80% of the Tax-Free Fund's net assets will be invested in
Municipal Obligations the income paid upon which will not be
subject to the alternative minimum tax; accordingly, the Tax-Free
Fund can invest the rest of its assets in obligations which are
subject to the Federal alternative minimum tax. The Tax-Free Fund
may refrain entirely from purchasing these types of Municipal
Obligations. For further information, see "Dividend and Tax
Information."
Municipal Obligations are debt obligations issued by or on
behalf of states, cities, municipalities and other public
authorities. Such obligations include:
Municipal Bonds
Municipal bonds generally have a maturity at the time of
issuance of up to 30 years. The Tax-Free Fund can invest in
municipal bonds which are Eligible Securities and which at the time
of purchase have a remaining maturity of not more than 397 days.
See "Effect of the Rule on Portfolio Management." See Appendix A to
the Additional Statement for information about ratings.
Municipal Notes
Municipal notes generally have maturities at the time of
issuance of three years or less. The Tax-Free Fund's investments in
municipal notes are limited to notes which at the time of purchase
have a remaining maturity of not more than 397 days and which are
Eligible Securities. See "Effect of the Rule on Portfolio
Management." See Appendix A to the Additional Statement for
information about ratings. These notes are generally issued in
anticipation of the receipt of tax funds, of the proceeds of bond
placements or of other revenues. The ability of an issuer to make
payments is therefore dependent on these tax receipts, proceeds
from bond sales or other revenues, as the case may be.
Municipal Commercial Paper
Municipal commercial paper is a debt obligation with a stated
maturity of 397 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term debt. The Tax-Free Fund may invest in municipal
commercial paper obligations that are Eligible Securities; see
"Effect of the Rule on Portfolio Management," below.
Other Information About Municipal Obligations
From time to time the Tax-Free Fund may invest 25% or more of
its assets in Municipal Obligations that are related in such a way
that an economic, business or political development or change
affecting one of these obligations would also affect the other
obligations, for example, Municipal Obligations the interest on
which is paid from revenues of similar type projects or Municipal
Obligations whose issuers are located in the same state.
The taxable market is a broader and more liquid market with a
greater number of investors, issuers and market makers than the
market for Municipal Obligations. The more limited marketability of
Municipal Obligations may make it difficult in certain
circumstances to dispose of large investments advantageously. In
general, Municipal Obligations are also subject to credit risks
such as the loss of credit ratings or possible default. In
addition, certain Municipal Obligations might lose tax-exempt
status in the event of a change in the tax laws.
Information about the Temporary Taxable Investments
the Tax-Free Fund May Make
The Tax-Free Fund may invest the proceeds of the sale of
shares or the sale of Municipal Obligations in Taxable Obligations
pending investment in Municipal Obligations. The Tax-Free Fund may
also enter into repurchase agreements as to Taxable Obligations.
(See "Repurchase Agreements" below.) As a fundamental policy, under
normal market conditions the Tax-Free Fund may not purchase Taxable
Obligations if thereafter more than 20% of its net assets would
consist of such obligations or cash, except for temporary defensive
purposes, i.e., in anticipation of a decline or possible decline in
the value of Municipal Obligations. Purchase of Taxable Obligations
is subject to certain specific diversification tests under the
Rule. See "Effect of the Rule on Portfolio Management," below.
Under current management policies the Taxable Obligations
which the Tax-Free Fund may purchase are obligations maturing in
397 days or less from the date of purchase by the Tax-Free Fund and
which are:
Obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities ("U.S. Government Obligations");
see the Additional Statement for further information; commercial
paper obligations that are First Tier Securities; see "Effect of
the Rule on Portfolio Management," below; and bank obligations that
are First Tier Securities including time deposits, certificates of
deposit, bankers' acceptances and other bank (see below for
definition) obligations, and which are (i) obligations of banks
subject to regulation by the U.S. Government having total assets of
at least $1.5 billion, which may be obligations issued by domestic
banks, by foreign branches of such banks or by U.S. subsidiaries of
foreign banks; or (ii) obligations ("insured bank obligations")
that are fully insured as to principal by the Federal Deposit
Insurance Corporation (see "Information on Insured Bank
Obligations" in the Additional Statement). (In this Prospectus and
in the Additional Statement, the term bank includes commercial
banks, savings banks and savings and loan associations.)
Floating and Variable Rate Instruments
Certain of the obligations that the Tax-Free Fund may purchase
have a floating or variable rate of interest. These obligations
bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the Prime Rate, or at
specified intervals. Certain of these obligations may carry a
demand feature that would permit the holder to tender them back to
the issuer at par value prior to maturity. The Tax-Free Fund may
invest in floating and variable rate obligations even if they carry
stated maturities in excess of 397 days, if under the provisions of
the Rule for determining the maturity, the maturity of the
instrument so determined is less than 397 days. See "Effect of the
Rule on Portfolio Management," below. The Tax-Free Fund will limit
its purchases of floating and variable rate obligations to those
which at the time of purchase are Eligible Securities. On an
ongoing basis, the Adviser will monitor the ability of an issuer of
a demand instrument to pay principal and interest on demand. The
Tax-Free Fund's right to obtain payment at par on a demand
instrument could be affected by events occurring between the date
the Tax-Free Fund elects to demand payment and the date payment is
due that may affect the ability of the issuer of the instrument to
make payment when due, except when such demand instrument permits
same day settlement. To facilitate settlement, these same day
demand instruments may be held in book entry form at a bank other
than the Tax-Free Fund's custodian subject to a sub-custodial
agreement approved by the Tax-Free Fund between that bank and the
Tax-Free Fund's custodian.
To the extent that floating and variable rate instruments
without demand features are not readily marketable, they will be
subject to the investment restriction that the Tax-Free Fund may
not invest an amount equal to more than 10% of the current value of
its net assets in securities that are illiquid.
Certain Put Rights
The Tax-Free Fund may enter into put transactions with
commercial banks with respect to obligations held in its portfolio.
The Tax-Free Fund does not intend to enter into put transactions
with broker-dealers, and in no event would it do so except as
permitted under the 1940 Act.
The right of the Tax-Free Fund to exercise a put is
unconditional and unqualified. A put is not transferable by the
Tax-Free Fund, although the Tax-Free Fund may sell the underlying
securities to a third party at any time. If necessary and
advisable, the Tax-Free Fund may pay for certain puts either
separately in cash or by paying a higher price for portfolio
securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities).
The Tax-Free Fund may enter into puts with banks or
broker-dealers that, in the opinion of the Adviser, present minimal
credit risks. The ability of the Tax-Free Fund to exercise a put
will depend on the ability of the bank or broker-dealer to pay for
the underlying securities at the time the put is exercised. In the
event that a bank or broker-dealer should default on its obligation
to repurchase an underlying security, the Tax-Free Fund might be
unable to recover all or a portion of any loss sustained from
having to sell the security elsewhere.
The Tax-Free Fund may enter into certain puts solely to
maintain liquidity and will not exercise its rights thereunder for
trading purposes. The puts will be only for periods substantially
less than the life of the underlying security. The acquisition of
a put will not affect the valuation by the Tax-Free Fund of the
underlying security. The actual put will be valued at zero in
determining net asset value. Where the Tax-Free Fund pays directly
or indirectly for a put, its cost will be reflected as an
unrealized loss for the period during which the put is held by the
Tax-Free Fund and will be reflected in realized gain or loss when
the put is exercised or expires. If the value of the underlying
security increases, the potential for unrealized or realized gain
is reduced by the cost of the put. The maturity of a Municipal
Obligation purchased by the Tax-Free Fund will not be considered
shortened by any such put to which the obligation is subject.
The Rule has a number of provisions affecting puts. (See
"Effect of the Rule on Portfolio Management.")
When-Issued Securities
The Tax-Free Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take
place within 45 days after the date of the commitment to purchase.
The Tax-Free Fund will only make commitments to purchase Municipal
Obligations on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement
date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are
subject to market fluctuation and no income accrues to the
purchaser prior to issuance. The payment obligation and the
interest rate that will be received on the securities are each
fixed at the time the purchaser enters into the commitment. For
purposes of determining the Tax-Free Fund's weighted-average
maturity, the maturity of a when-issued security is calculated from
its commitment date. Purchasing municipal securities on a
when-issued basis is a form of leverage and can involve a risk that
the yields available in the market when the delivery takes place
may actually be higher than those obtained in the transaction
itself, in which case there could be an unrealized loss in the
value of the investment at the time of delivery.
The Tax-Free Fund will establish a segregated account with its
Custodian in which it will maintain liquid assets in an amount at
least equal in value to the Tax-Free Fund's commitments to purchase
when-issued securities. If the value of these assets declines, the
Tax-Free Fund will place additional liquid assets in the account on
a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
Repurchase Agreements
The Tax-Free Fund may purchase securities subject to
repurchase agreements provided that such securities are listed
above under "The Tax-Free Fund And Its Investments"; it is the
Tax-Free Fund's current policy to use for repurchase agreements
only collateral that consists entirely of U.S. Government
securities or securities that, at the time the repurchase agreement
is entered into, are rated in the highest rating category by the
requisite NRSROs. (See "Effect of the Rule on Portfolio
Management.") Repurchase agreements may be entered into only with
commercial banks or broker-dealers. The Adviser, under the
supervision of the Board of Trustees, will regularly review the
financial strength of all parties to repurchase agreements with the
Tax-Free Fund. (See "Repurchase Agreements" under the caption
"Matters Applicable to All The Funds" below.)
Loans of Portfolio Securities
The Tax-Free Fund can lend its portfolio securities on a
collateralized basis up to 10% of the value of its total assets to
specified borrowers (brokers, dealers and certain financial
institutions) to increase its income (see the Additional Statement)
and enter into repurchase agreements (see "Repurchase Agreements"
above). The Tax-Free Fund may be considered as the beneficial owner
of the loaned securities in that any gain or loss in their market
price during the loan inures to the Tax-Free Fund and its
shareholders; thus, when the loan is terminated, the value of the
securities may be more or less than their value at the beginning of
the loan.
Shares of Investment Companies
The Tax-Free Fund may purchase shares of investment companies
with money market portfolios consisting only of Municipal
Obligations if such investment companies meet the requirements of
the Rule (see "Effect of the Rule on Portfolio Management" below).
It will not purchase shares of an investment company which imposes
a sales or redemption charge of any sort; however, an investment
company in which the Tax-Free Fund invests may have a distribution
plan under which it may pay for distribution expenses or services.
The Tax-Free Fund will purchase shares only of investment companies
with high-quality portfolios, which the Adviser, pursuant to
procedures approved by the Board of Trustees, determines present
minimal credit risks. Such investments will ordinarily be made to
provide additional liquidity and at the same time to earn higher
yields than are usually associated with the overnight or short-term
obligations in which the Tax-Free Fund might otherwise invest for
this purpose. While higher yields than those of alternative
investments may be obtainable, these yields will reflect management
fees and operating and distribution expenses of the investment
companies and will result in duplication of management fees with
respect to assets of the Tax-Free Fund so invested. The Tax-Free
Fund may not invest in the shares of investment companies if
immediately thereafter it has invested more than 10% of the value
of its total assets in such companies or more than 5% of the value
of its total assets in any one such company; it may not invest in
such a company if immediately thereafter it owns more than 3% of
the total outstanding voting stock of such a company.
Other Information About the Tax-Free Fund and its Investments
To the extent the ratings given by the NRSROs may change as a
result of changes in such organizations or their rating systems,
but not as a result of the downgrading of any security held by the
Tax-Free Fund or any issuer the securities of which are held by the
Tax-Free Fund, it will attempt to use comparable ratings as
standards for investments in accordance with the investment
policies contained in this Prospectus and in the Additional
Statement. The ratings of the NRSROs are more fully described in
the Appendix to the Additional Statement.
The Tax-Free Fund is a non-diversified investment company
under the 1940 Act. See "Diversity under the 1940 Act" under "
General Information" below.
Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations
The following is a discussion of the general factors that
might influence the ability of Hawaiian issuers to repay principal
and interest when due on the Hawaiian Obligations contained in the
portfolio of the Tax-Free Fund. Such information is derived from
sources that are generally available to investors and is believed
by the Tax-Free Fund to be accurate, but has not been independently
verified and may not be complete.
As of the date of this Prospectus, economic data available
indicate that 1995 was a year of mild expansion in Hawaii, with
lingering areas of weakness and not enough economic growth to do
more than halt the slide in employment. Local economic sources
expect that the economy will gain some further strength this year.
Despite the lower unemployment rate and strong growth in tourism,
business activity in the state remained sluggish. Disinflation has
accompanied the lower growth rate.
Tourism is the State's principal industry. Tourist arrivals
and spending provided a needed boost to the Hawaiian economy in
1995. The decline in construction, underway since mid-1991,
continued.
Value retailers from the mainland have been aggressively
penetrating island markets for several years. As a result, local
retailers have been repositioning themselves to confront the
competition posed by the newcomers. Some retailers have been forced
out of the industry, and as a result, retail employment continues
at a low level, despite the opening of several new retail
outlets.
Job loss also accompanied the closure or announcement of
timetables for closure of several sugar plantations around the
state.
Combined with more gradual reductions in the number of
military personnel stationed on the islands and civilian military
employees in the military, during 1995, Hawaii was able to create
only slightly more jobs than it lost, leaving the job count between
1993 and 1995 virtually unchanged.
The prolonged weakness has resulted in pressures for the
State to achieve a balanced budget by significant cuts in
expenditures. These reductions will pressure government to operate
in a much leaner and more efficient manner.
The Hawaiian economy may also be adversely impacted by the
uncertainty in the general interest rate environment caused by
outside factors.
Investment Restrictions of the Tax-Free Fund
The following restrictions on the Tax-Free Fund's investments
are fundamental policies and cannot be changed without approval of
the shareholders of the Tax-Free Fund.
1. The Tax-Free Fund has diversification and
anti-concentration requirements.
The Tax-Free Fund cannot buy the securities of issuers in any
one industry if more than 25% of its total assets would then be of
issuers in that industry; Municipal Obligations, U.S. Government
Obligations and those bank obligations and instruments of domestic
banks which the Fund may purchase (see "Investment of the Fund's
Assets") are considered as not included in this limit, except that
the Fund will consider that a non-governmental user of facilities
financed by industrial development bonds is an issuer in an
industry.
2. The Tax-Free Fund can make loans only by lending securities
or entering into repurchase agreements.
The Tax-Free Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Tax-Free Fund can lend its
portfolio securities (see "Loans of Portfolio Securities" above)
and enter into repurchase agreements (See "Repurchase Agreements"
above).
3. The Tax-Free Fund can borrow only in limited amounts for
special purposes.
The Tax-Free Fund can borrow from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets only in connection with such
borrowing and only up to the lesser of the amounts borrowed or 5%
of the value of its total assets. Interest on borrowings would
reduce the Fund's income. The Tax-Free Fund will not purchase any
securities while it has any outstanding borrowings which exceed 5%
of the value of its total assets.
THE TREASURIES FUND AND ITS INVESTMENTS
Management Policies of the Treasuries Fund
The Treasuries Fund invests only in short-term direct
obligations of the United States Treasury with remaining maturities
of one year or less, and certain repurchase agreements secured by
U.S. Treasury obligations. The Treasuries Fund will not invest in
other obligations issued or guaranteed by agencies or
instrumentalities of the United States Government. Shares of the
Treasuries Fund are not guaranteed or insured by the United States
Government.
U. S. Treasury Obligations
The U.S. Treasury issues various types of marketable
securities, consisting of bills, notes, bonds, and certificates of
indebtedness, which are all direct obligations of the U.S.
Government backed by its "full faith and credit" and which differ
primarily in the length of their maturity. U.S. Treasury bills,
which have a maturity of up to one year, are the most frequently
issued marketable U.S. Government security. The Fund may also
invest in separately traded principal and interest components of
securities issued by the United States Treasury. The principal and
interest components of selected securities are traded independently
under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the
principal and interest components are individually numbered and
separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts
independently.
The investment by the Treasuries Fund in such short-term
direct obligations of the U.S. Treasury may result in a lower yield
than a policy of investing in other types of instruments, and
therefore the yield of the Treasuries Fund may be lower, for
example, than the yield of another of the Trust's portfolios, the
Cash Fund, which invests in taxable money market obligations of a
broader range of issuers.
Repurchase Agreements
The Treasuries Fund may purchase securities subject to
repurchase agreements provided that such securities are obligations
of the U.S. Treasury. Repurchase agreements may be entered into
only with commercial banks or broker-dealers. Subject to the
control of the Board of Trustees, the Adviser will regularly review
the financial strength of all parties to repurchase agreements with
the Treasuries Fund. (See "Repurchase Agreements" under the caption
"Matters Applicable to All The Funds" below.)
Other Information about the Treasuries Fund's Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Treasuries Fund will purchase only those issues that will enable it
to achieve and maintain the highest rating for a mutual fund by at
least one NRSRO. There is no assurance that it will be able to
maintain such rating. As a result of this policy, the range of
obligations in which the Treasuries Fund can invest is reduced and
the yield obtained on such obligations may be less than would be
the case if this policy were not in force.
Investment Restrictions of the Treasuries Fund
The following restrictions on the Treasuries Fund's
investments are fundamental policies and cannot be changed without
approval of the shareholders of the Treasuries Fund.
1. The Treasuries Fund can make loans only by lending
securities or entering into repurchase agreements.
The Treasuries Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Treasuries Fund can lend its
portfolio securities on a collateralized basis up to 10% of the
value of its total assets to specified borrowers (broker-dealers,
banks and certain other financial institutions) to increase its
income (see the Additional Statement) and enter into repurchase
agreements (see "Repurchase Agreements" above). The Treasuries Fund
may be considered as the beneficial owner of the loaned securities
in that any gain or loss in their market price during the loan
inures to the Treasuries Fund and its shareholders; thus, when the
loan is terminated, the value of the securities may be more or less
than their value at the beginning of the loan.
2. The Treasuries Fund can borrow only in limited amounts for
special purposes.
The Treasuries Fund can borrow from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets only in connection with such
borrowing and only up to the lesser of the amounts borrowed or 5%
of the value of its total assets. Interest on borrowings would
reduce the Treasuries Fund's income. The Treasuries Fund will not
purchase any securities while it has any outstanding borrowings
which exceed 5% of the value of its assets. Except in connection
with borrowings, the Treasuries Fund will not issue senior
securities.
Portfolio Matters Applicable to All Funds
(In the material below, the text in bold does not apply to the
Treasuries Fund.)
Repurchase Agreements
Under a repurchase agreement, at the time a Fund purchases a
security, the Fund also resells it to the seller and must deliver
the security (or securities substituted for it) to the seller on an
agreed-upon date in the future. (The securities so resold or
substituted are referred to herein as the "Resold Securities.") The
resale price is in excess of the purchase price in that it reflects
an agreed-upon market interest rate effective for the period of
time during which the Fund's money is invested in the Resold
Securities. The majority of these transactions run from day to day,
and the delivery pursuant to the resale typically will occur within
one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the 1940 Act. The return on such "collateral"
may be more or less than that from the repurchase agreement. The
Resold Securities under any repurchase agreement will be marked to
market every business day so that the value of the "collateral" is
at least equal to the resale price provided in the agreement,
including the accrued interest earned thereon, plus sufficient
additional market value as is considered necessary to provide a
margin of safety. During the term of the repurchase agreement, the
Fund or its custodian or sub-custodian either has actual physical
possession of the Resold Securities or, in the case of a security
registered in a book entry system, the book entry is maintained in
the name of the Fund or its custodian. The Fund retains an
unqualified right to possess and sell the Resold Securities in the
event of a default by the other party.
In the event of bankruptcy or other default by the other
party, there may be possible delays and expenses in liquidating the
Resold Securities, decline in their value and loss of interest. If
the maturity of the Resold Securities is such that they cannot be
owned by the Fund under the applicable provisions of the Rule they
will have to be sold, which could result in a loss. See "Effect of
the Rule on Portfolio Management."
Limitation of 10% As To Certain Investments
Due to their possible limited liquidity, no Fund may make
certain investments if thereafter more than 10% of its net assets
would consist of such investments. The investments included in this
10% limit are (i) repurchase agreements maturing in more than seven
days; (ii) fixed time deposits subject to withdrawal penalties
other than overnight deposits; (iii) restricted securities, i.e.,
securities which cannot freely be sold for legal reasons (which the
Funds do not expect to own); (iv) securities for which market
quotations are not readily available; and (v) insured bank
obligations unless the Board of Trustees determines that a readily
available market exists for such obligations. However, this 10%
limit does not include any obligations payable at principal amount
plus accrued interest on demand or within seven days after demand.
Factors Which May Affect the Value
of the Funds' Investments and Their Yields
The value of the obligations and instruments in which the
Funds invest will fluctuate depending in large part on changes in
prevailing interest rates. If the prevailing interest rates go up
after a Fund buys a security, the value of the security may go
down; if these rates go down, the value of the security may go up.
Changes in value and yield based on changes in prevailing interest
rates may have different effects on short-term obligations than on
long-term obligations. Long-term obligations (which often have
higher yields) may fluctuate in value more than short-term ones.
Portfolio Transactions
Each Fund will seek to obtain the best net price and the most
favorable execution of orders. Purchases will be made directly from
issuers or from underwriters, dealers or banks which specialize in
the types of securities invested in by the Fund. As most purchases
made by the Funds are principal transactions at net prices, the
Funds incur little or no brokerage costs. Purchases from
underwriters will include a commission or concession paid by the
issuer to the underwriter and purchases from dealers may include
the spread between the bid and the asked price. If the execution
and price offered by more than one dealer are comparable, the order
may be allocated to a dealer which has provided research advice,
such as information on particular companies and industries and
market, economic and institutional activity. By allocating
transactions to obtain research services, the Funds enable the
Adviser to supplement its own research and analyses with the views
and information of other securities firms. Such research services,
whether or not useful to the Funds, may be useful to other accounts
managed by the Adviser or its affiliates.
Effect of the Rule on Portfolio Management
Under "Investment of the Funds' Assets" above immediately
following the investment objectives of the Funds, there is a brief
description of Rule 2a-7 (the "Rule") of the Securities and
Exchange Commission under the 1940 Act.
As money market funds, the Funds operate under the Rule, which
allows the Funds to use the "amortized cost" method of valuing
their securities and which contains certain risk limiting
provisions, including requirements as to maturity, quality and
diversification of each Fund's portfolio. Some of the most
important aspects of the Rule are described below.
Under the Rule, each Fund must limit its investments to those
instruments which are denominated in U.S. dollars, which are
determined by the Board of Trustees to present minimal credit
risks, and which, at the time of purchase, are Eligible Securities.
In accordance with the Rule, the Board of Trustees has adopted
investment procedures and has approved investment policies pursuant
to which all investment determinations have been delegated to the
Adviser, under the direction and control of the Board of Trustees,
except for those matters for which the Rule requires Board
determination.
In general, the Rule defines as Eligible Securities those that
at the time of purchase are rated in the two highest rating
categories for short-term securities by any two of the NRSROs or,
if unrated, are determined by the Board of Trustees to be of
comparable quality. Eligible Securities so rated in the highest
rating category (and unrated securities determined by the Board of
Trustees to be of comparable quality) are called "First Tier
Securities"; all other Eligible Securities are called "Second Tier
Securities." Eligible Securities can in some cases include
securities rated by only one NRSRO and unrated obligations that are
determined by the Board of Trustees to be of comparable quality to
rated securities. A security that was long-term when issued must,
at the time of purchase by a Fund, either have a short-term rating
such that it is an Eligible Security or be comparable in priority
and security to a rated short-term obligation of the same issuer
that is an Eligible Security or, if the issuer has no short-term
rating (and does not have a long-term rating from any NRSRO below
the highest rating), be determined by the Board of Trustees to be
of comparable quality to rated securities the Fund could purchase.
Purchase of any security rated by only one NRSRO and purchase of
any unrated security (except U.S. Government Securities) must be
ratified by the Board of Trustees; in the case of the Tax-Free
Fund, this requirement applies only to taxable securities.
As to the Cash Fund and the taxable securities of the Tax-Free
Fund, the Rule requires (with limited exceptions) that immediately
after purchase of any security, a Fund have invested not more than
5% of its assets in the securities of any one issuer, and provides
that a Fund cannot have more than 5% of its assets in the aggregate
invested in Second Tier Securities, nor more than the greater of 1%
of its assets or $1,000,000 invested in Second Tier Securities of
any single issuer. (In general, the Tax-Free Fund does not intend
to own Second Tier Securities.) The Rule has specific provisions
relating to determinations of the eligibility of certain types of
instruments such as repurchase agreements and instruments subject
to a demand feature. It also has specific provisions for
determining the issuer of a security for purposes of compliance
with the diversification requirements.
Generally, under the Rule, the maturity of an instrument is
considered to be its stated maturity (or in the case of an
instrument called for redemption, the date on which the redemption
payment must be made). There are special rules for determining the
maturity of certain kinds of instruments. The Rule contains
provisions as to the maturity of variable rate and floating rate
instruments. Repurchase agreements and securities loan agreements
are, in general, treated as having a maturity equal to the period
remaining until they can be executed.
The Rule has provisions requiring specific actions whenever
the rating of a portfolio security is downgraded. Generally, these
actions include a prompt reassessment by the Board of Trustees of
the credit risks associated with such a security. In general, the
Rule mandates prompt sale or other disposition, e.g., by exercising
a demand for payment, in certain cases, such as when a security
ceases to be an Eligible Security, no longer presents minimal
credit risks or suffers a financial default.
Fundamental Policies
Each Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the Prospectus
and Additional Statement as "fundamental policies," cannot be
changed unless the holders of a "majority," as defined in the 1940
Act, of the Fund's outstanding shares vote to change them. (See the
Additional Statement for a definition of such a majority.) All
other policies can be changed from time to time without shareholder
approval. Some of the more important of each Fund's fundamental
policies, not otherwise identified in the Prospectus, are described
above; others are listed in the Additional Statement.
NET ASSET VALUE PER SHARE
The net asset value per share for each class of the Funds'
shares is determined as of 4:00 p.m. New York time on each day that
the New York Stock Exchange is open by dividing the value of the
assets of the Fund allocable to that class less Fund liabilities
allocable to the class and any liabilities charged directly to the
class, exclusive of surplus, by the total number of shares of the
class outstanding.
The net asset value per share will normally remain constant at
$1.00 per share except under extraordinary circumstances; see the
Additional Statement for a discussion of the extraordinary
circumstances which could result in a change in this fixed share
value. The net asset value per share of each Fund is based on a
valuation of its investments at amortized cost; see the Additional
Statement.
HOW TO INVEST IN THE FUNDS
Each Fund's Original Shares are sold on a continuous basis at
the net asset value next determined after an order is entered and
deemed effective. There is no sales charge. The minimum initial
investment is $1,000 in the shares of a Fund. Subsequent
investments may be in any amount. Aquila Distributors, Inc. (the
"Distributor") is the exclusive Distributor of the Funds' shares.
The Distributor sells shares only for purchase orders received.
Original Shares are sold solely to (1) financial institutions for
their own account or for the investment of funds for which they act
in a fiduciary, agency, investment advisory or custodial capacity;
(2) persons entitled to exchange into such shares under the Fund's
exchange privilege; and (3) shareholders of record on January 20,
1995, the date on which the Funds first offered two classes of
shares.
Opening an Account
To open a new Original Shares account, you must send a
properly completed Application to Administrative Data Management
Corp. (the "Agent"). Redemption of Original Shares purchased by
wire payment will not be honored until a properly completed
Application has been received by the Agent.
Initial investments in Original Shares may be made in any of
these three ways:
1. By Mail. Payment may be made by check, money order, Federal
Reserve Draft or other negotiable bank draft drawn in United States
dollars on a United States commercial or savings bank or credit
union (each of which is a "Financial Institution") payable to the
order of Pacific Capital Cash Assets Trust, Pacific Capital
Tax-Free Cash Assets Trust or Pacific Capital U.S. Treasuries Cash
Assets Trust, as the case may be, and mailed to:
(Specify the name of the Fund)
Administrative Data Management Corp.,
Shareholder Servicing Agent
Attn: Aquilasm Group of Funds
581 Main Street
Woodbridge, NJ 07095-1198
2. By Wire. Payment may be wired in Federal funds (monies
credited to a bank's account with a Federal Reserve Bank) to Bank
One Trust Company, N.A., which serves as the Custodian of the
assets of the Funds.
To insure prompt and proper crediting to your account, if you
choose this method of payment you should first telephone the Agent
(800-255-2287 toll free or 908-855-5731) and then instruct your
bank to wire funds as indicated below for the appropriate Fund:
the Cash Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital Cash Assets Trust
(Original Shares) A/C 6801358400
the Tax-Free Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital Tax-Free
Cash Assets Trust (Original Shares)
A/C 6801358500
the Treasuries Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital U.S. Treasuries
Cash Assets Trust (Original Shares)
A/C 6801358600
In addition, add:
The name in which the investment is to be registered (if a new
account).
Your bank may impose a charge for wiring funds.
3. Through Brokers. If you wish, you may invest in a Fund by
purchasing Original Shares through registered broker-dealers.
There is no sales or service charge imposed by any Fund on
purchases of Original Shares, although broker-dealers may make
reasonable charges to their customers for their services. The
services to be provided and the fees therefor are established by
each broker-dealer acting independently; broker-dealers may also
determine to establish, as to accounts serviced by them, higher
initial or subsequent investment requirements than those required
by the Funds. Broker-dealers are responsible for prompt
transmission of orders placed through them.
Additional Investments
You may make additional investments in Original Shares in any
amount after an account has been established by mailing directly to
the Agent a check, money order or other negotiable bank draft made
payable to the Fund, or by wiring funds as described above. In each
case you should indicate your name and account number to insure
prompt and proper crediting of your account. The pre-printed stub
attached to each Fund's confirmations is provided as a convenient
identification method to accompany additional investments made by
mail. You may also make subsequent investments of $50 or more using
electronic funds transfers from your demand account at a Financial
Institution if it is a member of the Automated Clearing House and
if the Agent has received a completed Application designating this
feature, or, after your account has been opened, a Ready Access
Features form available from the Distributor or the Agent. A
pre-determined amount can be regularly transferred for investment
("Automatic Investment") or single investments can be made upon
receipt by the Agent of telephone instructions from anyone
("Telephone Investment"). The maximum amount of each Telephone
Investment is $50,000. Upon 30 days' written notice to
shareholders, the Funds may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
When Shares Are Issued
and Dividends Are Declared On Them
There are three methods as to when Original Shares are
issued. Under each method, shares are issued at the net asset value
per share next determined after the purchase order is effective, as
discussed below. Under each method, the Application must be
properly completed and have been received and accepted by the
Agent; each Fund or the Distributor may also reject any purchase
order for shares of that Fund. Under each method, Federal funds
(see above) must either be available to the Fund in question or the
payment thereof must be guaranteed to the Fund so that the Fund can
be as fully invested as practicable.
The first method under which Original Shares are issued
involves ordinary investments. Under this method, payments
transmitted by wire in Federal funds and payments made by Federal
Reserve Draft received by the Custodian prior to 4:00 p.m. New York
time on any day on which the New York Stock Exchange is open will
be invested (i.e., the purchase order will be effective) at the net
asset value per Original Share determined as of 4:00 p.m. on that
day; if either such type of payment is received after that time,
the purchase order will be effective as of 4:00 p.m. on the next
day that the exchange is open. Wire payments not in Federal funds
will normally be converted into Federal funds on the next day such
exchange is open and the purchase order will be effective as of
4:00 p.m. on such next day. Payments transmitted by check will
normally be converted to Federal funds by the Agent, as your agent,
within two business days for checks drawn on a member bank of the
Federal Reserve System, and longer for most other checks, and the
purchase orders will be effective as of 4:00 p.m. on the day of
conversion, if the exchange is open, and otherwise at 4:00 p.m. on
the next day the exchange is open after such conversion. All checks
are accepted subject to collection at full face value in United
States funds and must be drawn in United States dollars on a United
States bank; if not, shares will not be issued. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first day on which the exchange is open occurring on or after
the date an order is considered received by the Agent at the net
asset value determined on that day. In the case of Automatic
Investment the order will be executed on the date you specified for
investment at the price determined on that day, unless it is not a
day on which the exchange is open, in which case the order will be
executed at the net asset value determined on the next day on which
the exchange is open. In the case of Telephone Investment the order
will be filled at the next determined net asset value, which for
orders placed after the time for determining the net asset value of
any Fund's shares for any day will be the price determined on the
following day on which the exchange is open. Dividends on shares
issued under this first investment method are declared starting on
the day (whether or not a business day) after the purchase order is
effective and are declared on the day on which the shares are
redeemed.
The second method under which Original Shares are issued
involves a bank or broker-dealer making special arrangements with
the Funds under which (i) either (a) payment is made in Federal
funds or by check in New York Clearing House funds delivered to the
Agent prior to 5:00 p.m. New York time or (b) the Agent is advised
prior to that time of a dollar amount to be invested; (ii) the
Agent is advised prior to that time of the form of registration of
the shares to be issued; (iii) the bank or broker-dealer will prior
to noon New York time on the next business day wire Federal funds
to the Custodian (but in the case of prior payment by check under
(i)(a) above only if the check is not converted into Federal funds
in the normal course on the next business day); and (iv)
arrangements satisfactory to the Funds are made between it and the
bank or broker-dealer under which if Federal funds are not so
received by the Custodian, the Fund is reimbursed for any costs or
loss of income arising out of such non-receipt. New York Clearing
House funds are funds represented by a check drawn on a bank which
is a member of the New York Clearing House. Under this second
method, the purchase order is effective on the day the check or the
advice is received under (i) above. Dividends on shares issued
under this second method are declared starting on the day (whether
or not a business day) after the purchase order is effective and
are declared on the day on which such shares are redeemed.
The third method under which Original Shares are issued
involves broker-dealers or banks which have requested that this
method be used, to which request the Funds have consented. Under
this third method (i) the Agent must be advised prior to noon New
York time on any business day of a dollar amount to be invested;
and (ii) Federal funds must be wired to the Custodian on that day;
under this method, the purchase order is effective on that day.
Dividends on shares issued under this third investment method are
declared beginning on that day but not on the day such shares are
redeemed.
This third investment method is available to prospective
investors in Original Shares who wish to use it so that the
dividends on their shares will commence to be declared on the day
the purchase order is effective. Upon written or phone request to
a Fund by such a prospective investor, the Fund will advise as to
the broker-dealers or banks through which such purchases may be
made.
Confirmations and Share Certificates
All purchases of Original Shares will be confirmed and
credited to you in an account maintained for you by the Agent in
full and fractional shares of the Fund being purchased (rounded to
the nearest 1/1000th of a share). Share certificates will not be
issued unless you so request from the Agent in writing and declare
a need for such certificates, such as a pledge of shares or an
estate situation. If certificates are issued at your request,
Expedited Redemption Methods described below will not be available
and delay and expense may be incurred if you lose the certificates.
No certificates will be issued for fractional shares or to
shareholders who have elected the checking account or predesignated
bank account methods of withdrawing cash from their accounts. (See
"How to Redeem Your Investment" below.)
The Funds and the Distributor reserve the right to reject any
order for the purchase of Original Shares. In addition, the
offering of shares may be suspended at any time and resumed at any
time thereafter.
Distribution Plan
Each Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act. Rule 12b-1 provides in substance
that an investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in the
sale of its shares except pursuant to a plan adopted under that
rule. One section of the first part of the Distribution Plan of
each Fund is designed to protect against any claim against or
involving the Fund that some of the expenses which the Fund pays or
may pay come within the purview of Rule 12b-1. Another section of
the first part of the Distribution Plan authorizes Aquila
Management Corporation (the "Administrator"), not the Fund, to make
certain payments to certain Qualified Recipients (as defined in the
Distribution Plan) which have rendered assistance in the
distribution and/or retention of the Fund's shares. For the Cash
Fund, these payments may not exceed 0.15 of 1% of the average
annual net assets of the Fund for a fiscal year; for the Tax-Free
Fund and the Treasuries Fund, the rate is 0.10 of 1%. The second
part of the Distribution Plan of each Fund, discussed more fully
below under "General Information - Description of Classes,"
provides for payment by the Fund of fees to certain financial
institutions with respect to Service Shares (not to Original
Shares, to which this Prospectus relates). These fees are treated
as expenses allocable specifically to the Service Shares class and
are therefore borne only by that class.
See the Additional Statement for further information about the
Distribution Plan.
With the exception of its provisions relating specifically to
Service Shares, each Fund's Distribution Plan is solely a
defensive plan designed to protect that Fund and its affiliates
against any claim described above. The Distribution Plan does not
involve payments, out of assets or income allocated to Original
Shares, designed to recognize sales of shares of any Fund or to pay
advertising expenses.
HOW TO REDEEM YOUR INVESTMENT
Each Fund provides day-to-day liquidity. You may redeem all or
any part of your Original Shares at any time at the net asset
value next determined after acceptance of your redemption request
at the Agent. Redemptions can be made by the various methods
described below. Except for shares recently purchased by check as
discussed below, there is no minimum time period for any investment
in any Fund. There are no redemption fees or withdrawal penalties.
If you purchase Original Shares of any Fund through broker-dealers,
banks and other financial institutions which serve as shareholders
of record you must redeem through those institutions, which are
responsible for prompt transmission of redemption requests. In all
other cases, you may redeem directly, but a completed purchase
Application must have been received by the Agent before redemption
requests can be honored. A redemption may result in a taxable
transaction to you, but only if there has been a change in the net
asset value per share, which will occur only under extraordinary
circumstances.
For your convenience each Fund offers expedited redemption to
provide you with a high level of liquidity for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of three expedited methods of
initiating redemptions. These are available as to Original Shares
not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem Original Shares and make payments
to a Financial Institution account you have predesignated. See
"Redemption Payments" below for payment methods. Your name and your
account number must be supplied.
To redeem an investment in Original Shares by this method,
telephone:
800-255-2287 toll free or 908-855-5731
Note: The Funds, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name and number; name(s)
and social security number registered to the account and personal
identification; the Agent may also record calls. Shareholders
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter of
instruction sent to: Administrative Data Management Corp., Attn:
Aquilasm Group of Funds, by FAX at 908-855-5730 or by mail at 581
Main Street, Woodbridge, NJ 07095-1198, indicating Fund name,
account number, amount to be redeemed and any payment directions,
and signed by the registered holder(s). Signature guarantees are
not required. See "Redemption Payments" below for payment
methods.
If you wish to use the above procedures you should so elect on
the Expedited Redemption section of the Application or Ready Access
Features form and provide the required information concerning the
Financial Institution account number. The Financial Institution
account must be in the exclusive name(s) of the shareholder(s) as
registered with the Fund(s). You may change the designated
Financial Institution account at any time by completing and
returning a Ready Access Features form. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
3. By Check. The Agent will, upon request, provide you with
forms of drafts ("checks") drawn on the Custodian. This feature is
not available if your shares are represented by certificates. These
checks represent a further alternative redemption means and you may
make them payable to the order of anyone in any amount of not less
than $500. If you wish to use this check writing redemption
procedure you should notify the Agent or so indicate on your
Application. You will be issued special checks to be drawn against
the Custodian for this purpose. You will be subject to the
Custodian's rules and regulations governing its checking accounts.
If the account is registered in more than one name, each check must
be signed by each account holder exactly as the names appear on the
account registration, unless expressly stated otherwise on your
Application.
There is no charge for the maintenance of this special check
writing privilege or for the clearance of any checks.
When such a check is presented to the Custodian for it to pay
with proceeds of redemption of a Fund's shares, a sufficient number
of full and fractional shares of that Fund in your account will be
redeemed to cover the amount of the check. This check writing
redemption procedure enables you to continue receiving dividends on
those shares equaling the amount being redeemed by check until such
time as the check is actually presented to the Custodian for
payment.
As these checks are redemption drafts relating to Original
Shares, you should be certain that adequate shares for which
certificates have not been issued and which were not recently
purchased by check are in the account to cover the amount of the
check. See "Redemption Payments" below for more details as to
special problems as to Original Shares recently purchased by check.
If insufficient redeemable shares are in the account, the
redemption check will be returned marked "insufficient funds." The
fact that redemption checks are drafts may also permit a bank in
which they are deposited to delay crediting the account in question
until that bank has received payment funds for the redemption
check.
Checks may not be directly presented to any branch of the
Custodian. This does not affect checks used for the payment of
bills or cashed at other banks. You may not use checks to close
your account, since the number of shares in an account changes
daily through dividend payments which are automatically reinvested
in full and fractional shares. Consequently, you may not present a
check directly to the Custodian and request redemption for all or
substantially all Original Shares held in your account. Only
expedited redemption to a predesignated bank account or the regular
redemption method (see below) may be used when closing an account.
Multiple Redemption Services. You are not limited in choice of
redemption methods but may utilize all available forms. However,
when both redemption to a predesignated bank account and check
writing are desired, you must so elect on the Application, or by
proper completion of a Ready Access Features form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Original
Shares to be redeemed should be sent in blank (unsigned) to the
Fund's Shareholder Servicing Agent: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, 581 Main Street , Woodbridge,
NJ 07095-1198, with payment instructions. A stock assignment form
signed by the registered shareholder(s) exactly as the account is
registered must also be sent to the Shareholder Servicing
Agent.
For your own protection, it is essential that certificates
be mailed separately from signed redemption documentation. Because
of possible mail problems, it is also recommended that certificates
be sent by registered mail, return receipt requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration of
the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required if
sufficient documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
In all other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent bank,
a participant in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or
the New York Stock Exchange, Inc. Medallion Signature Program
(MSP). A notary public is not an acceptable signature
guarantor.
2. Non-Certificate Shares. If you own non-certificate
Original Shares registered on the books of a Fund, and you have not
elected Expedited Redemption to a predesignated Financial
Institution account, you must use the Regular Redemption Method.
Under this redemption method you should send a letter of
instruction to: Administrative Data Management Corp., Attn:
Aquilasm Group of Funds, 581 Main Street, Woodbridge, NJ
07095-1198, containing:
Fund Name;
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Funds);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above.
Redemption Payments
For redemptions of Original Shares other than by checks you
have written, redemption payments will ordinarily be mailed to you
at your address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. Any Fund may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. No Fund
has any present intention of making this charge. Upon 30 days'
written notice to shareholders, any Fund may modify or terminate
the use of the Automated Clearing House to make redemption payments
at any time or charge a service fee, although no such fee is
currently contemplated. If any such changes are made, the
Prospectus will be supplemented to reflect them. If you use a
dealer to arrange for a redemption, you may be required to pay the
dealer for this service.
Redemption proceeds on Original Shares issued under the third
method under which shares are issued (see "When Shares Are Issued
and Dividends Are Declared on Them" under "How to Invest in the
Funds") will be wired in Federal funds on the date of redemption,
if practicable, and, if not practicable, as soon thereafter as
practicable, irrespective of amount. Redemption requests as to such
shares may be made by telephone.
Except as indicated above, each Fund will normally make
payment for all Original Shares redeemed on the next business day
following receipt of request. Except as set forth below, in no
event will payment be made more than seven days after receipt of a
redemption request made in compliance with one of the redemption
methods specified above. However, the right of redemption may be
suspended or the date of payment postponed (i) during periods when
the New York Stock Exchange is closed for other than weekends and
holidays or when trading on such exchange is restricted as
determined by the Securities and Exchange Commission by rule or
regulation; (ii) during periods in which an emergency, as
determined by the Securities and Exchange Commission, exists which
causes disposal of, or valuation of the net asset value of, the
portfolio securities of the Fund to be unreasonable or
impracticable; or (iii) for such other periods as the Securities
and Exchange Commission may permit. Payment for redemption by any
method (including redemption by check) of Original Shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the bank on
which the purchase check was drawn or from which the funds for
Automatic Investment or Telephone Investment were transferred,
satisfactory to the Agent and the Fund, that the purchase check or
Automatic Investment or Telephone Investment will be honored.
Original Shares so purchased within the prior 15 days will not be
redeemed under the check writing redemption procedure and a
shareholder must not write a check if (i) it will be presented to
the Custodian for payment within 15 days of a purchase of Original
Shares by check and (ii) the redemption check would cause the
redemption of some or all of those shares. Possible delays in
payment of redemption proceeds can be eliminated by using wire
payments or Federal Reserve drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders of
any Fund to make payment wholly or partly in cash, that Fund may
pay the redemption price in whole or in part by the distribution in
kind of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. See the Additional Statement for details.
Each Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such shares
is less than $500 due to shareholder redemptions. If the Board of
Trustees elects to do this, shareholders who are affected will
receive prior written notice and will be permitted 60 days to bring
their accounts up to the minimum before this redemption is
processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Original Shares of a Fund having a net
asset value of at least $5,000 you may establish an Automatic
Withdrawal Plan under which you will receive a monthly or quarterly
check in a stated amount, not less than $50. If such a plan is
established, all dividends and distributions must be reinvested in
your shareholder's account. See the Automatic Withdrawal Plan
provisions of the Application included in this Prospectus, the
Additional Statement under "Automatic Withdrawal Plan" and
"Dividend and Tax Information" below.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of each Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Funds' Trustees and officers and provides
further information about them.
The Advisory Agreements
Hawaiian Trust Company, Limited (the "Adviser") supervises the
investment program of each Fund and the composition of its
portfolio.
The services of the Adviser to each Fund are rendered under
an Investment Advisory Agreement between that Fund and the Adviser
(together,the "Advisory Agreements") which were approved by each
Fund's shareholders on March 22, 1996. The new Advisory Agreements
have the same provisions as the agreements previously in effect,
except that under the new agreements the Funds are permitted to pay
regular fees to Trustees who are affiliated with the Adviser solely
by reason of membership on its Board of Directors.
The Advisory Agreements of the Funds provide, subject to the
control of the Board of Trustees, for investment supervision by the
Adviser. Under the advisory agreements, the Adviser will furnish
information as to the Fund's portfolio securities to any provider
of fund accounting services to each Fund; will monitor records of
each Fund as to the Fund's portfolio, including prices, maintained
by such provider of such services; and will supply at its expense,
monthly or more frequently as may be necessary, pricing of each
Fund's portfolio based on available market quotations using a
pricing service or other source of pricing information satisfactory
to that Fund. Each Advisory Agreement states that the Adviser
shall, at its expense, provide to the Fund all office space and
facilities, equipment and clerical personnel necessary for the
carrying out of the Adviser's duties under the Advisory Agreement.
Under each Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Adviser,
provided, however that if any Trustee is an affiliate of the
Adviser solely by reason of being a member of its Board of
Directors, the Trust may pay compensation to such Trustee, but at
a rate no greater than the rate it pays to its other Trustees .
Under the Advisory Agreements, each Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to its shareholders and the
costs of printing or otherwise producing and distributing those
copies of such prospectuses, statements of additional information
and reports as are sent to its shareholders. Under each Advisory
Agreement, all costs and expenses not expressly assumed by the
Adviser or by the Administrator under the Fund's Administration
Agreement or by the Fund's principal underwriter are paid by the
Fund. The Advisory Agreements list examples of such expenses borne
by the Funds, the major categories of such expenses being: legal
and audit expenses, custodian and transfer agent, or shareholder
servicing agent, fees and expenses, stock issuance and redemption
costs, certain printing costs, registration costs of the Funds and
their shares under Federal and State securities laws, interest,
taxes, and non-recurring expenses, including litigation.
Under the Advisory Agreements, each Fund pays a fee payable
monthly and computed on the net asset value of the Fund as of the
close of business each business day. For the Cash Fund, the fee is
payable at the annual rate of 0.33 of 1% of such net assets up to
$325 million, and on net assets above that amount at an annual rate
of 0.43 of 1% of such net assets; for each of the Tax-Free Fund and
the Treasuries Fund, the annual rate is 0.27 of 1% of such net
assets up to a stated amount of net assets and 0.33 of 1% on net
assets above that amount. (The amount for the Tax-Free Fund is $95
million and for the Treasuries Fund the amount is $60 million.)
However, the total fees which the Funds pay are at the annual rate
of 0.50 of 1% of such net assets for the Cash Fund and 0.40 of 1%
for the other Funds, since the Administrator also receives a fee
from each of the other Funds under the applicable Administration
Agreement as discussed below. The Adviser and/or Administrator may,
in order to attempt to achieve a competitive yield on the shares of
a Fund, each waive all or part of either fee.
The Adviser agrees in each case that its fee shall be
reduced, but not below zero, by an amount equal to the pro-rata
portion (based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2% of the
next $70 million of such assets and 1.5% of its average annual net
assets in excess of $100 million, or (ii) 25% of the Fund's total
annual investment income.
The Advisory Agreements contain provisions as to the
allocation of the portfolio transactions of each Fund; see the
Additional Statement. Under these provisions, the Adviser is
authorized to consider sales of the Fund's shares in making this
allocation.
The Administration Agreements
Under Administration Agreements with each Fund (the
"Administration Agreements"), Aquila Management Corporation as
Administrator, at its own expense, provides office space,
personnel, facilities and equipment for the performance of its
functions thereunder and as is necessary in connection with the
maintenance of the headquarters of the Fund and pays all
compensation of the Fund's Trustees, officers and employees who are
affiliated persons of the Administrator. The Administration
Agreements went into effect November 1, 1993.
Under the Administration Agreements, subject to the control of
the Funds' Board of Trustees, the Administrator provides all
administrative services to each Fund other than those relating to
its investment portfolio and the maintenance of its accounting
books and records. Such administrative services include but are not
limited to maintaining books and records (other than accounting
books and records) of the Funds, and overseeing all relationships
between the Funds and their transfer agent, custodian, legal
counsel, auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary or
desirable for effective operation of the Funds and for the sale,
servicing or redemption of the Funds' shares. See the Additional
Statement for a further description of functions listed in the
Administration Agreements as part of such duties.
Under each Administration Agreement, the Fund pays a fee
payable monthly and computed on the net asset value of the Fund at
the end of each business day. For the Cash Fund, the fee is payable
at the annual rate of 0.17 of 1% of such net assets up to $325
million, and on net assets above that amount at an annual rate of
0.07 of 1% of such net assets; for each of the Tax-Free Fund and
the Treasuries Fund, the annual rate is 0.13 of 1% of such net
assets up to a stated amount of net assets and 0.07 of 1% on net
assets above that amount. (The amount for the Tax-Free Fund is $95
million and for the Treasuries Fund the amount is $60 million.) The
Administrator has agreed in each case that its fee shall be
reduced, but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest, and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2% of the
next $70 million of such assets and 1.5% of its average annual net
assets in excess of $100 million, or (ii) 25% of the Fund's total
annual investment income.
Information about the Adviser,
the Administrator and the Distributor
The Adviser, a Hawaii corporation organized in 1898, is the
largest trust company in the State of Hawaii in terms of assets
under administration. As of March 31, 1995, the Adviser had over
$10 billion of clients' assets under administration. The Adviser is
not authorized to, and does not, carry on a banking business. The
Adviser is a wholly-owned subsidiary of Bank of Hawaii, all of
whose shares are owned by Bancorp Hawaii, Inc. ("Bancorp") and Bank
of Hawaii's directors (each of whom owns qualifying shares as
required by Hawaii law). Bancorp is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended,
and its common stock is registered under the Securities Exchange
Act of 1934 and is listed and traded on the New York Stock
Exchange. Bancorp files annual and periodic reports with the
Securities and Exchange Commission which are available for public
inspection. See the Additional Statement as to the legality, under
the Federal banking laws, of the Adviser's acting as the Funds'
investment adviser.
The Funds' Administrator is founder of, and administrator
to, the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, an equity fund and money market funds. As of
December 31, 1995 these funds had aggregate assets of approximately
$2.7 billion, of which approximately $900 million consisted of
assets of money market funds. The Administrator, which was founded
in 1984, is controlled by Mr. Lacy B. Herrmann (directly, through
a trust and through share ownership by his wife). See the
Additional Statement for information on Mr. Herrmann and these
arrangements.
For each Fund's fiscal year ended March 31, 1996, The Cash
Fund, the Tax-Free Fund and the Treasuries Fund paid or accrued to
the Adviser fees of $1,353,593, $394,009 and $210,982 respectively,
and paid or accrued to the Administrator fees of $597,533,
$152,543 and $88,287, respectively under the Advisory and
Administration Agreements. For the Treasury Fund, the Adviser
waived $44,372 and the Administrator waived $14,790 of such
fees.
The Distributor currently handles the distribution of the
shares of fourteen funds (five money market funds, seven tax-free
municipal bond funds and two equity funds) including the Funds.
Under Distribution Agreements with the Funds, the Distributor is
responsible for the payment of certain printing and distribution
costs relating to prospectuses and reports as well as the costs of
supplemental sales literature, advertising and other promotional
activities.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned by Mr. Herrmann, will be owned by certain directors
and/or officers of the Administrator and/or the Distributor
including Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
All of the Funds' net income for dividend purposes (see below)
will be declared daily as dividends; see "When Shares Are Issued
and Dividends Are Declared on Them" under "How to Invest in the
Funds" for information as to when dividends on Original Shares are
declared. Dividends are paid within a week before or after the end
of each month and invested in additional shares at net asset value
on the payable date, or, at your election, paid in cash by check.
This election may be made in the Application or by subsequent
written notice to the Agent. You may also elect to have dividends
deposited without charge by electronic funds transfers into an
account at a Financial Institution which is a member of the
Automated Clearing House by completing a Ready Access Features
form. If you redeem all of your Original Shares you will be
credited on the redemption payment date with the amount of all
dividends declared for the month through the date of redemption, or
through the day preceding the date of redemption in the case of
shares on which income dividends were declared on the same day on
which the shares were issued.
You will receive monthly a summary of your account, including
information as to dividends paid during the month and the shares
credited to the account through reinvestment of dividends.
Daily dividends for a Fund will be calculated as follows: the
net income for dividend purposes will be calculated immediately
prior to the calculation of net asset value and will include
accrued interest and original issue and market discount earned
since the last valuation, less the estimated expenses of the Fund
(including expenses allocable to each particular class of shares)
and amortized original issue and market premium for the period.
However, the calculation of the dividend could change under certain
circumstances under the procedures adopted by the Board of Trustees
relating to "amortized cost" valuation; see the Additional
Statement.
Dividends paid by each Fund with respect to Original Shares
and Service Shares will be calculated in the same manner, at the
same time, on the same day, and will be in the same amount except
that any class expenses (including payments made by Service Shares
under the Distribution Plan) will be borne exclusively by that
class. Dividends on Original Shares are expected generally to be
higher than those on Service Shares because expenses allocated to
Service Shares will generally be higher.
Dividends so paid will be taxable to shareholders as ordinary
income (except as described in "Tax Information Concerning the
Tax-Free Fund" below), even though reinvested, unless the net
income, computed as above, exceeds "earnings and profits," as
determined for tax purposes; this could occur because net income as
so determined will include certain unrealized appreciation and
discount which is not included for tax purposes. If dividends
exceed a shareholder's ratable share of "earnings and profits," the
excess will reduce the cost or other tax basis for his or her
shares; any reduction which would otherwise result in a negative
basis will cause the basis to be reduced to zero, with any
remaining amount being taxed as capital gain. The dividends paid by
the Funds will not be eligible for the 70% dividends received
deduction for corporations. Statements as to the tax status of each
investor's dividends will be mailed annually.
It is possible but unlikely that a Fund may have realized
long-term capital gains or losses in a year. If it has any net
long-term gains realized through October 31st of a year, it will
pay a capital gains distribution after that date. It may also pay
a supplemental distribution after the end of its fiscal year. Any
capital gains distribution will be taxed at the same rate as
ordinary income, except that for individuals, trusts and estates
the maximum tax rate on capital gains distributions is 28% even if
the applicable rate on ordinary income for such taxpayers is higher
than 28%.
Each Fund will be required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to
shareholders and on redemption proceeds, if a correct Taxpayer
Identification Number, certified when required, is not on file with
it.
Each Fund, during its last fiscal year, qualified and intends
to continue to qualify under subchapter M of the Internal Revenue
Code; if so qualified it will not be liable for Federal income
taxes on amounts distributed by the Fund.
Tax Information Concerning the Tax-Free Fund
The Tax-Free Fund seeks to pay exempt-interest dividends. In
the case of the Tax-Free Fund, these are dividends derived from net
income received by the Tax-Free Fund on its Municipal Obligations,
provided that, as the Tax-Free Fund intends, at least 50% of the
value of its assets is invested in tax-exempt obligations. Such
dividends are exempt from regular Federal income tax.
Classification of dividends as exempt-interest or
non-exempt-interest is made by one designated percentage applied
uniformly to all income dividends made during the Tax-Free Fund's
tax year. Such designation will normally be made in the first month
after the end of each of the Tax-Free Fund's fiscal years as to
income dividends paid in the prior year. The percentage of income
designated as tax-exempt for any particular dividend may be
different from the percentage of the Tax-Free Fund's income that
was tax-exempt during the period covered by the dividend.
A shareholder receiving a dividend from net interest income
earned by the Tax-Free Fund from one or more of (i) Taxable
Obligations and (ii) income from repurchase agreements and
securities loans, treats the dividend as a receipt of ordinary
income in the computation of the shareholder's gross income
regardless of whether it is reinvested in Tax-Free Fund shares;
such dividends and capital gains distributions are not included in
exempt-interest dividends.
Under the Code, interest on loans to purchase or carry
shares of the Tax-Free Fund may not be deducted for Federal tax
purposes unless the Tax-Free Fund realizes taxable income, in which
case interest would be deductible in proportion to the Tax-Free
Fund's taxable income. In addition, under rules used by the
Internal Revenue Service for determining when borrowed funds are
deemed used for the purpose of purchasing or carrying particular
assets, the purchase of shares of the Tax-Free Fund may be
considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of
shares. Moreover, the receipt of tax-exempt dividends from the
Tax-Free Fund by an individual shareholder may result in some
portion of the social security payments or railroad retirement
benefits received by the shareholder or the shareholder's spouse
being included in taxable income. Furthermore, persons who are
"substantial users" (or persons related thereto) of facilities
financed by industrial development bonds or private activity bonds
should consult their own tax advisers before purchasing shares.
While interest from all Municipal Obligations is tax-exempt
under the Code for purposes of computing the regular tax, interest
from so-called private activity bonds issued after August 7, 1986
constitutes a tax preference for both individuals and corporations
and thus will enter into a computation of the alternative minimum
tax. Whether or not that computation will result in a tax will
depend on the entire content of the taxpayer's return. The Tax-Free
Fund will not invest in the types of Municipal Obligations which
would give rise to interest that would be subject to alternative
minimum taxation if more than 20% of its assets would be so
invested, and may refrain from investing in that type of Municipal
Obligation completely. The 20% limit is a fundamental policy of the
Tax-Free Fund. Corporations receiving exempt-interest dividends
from the Tax-Free Fund are subject to additional provisions
applying the alternative minimum tax.
Hawaiian Tax Information
The Tax-Free Fund, and dividends and distributions made by
the Tax-Free Fund to Hawaii residents, will generally be treated
for Hawaii income tax purposes in the same manner as they are
treated under the Code for Federal income tax purposes. Under
Hawaii law, however, interest derived from obligations of states
(and their political subdivisions) other than Hawaii will not be
exempt from Hawaii income taxation. (Interest derived from bonds or
obligations issued by or under the authority of the following is
exempt from Hawaii income taxation: Guam, Northern Mariana Islands,
Puerto Rico, and the Virgin Islands.) For the calendar years 1995,
1994 and 1993, the percentage of the Tax-Free Fund's dividends
exempt from State of Hawaii income taxes was 34.77%, 38.9% and
33.9%, respectively, which should not be considered predictive of
future results.
Interest on Hawaiian Obligations, tax-exempt obligations of
states other than Hawaii and their political subdivisions, and
obligations of the United States or its possessions is not exempt
from the Hawaii Franchise Tax. This tax applies to banks, building
and loan associations, financial service loan companies, financial
corporations, and small business investment companies.
Persons or entities who are not Hawaii residents should not be
subject to Hawaii income taxation on dividends and distributions
made by the Tax-Free Fund but may be subject to other state and
local taxes.
Hawaiian Tax Information Concerning the Treasuries Fund
The Director of Taxation of Hawaii has stated to the
Treasuries Fund that dividends paid by a regulated investment
company from interest it receives on United States Government
obligations will be exempt from State of Hawaii income tax. For the
calendar years 1995, 1994 and 1993, the percentage of the
Treasuries Fund's dividends exempt from State of Hawaii income
taxes was 82.63, 85.6% and 87.9%, respectively, which should not be
considered predictive of future results. Dividends paid from other
types of interest (including interest on U.S. Treasury repurchase
transactions), and capital gains distributions, if any, will be
taxable.
EXCHANGE PRIVILEGES
There are two exchange privileges available to holders of
Original Shares of the Funds: the Pacific Capital Exchange
Privilege and the Aquilasm Group Exchange Privilege.
Pacific Capital Exchange Privilege
Shareholders may exchange their Original Shares in any Fund
for Institutional Class shares of any of the existing or future
funds (series) of Pacific Capital Funds, each of which represents
a different portfolio. As of the date of this Prospectus the
existing funds are Growth Stock Fund, Growth and Income Fund, New
Asia Growth Fund Diversified Fixed Income Fund, Tax Free Securities
Fund, Tax Free Short Intermediate Securities Fund, U.S. Treasuries
Securities Fund and Short Intermediate U.S. Treasury Securities
Fund. Each of these funds is referred to in the Prospectus as a
"Pacific Capital Fund" and collectively they are referred to as the
"Pacific Capital Funds" or the "Pacific Capital Exchange Group."
The Adviser acts as investment adviser for the Pacific Capital
Funds. All exchanges are subject to certain conditions described
below.
Aquilasm Group Exchange Privilege
Shareholders may exchange their Original Shares of any Fund
into certain related tax-free municipal bond funds and an equity
fund (the "Aquila Bond and Equity Funds") and money market funds
(the "Aquila Money Market Funds"), all of which (the "Aquila
Exchange Group") are sponsored by Aquila Management Corporation and
Aquila Distributors, Inc., and have the same Administrator and
Distributor as the Funds. All exchanges are subject to certain
conditions described below. As of the date of this Prospectus, the
Aquila Bond and Equity Funds are Hawaiian Tax-Free Trust, Tax-Free
Trust of Oregon, Tax-Free Trust of Arizona, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For
Utah, Narragansett Insured Tax-Free Income Fund and Aquila Rocky
Mountain Equity Fund; the Aquila Money Market Funds are the Funds,
Capital Cash Management Trust and Churchill Cash Reserves Trust.
(With respect to exchanges of Original Shares of any Fund into
shares of any other Fund, only exchanges for Original Shares of
those funds are permitted.)
Terms and conditions of both Exchange Privileges
The Institutional Class shares of each Pacific Capital Fund
have an exchange privilege which allows further exchanges among the
Institutional Class shares of each other Pacific Capital Fund at
relative net asset values. The Institutional Class shares of each
Pacific Capital Fund also have another exchange privilege with
certain funds in the Aquila Exchange Group under which their shares
and Original Shares of Funds may be exchanged, also without payment
of an additional sales charge.
The funds in the Aquila Exchange Group also have exchange
privileges, as described below. Under the exchange privileges of
both Exchange Groups, once any applicable sales charge has been
paid with respect to exchangeable shares of a fund in one of the
Exchange Groups, those shares (and any shares acquired as a result
of reinvestment of dividends and/or distributions) may be exchanged
any number of times among the other funds of the same Exchange
Group without the payment of any additional sales charge. An
exchange between the two Exchange Groups will, however, result in
the applicable sales charge if the shares of the fund being
acquired in the exchange carry a sales charge, unless the shares
being exchanged are the Eligible Shares (see below) of that
Exchange Group.
The "Pacific Capital Eligible Shares" of any Pacific
Capital Fund are those Institutional shares which were (a) acquired
by direct purchase with payment of any applicable sales charge, or
which were received in exchange for shares of another Pacific
Capital Fund on which any applicable sales charge was paid; (b)
acquired with payment of any applicable sales charge by exchange
for Original Shares of any Fund; (c) acquired in one or more
exchanges between Original Shares of the Funds and shares of the
Pacific Capital Funds so long as the Pacific Capital Fund shares
were originally purchased as set forth in (a) or (b); or (d)
acquired as a result of reinvestment of dividends and/or
distributions on otherwise Pacific Capital Eligible Shares.
If you own Pacific Capital Eligible Shares of any Fund, you
may exchange them for shares of any Pacific Capital Fund or any
Aquila Money Market Fund without payment of any sales charge. The
shares received will continue to be Pacific Capital Eligible
shares. You may also exchange them for the shares of any Aquila
Bond or Equity Fund, but only upon payment of the appropriate sales
charges.
The Aquila Group Exchange Privilege
Each of the Aquila Bond and Equity Funds offers three
Classes of Shares: Class A Shares "Front-Payment Shares") and Class
C Shares ("Level-Payment Shares") which can be purchased by anyone
and Class Y Shares ("Institutional Class Shares"), which are
offered only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity, and are not
offered directly to retail customers. The Aquila Group Exchange
Privilege has different provisions for exchanges for each
class.
Class A Shares Exchange Privilege
Under the Aquila Class A Shares exchange privilege, once
any applicable sales charge has been paid on Class A Shares of any
Aquila Bond and Equity Fund, those shares (and any shares acquired
as a result of reinvestment of dividends and/or distributions) may
be exchanged any number of times between Aquila Money-Market Funds
and Bond or Equity Funds without the payment of any additional
sales charge.
CDSC Class A Shares of an Aquila Bond or Equity Fund, which
are issued in purchases of $1 Million or more and when certain
special dealer arrangements are in effect, can be exchanged for
CDSC Class A Shares of a Bond or Equity Fund or into an Aquila
Money-Market Fund. The CDSC Class A Shares will not be subject to
a contingent deferred sales charge at the time of exchange, but the
contingent deferred sales charge will be payable upon a redemption
which occurs before the expiration of the applicable holding period
of the CDSC Class A Shares or any shares of an Aquila Money-Market
Fund received on exchange for the CDSC Class A Shares. (The
contingent deferred sales charge does not apply to any shares
acquired as a result of reinvestment of dividends and/or
distributions.) For purposes of computing the time period for the
applicable contingent deferred sales charge, the length of time of
ownership of CDSC Class A Shares will be determined by the time of
original purchase and not by the time of the exchange. Any period
of 30 days or more during which Aquila Money-Market shares received
in exchange for CDSC Class A Shares are held is not counted in
computing the period of ownership of CDSC Class A Shares.
Class C Shares Exchange Privilege
Under the Class C Shares exchange privilege, Class C Shares
(and any shares acquired as a result of reinvestment of dividends
and/or distributions) may be exchanged any number of times for
shares of Aquila Money-Market Funds and for Class C Shares of the
Aquila Bond or Equity Funds. Class C Shares will not be subject to
a contingent deferred sales charge at the time of exchange, but the
contingent deferred sales charge will be payable upon a redemption
which occurs before the expiration of the applicable holding period
of the Class C Shares or any shares of an Aquila Money-Market Fund
received in exchange for the Class C Shares. (The contingent
deferred sales charge does not apply to any shares acquired as a
result of reinvestment of dividends and/or distributions.) For
purposes of computing the time period for the applicable contingent
deferred sales charge or for the conversion of Class C Shares into
Class A Shares, the length of time of ownership of Class C shares
will be determined by the time of original purchase and not by the
time of the exchange. Any period of 30 days or more during which
Aquila Money-Market shares received in exchange for Class C Shares
are held is not counted in computing the period of ownership of
Class C Shares.
Class Y Exchange Privilege
Class Y Shares of an Aquila Bond or Equity Fund may be
exchanged only for Class Y Shares of another Aquila Bond or Equity
Funds or for shares of an Aquila Money-Market Fund. Under the Class
Y exchange privilege, once Class Y Shares of any Bond or Equity
Fund have been purchased, those shares (and any shares acquired as
a result of reinvestment of dividends and/or distributions) may be
exchanged any number of times for shares of Aquila Money-Market
Funds and Class Y Shares of the Aquila Bond or Equity Funds without
the payment of any sales charge. Shares of an Aquila Money-Market
Fund not acquired in exchange for Class Y Eligible Shares of a Bond
or Equity Fund can be exchanged for Class Y Shares of a Bond or
Equity Fund only by persons eligible to make an initial purchase of
Class Y Shares.
Eligible Shares
The "Class A Eligible Shares" of any Aquila Bond or Equity
Fund are those Class A Shares which were (a) acquired by direct
purchase with payment of any applicable sales charge, or which were
received in exchange for shares of another Aquila Bond or Equity
Fund on which any applicable sales charge was paid; (b) acquired by
exchange for shares of an Aquila Money-Market Fund with payment of
the applicable sales charge; (c) acquired in one or more exchanges
between Aquila Money- Market Funds and the Aquila Bond and Equity
Funds so long as shares of a Bond or Equity Fund were originally
purchased as set forth in (a) or (b); (d) acquired on conversion of
Class C Shares or (e) acquired as a result of reinvestment of
dividends and/or distributions on otherwise Class A Eligible
Shares.
"CDSC Class A Eligible Shares" of any Aquila Bond or Equity
Fund are those CDSC Class A Shares which were (a) acquired by
direct purchase in the amount of $1 million or more without a sales
charge or in certain purchases when special dealer arrangements are
in effect or which were received in exchange for CDSC Class A
Shares of another Aquila Bond or Equity Fund acquired under the
same conditions; (b) acquired by exchange for shares of an Aquila
Money-Market Fund under the same conditions; (c) acquired in one or
more exchanges between the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds so long as shares of a Bond or Equity Fund
were originally purchased as set forth in (a) or (b); or (d)
acquired as a result of reinvestment of dividends and/or
distributions on otherwise CDSC Class A Eligible Shares.
The "Class C Eligible Shares" of any Bond or Equity Fund
are those shares which were (a) acquired by direct purchase or by
exchange from an Aquila Money-Market Fund, or were received in
exchange for Class C Shares of another Aquila Bond or Equity Fund;
or (b) acquired as a result of reinvestment of dividends and/or
distributions on otherwise Class C Eligible Shares.
The "Class Y Eligible Shares" of any Aquila Bond or Equity
Fund are those shares which were (a) acquired by direct purchase,
by exchange from an Aquila Money-Market Fund, or which were
received in exchange for Class Y Shares of another Bond or Equity
Fund; or (b) acquired as a result of reinvestment of dividends
and/or distributions on otherwise Class Y Eligible Shares. Shares
of an Aquila Money-Market Fund not acquired in exchange for Class
Y Eligible Shares of a Bond or Equity Fund can be exchanged for
Class Y Shares of a Bond or Equity Fund only by persons eligible to
make an initial purchase of Class Y Shares.
If you own Class A, CDSC Class A or Class C Eligible Shares
of any Bond or Equity Fund, you may exchange them for shares of any
Aquila Money Market Fund or the Class A, CDSC Class A or Class C
Shares, respectively, of any other Bond or Equity Fund without
payment of any sales charge or CDSC. The shares received will
continue to be Class A, CDSC Class A or Class C Eligible
shares.
If you own Class Y Shares of any Bond or Equity Fund or
shares of any Aquila Money Market Fund received in exchange for
Class Y Shares of a Bond or Equity Fund you may exchange them for
shares of any Aquila Money Market Fund or the Class Y Shares of any
other Bond or Equity Fund without payment of any sales charge or
CDSC. The shares received will continue to be Class Y Eligible
shares.
If you own shares of an Aquila Money-Market Fund which you
have acquired by exchange for Class A Eligible Shares of any Aquila
Bond or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class A Shares of any Aquila
Bond or Equity Fund without payment of any sales charge.
If you own shares of an Aquila Money-Market Fund which you
have acquired by exchange for CDSC Class A Eligible Shares of any
Bond or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for CDSC Class A shares of any Bond
or Equity Fund but you will be required to pay the applicable
contingent deferred sales charge if you redeem such shares before
you have held CDSC Class A Shares for four years. You will also be
required to pay the applicable contingent deferred sales charge if
you redeem such shares of an Aquila Money-Market Fund before you
have held CDSC Class A Shares for four years. The running of the
four-year period is suspended during the period you hold shares of
an Aquila Money-Market Fund received in exchange for CDSC Class A
Shares.
If you own shares of an Aquila Money-Market Fund which you
have acquired by exchange for Class C Eligible Shares of any Bond
or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class C Shares of any Bond or
Equity Fund, but you will be required to pay the applicable
contingent deferred sales charge if you redeem such Class C shares
before you have held Class C Shares for 12 months. You will also be
required to pay the applicable contingent deferred sales charge if
you redeem such shares of an Aquila Money-Market Fund before you
have held Class C Shares for 12 months. The running of the 12-month
CDSC period and the six-year conversion period for Class C Shares
is suspended during the period you hold shares of an Aquila
Money-Market Fund received in exchange for Class C Shares.
Shares of an Aquila Money-Market Fund may be exchanged for
shares of another Aquila Money-Market Fund or for Class A Shares,
CDSC Class A Shares or Class C Shares of an Aquila Bond or Equity
Fund, and, for eligible purchasers, for Class Y Shares; however, if
the shares of an Aquila Money-Market Fund were not acquired by
exchange of Eligible Shares of a Bond or Equity Fund or of shares
of an Aquila Money-Market Fund acquired in such an exchange, they
may be exchanged for Class A Shares of a Bond or Equity Fund only
upon payment of the applicable sales charge. Shares of an Aquila
Money-Market Fund not acquired in exchange for Class Y Eligible
Shares of a Bond or Equity Fund can be exchanged for Class Y Shares
of a Bond or Equity Fund only by persons eligible to make an
initial purchase of Class Y Shares.
The Funds, as well as the other Aquila Money-Market Funds
and the Aquila Bond or Equity Funds, reserves the right to reject
any exchange into its shares, if shares of the fund into which
exchange is desired are not available for sale in your state of
residence. The Funds may also modify or terminate this exchange
privilege at any time. In the case of termination, the Prospectus
will be appropriately supplemented. No such modification or
termination shall take effect on less than 60 days' written notice
to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
Dividends paid by the Aquila Money-Market Funds are
taxable, except to the extent that a portion or all of the
dividends paid by Pacific Capital Tax-Free Cash Assets Trust (a
tax-free Money-Market Fund) are exempt from regular Federal income
tax, and to the extent that a portion or all of the dividends paid
by Pacific Capital U.S. Treasuries Cash Assets Trust (which invests
in U.S. Treasury obligations) are exempt from state income taxes.
Dividends paid by Aquila Rocky Mountain Equity Fund are taxable. If
your state of residence is not the same as that of the issuers of
obligations in which a tax-free municipal Bond Fund or a tax-free
Money-Market Fund invests, the dividends from that fund may be
subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a Bond Fund or a tax-free Money-Market Fund under
the exchange privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
If you own Original Shares of a Fund that are neither
Pacific Capital Eligible Shares nor Aquila Eligible Shares, you may
exchange them for shares of any Aquila Money Market Fund without
payment of any sales charge. The shares received will continue not
to be Eligible shares. You may also exchange them for the shares of
any Pacific Capital Fund or Aquila Bond or Equity Fund, but only
upon payment of the appropriate sales charge, if any.
Each of the Funds, as well as the Pacific Capital Funds,
the other Aquila Money Market Funds and the Aquila Bond or Equity
Funds, reserves the right to reject any exchange into its shares,
if the shares of the fund into which exchange is desired are not
available for sale in the shareholder's state of residence, and to
modify or terminate this exchange privilege at any time; in the
case of termination, this Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of an exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired; and (iii) you maintain the respective
minimum account balances, if any, in each fund in which you own
shares.
To effect an exchange, you must complete a form which is
available from the Distributor, unless you have elected the
Telephone Exchange feature on the Application. The exchange will be
effected at the relative exchange prices of the shares being
exchanged next determined after receipt by the Distributor of a
properly completed form or Telephone Exchange request. The exchange
prices will be the respective net asset values of the shares
(unless a sales charge is to be deducted in connection with an
exchange of shares as described above, in which case the exchange
price of shares of the Pacific Capital Fund or Aquila Bond or
Equity Fund will be its public offering price).
Dividends paid by the Aquila Money Market Funds are
taxable, except to the extent that dividends paid by the Tax-Free
Fund (which invests in tax-free municipal obligations) are exempt
from regular Federal income tax and Hawaiian income tax, and to the
extent that dividends paid by the Treasuries Fund (which invests in
U.S. Treasury obligations) are exempt from state income taxes.
Dividends paid by the Aquila Rocky Mountain Equity Fund are
taxable. If your state of residence is not the same as that of the
issuers of obligations in which a tax-free municipal bond fund or
a tax-free money market fund invests, the dividends from that fund
may be subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a fund under the exchange privilege
arrangement.
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see the Additional
Statement); no representation is made as to the deductibility of
any such loss that may occur.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Description of Shares
The Trust issues three series of shares, each series
constituting the shares of a Fund. Each series has separate assets
and liabilities and is comprised of two classes of shares: Original
Shares and Service Shares; only Original Shares of the Funds are
offered by this Prospectus. The Declaration of Trust permits the
Trustees to issue an unlimited number of full and fractional shares
and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial
interests in the Trust. Each share represents an equal
proportionate interest in a Fund. Income, direct liabilities and
direct operating expenses of each series will be allocated directly
to each series, and general liabilities and expenses, if any, of
the Trust will be allocated among the series in a manner acceptable
to the Board of Trustees. Certain expenses of a series specifically
allocable to a particular class will be borne by that class; the
expense of the series not so allocated will be allocated among the
classes in a manner acceptable to the Board of Trustees and in
accordance with any applicable exemptive order or Rule of the SEC.
Upon liquidation of a series, shareholders of each class of the
series are entitled to share pro-rata (subject to liabilities, if
any, allocated specifically to that class) in the net assets of
that series available for distribution to shareholders and upon
liquidation of the Trust, the respective series are entitled to
share proportionately in the assets available to the Trust after
allocation to the various series. If they deem it advisable and in
the best interests of shareholders, the Board of Trustees of the
Trust may create additional classes of shares (subject to rules and
regulations of the Securities and Exchange Commission or by
exemptive order) or the Board of Trustees may, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such series
will have a designation including the word "Series"). See the
Additional Statement for further information about possible
additional classes or series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
The ownership of more than 5% of the outstanding shares of
each Fund on July ***, 1996, was as follows:
************ Update ************
The Cash Fund: Of the Cash Fund's Original Shares, ...
The Tax-Free Fund: Of the Tax-Free Fund's Original
Shares...
The Treasuries Fund: Of the Treasuries Fund's Original
Shares ...
The Funds' management is not aware of any person, other than
those named above, who beneficially owned 5% or more of either
class of a Fund's outstanding shares on such date. On the basis of
information received from the record owners listed above, the
Funds' management believes (i) that all of the Original Shares
indicated are held for the benefit of custodial or trust clients;
and (ii) that all of such shares could be considered as
"beneficially" owned by the named shareholders in that they
possessed shared voting and/or investment powers as to such shares.
The Service Shares indicated above are held for the benefit of
customers.
Voting Rights
At any meeting of shareholders, shareholders are entitled
to one vote for each dollar of net asset value (determined as of
the record date for the meeting) represented by the shares held
(and proportionate fractional votes for fractional dollar
amounts). Shareholders will vote on the election of Trustees and on
other matters submitted to the vote of shareholders. No amendment
may be made to the Declaration of Trust without the affirmative
vote of the holders of a majority of the outstanding shares of the
Trust. The Trust may be terminated (i) upon the sale of its assets
to another issuer, or (ii) upon liquidation and distribution of the
assets of the Trust, in either case if such action is approved by
the vote of the holders of a majority of the outstanding shares of
each series. If not so terminated, the Trust will continue
indefinitely. Rule 18f-2 under the Investment Company Act of 1940
provides that matters submitted to shareholders be approved by a
majority of the outstanding voting securities of each series,
unless it is clear that the interests of each series in the matter
are identical or the matter does not affect a series. However, the
rule exempts the selection of accountants and the election of
Trustees from the separate voting requirement. Classes do not vote
separately except that, as to matters exclusively affecting one
class (such as the adoption or amendment of class-specific
provisions of the Distribution Plan), only shares of that class are
entitled to vote.
Description of Classes
As stated above, each Fund has two classes of shares: Original
Shares, which are offered by this Prospectus, and Service Shares.
Potential investors in Original Shares may also be eligible to
purchase Service Shares, which are offered in a separate prospectus
that may be obtained by contacting the transfer agent of the Funds
at the address or telephone number(s) given on the front cover of
this Prospectus.
Original Shares include all currently outstanding shares of
the Funds that were issued prior to January 20, 1995, the date on
which the capital structure of the Funds was changed to include two
classes rather than one. Original Shares are sold solely to (1)
financial institutions for their own account or for the investment
of funds for which they act in a fiduciary, agency, investment
advisory or custodial capacity; (2) persons entitled to exchange
into such shares under the Funds' exchange privilege; and (3)
shareholders of record on January 20, 1995, the date on which the
Funds first offered two classes of shares.
Under each Fund's Distribution Plan, the Fund pays certain
fees to "Service Organizations," that are borne only by the
Services Shares; no payments under the Distribution Plan are borne
by Original Shares. For this reason, dividends on the two classes
generally will differ. In addition, certain other expenses directly
attributable to a particular class of shares may be allocated, in
the discretion of the Board of Trustees, solely to that class; such
action would also differentially affect dividends on the two
classes.
A financial institution that holds Original Shares of a Fund
on behalf its clients receives no compensation from the Fund for
any services it provides in connection with those shares, although
it may receive compensation from its clients and/or from the
Administrator out of the Administrator's own resources.
Accordingly, any compensation that a financial institution may
receive for services provided in connection with Original Shares
may be expected to differ both as to source and amount from that
received in connection with Service Shares.
Diversity under the 1940 Act; IRS Compliance
The Tax-Free Fund is classified as a "non-diversified"
investment company under the 1940 Act and the Cash Fund and the
Treasuries Fund are classified as "diversified" investment
companies under the 1940 Act. Each Fund intends to continue to
qualify as a "regulated investment company" under the Internal
Revenue Code (the "Code"). One of the tests for such qualification
under the Code is, in general, that at the end of each fiscal
quarter of the Fund, at least 50% of its assets must consist of (i)
cash; and (ii) securities which, as to any one issuer, do not
exceed 5% of the value of the Fund's assets. As "diversified"
investment companies under the 1940 Act, the Cash Fund and the
Treasuries Fund must both meet the same test as to 75% of their
respective assets. The Tax-Free Fund may therefore not have as much
diversification among securities, and thus diversification of risk,
as if it had made the election to register as a "diversified"
investment company under the 1940 Act. In general, the more a Fund
invests in the securities of specific issuers, the more it is
exposed to risks associated with investments in those issuers.
<PAGE>
[LOGO] Application for
The Pacific Capital Funds of Cash Assets Trust - Original Shares
Please complete steps 1 through 4 and mail to:
ADM, Attn: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
1-800-255-2287
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation,
Other Organization or
any Fiduciary capacity
Use line 4
* Joint Accounts will be Joint
Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers
to Minors Act.
Please type or print name exactly as account is to be registered
1._____________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2._____________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3._____________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for_________________________________________________________
Minor's First Name Middle Initial Last Name
Under the________________ UGTMA**_____________________________________
Name of State Minor's Social Security Number
4._____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or Organization. If a Trust, include the name(s)
of Trustees in which account will be registered and the name and date
of the Trust Instrument. Account for a Pension or Profit Sharing Plan
or Trust may be registered in the name of the Plan or Trust itself.)
______________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
______________________________________________________________________
Street or PO Box City
_________________________________ (____)__________________________
State Zip Daytime Phone Number
Occupation:______________________ Employer:__________________________
Employer's Address:___________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. Other___ ______ Check here ___ if you
are a non-U.S. Citizen or resident and not subject to back-up
withholding (See certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
________________________________ _________________________________
Dealer Name Branch Number
________________________________ _________________________________
Street Address Rep.Number/Name
________________________________ (_______)________________________
City State Zip Area Code Telephone
STEP 2
PURCHASES OF SHARES
A. INITIAL INVESTMENT
___ Pacific Capital Cash Assets Trust (61V)
___ Pacific Capital Tax-Free Cash Assets Trust (71V)
___ Pacific Capital U.S. Treasuries Cash Assets Trust (64V)
1) ___ By Check
2) ___ By Wire
1) By Check: Make check payable to either: Pacific Capital
Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust,
or Pacific Capital U.S. Treasuries Cash Assets Trust
Amount of investment $ ____________ Minimum initial investment $1,000
OR
2) By Wire*:
$______________________________ From_______________________________
Name of Financial Institution
_________________________________ _______________________________
Financial Institution Account No. Branch, Street or Box#
On_______________________________ ________________________________
(Date) City State Zip
* NOTE: To insure prompt and proper crediting to your account, if you
choose this method of payment you should first telephone the Agent
(800-255-2287 toll free or 908-855-5731) and then instruct your
Financial Institution to wire funds as indicated below for the
appropriate Fund:
Wire Instructions:
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to (specify the Fund you are investing in)
Pacific Capital Cash Assets Trust (Original Shares) A/C 6801358400
Pacific Capital Tax-Free Cash Assets Trust (Original Shares)
A/C 6801358500
Pacific Capital U.S. Treasuries Cash Assets Trust (Original Shares)
A/C 6801358600
Please include account name(s) and number (if an existing account) or the
name(s) in which the investment is to be registered (if a new account).
(A FINANCIAL INSTITUTION IS A COMMERCIAL BANK,
SAVINGS BANK OR CREDIT UNION.)
B. DIVIDENDS
ALL INCOME DIVIDENDS ARE AUTOMATICALLY REINVESTED IN ADDITIONAL SHARES
AT NET ASSET VALUE UNLESS OTHERWISE INDICATED BELOW.
Dividends are to be:___ Reinvested or ___Paid in cash*
* FOR CASH DIVIDENDS, PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS:
___Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like
you to deposit the dividend.
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your account. To establish this program, please complete Step 4,
Sections A & B of this Application.
I/We wish to make regular monthly investments of $______ (minimum $50)
on the ___ 1st day or ___ 16th day of the month (or on the first
business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply
calling the Agent toll-free at 1-800-255-2287. To establish this
program, please complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks
prior to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions
set forth below. To realize the amount stated below, the Agent is
authorized to redeem sufficient shares from this account at the
then current Net Asset Value, in accordance with the terms below:
Dollar Amount of each withdrawal $____________ beginning_______________
Minimum:$50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is
payable to a Financial Institution for your account, indicate
Financial Institution name, address and your account number.
_______________________________________ __________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________________ __________________________
Street Financial Institution
Street Address
_______________________________________ __________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the AquilaSM Group of Funds by telephone.
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-255-2287
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds and Pacific Capital Funds, and their respective
officers, directors, trustees, employees, agents and affiliates against
any liability, damage, expense, claim or loss, including reasonable costs
and attorney's fees, resulting from acceptance of, or acting or failure
to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
TO MAKE AN EXPEDITED REDEMPTION, CALL THE AGENT AT 1-800-255-2287
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Trust
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
________________________________ ___________________________________
Account Registration Financial Institution Account Number
________________________________ ___________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
________________________________ ___________________________________
Street City State Zip
F. CHECKING ACCOUNT SERVICE
(Check appropriate box)
___ Yes ___ No
Please open a redemption checking account at Bank One Trust Company,
N.A., in my (our) name(s) as registered and send me (us) a supply of
checks. I (we) understand that this checking account will be subject to
the rules and regulations of Bank One Trust Company, N.A., pertaining
thereto and as amended from time to time. For joint account: Check
here whether either owner ___ is authorized, or all owners ___ are
required to sign checks. IF NO BOX IS CHECKED, TWO SIGNATURES WILL BE
REQUIRED ON JOINT ACCOUNTS.
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number______________________________________
Name and Address
where my/our account Name of Financial Institution____________________
is maintained Street Address___________________________________
City______________________State_____ Zip_________
Name(s) and
Signature(s) of _______________________________
Depositor(s) as they (Please Print)
appear where account X_______________________________ __________
is registered (Signature) (Date)
________________________________
(Please Print)
X_______________________________ __________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant
to the above authorization shall be subject to the provisions of the
Operating Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit
in the normal course of business initiated by the Agent (except any
loss due to your payment of any amount drawn against insufficient or
uncollected funds), provided that you promptly notify us in writing
of any claim against you with respect to the same, and further provided
that you will not settle or pay or agree to settle or pay any such
claim without the written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any
such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
The undersigned warrants that he/she has full authority and is of legal
age to purchase shares of the Trust and has received and read a current
Prospectus of the Trust and agrees to its terms.
I/We authorize the Trust and its agents to act upon these instructions
for the features that have been checked.
I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Trust and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Trust account to make up any deficiency resulting
from any decline in the net asset value of shares so purchased and any
dividends paid on those shares. I/We authorize the Trust and its agents
to correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Trust account and to charge the account for
any related charges.
The Trust, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify the identity of the caller.
The Agent will request some or all of the following information:
account name and number; name(s) and social security number registered
to the account and personal identification; the Agent may also record
calls. Shareholders should verify the accuracy of confirmation
statements immediately upon receipt. Under penalties of perjury, the
undersigned whose Social Security (Tax I.D.) Number is shown above
certifies (i) that Number is my correct taxpayer identification number
and (ii) currently I am not under IRS notification that I am subject to
backup withholding (line out (ii) if under notification). If no such
Number is shown, the undersigned further certifies, under penalties of
perjury, that either (a) no such Number has been issued, and a Number
has been or will soon be applied for; if a Number is not provided to
you within sixty days, the undersigned understands that all payments
(including liquidations) are subject to 31% withholding under federal
tax law, until a Number is provided and the undersigned may be subject
to a $50 I.R.S. penalty; or (b) that the undersigned is not a citizen
or resident of the U.S.; and either does not expect to be in the U.S.
for more than 183 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Trust, or is
exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
______________________________ __________________________ __________
Individual (or Custodian) Joint Registrant, if any Date
______________________________ __________________________ __________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied by
proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
You may cancel any feature at any time, effective 3 days after the Agent
receives written notice from you.
Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days' written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
If your Financial Institution account changes, you must complete a Ready
Access features form which may be obtained from Aquila Distributors at
1-800-228-7496 and send it to the Agent together with a "voided" check or
pre-printed deposit slip from the new account. The new Financial
Institution change is effective in 15 days after this form is
received in good order by the Trust's Agent.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, Vice President
Sherri Foster, Assistant Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights 2
Table of Expenses 4
Financial Highlights 5
Introduction 8
Investment Of The Funds' Assets 8
The Cash Fund And Its Investments
The Tax-Free Fund And Its Investments
The Treasuries Fund And Its Investments
Net Asset Value Per Share 10
How To Invest In The Funds 10
How To Redeem Your Investment 13
Automatic Withdrawal Plan 17
Management Arrangements 17
Dividend And Tax Information 19
Exchange Privileges 20
General Information 22
Table of Expenses-Service Shares
Application
The Pacific Capital Funds
of
Cash Assets Trust
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
A cash management
investment
[LOGO]
PROSPECTUS
Original Shares
<PAGE>
The Pacific Capital Funds
of
Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-CATS-4-YOU (800-228-7496)
212-697-6666
Prospectus
Service Shares July 31, 1996
Cash Assets Trust (the "Trust") is a professionally managed,
open-end investment company consisting of three separate funds:
Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Treasuries Cash Assets Trust
(each a "Fund" and collectively, the "Funds").
There are two classes of shares of each of the Funds: "Service
Shares" and "Original Shares"; see "General Information
- -Description of Classes." Only Service Shares are offered by this
Prospectus. Service shares of the Funds may be purchased and
redeemed at their next determined net asset value, which is
normally the constant price of $1.00 per share; see "Net Asset
Value Per Share." Purchases are made without any sales charge
through Aquila Distributors, Inc., which is the exclusive
Distributor of the Funds' shares. Although Service Shares are
offered principally to customers of banks and other institutions
that typically are compensated by service or distribution fees paid
by the mutual funds sold to their customers, they are also
available to the general public. See "How to Invest in the Funds"
and "How to Redeem Your Investment."
This Prospectus concisely states information about the
three Funds that you should know before investing in Service
Shares. A Statement of Additional Information about the Funds dated
July 31, 1996 (the "Additional Statement") has been filed with the
Securities and Exchange Commission and is available without charge
upon written request to Administrative Data Management Corp., the
Funds' transfer agent, at the address given below, or by calling
the telephone number(s) given below. The Additional Statement
contains information about the three Funds and their management not
included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in this Prospectus. Only
when you have read both the Prospectus and the Additional Statement
are all the material facts about the Funds available to you.
AN INVESTMENT IN ANY OF THE FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT
THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY HAWAIIAN TRUST COMPANY, LIMITED (THE
"ADVISER"), BANK OF HAWAII OR ITS BANK OR NON-BANK AFFILIATES OR BY
ANY OTHER BANK. SHARES OF THE FUNDS ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED
AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN ANY OF THE FUNDS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
For General Inquiries & Yield Information, Call 800-228-7496 toll
free or 212-697-6666
For Purchase, Redemption or Account inquiries contact
the Funds' Shareholder Servicing Agent:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-255-2287 toll free or 908-855-5731
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
For your convenience, important matters pertaining solely to
a single Fund is displayed in a distinctive manner below; however,
to obtain all information about that Fund, you must read the entire
Prospectus.
The Pacific Capital Funds of Cash Assets Trust are these three
separate money-market funds:
Pacific Capital Cash Assets Trust (the "Cash Fund") is a
general purpose money market mutual fund which invests in
short-term "money market" securities which meet specific quality,
maturity and diversification standards.
Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free
Fund") is a tax-exempt money market mutual fund which invests in
short-term tax-exempt "money market" securities.
Pacific Capital U.S. Treasuries Cash Assets Trust (the
"Treasuries Fund") is a money market mutual fund which invests
exclusively in short-term direct obligations of the United States
Treasury with remaining maturities of one year or less and certain
repurchase agreements secured by U.S. Treasury obligations.
All investments must meet specific quality, maturity and
diversification standards. (See "Investment of the Funds' Assets.")
Initial Investment - You may open your account in any Fund
with any purchase of $1,000 or more. There is no sales charge. An
Application is in the back of the Prospectus. (See "How to Invest
in the Funds.")
Additional Investments - There is no minimum on additional
investments and they can be made at any time.
Monthly Income - The securities in which the Funds invest earn
interest which is declared daily as dividends. Dividends are paid
monthly on or about the last day of each month. At your choice,
dividends are paid by check mailed to you, directly deposited into
your financial institution account or automatically reinvested
without sales charge in additional Service Shares. (See "Dividend
and Tax Information.")
Many Different Issues - Even a small investment in any Fund
allows an investor to have the advantages of a portfolio which
consists of a large number of issues. (See "Investment of the
Funds' Assets.")
Exchanges - You may exchange Service Shares of any Fund
into other money market funds and certain bond and equity funds.
(See "Exchange Privileges.")
Portfolio Management - Hawaiian Trust Company, Limited (the
"Adviser") serves as the Funds' Investment Adviser, providing
experienced professional management of each Fund's investments. It
is a subsidiary of Bank of Hawaii, was founded in 1898 and is the
oldest and largest trust company in Hawaii, administering
approximately $10 billion in client assets. The Cash Fund pays
monthly fees to the Adviser and to the Administrator at a total
rate of 0.50 of 1% of average annual net assets. The Tax-Free Fund
and the Treasuries Fund each pay monthly fees to the Adviser and to
the Administrator at a total rate of 0.40 of 1% of average annual
net assets. (See "Table of Expenses" and "Management
Arrangements.")
Investment Quality -
The Cash Fund invests in commercial paper obligations,
U.S. government securities, bank obligations and instruments
secured by them, corporate debt obligations and certain other
obligations.
The Tax-Free Fund invests in municipal obligations which earn
interest which is exempt from regular Federal income taxes and
a significant portion of those obligations earn interest which
is also exempt from regular State of Hawaii income taxes.
Dividends paid by the Tax-Free Fund are free of both such
taxes to the same extent. It is, however, possible that in
certain circumstances, the Federal alternative minimum tax may
apply (see "Dividend and Tax Information"). Under certain
circumstances, the Tax-Free Fund may invest a portion of its
assets in taxable obligations.
The Treasuries Fund invests only in U.S. Government
securities and certain repurchase agreements secured by U.S.
Treasury obligations.
All of the investments of the Funds must be determined by
the Adviser under an applicable rule of the Securities and Exchange
Commission to be "Eligible Securities" and to present minimal
credit risks. (See "Investment of the Funds' Assets" and "Effect of
the Rule on Portfolio Management" thereunder.)
Constant Share Value - Each Fund's net asset value per
share is determined on a daily basis and is normally constant at
$1.00 per share except under extraordinary circumstances. (See
"Factors Which May Affect the Value of the Funds' Investments and
Their Yields.")
Risk Factors - There can be no assurance that any of the Funds
will be able to maintain a stable net asset value of $1.00 per
share. (See "Factors Which May Affect the Value of the Funds'
Investments and Their Yields.") In addition, there may be risks as
to obligations which the Cash Fund and Tax-Free Fund may purchase
such as variable amount master demand notes (see "Variable Amount
Master Demand Notes" in the Prospectus and Additional Statement)
and as to repurchase agreements, in which all Funds may invest (see
"Repurchase Agreements" in the Prospectus). The Tax-Free Fund's
assets, being significantly invested in Hawaiian issues, are
subject to economic and other conditions affecting Hawaii. (See
"Risks and Special Considerations Regarding Investment in Hawaii
Obligations.") Moreover, the Tax-Free Fund is classified as a
"non-diversified" investment company, because it may choose to
invest in the obligations of a relatively limited number of
issuers. (See "Diversity under the 1940 Act" under "General
Information.")
Liquidity - Redemptions - If you invest directly in any Fund
rather than through a broker-dealer, bank or other financial
intermediary, you may redeem any amount of Service Shares on any
business day by telephone, FAX or mail request by using a Fund's
Expedited Redemption procedure, with proceeds being sent to a
predesignated financial institution. If the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House; otherwise they will be mailed. You may
also write checks for any purpose in amounts of $500 or more. There
are no penalties or redemption fees. See "How to Redeem Your
Investment" for these and other redemption methods. If a financial
intermediary is the record holder of your Service Shares you must
redeem those shares through the intermediary, and the foregoing
redemption methods will not apply.
Statements and Reports - For each Fund in which you invest,
you will receive statements of your Service Share account monthly
as well as each time you add to your account or take money out.
Additionally, you will receive a Semi-Annual Report and an audited
Annual Report.
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST - SERVICE SHARES
TABLE OF EXPENSES
Cash Tax-Free Treasuries
Shareholder Transaction Expenses Fund Fund Fund
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases 0% 0% 0%
Maximum Sales Charge
Imposed on Reinvested Dividends 0% 0% 0%
Deferred Sales Charge 0% 0% 0%
Redemption Fees 0% 0% 0%
Exchange Fee 0% 0% 0%
Annual Fund Operating Expenses*
(as a percentage of average net assets)
Investment Advisory Fee 0.35% 0.29% 0.28%
12b-1 Fees 0.25% 0.25% 0.25%
All Other Expenses 0.26% 0.26% 0.35%
Administration Fee 0.15% 0.11% 0.12%
Other Expenses 0.11% 0.15% 0.23%
Total Fund Operating Expenses 0.86% 0.80% 0.88%
Example+
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period
<CAPTION>
Cash Tax-Free Treasuries
Time Period Fund Fund Fund
<S> <C> <C> <C>
1 year $ 9 $ 8 $ 9
3 years $ 27 $26 $ 28
5 years $ 48 $44 $ 49
10 years $106 $99 $108
<FN>
*Based upon amounts incurred during the most recent fiscal year of
each Fund restated to reflect current arrangements.
The respective rates for the investment advisory fee and the
administration fee shown in the table represent the effective rates,
taking into consideration the breakpoint in net assets used in the
calculation of fees. For the portion of net assets above and below
each breakpoint, the aggregate rate of fees is the same but is
allocated differently to the Adviser and the Administrator so that
Total Fund Operating Expenses shown remains unchanged. (See
"Management Arrangements".)
Other expenses for the Cash Fund and the Treasuries Fund do not
reflect a 0.01% expense offset in custodian fees received for
uninvested cash balances. Reflecting this offset, other expenses,
all other expenses, and total Fund operating expenses for the Cash
Fund would have been 0.10%, 0.25%, and 0.85%, respectively; for the
Treasuries Fund, these expenses would have been 0.24%, 0.34% and
0.87%, respectively.
</FN>
<FN>
+The expenses example is based upon an amount at the beginning of each
year which includes the prior year's assumed results. A year's results
consist of an assumed 5% annual return less operating expenses as shown
above; the expense ratio was applied to an assumed average balance
(the year's starting investment plus one-half the year's results). Each
column represents the cumulative expenses so determined for the period
specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT
ALL MUTUAL FUNDS USE THE 5% RATE FOR PURPOSES OF PREPARING THE ABOVE
EXAMPLE.
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in
Service Shares of each Fund will bear directly or indirectly.
(See "Management Arrangements" for a more complete description of
the various investment advisory and administration fees.)
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF
CASH ASSETS TRUST
SERVICE SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report thereon
is included in the Funds' financial statements contained in its Annual
Report, which are incorporated by reference into the Additional Statement.
The information provided in the table should be read in conjunction
with the financial statements and related notes.
CASH FUND
Year Period
Ended Ended
March 31, 1996 March 31, 1995**
<S> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00
Income from Investment Operations:
Net investment income 0.05 0.01
Less Distributions:
Dividends from net investment
income (0.05) (0.01)
Net Asset Value, End of Period $1.00 $1.00
Total Return 5.06% 0.85%+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $32,856 $3,501
Ratio of Expenses to Average
Net Assets 0.86% 0.83%*
Ratio of Net Investment Income
to Average Net Assets 4.84% 5.26%*
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees, and for the year 1996, without the offset
in custodian fees for invested cash balances, would have been
Net Investment Income $0.05 $0.01
Ratio of Expenses to Average
Net Assets 0.86% 0.83%*
Ratio of Net Investment Income
to Average Net Assets 4.84% 5.26%*
<CAPTION>
TAX-FREE FUND
Year Period
Ended Ended
March 31, 1996 March 31, 1995**
<S> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00
Income from Investment Operations:
Net investment income 0.03 0.01
Less Distributions:
Dividends from net investment
income (0.03) (0.01)
Net Asset Value, End of Period $1.00 $1.00
Total Return 3.11% 0.52%+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $17,609 $1,378
Ratio of Expenses to Average
Net Assets 0.80% 0.77%*
Ratio of Net Investment Income
to Average Net Assets 2.97% 3.22%*
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees, and for the year 1996, without the offset
in custodian fees for invested cash balances, would have been
Net Investment Income $0.03 $0.01
Ratio of Expenses to Average
Net Assets 0.80% 0.77%*
Ratio of Net Investment Income
to Average Net Assets 2.97% 3.22%*
<CAPTION>
TREASURIES FUND
Year Period
Ended Ended
March 31, 1996 March 31, 1995**
<S> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00
Income from Investment Operations:
Net investment income 0.05 0.01
Less Distributions:
Dividends from net investment
income (0.05) (0.01)
Net Asset Value, End of Period $1.00 $1.00
Total Return 4.94% 0.94%+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $11,806 $506
Ratio of Expenses to Average
Net Assets 0.79% 0.85%*
Ratio of Net Investment Income
to Average Net Assets 4.68% 5.09%*
Net investment income per share and the ratios of income and expenses to average
net assets without the Adviser's and Administrator's voluntary waiver of fees,
and for the year 1996, without the offset in custodian fees for invested cash
balances, would have been
Net Investment Income $0.05 $0.01
Ratio of Expenses to Average
Net Assets 0.88% 0.98%*
Ratio of Net Investment Income
to Average Net Assets 4.60% 4.96%*
<FN>
** For the period from February 1, 1995 (commencement of operations)
to March 31, 1995.
</FN>
<FN>
+ Not annualized.
</FN>
<FN>
* Annualized.
</FN>
<CAPTION>
The "current yield" and "compounded yield" for the seven-day
period ended March 31, 1996 for each Fund was:
CURRENT YIELD COMPOUNDED YIELD
<S> <C> <C>
Cash Fund ........................ 4.47% 4.57%
Tax-Free Fund .................... 2.59% 2.62%
Treasuries Fund .................. 4.39% 4.49%
</TABLE>
<PAGE>
INTRODUCTION
Cash Assets Trust (the "Trust") is a professionally managed,
open-end investment company formed in 1984 as a Massachusetts
business trust. The Trust consists of three separate funds: Pacific
Capital Assets Trust, (the "Cash Fund"), Pacific Capital Tax-Free
Cash Assets Trust (the "Tax-Free Fund"), and Pacific Capital U.S.
Treasuries Cash Assets Trust (the "Treasuries Fund") .
Cash of investors may be invested in shares of each Fund as an
alternative to idle funds, direct investments in savings deposits
or short-term debt securities. Each Fund offers the opportunity to
keep cash reserves fully invested and provides you with a
professionally managed portfolio of money market instruments which
may be more diversified, higher yielding, more stable and more
liquid than you might be able to obtain on an individual basis.
Through the convenience of investment in shares of a Fund, you are
also relieved of the inconvenience of making multiple direct
investments, including the selection, purchasing and handling of
various securities.
INVESTMENT OF THE FUNDS' ASSETS
Each Fund's investment objective is as follows:
The investment objective of the Cash Fund is to achieve a high
level of current income, stability and liquidity for
investors' cash assets by investing in a diversified portfolio
of short-term "money market" securities meeting specific
quality standards.
The investment objective of the Tax-Free Fund is to provide
safety of principal while achieving as high a level as
possible of liquidity and of current income exempt from
Federal and Hawaii income taxes. It seeks to attain this
objective by investing primarily in municipal obligations,
which have remaining maturities not exceeding one year, of
Hawaii issuers or, if obligations of the desired quality,
maturity and interest rate are not available, in similar
obligations of non-Hawaii issuers.
The investment objective of the Treasuries Fund is to provide
safety of principal while achieving as high a level as
possible of liquidity and of current income. It seeks to
attain this objective by investing exclusively in short-term
direct obligations of the United States Treasury with
remaining maturities of one year or less, and certain
repurchase agreements secured by U.S. Treasury obligations.
There is no assurance that any Fund will achieve its
objective, which is a fundamental policy of the Fund.
In addition to the requirements of the Funds' management
policies, all obligations and instruments purchased by any Fund
must meet the requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission under the Investment Company Act
of 1940 (the "1940 Act"). The provisions of the Rule that affect
portfolio management are summarized under "Effect of the Rule on
Portfolio Management," below. In brief, the Rule's provisions for
quality, diversity and maturity require each Fund to limit its
investments to those instruments which Hawaiian Trust Company,
Limited, the Funds' investment adviser (the "Adviser"), determines
(pursuant to procedures approved by the Board of Trustees) present
minimal credit risks and which at the time of purchase are Eligible
Securities. In general, the Rule defines as Eligible Securities
those that at the time of purchase are rated in the two highest
rating categories for short-term securities by any two of the
nationally recognized statistical rating organizations ("NRSROs")
or unrated securities determined by the Board of Trustees to be of
comparable quality. See Appendix A to the Additional Statement for
a description of the NRSROs and the factors considered by them in
determining ratings. Eligible Securities so rated in the highest
rating category (or unrated securities of comparable quality) are
called "First Tier Securities"; all other Eligible Securities are
called "Second Tier Securities." The Rule also requires that the
dollar-weighted average maturity of each Fund's portfolio cannot
exceed 90 days and that each Fund cannot purchase any security
having a remaining maturity in excess of 397 days. The Rule also
contains limits on the percentage of each Fund's assets that can be
invested in the securities of any issuer. See "Effect of the Rule
on Portfolio Management," below.
Management Policies: Each Fund seeks to achieve its investment
objective through investments in the types of instruments described
in the management policies listed below. Except for policies
designated as fundamental, shareholder approval is not required to
change any of the foregoing management policies.
THE CASH FUND AND ITS INVESTMENTS
Management Policies of the Cash Fund
Under current management policies, the Cash Fund invests only
in the following types of obligations:
(1) U.S. Government Securities: Obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities; these obligations are referred to in this
Prospectus as "U.S. Government Securities"; see "Information On
U.S. Government Securities" below.
(2) Bank Obligations and Instruments Secured by Them: Bank
obligations that are First Tier Securities including time deposits,
certificates of deposit, bankers' acceptances and other bank (see
below for definition) obligations, and which are (i) obligations of
banks subject to regulation by the U.S. Government having total
assets of at least $1.5 billion, which may be obligations issued by
domestic banks, by foreign branches of such banks or by U.S.
subsidiaries of foreign banks; (ii) obligations of any foreign bank
having total assets equivalent to at least $1.5 billion; or (iii)
obligations ("insured bank obligations") if such obligations are
fully insured as to principal by the Federal Deposit Insurance
Corporation; (see "Information on Insured Bank Obligations" in the
Additional Statement); the Cash Fund may also invest in obligations
secured by any obligations set forth in (i) or (ii) above if such
investment meets the requirements of (6) below. (In this Prospectus
and in the Additional Statement, a bank includes commercial banks,
savings banks and savings and loan associations.)
(3) Commercial Paper Obligations: Commercial paper obligations
that are First Tier Securities; see "Effect of the Rule on
Portfolio Management," below.
(4) Corporate Debt Obligations: Corporate debt obligations
(for example, bonds and debentures) which are First Tier Securities
and which at the time of purchase have a remaining maturity of not
more than 397 days. See "Effect of the Rule on Portfolio
Management." See Appendix A to the Additional Statement for
information about bond ratings.
(5) Variable Amount Master Demand Notes: Variable amount
master demand notes that are First Tier Securities and which are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time on not more than thirty
days' notice. Variable amount master demand notes may or may not be
backed by bank letters of credit. (Because variable amount master
demand notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that they will be
traded, and there is no secondary market for them; see the
Additional Statement for further information on these notes.)
Variable amount master demand notes repayable in more than seven
days are securities which are not readily marketable, and fall
within the Cash Fund's overall 10% limitation on securities which
are illiquid. (See the Additional Statement.)
(6) Certain Other Obligations: Obligations other than those
listed in 1 through 5 above if such other obligations are
guaranteed as to principal and interest by either a bank in whose
obligations the Cash Fund may invest (see 2 above) or a corporation
in whose commercial paper the Cash Fund may invest (see 3 above).
See "Effect of the Rule on Portfolio Management." If the Cash Fund
invests more than 5% of its net assets in such other obligations,
the Prospectus will be supplemented to describe them. See the
Additional Statement.
(7) Repurchase Agreements: The Cash Fund may purchase
securities subject to repurchase agreements provided that such
securities consist entirely of U.S. government securities or
securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by the requisite
NRSROs. Repurchase agreements may be entered into only with
commercial banks or broker-dealers. Subject to the control of the
Board of Trustees, the Adviser will regularly review the financial
strength of all parties to repurchase agreements with the Cash
Fund. (See "Repurchase Agreements" under the caption "Matters
Applicable to All Funds" below.)
(8) When-Issued or Delayed Delivery Securities: The Cash Fund
may buy securities on a when-issued or delayed delivery basis; the
securities so purchased are subject to market fluctuation and no
interest accrues to the Cash Fund until delivery and payment take
place; their value at the delivery date may be less than the
purchase price. The Cash Fund may enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
its total assets, less liabilities other than the obligations
created by when-issued commitments. See the Additional Statement
for further information.
Other Information about the Cash Fund's Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Cash Fund will purchase only those issues that will enable it to
achieve and maintain the highest rating for a mutual fund by at
least one NRSRO. There is no assurance that it will be able to
maintain such rating. As a result of this policy, the range of
obligations in which the Cash Fund can invest is reduced and the
yield obtained on such obligations may be less than would be the
case if this policy were not in force.
Information On U.S. Government Securities
U.S. Government Securities (i.e., obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S.
Government, which in turn include Treasury Bills (which mature
within one year of the date they are issued) and Treasury Notes and
Bonds (which are issued with longer maturities). All Treasury
securities are backed by the full faith and credit of the United
States.
U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the Farmers
Home Administration, Federal Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal National Mortgage Association, Financing
Corporation, Government National Mortgage Association, Resolution
Funding Corporation, Small Business Administration, Student Loan
Marketing Association and the Tennessee Valley Authority.
Securities issued or guaranteed by U.S. Government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States. Some, such as securities issued by
the Federal Home Loan Banks, are backed by the right of the agency
or instrumentality to borrow from the U.S. Treasury. Others, such
as securities issued by the Federal National Mortgage Association,
are supported only by the credit of the instrumentality and not by
the U.S. Treasury. If the securities are not backed by the full
faith and credit of the United States, the owner of the securities
must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United
States in the event that the agency or instrumentality does not
meet its commitment. The Cash Fund will invest in government
securities, including securities of agencies and instrumentalities,
only if the Adviser (pursuant to procedures approved by the Board
of Trustees) is satisfied that these obligations present minimal
credit risks. See "Effect of the Rule on Portfolio Management"
below, for a discussion of the determination of minimal credit
risks in connection with the purchase of portfolio securities.
Information On Foreign Bank Obligations
Investments, which must be denominated in U.S. dollars, in
foreign banks and foreign branches of United States banks involve
certain risks in addition to those involved with investment in
domestic banks. While domestic banks are required to maintain
certain reserves and are subject to other regulations, such
requirements and regulations may not apply to foreign branches of
domestic banks. Investments in foreign banks and foreign branches
of domestic banks may also be subject to other risks, including
future political and economic developments, the possible
imposition of withholding taxes on interest income, the seizure or
nationalization of foreign deposits and the establishment of
exchange controls or other restrictions.
Investment Restrictions of the Cash Fund
The following restrictions on the Cash Fund's investments are
fundamental policies and cannot be changed without approval of the
shareholders of the Cash Fund.
1. The Cash Fund has diversification and anti-concentration
requirements.
The Cash Fund cannot buy the securities of any issuer if it
would then own more than 10% of the total value of all of the
issuer's outstanding securities.
The Cash Fund cannot buy the securities (not including U.S.
Government Securities) of any issuer if more than 5% of its total
assets (valued at market value) would then be invested in
securities of that issuer. In addition, the Rule limits investment
in Second Tier Securities to 5% of the Cash Fund's assets in the
aggregate, and to no more than the greater of 1% of the Cash Fund's
assets or $1,000,000 in the securities of any one issuer.
The Cash Fund cannot buy the securities of issuers in any one
industry if more than 25% of its total assets would then be
invested in securities of issuers in that industry (see the
Additional Statement); U.S. Government Securities and those
domestic bank obligations and instruments of domestic banks which
the Cash Fund may purchase (see "Investment of the Funds' Assets")
are considered as not included in this limit; however, obligations
of foreign banks and of foreign branches of domestic banks are
considered as included in this limit.
2. The Cash Fund can make loans only by lending securities or
entering into repurchase agreements.
The Cash Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Cash Fund can lend its portfolio
securities on a collateralized basis up to 10% of the value of its
total assets to specified borrowers (broker-dealers, banks and
certain other financial institutions) to increase its income (see
the Additional Statement) and enter into repurchase agreements (see
"Repurchase Agreements" above). The Cash Fund may be considered as
the beneficial owner of the loaned securities in that any gain or
loss in their market price during the loan inures to the Cash Fund
and its shareholders; thus, when the loan is terminated, the value
of the securities may be more or less than their value at the
beginning of the loan.
3. The Cash Fund can borrow only in limited amounts for
special purposes.
The Cash Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage or
pledge its assets only in connection with such borrowing and only
up to the lesser of the amounts borrowed or 5% of the value of its
total assets. Interest on borrowings would reduce the Cash Fund's
income. The Cash Fund will not purchase any securities while it has
any outstanding borrowings which exceed 5% of the value of its
assets. Except in connection with borrowings, the Cash Fund will
not issue senior securities.
THE TAX-FREE FUND AND ITS INVESTMENTS
Management Policies of the Tax-Free Fund
The Tax-Free Fund invests primarily in Municipal Obligations
(as defined below). Under current management policies, it invests
only in Municipal Obligations and in shares of investment companies
with money market portfolios consisting only of Municipal
Obligations, except for certain temporary investments in taxable
obligations described below ("Taxable Obligations").
Information about the Tax-Free Fund's Municipal Obligations
As used in this Prospectus and the Additional Statement, the
term "Municipal Obligations" means obligations with maturities of
397 days or less paying interest which, in the opinion of bond
counsel or other appropriate counsel, is exempt from regular
Federal income taxes. "Hawaiian Obligations" are Municipal
Obligations, including those of certain non-Hawaii issuers, paying
interest which, in the opinion of bond counsel or other appropriate
counsel, is also exempt from Hawaii state income taxes. The
non-Hawaiian bonds or other obligations the interest on which is
exempt from Hawaii state income tax under present law are the bonds
or other obligations issued by or under the authority of Guam, the
Northern Mariana Islands, Puerto Rico and the Virgin Islands. If
Hawaiian Obligations of the desired quality, maturity and interest
rate are not available, the Tax-Free Fund will invest in other
Municipal Obligations.
Although the portion of dividends of the Tax-Free Fund paid
from interest on Hawaiian Obligations will be free of Hawaii state
income tax, that paid from interest on other Municipal Obligations
will not. Since it is not possible to predict the extent to which
suitable Hawaiian Obligations will be available for investment, the
Tax-Free Fund has no investment restriction limiting the proportion
of its portfolio which it may invest in other Municipal
Obligations. See "Dividend and Tax Information." The
diversification requirements of the Rule may also restrict the Tax-
Free Fund's investment in Hawaiian Obligations. See "Effect of the
Rule on Portfolio Management."
Although exempt from regular Federal income tax, interest paid
on certain types of Municipal Obligations, and dividends which the
Tax-Free Fund might pay from this interest, are preference items as
to the Federal alternative minimum tax. As a fundamental policy, at
least 80% of the Tax-Free Fund's net assets will be invested in
Municipal Obligations the income paid upon which will not be
subject to the alternative minimum tax; accordingly, the Tax-Free
Fund can invest the rest of its assets in obligations which are
subject to the Federal alternative minimum tax. The Tax-Free Fund
may refrain entirely from purchasing these types of Municipal
Obligations. For further information, see "Dividend and Tax
Information."
Municipal Obligations are debt obligations issued by or on
behalf of states, cities, municipalities and other public
authorities. Such obligations include:
Municipal Bonds
Municipal bonds generally have a maturity at the time of
issuance of up to 30 years. The Tax-Free Fund can invest in
municipal bonds which are Eligible Securities and which at the time
of purchase have a remaining maturity of not more than 397 days.
See "Effect of the Rule on Portfolio Management." See Appendix A to
the Additional Statement for information about bond ratings.
Municipal Notes
Municipal notes generally have maturities at the time of
issuance of three years or less. The Tax-Free Fund's investments in
municipal notes are limited to notes which at the time of purchase
have a remaining maturity of not more than 397 days and which are
Eligible Securities. See "Effect of the Rule on Portfolio
Management." See Appendix A to the Additional Statement for
information about bond ratings. These notes are generally issued in
anticipation of the receipt of tax funds, of the proceeds of bond
placements or of other revenues. The ability of an issuer to make
payments is therefore dependent on these tax receipts, proceeds
from bond sales or other revenues, as the case may be.
Municipal Commercial Paper
Municipal commercial paper is a debt obligation with a stated
maturity of 397 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term debt. The Tax-Free Fund may invest in municipal
commercial paper obligations that are Eligible Securities; see
"Effect of the Rule on Portfolio Management," below.
Other Information About Municipal Obligations
From time to time the Tax-Free Fund may invest 25% or more of
its assets in Municipal Obligations that are related in such a way
that an economic, business or political development or change
affecting one of these obligations would also affect the other
obligations, for example, Municipal Obligations the interest on
which is paid from revenues of similar type projects or Municipal
Obligations whose issuers are located in the same state.
The taxable market is a broader and more liquid market with a
greater number of investors, issuers and market makers than the
market for Municipal Obligations. The more limited marketability of
Municipal Obligations may make it difficult in certain
circumstances to dispose of large investments advantageously. In
general, Municipal Obligations are also subject to credit risks
such as the loss of credit ratings or possible default. In
addition, certain Municipal Obligations might lose tax-exempt
status in the event of a change in the tax laws.
Information about the Temporary Taxable Investments
the Tax-Free Fund May Make
The Tax-Free Fund may invest the proceeds of the sale of
shares or the sale of Municipal Obligations in Taxable Obligations
pending investment in Municipal Obligations. The Tax-Free Fund may
also enter into repurchase agreements as to Taxable Obligations.
(See "Repurchase Agreements" below.) As a fundamental policy, under
normal market conditions the Tax-Free Fund may not purchase Taxable
Obligations if thereafter more than 20% of its net assets would
consist of such obligations or cash, except for temporary defensive
purposes, i.e., in anticipation of a decline or possible decline in
the value of Municipal Obligations. Purchase of Taxable Obligations
is subject to certain specific diversification tests under the
Rule. See "Effect of the Rule on Portfolio Management," below.
Under current management policies the Taxable Obligations
which the Tax-Free Fund may purchase are obligations maturing in
397 days or less from the date of purchase by the Tax-Free Fund and
which are:
Obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities ("U.S. Government Obligations");
see the Additional Statement for further information; commercial
paper obligations that are First Tier Securities; see "Effect of
the Rule on Portfolio Management," below; and bank obligations that
are First Tier Securities including time deposits, certificates of
deposit, bankers' acceptances and other bank (see below for
definition) obligations, and which are (i) obligations of banks
subject to regulation by the U.S. Government having total assets of
at least $1.5 billion, which may be obligations issued by domestic
banks, by foreign branches of such banks or by U.S. subsidiaries
of foreign banks; or (ii) obligations ("insured bank obligations")
that are fully insured as to principal by the Federal Deposit
Insurance Corporation (see "Information on Insured Bank
Obligations" in the Additional Statement). (In this Prospectus and
in the Additional Statement, the term bank includes commercial
banks, savings banks and savings and loan associations.)
Floating and Variable Rate Instruments
Certain of the obligations that the Tax-Free Fund may purchase
have a floating or variable rate of interest. These obligations
bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the Prime Rate, or at
specified intervals. Certain of these obligations may carry a
demand feature that would permit the holder to tender them back to
the issuer at par value prior to maturity. The Tax-Free Fund may
invest in floating and variable rate obligations even if they carry
stated maturities in excess of 397 days, if under the provisions of
the Rule for determining the maturity, the maturity of the
instrument so determined is less than 397 days. See "Effect of the
Rule on Portfolio Management," below. The Tax-Free Fund will limit
its purchases of floating and variable rate obligations to those
which at the time of purchase are Eligible Securities. On an
ongoing basis, the Adviser will monitor the ability of an issuer of
a demand instrument to pay principal and interest on demand. The
Tax-Free Fund's right to obtain payment at par on a demand
instrument could be affected by events occurring between the date
the Tax-Free Fund elects to demand payment and the date payment is
due that may affect the ability of the issuer of the instrument to
make payment when due, except when such demand instrument permits
same day settlement. To facilitate settlement, these same day
demand instruments may be held in book entry form at a bank other
than the Tax-Free Fund's custodian subject to a sub-custodial
agreement approved by the Tax-Free Fund between that bank and the
Tax-Free Fund's custodian.
To the extent that floating and variable rate instruments
without demand features are not readily marketable, they will be
subject to the investment restriction that the Tax-Free Fund may
not invest an amount equal to more than 10% of the current value of
its net assets in securities that are illiquid.
Certain Put Rights
The Tax-Free Fund may enter into put transactions with
commercial banks with respect to obligations held in its portfolio.
The Tax-Free Fund does not intend to enter into put transactions
with broker-dealers, and in no event would it do so except as
permitted under the 1940 Act.
The right of the Tax-Free Fund to exercise a put is
unconditional and unqualified. A put is not transferable by the
Tax-Free Fund, although the Tax-Free Fund may sell the underlying
securities to a third party at any time. If necessary and
advisable, the Tax-Free Fund may pay for certain puts either
separately in cash or by paying a higher price for portfolio
securities that are acquired subject to such a put (thus reducing
the yield to maturity otherwise available for the same securities).
The Tax-Free Fund may enter into puts with banks or
broker-dealers that, in the opinion of the Adviser, present minimal
credit risks. The ability of the Tax-Free Fund to exercise a put
will depend on the ability of the bank or broker-dealer to pay for
the underlying securities at the time the put is exercised. In the
event that a bank or broker-dealer should default on its obligation
to repurchase an underlying security, the Tax-Free Fund might be
unable to recover all or a portion of any loss sustained from
having to sell the security elsewhere.
The Tax-Free Fund may enter into certain puts solely to
maintain liquidity and will not exercise its rights thereunder for
trading purposes. The puts will be only for periods substantially
less than the life of the underlying security. The acquisition of
a put will not affect the valuation by the Tax-Free Fund of the
underlying security. The actual put will be valued at zero in
determining net asset value. Where the Tax-Free Fund pays directly
or indirectly for a put, its cost will be reflected as an
unrealized loss for the period during which the put is held by the
Tax-Free Fund and will be reflected in realized gain or loss when
the put is exercised or expires. If the value of the underlying
security increases, the potential for unrealized or realized gain
is reduced by the cost of the put. The maturity of a Municipal
Obligation purchased by the Tax-Free Fund will not be considered
shortened by any such put to which the obligation is subject.
The Rule has a number of provisions affecting puts. (See
"Effect of the Rule on Portfolio Management.")
When-Issued Securities
The Tax-Free Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take
place within 45 days after the date of the commitment to purchase.
The Tax-Free Fund will only make commitments to purchase Municipal
Obligations on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement
date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are
subject to market fluctuation and no income accrues to the
purchaser prior to issuance. The payment obligation and the
interest rate that will be received on the securities are each
fixed at the time the purchaser enters into the commitment. For
purposes of determining the Tax-Free Fund's weighted-average
maturity, the maturity of a when-issued security is calculated from
its commitment date. Purchasing municipal securities on a
when-issued basis is a form of leverage and can involve a risk that
the yields available in the market when the delivery takes place
may actually be higher than those obtained in the transaction
itself, in which case there could be an unrealized loss in the
value of the investment at the time of delivery.
The Tax-Free Fund will establish a segregated account with its
Custodian in which it will maintain liquid assets in an amount at
least equal in value to the Tax-Free Fund's commitments to purchase
when-issued securities. If the value of these assets declines, the
Tax-Free Fund will place additional liquid assets in the account on
a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.
Repurchase Agreements
The Tax-Free Fund may purchase securities subject to
repurchase agreements provided that such securities are listed
above under " The Tax-Free Fund and Its Investments"; it is the
Tax-Free Fund's current policy to use for repurchase agreements
only collateral that consists entirely of U.S. Government
securities or securities that, at the time the repurchase agreement
is entered into, are rated in the highest rating category by the
requisite NRSROs. (See "Effect of the Rule on Portfolio
Management.") Repurchase agreements may be entered into only with
commercial banks or broker-dealers. The Adviser, under the
supervision of the Board of Trustees, will regularly review the
financial strength of all parties to repurchase agreements with the
Tax-Free Fund. (See "Repurchase Agreements" under the caption
"Matters Applicable to All The Funds" below.)
Loans of Portfolio Securities
The Tax-Free Fund can lend its portfolio securities on a
collateralized basis up to 10% of the value of its total assets to
specified borrowers (brokers, dealers and certain financial
institutions) to increase its income (see the Additional Statement)
and enter into repurchase agreements (see "Repurchase Agreements"
above). The Tax-Free Fund may be considered as the beneficial owner
of the loaned securities in that any gain or loss in their market
price during the loan inures to the Tax-Free Fund and its
shareholders; thus, when the loan is terminated, the value of the
securities may be more or less than their value at the beginning of
the loan.
Shares of Investment Companies
The Tax-Free Fund may purchase shares of investment companies
with money market portfolios consisting only of Municipal
Obligations if such investment companies meet the requirements of
the Rule (see "Effect of the Rule on Portfolio Management" below).
It will not purchase shares of an investment company which imposes
a sales or redemption charge of any sort; however, an investment
company in which the Tax-Free Fund invests may have a distribution
plan under which it may pay for distribution expenses or services.
The Tax-Free Fund will purchase shares only of investment companies
with high-quality portfolios, which the Adviser, pursuant to
procedures approved by the Board of Trustees, determines present
minimal credit risks. Such investments will ordinarily be made to
provide additional liquidity and at the same time to earn higher
yields than are usually associated with the overnight or short-term
obligations in which the Tax-Free Fund might otherwise invest for
this purpose. While higher yields than those of alternative
investments may be obtainable, these yields will reflect management
fees and operating and distribution expenses of the investment
companies and will result in duplication of management fees with
respect to assets of the Tax-Free Fund so invested. The Tax-Free
Fund may not invest in the shares of investment companies if
immediately thereafter it has invested more than 10% of the value
of its total assets in such companies or more than 5% of the value
of its total assets in any one such company; it may not invest in
such a company if immediately thereafter it owns more than 3% of
the total outstanding voting stock of such a company.
Other Information About the Tax-Free Fund and its Investments
To the extent the ratings given by the NRSROs may change as a
result of changes in such organizations or their rating systems,
but not as a result of the downgrading of any security held by the
Tax-Free Fund or any issuer the securities of which are held by the
Tax-Free Fund, it will attempt to use comparable ratings as
standards for investments in accordance with the investment
policies contained in this Prospectus and in the Additional
Statement. The ratings of the NRSROs are more fully described in
the Appendix to the Additional Statement.
The Tax-Free Fund is a non-diversified investment company
under the 1940 Act. See "Diversity under the 1940 Act" under "
General Information" below.
Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations
The following is a discussion of the general factors that
might influence the ability of Hawaiian issuers to repay principal
and interest when due on the Hawaiian Obligations contained in the
portfolio of the Tax-Free Fund. Such information is derived from
sources that are generally available to investors and is believed
by the Tax-Free Fund to be accurate, but has not been independently
verified and may not be complete.
As of the date of this Prospectus, economic data available
indicate that 1995 was a year of mild expansion in Hawaii, with
lingering areas of weakness and not enough economic growth to do
more than halt the slide in employment. Local economic sources
expect that the economy will gain some further strength this year.
Despite the lower unemployment rate and strong growth in tourism,
business activity in the state remained sluggish. Disinflation has
accompanied the lower growth rate.
Tourism is the State's principal industry. Tourist arrivals
and spending provided a needed boost to the Hawaiian economy in
1995. The decline in construction, underway since mid-1991,
continued.
Value retailers from the mainland have been aggressively
penetrating island markets for several years. As a result, local
retailers have been repositioning themselves to confront the
competition posed by the newcomers. Some retailers have been forced
out of the industry, and as a result, retail employment continues
at a low level, despite the opening of several new retail
outlets.
Job loss also accompanied the closure or announcement of
timetables for closure of several sugar plantations around the
state.
Combined with more gradual reductions in the number of
military personnel stationed on the islands and civilian military
employees in the military, during 1995, Hawaii was able to create
only slightly more jobs than it lost, leaving the job count between
1993 and 1995 virtually unchanged.
The prolonged weakness has resulted in pressures for the
State to achieve a balanced budget by significant cuts in
expenditures. These reductions will pressure government to operate
in a much leaner and more efficient manner.
The Hawaiian economy may also be adversely impacted by the
uncertainty in the general interest rate environment caused by
outside factors.
Investment Restrictions of the Tax-Free Fund
The following restrictions on the Tax-Free Fund's investments
are fundamental policies and cannot be changed without approval of
the shareholders of the Tax-Free Fund.
1. The Tax-Free Fund has diversification and
anti-concentration requirements.
The Tax-Free Fund cannot buy the securities of issuers in any
one industry if more than 25% of its total assets would then be of
issuers in that industry; Municipal Obligations, U.S. Government
Obligations and those bank obligations and instruments of domestic
banks which the Fund may purchase (see "Investment of the Fund's
Assets") are considered as not included in this limit, except that
the Fund will consider that a non-governmental user of facilities
financed by industrial development bonds is an issuer in an
industry.
2. The Tax-Free Fund can make loans only by lending securities
or entering into repurchase agreements.
The Tax-Free Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Tax-Free Fund can lend its
portfolio securities (see "Loans of Portfolio Securities" above)
and enter into repurchase agreements (See "Repurchase Agreements"
above).
3. The Tax-Free Fund can borrow only in limited amounts for
special purposes.
The Tax-Free Fund can borrow from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets only in connection with such
borrowing and only up to the lesser of the amounts borrowed or 5%
of the value of its total assets. Interest on borrowings would
reduce the Fund's income. The Tax-Free Fund will not purchase any
securities while it has any outstanding borrowings which exceed 5%
of the value of its total assets.
THE TREASURIES FUND AND ITS INVESTMENTS
Management Policies of the Treasuries Fund
The Treasuries Fund invests only in short-term direct
obligations of the United States Treasury with remaining maturities
of one year or less, and certain repurchase agreements secured by
U.S. Treasury obligations. The Treasuries Fund will not invest in
other obligations issued or guaranteed by agencies or
instrumentalities of the United States Government. Shares of the
Treasuries Fund are not guaranteed or insured by the United States
Government.
U. S. Treasury Obligations
The U.S. Treasury issues various types of marketable
securities, consisting of bills, notes, bonds, and certificates of
indebtedness, which are all direct obligations of the U.S.
Government backed by its "full faith and credit" and which differ
primarily in the length of their maturity. U.S. Treasury bills,
which have a maturity of up to one year, are the most frequently
issued marketable U.S. Government security. The Fund may also
invest in separately traded principal and interest components of
securities issued by the United States Treasury. The principal and
interest components of selected securities are traded independently
under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the
principal and interest components are individually numbered and
separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts
independently.
The investment by the Treasuries Fund in such short-term
direct obligations of the U.S. Treasury may result in a lower yield
than a policy of investing in other types of instruments, and
therefore the yield of the Treasuries Fund may be lower, for
example, than the yield of another of the Trust's portfolios, the
Cash Fund, which invests in taxable money market obligations of a
broader range of issuers.
Repurchase Agreements
The Treasuries Fund may purchase securities subject to
repurchase agreements provided that such securities are obligations
of the U.S. Treasury. Repurchase agreements may be entered into
only with commercial banks or broker-dealers. Subject to the
control of the Board of Trustees, the Adviser will regularly review
the financial strength of all parties to repurchase agreements with
the Treasuries Fund. (See Repurchase Agreements under the caption
"Matters Applicable to All The Funds" below.)
Other Information about the Treasuries Fund's Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Treasuries Fund will purchase only those issues that will enable it
to achieve and maintain the highest rating for a mutual fund by at
least one NRSRO. There is no assurance that it will be able to
maintain such rating. As a result of this policy, the range of
obligations in which the Treasuries Fund can invest is reduced and
the yield obtained on such obligations may be less than would be
the case if this policy were not in force.
Investment Restrictions of the Treasuries Fund
The following restrictions on the Treasuries Fund's
investments are fundamental policies and cannot be changed without
approval of the shareholders of the Treasuries Fund.
1. The Treasuries Fund can make loans only by lending
securities or entering into repurchase agreements.
The Treasuries Fund can buy those debt securities which it is
permitted to buy (see "Investment of the Funds' Assets"); this is
investing, not making a loan. The Treasuries Fund can lend its
portfolio securities on a collateralized basis up to 10% of the
value of its total assets to specified borrowers (broker-dealers,
banks and certain other financial institutions) to increase its
income (see the Additional Statement) and enter into repurchase
agreements (see "Repurchase Agreements" above). The Treasuries Fund
may be considered as the beneficial owner of the loaned securities
in that any gain or loss in their market price during the loan
inures to the Treasuries Fund and its shareholders; thus, when the
loan is terminated, the value of the securities may be more or less
than their value at the beginning of the loan.
2. The Treasuries Fund can borrow only in limited amounts for
special purposes.
The Treasuries Fund can borrow from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets only in connection with such
borrowing and only up to the lesser of the amounts borrowed or 5%
of the value of its total assets. Interest on borrowings would
reduce the Treasuries Fund's income. The Treasuries Fund will not
purchase any securities while it has any outstanding borrowings
which exceed 5% of the value of its assets. Except in connection
with borrowings, the Treasuries Fund will not issue senior
securities.
Portfolio Matters Applicable to All Funds
(In the material below, the text in bold does not apply to the
Treasuries Fund.)
Repurchase Agreements
Under a repurchase agreement, at the time a Fund purchases a
security, the Fund also resells it to the seller and must deliver
the security (or securities substituted for it) to the seller on an
agreed-upon date in the future. (The securities so resold or
substituted are referred to herein as the "Resold Securities.") The
resale price is in excess of the purchase price in that it reflects
an agreed-upon market interest rate effective for the period of
time during which the Fund's money is invested in the Resold
Securities. The majority of these transactions run from day to day,
and the delivery pursuant to the resale typically will occur within
one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the 1940 Act. The return on such "collateral"
may be more or less than that from the repurchase agreement. The
Resold Securities under any repurchase agreement will be marked to
market every business day so that the value of the "collateral" is
at least equal to the resale price provided in the agreement,
including the accrued interest earned thereon, plus sufficient
additional market value as is considered necessary to provide a
margin of safety. During the term of the repurchase agreement, the
Fund or its custodian or sub-custodian either has actual physical
possession of the Resold Securities or, in the case of a security
registered in a book entry system, the book entry is maintained in
the name of the Fund or its custodian. The Fund retains an
unqualified right to possess and sell the Resold Securities in the
event of a default by the other party.
In the event of bankruptcy or other default by the other
party, there may be possible delays and expenses in liquidating the
Resold Securities, decline in their value and loss of interest. If
the maturity of the Resold Securities is such that they cannot be
owned by the Fund under the applicable provisions of the Rule they
will have to be sold, which could result in a loss. See "Effect of
the Rule on Portfolio Management."
Limitation of 10% As To Certain Investments
Due to their possible limited liquidity, no Fund may make
certain investments if thereafter more than 10% of its net assets
would consist of such investments. The investments included in this
10% limit are (i) repurchase agreements maturing in more than seven
days; (ii) fixed time deposits subject to withdrawal penalties
other than overnight deposits; (iii) restricted securities, i.e.,
securities which cannot freely be sold for legal reasons (which the
Funds do not expect to own); (iv) securities for which market
quotations are not readily available; and (v) insured bank
obligations unless the Board of Trustees determines that a readily
available market exists for such obligations. However, this 10%
limit does not include any obligations payable at principal amount
plus accrued interest on demand or within seven days after demand.
Factors Which May Affect the Value
of the Funds' Investments and Their Yields
The value of the obligations and instruments in which the
Funds invest will fluctuate depending in large part on changes in
prevailing interest rates. If the prevailing interest rates go up
after a Fund buys a security, the value of the security may go
down; if these rates go down, the value of the security may go up.
Changes in value and yield based on changes in prevailing interest
rates may have different effects on short-term obligations than on
long-term obligations. Long-term obligations (which often have
higher yields) may fluctuate in value more than short-term ones.
Portfolio Transactions
Each Fund will seek to obtain the best net price and the most
favorable execution of orders. Purchases will be made directly from
issuers or from underwriters, dealers or banks which specialize in
the types of securities invested in by the Fund. As most purchases
made by the Funds are principal transactions at net prices, the
Funds incur little or no brokerage costs. Purchases from
underwriters will include a commission or concession paid by the
issuer to the underwriter and purchases from dealers may include
the spread between the bid and the asked price. If the execution
and price offered by more than one dealer are comparable, the order
may be allocated to a dealer which has provided research advice,
such as information on particular companies and industries and
market, economic and institutional activity. By allocating
transactions to obtain research services, the Funds enable the
Adviser to supplement its own research and analyses with the views
and information of other securities firms. Such research services,
whether or not useful to the Funds, may be useful to other accounts
managed by the Adviser or its affiliates.
Effect of the Rule on Portfolio Management
Under "Investments of the Funds' Assets" above immediately
following the investment objectives of the Funds, there is a brief
description of Rule 2a-7 (the "Rule") of the Securities and
Exchange Commission under the 1940 Act.
As money market funds, the Funds operate under the Rule, which
allows the Funds to use the "amortized cost" method of valuing
their securities and which contains certain risk limiting
provisions, including requirements as to maturity, quality and
diversification of each Fund's portfolio. Some of the most
important aspects of the Rule are described below.
Under the Rule, each Fund must limit its investments to those
instruments which are denominated in U.S. dollars, which are
determined by the Board of Trustees to present minimal credit
risks, and which, at the time of purchase, are Eligible Securities.
In accordance with the Rule, the Board of Trustees has adopted
investment procedures and has approved investment policies pursuant
to which all investment determinations have been delegated to the
Adviser, under the direction and control of the Board of Trustees,
except for those matters for which the Rule requires Board
determination.
In general, the Rule defines as Eligible Securities those that
at the time of purchase are rated in the two highest rating
categories for short-term securities by any two of the NRSROs or,
if unrated, are determined by the Board of Trustees to be of
comparable quality. Eligible Securities so rated in the highest
rating category (and unrated securities determined by the Board of
Trustees to be of comparable quality) are called "First Tier
Securities"; all other Eligible Securities are called "Second Tier
Securities." Eligible Securities can in some cases include
securities rated by only one NRSRO and unrated obligations that are
determined by the Board of Trustees to be of comparable quality to
rated securities. A security that was long-term when issued must,
at the time of purchase by a Fund, either have a short-term rating
such that it is an Eligible Security or be comparable in priority
and security to a rated short-term obligation of the same issuer
that is an Eligible Security or, if the issuer has no short-term
rating (and does not have a long-term rating from any NRSRO below
the highest rating), be determined by the Board of Trustees to be
of comparable quality to rated securities the Fund could purchase.
Purchase of any security rated by only one NRSRO and purchase of
any unrated security (except U.S. Government Securities) must be
ratified by the Board of Trustees; in the case of the Tax-Free
Fund, this requirement applies only to taxable securities.
As to the Cash Fund and the taxable securities of the Tax-Free
Fund, the Rule requires (with limited exceptions) that immediately
after purchase of any security, a Fund have invested not more than
5% of its assets in the securities of any one issuer, and provides
that a Fund cannot have more than 5% of its assets in the aggregate
invested in Second Tier Securities, nor more than the greater of 1%
of its assets or $1,000,000 invested in Second Tier Securities of
any single issuer. (In general, the Tax-Free Fund does not intend
to own Second Tier Securities.) The Rule has specific provisions
relating to determinations of the eligibility of certain types of
instruments such as repurchase agreements and instruments subject
to a demand feature. It also has specific provisions for
determining the issuer of a security for purposes of compliance
with the diversification requirements.
Generally, under the Rule, the maturity of an instrument is
considered to be its stated maturity (or in the case of an
instrument called for redemption, the date on which the redemption
payment must be made). There are special rules for determining the
maturity of certain kinds of instruments. The Rule contains
provisions as to the maturity of variable rate and floating rate
instruments. Repurchase agreements and securities loan agreements
are, in general, treated as having a maturity equal to the period
remaining until they can be executed.
The Rule has provisions requiring specific actions whenever
the rating of a portfolio security is downgraded. Generally, these
actions include a prompt reassessment by the Board of Trustees of
the credit risks associated with such a security. In general, the
Rule mandates prompt sale or other disposition, e.g., by exercising
a demand for payment, in certain cases, such as when a security
ceases to be an Eligible Security, no longer presents minimal
credit risks or suffers a financial default.
Fundamental Policies
Each Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the Prospectus
and Additional Statement as "fundamental policies," cannot be
changed unless the holders of a "majority," as defined in the 1940
Act, of the Fund's outstanding shares vote to change them. (See
the Additional Statement for a definition of such a majority.) All
other policies can be changed from time to time without shareholder
approval. Some of the more important of each Fund's fundamental
policies, not otherwise identified in the Prospectus, are described
above; others are listed in the Additional Statement.
NET ASSET VALUE PER SHARE
The net asset value per share for each class of the Funds'
shares is determined as of 4:00 p.m. New York time on each day that
the New York Stock Exchange is open by dividing the value of the
assets of the Fund allocable to that class less Fund liabilities
allocable to the class and any liabilities charged directly to the
class, exclusive of surplus, by the total number of shares of the
class outstanding.
The net asset value per share will normally remain constant at
$1.00 per share except under extraordinary circumstances; see the
Additional Statement for a discussion of the extraordinary
circumstances which could result in a change in this fixed share
value. The net asset value per share of each Fund is based on a
valuation of its investments at amortized cost; see the Additional
Statement.
HOW TO INVEST IN THE FUNDS
Each Fund's Service Shares are sold on a continuous basis at
the net asset value next determined after an order is entered and
deemed effective. There is no sales charge. The minimum initial
investment is $1,000 in the Shares of a Fund. Subsequent
investments may be in any amount. Aquila Distributors, Inc. (the
"Distributor") is the exclusive Distributor of the Funds' shares.
The Distributor sells shares only for purchase orders received.
Opening an Account
To open a new Service Shares account directly with any Fund,
you must send a properly completed Application to Administrative
Data Management Corp. (the "Agent"). Redemption of Service Shares
purchased directly by wire payment will not be honored until a
properly completed Application has been received by the Agent.
Initial investments in Service Shares may be made in any of
these three ways:
1. By Mail. Payment may be made by check, money order, Federal
Reserve Draft or other negotiable bank draft drawn in United
States dollars on a United States commercial or savings bank
or credit union (each of which is a "Financial Institution")
payable to the order of Pacific Capital Cash Assets Trust,
Pacific Capital Tax-Free Cash Assets Trust or Pacific Capital
U.S. Treasuries Cash Assets Trust, as the case may be, and
mailed to:
(Specify the name of the Fund)
Administrative Data Management Corp.,
Shareholder Servicing Agent
Attn: Aquilasm Group of Funds
581 Main Street
Woodbridge, NJ 07095-1198
2. By Wire. Payment may be wired in Federal funds (monies
credited to a bank's account with a Federal Reserve Bank) to
Bank One Trust Company, N.A., which serves as the Custodian of
the assets of the Funds.
To insure prompt and proper crediting to your account, if you
choose this method of payment you should first telephone the Agent
(800-255-2287 toll free or 908-855-5731) and then instruct your
bank to wire funds as indicated below for the appropriate Fund:
the Cash Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital Cash Assets Trust
(Service Shares) A/C 6801358400
the Tax-Free Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital Tax-Free
Cash Assets Trust (Service Shares)
A/C 6801358500
the Treasuries Fund
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Pacific Capital U.S. Treasuries
Cash Assets Trust (Service Shares)
A/C 6801358600
In addition, add:
The name in which the investment is to be registered (if a new
account).
Your bank may impose a charge for wiring funds.
3. Through Brokers. If you wish, you may invest in a Fund by
purchasing Service Shares through registered broker-dealers.
There is no sales or service charge imposed by any Fund on
purchases of Service Shares, although financial intermediaries may
make reasonable charges to their customers for their services. The
services to be provided and the fees therefor are established by
each financial intermediary acting independently; financial
intermediaries may also determine to establish, as to accounts
serviced by them, higher initial or subsequent investment
requirements than those required by the Funds. Financial
intermediaries are responsible for prompt transmission of orders
placed through them.
The Bank of Hawaii, the parent of the Adviser, offers an
arrangement whereby its customers may invest in Service Shares of
any Fund by establishing a "sweep account" with the Bank, which
connects an FDIC-insured Bank of Hawaii checking account with a
brokerage account provided through Bancorp Investment Group, a
subsidiary of the Bank of Hawaii. When money is transferred out of
your checking account for investment in any of the Funds, it is no
longer covered by FDIC insurance. Other banks or broker-dealers may
offer a similar facility for automatic investment of account
balances in Service Shares of the Funds. Because of the special
arrangements for automated purchases and redemptions of Service
Shares that sweep accounts involve, certain options or other
features described in this Prospectus (such as alternative purchase
and redemption procedures, dividend and distribution arrangements
or share certificates) may not be available to persons investing
through such accounts. Investments through a sweep account are
governed by the terms and conditions of the account (including fees
and expenses associated with the account), which are typically set
forth in agreements and accompanying disclosure statements used to
establish the account. You should review copies of these materials
before investing in a Fund through a sweep account.
Additional Investments
If you invest in a Fund directly, rather than through a
financial intermediary, you may make additional investments in
Service Shares in any amount after an account has been established
by mailing directly to the Agent a check, money order or other
negotiable bank draft made payable to the Fund, or by wiring funds
as described above. In each case you should indicate your name and
account number to insure prompt and proper crediting of your
account. The pre-printed stub attached to each Fund's confirmations
is provided as a convenient identification method to accompany
additional investments made by mail. You may also make subsequent
investments of $50 or more using electronic funds transfers from
your demand account at a Financial Institution if it is a member of
the Automated Clearing House and if the Agent has received a
completed Application designating this feature, or, after your
account has been opened, a Ready Access Features form available
from the Distributor or the Agent. A pre-determined amount can be
regularly transferred for investment ("Automatic Investment") or
single investments can be made upon receipt by the Agent of
telephone instructions from anyone ("Telephone Investment"). The
maximum amount of each Telephone Investment is $50,000. Upon 30
days' written notice to shareholders, the Funds may modify or
terminate these investment methods at any time or charge a service
fee, although no such fee is currently contemplated.
If you make additional investments in Service Shares through
an account with a financial intermediary, the procedures for such
investments will be those provided in connection with the account
rather than the foregoing.
When Shares Are Issued and Dividends Are Declared On Them
There are three methods as to when Service Shares are issued.
Under each method, shares are issued at the net asset value per
share next determined after the purchase order is effective, as
discussed below. Under each method, the Application must be
properly completed and have been received and accepted by the
Agent; each Fund or the Distributor may also reject any purchase
order for shares of that Fund. Under each method, Federal funds
(see above) must either be available to the Fund in question or the
payment thereof must be guaranteed to the Fund so that the Fund can
be as fully invested as practicable.
The first method under which Service Shares are issued
involves ordinary investments. Under this method, payments
transmitted by wire in Federal funds and payments made by Federal
Reserve Draft received by the Custodian prior to 4:00 p.m. New York
time on any day on which the New York Stock Exchange is open will
be invested (i.e., the purchase order will be effective) at the net
asset value per Service Share determined as of 4:00 p.m. on that
day; if either such type of payment is received after that time,
the purchase order will be effective as of 4:00 p.m. on the next
day that the exchange is open. Wire payments not in Federal funds
will normally be converted into Federal funds on the next day such
exchange is open and the purchase order will be effective as of
4:00 p.m. on such next day. Payments transmitted by check will
normally be converted to Federal funds by the Agent, as your agent,
within two business days for checks drawn on a member bank of the
Federal Reserve System, and longer for most other checks, and the
purchase orders will be effective as of 4:00 p.m. on that day if
the exchange is open and otherwise at 4:00 p.m. on the next day the
exchange is open after such conversion. All checks are accepted
subject to collection at full face value in United States funds and
must be drawn in United States dollars on a United States bank; if
not, shares will not be issued. Purchases by Automatic Investment
and Telephone Investment will be executed on the first day on
which that exchange is open occurring on or after the date an order
is considered received by the Agent at the net asset value
determined on that day. In the case of Automatic Investment the
order will be executed on the date you specified for investment at
the price determined on that day, unless it is not a day on which
that exchange is open, in which case the order will be executed at
the net asset value determined on the next day on which that
exchange is open. In the case of Telephone Investment the order
will be filled at the next determined net asset value, which for
orders placed after the time for determining the net asset value of
any Fund's shares for any day will be the price determined on the
following day on which the exchange is open. Dividends on shares
issued under this first investment method are declared starting on
the day (whether or not a business day) after the purchase order is
effective and are declared on the day on which the shares are
redeemed.
The second method under which Service Shares are issued
involves a bank or broker-dealer making special arrangements with
the Funds under which (i) either (a) payment is made in Federal
funds or by check in New York Clearing House funds delivered to the
Agent prior to 5:00 p.m. New York time or (b) the Agent is advised
prior to that time of a dollar amount to be invested; (ii) the
Agent is advised prior to that time of the form of registration of
the shares to be issued; (iii) the bank or broker-dealer will prior
to noon New York time on the next business day wire Federal funds
to the Custodian (but in the case of prior payment by check under
(i)(a) above only if the check is not converted into Federal funds
in the normal course on the next business day); and (iv)
arrangements satisfactory to the Funds are made between it and the
bank or broker-dealer under which if Federal funds are not so
received by the Custodian, the Fund is reimbursed for any costs or
loss of income arising out of such non-receipt. New York Clearing
House funds are funds represented by a check drawn on a bank which
is a member of the New York Clearing House. Under this second
method, the purchase order is effective on the day the check or the
advice is received under (i) above. Dividends on shares issued
under this second method are declared starting on the day (whether
or not a business day) after the purchase order is effective and
are declared on the day on which such shares are redeemed.
The third method under which Service Shares are issued
involves broker-dealers or banks which have requested that this
method be used, to which request the Funds have consented. Under
this third method (i) the Agent must be advised prior to noon New
York time on any business day of a dollar amount to be invested;
and (ii) Federal funds must be wired to the Custodian on that day;
under this method, the purchase order is effective on that day.
Dividends on shares issued under this third investment method are
declared beginning on that day but not on the day such shares are
redeemed.
This third investment method is available to prospective
investors in Service Shares who wish to use it so that the
dividends on their shares will commence to be declared on the day
the purchase order is effective. Upon written or phone request to
a Fund by such a prospective investor, the Fund will advise as to
the broker-dealers or banks through which such purchases may be
made.
Confirmations and Share Certificates
If you invest in a Fund directly, rather than through a
financial intermediary, all purchases of Service Shares will be
confirmed and credited to you in an account maintained for you by
the Agent in full and fractional shares of the Fund (rounded to the
nearest 1/1000th of a share). Share certificates will not be issued
unless you so request from the Agent in writing and declare a need
for such certificates, such as a pledge of shares or an estate
situation. If certificates are issued at your request, Expedited
Redemption Methods described below will not be available and delay
and expense may be incurred if you lose the certificates. No
certificates will be issued for fractional shares or to
shareholders who have elected the checking account or predesignated
bank account methods of withdrawing cash from their accounts. (See
"How to Redeem Your Investment" below.) Share certificates may not
be available to investors who purchase Service Shares through an
account with a financial intermediary.
The Funds and the Distributor reserve the right to reject any
order for the purchase of Service Shares. In addition, the offering
of shares may be suspended at any time and resumed at any time
thereafter.
Distribution Plan
Each Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act. Rule 12b-1 provides in substance
that an investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in the
sale of its shares except pursuant to a plan adopted under that
rule. One section of the first part of the Distribution Plan of
each Fund is designed to protect against any claim against or
involving the Fund that some of the expenses which the Fund pays or
may pay come within the purview of Rule 12b-1. Another section of
the first part of the Distribution Plan authorizes Aquila
Management Corporation (the "Administrator"), not the Fund, to make
certain payments to certain Qualified Recipients (as defined in the
Distribution Plan) which have rendered assistance in the
distribution and/or retention of the Fund's shares. For the Cash
Fund, these payments may not exceed 0.15 of 1% of the average
annual net assets of the Fund for a fiscal year; for the Tax-Free
Fund and the Treasuries Fund, the rate is 0.10 of 1%.
The second part of each Distribution Plan provides for
payments by the Fund out of its assets to "Designated Payees,"
which are broker-dealers, other financial institutions and service
providers which have entered into appropriate agreements with the
Distributor and which have rendered assistance in the distribution
and/or retention of the Fund's Service Shares or in the servicing
of Service Share accounts. The total payments under this part of
each Distribution Plan may not exceed 0.25 of 1% of the average
annual assets of the Fund represented by Service Shares. Subject to
this limitation and to the overall direction and oversight of the
Board of Trustees, the Distributor is authorized to determine the
amounts paid to each Designated Payee, taking into account, among
other factors, the Designated Payee's "Qualified Holdings" i.e.,
the number of Service Shares beneficially owned by the Designated
Payee or its customers or clients, whether the Designated Payee was
instrumental in the purchase and/or retention of, or provides
administrative or other services in connection with, such shares.
A Designated Payee may, consistent with its agreement with the
Distributor, pass on a portion of the payments it receives under
the Distribution Plan to other financial institutions or service
organizations that also render assistance in the distribution,
retention and/or servicing of Service Shares. The Bank of Hawaii
and Bancorp Investment Group, "affiliated persons," as defined in
the 1940 Act, of the Adviser, are among those who, indirectly
through one or more Designated Payees, will receive payments
authorized by the Plan in consideration of their services in
connection with investments in Service Shares by their customers.
Because payments by each Fund under this part of its
Distribution Plan relate to sales and services in connection solely
with Service Shares, they are borne only by that class of shares.
Accordingly, dividends on Service Shares generally will differ from
those paid on Original Shares; see "Dividend and Tax Information."
If you purchase Service Shares directly from the Fund, some or
all of the services offered by recipients of payments under the
Distribution Plan may not be available to you.
A financial institution that holds Original Shares of any Fund
on behalf its clients receives no compensation from such Fund for
any services it provides in connection with those shares, although
it may receive compensation from its clients and/or from the
Administrator out of the Administrator's own resources.
Accordingly, any compensation that a financial institution may
receive for services provided in connection with Original Shares
may be expected to differ both as to source and amount from that
received in connection with Service Shares.
See the Additional Statement for further information about the
Distribution Plan.
HOW TO REDEEM YOUR INVESTMENT
Each Fund provides day-to-day liquidity. You may redeem all or
any part of your Service Shares at any time at the net asset value
next determined after acceptance of your redemption request at the
Agent. Redemptions can be made by the various methods described
below. Except for shares recently purchased by check as discussed
below, there is no minimum time period for any investment in any
Fund. There are no redemption fees or withdrawal penalties. If you
purchase Service Shares of any Fund through broker-dealers, banks
and other financial institutions which serve as shareholders of
record you must redeem through those institutions, which are
responsible for prompt transmission of redemption requests. In all
other cases, you may redeem directly, but a completed purchase
Application must have been received by the Agent before redemption
requests can be honored. A redemption may result in a taxable
transaction to you, but only if there has been a change in the net
asset value per share, which will occur only under extraordinary
circumstances.
For your convenience each Fund offers expedited redemption to
provide you with a high level of liquidity for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of three expedited methods of
initiating redemptions. These are available as to Service Shares
not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem Service Shares and make
payments to a Financial Institution account you have
predesignated. See "Redemption Payments" below for payment
methods. Your name and your account number must be supplied.
To redeem an investment in Service Shares by this method,
telephone:
800-255-2287 toll free or 908-855-5731
Note: The Funds, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name and number; name(s)
and social security number registered to the account and personal
identification; the Agent may also record calls. Shareholders
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 908-855-5730 or by
mail at 581 Main Street, Woodbridge, NJ 07095-1198,
indicating Fund name, account number, amount to be redeemed,
and any payment directions, signed by the registered
holder(s). Signature guarantees are not required. See
"Redemption Payments" below for payment methods.
If you wish to use the above procedures you should so elect on
the Expedited Redemption section of the Application or Ready Access
Features form and provide the required information concerning the
Financial Institution account number. The Financial Institution
account must be in the exclusive name(s) of the shareholder(s) as
registered with the Fund(s). You may change the designated
Financial Institution account at any time by completing and
returning a Ready Access Features form. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
3. By Check. The Agent will, upon request, provide you with
forms of drafts ("checks") drawn on the Custodian. This
feature is not available if your shares are represented by
certificates. These checks represent a further alternative
redemption means and you may make them payable to the order of
anyone in any amount of not less than $500. If you wish to use
this check writing redemption procedure you should notify the
Agent or so indicate on your Application. You will be issued
special checks to be drawn against the Custodian for this
purpose. You will be subject to the Custodian's rules and
regulations governing its checking accounts. If the account is
registered in more than one name, each check must be signed by
each account holder exactly as the names appear on the account
registration, unless expressly stated otherwise on your
Application.
There is no charge for the maintenance of this special check
writing privilege or for the clearance of any checks.
When such a check is presented to the Custodian for it to pay
with proceeds of redemption of a Fund's shares, a sufficient number
of full and fractional shares of that Fund in your account will be
redeemed to cover the amount of the check. This check writing
redemption procedure enables you to continue receiving dividends on
those shares equaling the amount being redeemed by check until such
time as the check is actually presented to the Custodian for
payment.
As these checks are redemption drafts relating to Service
Shares, you should be certain that adequate shares for which
certificates have not been issued and which were not recently
purchased by check are in the account to cover the amount of the
check. See "Redemption Payments" below for more details as to
special problems as to Service Shares recently purchased by check.
If insufficient redeemable shares are in the account, the
redemption check will be returned marked "insufficient funds." The
fact that redemption checks are drafts may also permit a bank in
which they are deposited to delay crediting the account in question
until that bank has received payment funds for the redemption
check.
Checks may not be directly presented to any branch of the
Custodian. This does not affect checks used for the payment of
bills or cashed at other banks. You may not use checks to close
your account, since the number of shares in an account changes
daily through dividend payments which are automatically reinvested
in full and fractional shares. Consequently, you may not present a
check directly to the Custodian and request redemption for all or
substantially all Service Shares held in your account. Only
expedited redemption to a predesignated bank account or the regular
redemption method (see below) may be used when closing an account.
Multiple Redemption Services. You are not limited in choice of
redemption methods but may utilize all available forms. However,
when both redemption to a predesignated bank account and check
writing are desired, you must so elect on the Application, or by
proper completion of a Ready Access Features form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Service
Shares to be redeemed should be sent in blank (unsigned) to the
Funds' Shareholder Servicing Agent: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, 581 Main Street, Woodbridge
, Woodbridge, NJ 07095-1198, with payment instructions. A stock
assignment form signed by the registered shareholder(s) exactly as
the account is registered must also be sent to the Shareholder
servicing Agent.
For your own protection, separate mailing of certificates
and signed redemption documentation is essential. Because of
possible mail problems, it is also recommended that certificates be
sent by registered mail, return receipt requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration of
the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required if
sufficient documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
In all other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent bank,
a participant in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or
the New York Stock Exchange, Inc. Medallion Signature Program
(MSP). A notary public is not an acceptable signature
guarantor.
2. Non-Certificate Shares. If you own non-certificate
Service Shares registered on the books of a Fund, and you have not
elected Expedited Redemption to a predesignated Financial
Institution account, you must use the Regular Redemption Method.
Under this redemption method you should send a letter of
instruction to: Administrative Data Management Corp., Attn:
Aquilasm Group of Funds, 581 Main Street, Woodbridge, NJ
07095-1198, containing:
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Funds);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above.
Redemption Payments
For redemptions of Service Shares other than by checks you
have written, redemption payments will ordinarily be mailed to you
at your address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. Any Fund may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. No Fund
has any present intention of making this charge. Upon 30 days'
written notice to shareholders, any Fund may modify or terminate
the use of the Automated Clearing House to make redemption
payments at any time or charge a service fee, although no such fee
is currently contemplated. If any such changes are made, the
Prospectus will be supplemented to reflect them. If you use a
dealer to arrange for a redemption, you may be required to pay the
dealer for this service.
Redemption proceeds on Service Shares issued under the third
method under which shares are issued (see "When Shares Are Issued
and Dividends Are Declared on Them" under "How to Invest in the
Funds") will be wired in Federal funds on the date of redemption,
if practicable, and, if not practicable, as soon thereafter as
practicable, irrespective of amount. Redemption requests as to such
shares may be made by telephone.
Except as indicated above, each Fund will normally make
payment for all Service Shares redeemed on the next business day
following receipt of request. Except as set forth below, in no
event will payment be made more than seven days after receipt of a
redemption request made in compliance with one of the redemption
methods specified above. However, the right of redemption may be
suspended or the date of payment postponed (i) during periods when
the New York Stock Exchange is closed for other than weekends and
holidays or when trading on such exchange is restricted as
determined by the Securities and Exchange Commission by rule or
regulation; (ii) during periods in which an emergency, as
determined by the Securities and Exchange Commission, exists which
causes disposal of, or valuation of the net asset value of, the
portfolio securities of the Fund to be unreasonable or
impracticable; or (iii) for such other periods as the Securities
and Exchange Commission may permit. Payment for redemption by any
method (including redemption by check) of Service Shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the bank on
which the purchase check was drawn or from which the funds for
Automatic Investment or Telephone Investment were transferred,
satisfactory to the Agent and the Fund, that the purchase check or
Automatic Investment or Telephone Investment will be honored.
Service Shares so purchased within the prior 15 days will not be
redeemed under the check writing redemption procedure and a
shareholder must not write a check if (i) it will be presented to
the Custodian for payment within 15 days of a purchase of Service
Shares by check and (ii) the redemption check would cause the
redemption of some or all of those shares. Possible delays in
payment of redemption proceeds can be eliminated by using wire
payments or Federal Reserve drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders of
any Fund to make payment wholly or partly in cash, that Fund may
pay the redemption price in whole or in part by the distribution in
kind of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. See the Additional Statement for details.
Each Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such shares
is less than $500 due to shareholder redemptions. If the Board of
Trustees elects to do this, shareholders who are affected will
receive prior written notice and will be permitted 60 days to bring
their accounts up to the minimum before this redemption is
processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Service Shares of any Fund having a net
asset value of at least $5,000 and these shares have been purchased
directly rather than through a financial intermediary, you may
establish an Automatic Withdrawal Plan under which you will receive
a monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions must
be reinvested in your shareholder's account. See the Automatic
Withdrawal Plan provisions of the Application included in this
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan" and "Dividend and Tax Information" below.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of each Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Funds' Trustees and officers and provides
further information about them.
The Advisory Agreements
Hawaiian Trust Company, Limited (the "Adviser") supervises the
investment program of each Fund and the composition of its
portfolio.
The services of the Adviser to each Fund are rendered under
an Investment Advisory Agreement between that Fund and the Adviser
(together,the "Advisory Agreements") which were approved by each
Fund's shareholders on March 22, 1996. The new Advisory Agreements
have the same provisions as the agreements previously in effect,
except that under the new agreements the Funds are permitted to pay
regular fees to Trustees who are affiliated with the Adviser solely
by reason of membership on its Board of Directors.
The Advisory Agreements of the Funds provide, subject to the
control of the Board of Trustees, for investment supervision by the
Adviser. Under the advisory agreements, the Adviser will furnish
information as to the Fund's portfolio securities to any provider
of fund accounting services to each Fund; will monitor records of
each Fund as to the Fund's portfolio, including prices, maintained
by such provider of such services; and will supply at its expense,
monthly or more frequently as may be necessary, pricing of each
Fund's portfolio based on available market quotations using a
pricing service or other source of pricing information satisfactory
to that Fund. Each Advisory Agreement states that the Adviser
shall, at its expense, provide to the Fund all office space and
facilities, equipment and clerical personnel necessary for the
carrying out of the Adviser's duties under the Advisory Agreement.
Under each Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Adviser
provided, however that if any Trustee is an affiliate of the
Adviser solely by reason of being a member of its Board of
Directors, the Trust may pay compensation to such Trustee, but at
a rate no greater than the rate it pays to its other Trustees .
Under the Advisory Agreements, each Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to its shareholders and the
costs of printing or otherwise producing and distributing those
copies of such prospectuses, statements of additional information
and reports as are sent to its shareholders. Under each Advisory
Agreement, all costs and expenses not expressly assumed by the
Adviser or by the Administrator under the Fund's Administration
Agreement or by the Fund's principal underwriter are paid by the
Fund. The Advisory Agreements list examples of such expenses borne
by the Funds, the major categories of such expenses being: legal
and audit expenses, custodian and transfer agent, or shareholder
servicing agent fees and expenses, stock issuance and redemption
costs, certain printing costs, registration costs of the Funds and
their shares under Federal and State securities laws, interest,
taxes, and non-recurring expenses, including litigation.
Under the Advisory Agreements, each Fund pays a fee payable
monthly and computed on the net asset value of the Fund as of the
close of business each business day. For the Cash Fund, the fee is
payable at the annual rate of 0.33 of 1% of such net assets up to
$325 million, and on net assets above that amount at an annual rate
of 0.43 of 1% of such net assets; for each of the Tax-Free Fund and
the Treasuries Fund, the annual rate is 0.27 of 1% of such net
assets up to a stated amount of net assets and 0.33 of 1% on net
assets above that amount. (The amount for the Tax-Free Fund is $95
million and for the Treasuries Fund the amount is $60 million.)
However, the total fees which the Funds pay are at the annual rate
of 0.50 of 1% of such net assets for the Cash Fund and 0.40 of 1%
for the other Funds, since the Administrator also receives a fee
from each of the other Funds under the applicable Administration
Agreement as discussed below. The Adviser and/or Administrator may,
in order to attempt to achieve a competitive yield on the shares of
a Fund, each waive all or part of either fee.
The Adviser agrees in each case that its fee shall be reduced,
but not below zero, by an amount equal to the pro-rata portion
(based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2% of the
next $70 million of such assets and 1.5% of its average annual net
assets in excess of $100 million, or (ii) 25% of the Fund's total
annual investment income.
The Advisory Agreements contain provisions as to the
allocation of the portfolio transactions of each Fund; see the
Additional Statement. Under these provisions, the Adviser is
authorized to consider sales of the Fund's shares in making this
allocation.
The Administration Agreements
Under Administration Agreements with each Fund (the
"Administration Agreements"), Aquila Management Corporation as
Administrator, at its own expense, provides office space,
personnel, facilities and equipment for the performance of its
functions thereunder and as is necessary in connection with the
maintenance of the headquarters of the Fund and pays all
compensation of the Fund's Trustees, officers and employees who are
affiliated persons of the Administrator. The Administration
Agreements went into effect November 1, 1993.
Under the Administration Agreements, subject to the control of
the Funds' Board of Trustees, the Administrator provides all
administrative services to each Fund other than those relating to
its investment portfolio and the maintenance of its accounting
books and records. Such administrative services include but are not
limited to maintaining books and records (other than accounting
books and records) of the Funds, and overseeing all relationships
between the Funds and their transfer agent, custodian, legal
counsel, auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary or
desirable for effective operation of the Funds and for the sale,
servicing or redemption of the Funds' shares. See the Additional
Statement for a further description of functions listed in the
Administration Agreements as part of such duties.
Under each Administration Agreement, the Fund pays a fee
payable monthly and computed on the net asset value of the Fund at
the end of each business day. For the Cash Fund, the fee is payable
at the annual rate of 0.17 of 1% of such net assets up to $325
million, and on net assets above that amount at an annual rate of
0.07 of 1% of such net assets; for each of the Tax-Free Fund and
the Treasuries Fund, the annual rate is 0.13 of 1% of such net
assets up to a stated amount of net assets and 0.07 of 1% on net
assets above that amount. (The amount for the Tax-Free Fund is $95
million and for the Treasuries Fund the amount is $60 million.) The
Administrator has agreed in each case that its fee shall be
reduced, but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest, and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2% of the
next $70 million of such assets and 1.5% of its average annual net
assets in excess of $100 million, or (ii) 25% of the Fund's total
annual investment income.
Information about the Adviser,
the Administrator and the Distributor
The Adviser, a Hawaii corporation organized in 1898, is the
largest trust company in the State of Hawaii in terms of assets
under administration. As of March 31, 1995, the Adviser had over
$10 billion of clients' assets under administration. The Adviser is
not authorized to, and does not, carry on a banking business. The
Adviser is a wholly-owned subsidiary of Bank of Hawaii, all of
whose shares are owned by Bancorp Hawaii, Inc. ("Bancorp") and Bank
of Hawaii's directors (each of whom owns qualifying shares as
required by Hawaii law). Bancorp is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended,
and its common stock is registered under the Securities Exchange
Act of 1934 and is listed and traded on the New York Stock
Exchange. Bancorp files annual and periodic reports with the
Securities and Exchange Commission which are available for public
inspection. See the Additional Statement as to the legality, under
the Federal banking laws, of the Adviser's acting as the Funds'
investment adviser.
The Funds' Administrator is founder of, and administrator
to, the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, an equity fund and money market funds. As of
December 31, 1995 these funds had aggregate assets of approximately
$2.7 billion, of which approximately $900 million consisted of
assets of money market funds. The Administrator, which was founded
in 1984, is controlled by Mr. Lacy B. Herrmann (directly, through
a trust and through share ownership by his wife). See the
Additional Statement for information on Mr. Herrmann and these
arrangements.
For each Fund's fiscal year ended March 31, 1996, The
Cash Fund, the Tax-Free Fund and the Treasuries Fund paid or
accrued to the Adviser fees of $1,353,593, $394,009 and $210,982
respectively, and paid or accrued to the Administrator fees of
$597,533, $152,543 and $88,287, respectively under the Advisory
and Administration Agreements. For the Treasury Fund, the Adviser
waived $44,372 and the Administrator waived $14,790 of such
fees.
The Distributor currently handles the distribution of the
shares of fourteen funds (five money market funds, seven tax-free
municipal bond funds and two equity funds) including the Funds.
Under Distribution Agreements with the Funds, the Distributor is
responsible for the payment of certain printing and distribution
costs relating to prospectuses and reports as well as the costs of
supplemental sales literature, advertising and other promotional
activities.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned by Mr. Herrmann, will be owned by certain directors
and/or officers of the Administrator and/or the Distributor
including Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
All of the Funds' net income for dividend purposes (see below)
will be declared daily as dividends; see "When Shares Are Issued
and Dividends Are Declared on Them" under "How to Invest in the
Funds" for information as to when dividends on Service Shares are
declared. Dividends are paid within a week before or after the end
of each month and invested in additional shares at net asset value
on the payable date, or, at your election, paid in cash by check.
This election may be made in the Application or by subsequent
written notice to the Agent. You may also elect to have dividends
deposited without charge by electronic funds transfers into an
account at a Financial Institution which is a member of the
Automated Clearing House by completing a Ready Access Features
form. If you redeem all of your Service Shares you will be credited
on the redemption payment date with the amount of all dividends
declared for the month through the date of redemption, or through
the day preceding the date of redemption in the case of shares on
which income dividends were declared on the same day on which the
shares were issued.
You will receive monthly a summary of your account, including
information as to dividends paid during the month and the shares
credited to the account through reinvestment of dividends.
Daily dividends for a Fund will be calculated as follows: the
net income for dividend purposes will be calculated immediately
prior to the calculation of net asset value and will include
accrued interest and original issue and market discount earned
since the last valuation, less the estimated expenses of the Fund
(including expenses allocable to each particular class of shares)
and amortized original issue and market premium for the period.
However, the calculation of the dividend could change under certain
circumstances under the procedures adopted by the Board of Trustees
relating to "amortized cost" valuation; see the Additional
Statement.
Dividends paid by each Fund with respect to Service Shares and
Original Shares will be calculated in the same manner, at the same
time, on the same day, and will be in the same amount except that
any class expenses (including payments made by Service Shares under
the Distribution Plan) will be borne exclusively by that class.
Dividends on Original Shares are expected generally to be higher
than those on Service Shares because expenses allocated to Service
Shares will generally be higher.
Dividends so paid will be taxable to shareholders as ordinary
income (except as described in "Tax Information Concerning the
Tax-Free Fund" below), even though reinvested, unless the net
income, computed as above, exceeds "earnings and profits," as
determined for tax purposes; this could occur because net income as
so determined will include certain unrealized appreciation and
discount which is not included for tax purposes. If dividends
exceed a shareholder's ratable share of "earnings and profits," the
excess will reduce the cost or other tax basis for his or her
shares; any reduction which would otherwise result in a negative
basis will cause the basis to be reduced to zero, with any
remaining amount being taxed as capital gain. The dividends paid by
the Funds will not be eligible for the 70% dividends received
deduction for corporations. Statements as to the tax status of each
investor's dividends will be mailed annually.
It is possible but unlikely that a Fund may have realized
long-term capital gains or losses in a year. If it has any net
long-term gains realized through October 31st of a year, it will
pay a capital gains distribution after that date. It may also pay
a supplemental distribution after the end of its fiscal year. Any
capital gains distribution will be taxed at the same rate as
ordinary income, except that for individuals, trusts and estates
the maximum tax rate on capital gains distributions is 28% even if
the applicable rate on ordinary income for such taxpayers is higher
than 28%.
Each Fund will be required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to
shareholders and on redemption proceeds, if a correct Taxpayer
Identification Number, certified when required, is not on file with
it.
Each Fund, during its last fiscal year, qualified and intends
to continue to qualify under subchapter M of the Internal Revenue
Code; if so qualified it will not be liable for Federal income
taxes on amounts distributed by the Fund.
Tax Information Concerning the Tax-Free Fund
The Tax-Free Fund seeks to pay exempt-interest dividends. In
the case of the Tax-Free Fund, these are dividends derived from net
income received by the Tax-Free Fund on its Municipal Obligations,
provided that, as the Tax-Free Fund intends, at least 50% of the
value of its assets is invested in tax-exempt obligations. Such
dividends are exempt from regular Federal income tax.
Classification of dividends as exempt-interest or
non-exempt-interest is made by one designated percentage applied
uniformly to all income dividends made during the Tax-Free Fund's
tax year. Such designation will normally be made in the first month
after the end of each of the Tax-Free Fund's fiscal years as to
income dividends paid in the prior year. The percentage of income
designated as tax-exempt for any particular dividend may be
different from the percentage of the Tax-Free Fund's income that
was tax-exempt during the period covered by the dividend.
A shareholder receiving a dividend from net interest income
earned by the Tax-Free Fund from one or more of (i) Taxable
Obligations, and (ii) income from repurchase agreements and
securities loans, treats the dividend as a receipt of ordinary
income in the computation of the shareholder's gross income
regardless of whether it is reinvested in Tax-Free Fund shares;
such dividends and capital gains distributions are not included in
exempt-interest dividends.
Under the Code, interest on loans to purchase or carry
shares of the Tax-Free Fund may not be deducted for Federal tax
purposes unless the Tax-Free Fund realizes taxable income, in which
case interest would be deductible in proportion to the Tax-Free
Fund's taxable income. In addition, under rules used by the
Internal Revenue Service for determining when borrowed funds are
deemed used for the purpose of purchasing or carrying particular
assets, the purchase of shares of the Tax-Free Fund may be
considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of
shares. Moreover, the receipt of tax-exempt dividends from the
Tax-Free Fund by an individual shareholder may result in some
portion of the social security payments or railroad retirement
benefits received by the shareholder or the shareholder's spouse
being included in taxable income. Furthermore, persons who are
"substantial users" (or persons related thereto) of facilities
financed by industrial development bonds or private activity bonds
should consult their own tax advisers before purchasing shares.
While interest from all Municipal Obligations is tax-exempt
under the Code for purposes of computing the regular tax, interest
from so-called private activity bonds issued after August 7, 1986
constitutes a tax preference for both individuals and corporations
and thus will enter into a computation of the alternative minimum
tax. Whether or not that computation will result in a tax will
depend on the entire content of the taxpayer's return. The Tax-Free
Fund will not invest in the types of Municipal Obligations which
would give rise to interest that would be subject to alternative
minimum taxation if more than 20% of its assets would be so
invested, and may refrain from investing in that type of Municipal
Obligation completely. The 20% limit is a fundamental policy of the
Tax-Free Fund. Corporations receiving exempt-interest dividends
from the Tax-Free Fund are subject to additional provisions
applying the alternative minimum tax.
Hawaiian Tax Information
The Tax-Free Fund, and dividends and distributions made by
the Tax-Free Fund to Hawaii residents, will generally be treated
for Hawaii income tax purposes in the same manner as they are
treated under the Code for Federal income tax purposes. Under
Hawaii law, however, interest derived from obligations of states
(and their political subdivisions) other than Hawaii will not be
exempt from Hawaii income taxation. (Interest derived from bonds or
obligations issued by or under the authority of the following is
exempt from Hawaii income taxation: Guam, Northern Mariana Islands,
Puerto Rico, and the Virgin Islands.) For the calendar years 1995,
1994 and 1993 , the percentage of the Tax-Free Fund's dividends
exempt from State of Hawaii income taxes was 34.77%, 38.9% and
33.9% , respectively, which should not be considered predictive of
future results.
Interest on Hawaiian Obligations, tax-exempt obligations of
states other than Hawaii and their political subdivisions, and
obligations of the United States or its possessions is not exempt
from the Hawaii Franchise Tax. This tax applies to banks, building
and loan associations, financial service loan companies, financial
corporations, and small business investment companies.
Persons or entities who are not Hawaii residents should not be
subject to Hawaii income taxation on dividends and distributions
made by the Tax-Free Fund but may be subject to other state and
local taxes.
Hawaiian Tax Information Concerning the Treasuries Fund
The Director of Taxation of Hawaii has stated to the
Treasuries Fund that dividends paid by a regulated investment
company from interest it receives on United States Government
obligations will be exempt from State of Hawaii income tax. For the
calendar years 1995, 1994 and 1993 , the percentage of the
Treasuries Fund's dividends exempt from State of Hawaii income
taxes was 82.63, 85.6% and 87.9% , respectively, which should not
be considered predictive of future results. Dividends paid from
other types of interest (including interest on U.S. Treasury
repurchase transactions), and capital gains distributions, if any,
will be taxable.
EXCHANGE PRIVILEGES
You may exchange Service Shares in any Fund for Retail Class
shares of any of the existing or future funds (series) of Pacific
Capital Funds, each of which represents a different portfolio. The
Adviser also acts as Investment Adviser to these funds. As of the
date of this Prospectus the existing funds are Growth Stock Fund,
Growth and Income Fund, New Asia Growth Fund, Diversified Fixed
Income Fund, Tax Free Securities Fund, Tax Free Short Intermediate
Securities Fund, U.S. Treasuries Securities Fund and Short
Intermediate U.S. Treasury Securities Fund. Each of these funds is
referred to in the Prospectus as a "Pacific Capital Fund" and
collectively they are referred to as the "Pacific Capital Funds" or
the "Pacific Capital Exchange Group."
Shareholders of any Fund may also exchange their Service
Shares for Service Shares of any other Fund, all of which are
series of the Business Trust and as such, have the same
Administrator, Distributor and Adviser. They are collectively
called the "Funds."
All exchanges are subject to certain conditions described
below.
Terms and conditions of the Exchange Privilege
The Retail Class shares of each Pacific Capital Fund have an
exchange privilege which allows further exchanges for Retail Class
shares of each other Pacific Capital Fund at relative net asset
values without the payment of additional sales charges.
Under the exchange privileges of the Pacific Capital Exchange
Group, once any applicable sales charge has been paid with respect
to exchangeable shares of a fund in the Pacific Capital Exchange
Group, those shares (and any shares acquired as a result of
reinvestment of dividends and/or distributions) may be exchanged
any number of times among the other funds of the Pacific Capital
Exchange Group without the payment of any additional sales charge.
The "Pacific Capital Eligible Shares" of any Pacific Capital
Fund are those Retail Shares which were (a) acquired by direct
purchase with payment of any applicable sales charge, or which were
received in exchange for shares of another Pacific Capital Fund on
which any applicable sales charge was paid; (b) acquired with
payment of any applicable sales charge by exchange for Service
Shares of a Fund; (c) acquired in one or more exchanges between
Service Shares of Funds and Retail Shares of Pacific Capital Funds
so long as the Pacific Capital Fund shares were acquired as set
forth in (a) or (b); or (d) acquired as a result of reinvestment
of dividends and/or distributions on otherwise Pacific Capital
Eligible Shares. "Pacific Capital Eligible Shares" of a Fund are
those Service Shares which were acquired (a) by exchange for other
Pacific Capital Eligible Shares or (b) as a result of reinvestment
of dividends and/or distributions of otherwise Pacific Capital
Eligible Shares.
If you own Pacific Capital Eligible Shares of a Fund, you may
exchange them for shares of any Pacific Capital Fund without
payment of any sales charge. The shares received will continue to
be Pacific Capital Eligible shares.
If you own Service Shares of any of the Funds that are not
Pacific Capital Eligible Shares, you may exchange them for Service
Shares of any other Fund without payment of any sales charge. The
shares received will continue not to be Pacific Capital Eligible
shares. You may also exchange them for the Retail Shares of any
Pacific Capital Fund, but only upon payment of the appropriate
sales charge.
Each of the Funds, as well as the Pacific Capital Funds,
reserves the right to reject any exchange into its shares, if the
shares of the fund into which exchange is desired are not available
for sale in the shareholder's state of residence, and to modify or
terminate this exchange privilege at any time; in the case of
termination, this Prospectus will be appropriately supplemented. No
such modification or termination shall take effect on less than 60
days' written notice to shareholders.
All exercises of an exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired; and (iii) you maintain the respective
minimum account balances, if any, in each fund in which you own
shares.
To effect an exchange, you must complete a form which is
available from the Distributor, unless you have elected the
Telephone Exchange feature on the Application. The exchange will be
effected at the relative exchange prices of the shares being
exchanged next determined after receipt by the Distributor of a
properly completed form or Telephone Exchange request. The exchange
prices will be the respective net asset values of the shares
(unless a sales charge is to be deducted in connection with an
exchange of shares of a Fund which are not Pacific Capital Eligible
Shares for shares of a Pacific Capital Fund as described above, in
which case the exchange price of shares of the Pacific Capital Fund
will be its public offering price). Prices for exchanges are
determined in the same manner as for purchases of shares.
Dividends paid by the Funds are taxable, except to the extent
that dividends paid by the Tax-Free Fund (which invests in tax-free
municipal obligations) are exempt from regular Federal income tax
and Hawaiian income tax, and to the extent that dividends paid by
the Treasuries Fund (which invests in U.S. Treasury obligations)
are exempt from state income taxes. If your state of residence is
not the same as that of the issuers of obligations in which a the
Tax-Free Fund invests, the dividends from that fund may be subject
to income tax of the state in which you reside. Accordingly, you
should consult your tax adviser before acquiring shares of a such
a fund under the exchange privilege arrangement.
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see the Additional
Statement); no representation is made as to the deductibility of
any such loss that may occur.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Description of Shares
The Trust issues three series of shares , each series
constituting the shares of a Fund. Each series has separate assets
and liabilities and is comprised of two classes of shares: Original
Shares and Service Shares; only Service Shares of the Funds are
offered by this Prospectus. The Declaration of Trust permits the
Trustees to issue an unlimited number of full and fractional shares
and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial
interests in the Trust. Each share represents an equal
proportionate interest in a Fund. Income, direct liabilities and
direct operating expenses of each series will be allocated directly
to each series, and general liabilities and expenses, if any, of
the Trust will be allocated among the series in a manner acceptable
to the Board of Trustees. Certain expenses of a series specifically
allocable to a particular class will be borne by that class; the
expense of the series not so allocated will be allocated among the
classes in a manner acceptable to the Board of Trustees and in
accordance with any applicable exemptive order or Rule of the SEC.
Upon liquidation of a series, shareholders of each class of the
series are entitled to share pro-rata (subject to liabilities, if
any, allocated specifically to that class) in the net assets of
that series available for distribution to shareholders and upon
liquidation of the Trust, the respective series are entitled to
share proportionately in the assets available to the Trust after
allocation to the various series. If they deem it advisable and in
the best interests of shareholders, the Board of Trustees of the
Trust may create additional classes of shares (subject to rules and
regulations of the Securities and Exchange Commission or by
exemptive order) or the Board of Trustees may, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such series
will have a designation including the word "Series"). See the
Additional Statement for further information about possible
additional classes or series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
The ownership of more than 5% of each Fund's outstanding
shares on July ***, 1996 was as follows:
*************** UPDATE in JULY *********
The Cash Fund: Of the Cash Fund's Original Shares, ...
The Tax-Free Fund: Of the Tax-Free Fund's Original Shares,
...
The Treasuries Fund: Of the Treasuries Fund's Original Shares,
...
The Funds' management is not aware of any person, other than
those named above, who beneficially owned 5% or more of either
class of a Fund's outstanding shares on such date. On the basis of
information received from the record owners listed above, the
Funds' management believes (i) that all of the Original Shares
indicated are held for the benefit of custodial or trust clients;
and (ii) that all of such shares could be considered as
"beneficially" owned by the named shareholders in that they
possessed shared voting and/or investment powers as to such shares.
The Service Shares indicated above are held for the benefit of
customers.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) represented by the shares held (and
proportionate fractional votes for fractional dollar amounts).
Shareholders will vote on the election of Trustees and on other
matters submitted to the vote of shareholders. No amendment may be
made to the Declaration of Trust without the affirmative vote of
the holders of a majority of the outstanding shares of the Trust.
The Trust may be terminated (i) upon the sale of its assets to
another issuer, or (ii) upon liquidation and distribution of the
assets of the Trust, in either case if such action is approved by
the vote of the holders of a majority of the outstanding shares of
each series. If not so terminated, the Trust will continue
indefinitely. Rule 18f-2 under the Investment Company Act of 1940
provides that matters submitted to shareholders be approved by a
majority of the outstanding voting securities of each series,
unless it is clear that the interests of each series in the matter
are identical or the matter does not affect a series. However, the
rule exempts the selection of accountants and the election of
Trustees from the separate voting requirement. Classes do not vote
separately except that, as to matters exclusively affecting one
class (such as the adoption or amendment of class-specific
provisions of the Distribution Plan), only shares of that class are
entitled to vote.
Description of Classes
As stated above, each of the Funds of Cash Assets Trust has
two classes of shares: Service Shares, which are offered by this
Prospectus, and Original Shares. Potential investors in Service
Shares may also be eligible to purchase Original Shares, which are
offered in a separate prospectus that may be obtained by contacting
the transfer agent of the Funds at the address or telephone
number(s) given on the front cover of this Prospectus. Original
Shares are sold solely to (1) financial institutions for their own
account or for the investment of funds for which they act in a
fiduciary, agency, investment advisory or custodial capacity; (2)
persons entitled to exchange into such shares under the Fund's
exchange privilege; and (3) shareholders of record on January 20,
1995, the date on which the Funds first offered two classes of
shares.
Diversity under the 1940 Act; IRS Compliance
The Tax-Free Fund is classified as a "non-diversified"
investment company under the 1940 Act and the Cash Fund and the
Treasuries Fund are classified as "diversified" investment
companies under the 1940 Act. Each Fund intends to continue to
qualify as a "regulated investment company" under the Internal
Revenue Code (the "Code"). One of the tests for such qualification
under the Code is, in general, that at the end of each fiscal
quarter of the Fund, at least 50% of its assets must consist of (i)
cash; and (ii) securities which, as to any one issuer, do not
exceed 5% of the value of the Fund's assets. As "diversified"
investment companies under the 1940 Act, the Cash Fund and the
Treasuries Fund must both meet the same test as to 75% of their
respective assets. The Tax-Free Fund may therefore not have as much
diversification among securities, and thus diversification of risk,
as if it had made the election to register as a "diversified"
investment company under the 1940 Act. In general, the more a Fund
invests in the securities of specific issuers, the more it is
exposed to risks associated with investments in those issuers.
<PAGE>
[LOGO] Application for
The Pacific Capital Funds of Cash Assets Trust - Service Shares
Please complete steps 1 through 4 and mail to:
ADM, Attn: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
1-800-255-2287
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation,
Other Organization or
any Fiduciary capacity
Use line 4
* Joint Accounts will be Joint
Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers
to Minors Act.
Please type or print name exactly as account is to be registered
1._____________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2._____________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3._____________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for_________________________________________________________
Minor's First Name Middle Initial Last Name
Under the________________ UGTMA**_____________________________________
Name of State Minor's Social Security Number
4._____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or Organization. If a Trust, include the name(s)
of Trustees in which account will be registered and the name and date
of the Trust Instrument. Account for a Pension or Profit Sharing Plan
or Trust may be registered in the name of the Plan or Trust itself.)
______________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
______________________________________________________________________
Street or PO Box City
_________________________________ (____)__________________________
State Zip Daytime Phone Number
Occupation:______________________ Employer:__________________________
Employer's Address:___________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. Other___ ______ Check here ___ if you
are a non-U.S. Citizen or resident and not subject to back-up
withholding (See certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
________________________________ _________________________________
Dealer Name Branch Number
________________________________ _________________________________
Street Address Rep.Number/Name
________________________________ (_______)________________________
City State Zip Area Code Telephone
STEP 2
PURCHASES OF SHARES
A. INITIAL INVESTMENT
___ Pacific Capital Cash Assets Trust (7AV)
___ Pacific Capital Tax-Free Cash Assets Trust (7CV)
___ Pacific Capital U.S. Treasuries Cash Assets Trust (7BV)
1) ___ By Check
2) ___ By Wire
1) By Check: Make check payable to either: Pacific Capital
Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust,
or Pacific Capital U.S. Treasuries Cash Assets Trust
Amount of investment $ ____________ Minimum initial investment $1,000
OR
2) By Wire*:
$______________________________ From_______________________________
Name of Financial Institution
_________________________________ _______________________________
Financial Institution Account No. Branch, Street or Box#
On_______________________________ ________________________________
(Date) City State Zip
* NOTE: To insure prompt and proper crediting to your account, if you
choose this method of payment you should first telephone the Agent
(800-255-2287 toll free or 908-855-5731) and then instruct your
Financial Institution to wire funds as indicated below for the
appropriate Fund:
Wire Instructions:
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to (specify the Fund you are investing in)
Pacific Capital Cash Assets Trust (Original Shares) A/C 6801358400
Pacific Capital Tax-Free Cash Assets Trust (Original Shares)
A/C 6801358500
Pacific Capital U.S. Treasuries Cash Assets Trust (Original Shares)
A/C 6801358600
Please include account name(s) and number (if an existing account) or the
name(s) in which the investment is to be registered (if a new account).
(A FINANCIAL INSTITUTION IS A COMMERCIAL BANK,
SAVINGS BANK OR CREDIT UNION.)
B. DIVIDENDS
ALL INCOME DIVIDENDS ARE AUTOMATICALLY REINVESTED IN ADDITIONAL SHARES
AT NET ASSET VALUE UNLESS OTHERWISE INDICATED BELOW.
Dividends are to be:___ Reinvested or ___Paid in cash*
* FOR CASH DIVIDENDS, PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS:
___Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like
you to deposit the dividend.
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your account. To establish this program, please complete Step 4,
Sections A & B of this Application.
I/We wish to make regular monthly investments of $______ (minimum $50)
on the ___ 1st day or ___ 16th day of the month (or on the first
business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply
calling the Agent toll-free at 1-800-255-2287. To establish this
program, please complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks
prior to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions
set forth below. To realize the amount stated below, the Agent is
authorized to redeem sufficient shares from this account at the
then current Net Asset Value, in accordance with the terms below:
Dollar Amount of each withdrawal $____________ beginning_______________
Minimum:$50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is
payable to a Financial Institution for your account, indicate
Financial Institution name, address and your account number.
_______________________________________ __________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________________ __________________________
Street Financial Institution
Street Address
_______________________________________ __________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the Business Trust and Pacific Capital Funds by telephone.
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-255-2287
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds and Pacific Capital Funds, and their respective
officers, directors, trustees, employees, agents and affiliates against
any liability, damage, expense, claim or loss, including reasonable costs
and attorney's fees, resulting from acceptance of, or acting or failure
to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
TO MAKE AN EXPEDITED REDEMPTION, CALL THE AGENT AT 1-800-255-2287
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Trust
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
________________________________ ___________________________________
Account Registration Financial Institution Account Number
________________________________ ___________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
________________________________ ___________________________________
Street City State Zip
F. CHECKING ACCOUNT SERVICE
(Check appropriate box)
___ Yes ___ No
Please open a redemption checking account at Bank One Trust Company,
N.A., in my (our) name(s) as registered and send me (us) a supply of
checks. I (we) understand that this checking account will be subject to
the rules and regulations of Bank One Trust Company, N.A., pertaining
thereto and as amended from time to time. For joint account: Check
here whether either owner ___ is authorized, or all owners ___ are
required to sign checks. IF NO BOX IS CHECKED, TWO SIGNATURES WILL BE
REQUIRED ON JOINT ACCOUNTS.
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number______________________________________
Name and Address
where my/our account Name of Financial Institution____________________
is maintained Street Address___________________________________
City______________________State_____ Zip_________
Name(s) and
Signature(s) of _______________________________
Depositor(s) as they (Please Print)
appear where account X_______________________________ __________
is registered (Signature) (Date)
________________________________
(Please Print)
X_______________________________ __________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant
to the above authorization shall be subject to the provisions of the
Operating Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit
in the normal course of business initiated by the Agent (except any
loss due to your payment of any amount drawn against insufficient or
uncollected funds), provided that you promptly notify us in writing
of any claim against you with respect to the same, and further provided
that you will not settle or pay or agree to settle or pay any such
claim without the written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any
such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
The undersigned warrants that he/she has full authority and is of legal
age to purchase shares of the Trust and has received and read a current
Prospectus of the Trust and agrees to its terms.
I/We authorize the Trust and its agents to act upon these instructions
for the features that have been checked.
I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Trust and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Trust account to make up any deficiency resulting
from any decline in the net asset value of shares so purchased and any
dividends paid on those shares. I/We authorize the Trust and its agents
to correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Trust account and to charge the account for
any related charges.
The Trust, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify the identity of the caller.
The Agent will request some or all of the following information:
account name and number; name(s) and social security number registered
to the account and personal identification; the Agent may also record
calls. Shareholders should verify the accuracy of confirmation
statements immediately upon receipt. Under penalties of perjury, the
undersigned whose Social Security (Tax I.D.) Number is shown above
certifies (i) that Number is my correct taxpayer identification number
and (ii) currently I am not under IRS notification that I am subject to
backup withholding (line out (ii) if under notification). If no such
Number is shown, the undersigned further certifies, under penalties of
perjury, that either (a) no such Number has been issued, and a Number
has been or will soon be applied for; if a Number is not provided to
you within sixty days, the undersigned understands that all payments
(including liquidations) are subject to 31% withholding under federal
tax law, until a Number is provided and the undersigned may be subject
to a $50 I.R.S. penalty; or (b) that the undersigned is not a citizen
or resident of the U.S.; and either does not expect to be in the U.S.
for more than 183 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Trust, or is
exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
______________________________ __________________________ __________
Individual (or Custodian) Joint Registrant, if any Date
______________________________ __________________________ __________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied by
proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
You may cancel any feature at any time, effective 3 days after the Agent
receives written notice from you.
Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days' written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
If your Financial Institution account changes, you must complete a Ready
Access features form which may be obtained from Aquila Distributors at
1-800-228-7496 and send it to the Agent together with a "voided" check or
pre-printed deposit slip from the new account. The new Financial
Institution change is effective in 15 days after this form is
received in good order by the Trust's Agent.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, Vice President
Sherri Foster, Assistant Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights 2
Table of Expenses 4
Financial Highlights 5
Introduction 6
Investment Of The Funds' Assets 6
The Cash Fund And Its Investments 7
The Tax-Free Fund And Its Investments 10
The Treasuries Fund And Its Investments 16
Net Asset Value Per Share 19
How To Invest In The Funds 20
How To Redeem Your Investment 24
Automatic Withdrawal Plan 28
Management Arrangements 28
Dividend And Tax Information 31
Exchange Privileges 34
General Information 36
Table of Expenses-Service Shares 39
Application
The Pacific Capital Funds
of
Cash Assets Trust
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
A cash management
investment
[LOGO]
PROSPECTUS
Service Shares
<PAGE>
The Pacific Capital Funds
of
CASH ASSETS TRUST
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
212-697-6666
800-CATS-4-YOU (800-228-7496)
Statement of Additional Information July 31, 1996
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. It relates to Cash Assets Trust
(the "Trust") which has three separate funds, Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust
and Pacific Capital U.S. Treasuries Cash Assets Trust. There are
two Prospectuses for these funds dated July 31, 1996, each of which
pertains to a single class -- the Original Class or the Service
Class -- of shares of the Funds. References in the Additional
Statement to "the Prospectus" may be regarded as applying to either
of these Prospectuses, each of which addresses the indicated topic.
The Additional Statement should be read in conjunction with the
Prospectus for the class of shares in which you are considering
investing. Either or both Prospectuses may be obtained from the
Fund's transfer agent, Administrative Data Management Corp., by
writing to it at: 581 Main Street, Woodbridge, NJ 07095-1198, or by
calling the following numbers:
800-255-2287 toll free or 908-855-5731
or from Aquila Distributors, Inc., the Fund's Distributor, by
writing to it at 380 Madison Avenue, Suite 2300, New York, New York
10017; or by calling:
800-228-7496 toll free
or 212-697-6666
The Annual Report of the Funds for the fiscal year ended
March 31, 1996 will be delivered with the Additional Statement.
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . . .3
Yield Information . . . . . . . . . . . . . . . . . . . . . . .8
Investment Restrictions . . . . . . . . . . . . . . . . . . . .9
Loans of Portfolio Securities . . . . . . . . . . . . . . . . 10
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . 10
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 16
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 16
Additional Information as to Management Arrangements . . . . . 23
Amortized Cost Valuation . . . . . . . . . . . . . . . . . . . 27
Computation of Daily Dividends . . . . . . . . . . . . . . . . 28
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 28
General Information . . . . . . . . . . . . . . . . . . . . . 29
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The Pacific Capital Funds of Cash Assets Trust are Pacific
Capital Cash Assets Trust (the "Cash Fund"), Pacific Capital
Tax-Free Cash Assets Trust (the "Tax-Free Fund") and Pacific
Capital U.S. Treasuries Cash Assets Trust (the "Treasuries Fund").
They are collectively referred to as the "Funds." Each Prospectus
contains information as to the purchase and redemption of one class
of the Funds' shares. The investment objective and policies of each
Fund are described in the Prospectus, which refers to the
investments and investment methods described below.
Information on Variable Amount Master Demand Notes
The Cash Fund may buy variable amount master demand notes. The
nature and terms of these obligations are as follows. They permit
the investment of fluctuating amounts by the Fund at varying rates
of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts
borrowed. The Cash Fund has the right to increase the amount under
the note 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 note without penalty. Because these
notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that they will be
traded, and there is no secondary market for them. They are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time on not more than thirty
days' notice. Except for those notes which are payable at principal
amount plus accrued interest within seven days after demand, such
notes fall within the Fund's overall 10% limitation on securities
with possible limited liquidity. There is no limitation on the type
of issuer from which these notes will be purchased; however, all
such notes must be First Tier Securities and in connection with
such purchases and on an ongoing basis, Hawaiian Trust Company,
Limited (the "Adviser") will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay
principal and interest on demand, including a situation in which
all holders of such notes make demand simultaneously. Master demand
notes as such are not typically rated by credit rating agencies and
if not so rated the Fund may, under its minimum rating standards,
invest in them only if at the time of an investment they are
determined to be comparable in quality to rated issues in which the
Fund can invest.
Information On Insured Bank Obligations
The Federal Deposit Insurance Corporation ("FDIC") insures the
deposits of Federally insured banks and, effective August 9, 1989,
savings institutions (collectively herein, "banks") up to $100,000.
On that date the FDIC assumed the insurance functions of the
Federal Savings and Loan Insurance Corporation, which was
abolished. The Cash Fund may purchase bank obligations which are
fully insured as to principal by the FDIC. To remain fully insured
as to principal, these investments must currently be limited to
$100,000 per bank; if the principal amount and accrued interest
together exceed $100,000 then the excess accrued interest will not
be insured. Insured bank obligations may have limited
marketability; unless the Board of Trustees determines that a
readily available market exists for such obligations, the Cash Fund
and the Tax-Free Fund will invest in them only within the 10% limit
of each Fund mentioned in the Prospectus unless such obligations
are payable at principal amount plus accrued interest on demand or
within seven days after demand.
Information about Certain Other Obligations
The Cash Fund may purchase obligations other than those listed
in categories 1 through 5 under "The Cash Fund and its
Investments," in the Prospectus, but only if such other obligations
are guaranteed as to principal and interest by either a bank in
whose obligations the Cash Fund may invest or a corporation in
whose commercial paper it may invest. If any such guarantee is
unconditional and is itself an Eligible Security, the obligation
may be purchased based on the guarantee; if any such guarantee is
not unconditional, purchase of the obligation can only be made if
the underlying obligation is an Eligible Security and meets all
other applicable requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission. See "Effect of the Rule on
Portfolio Management" in the Prospectus. As of the date of the
Additional Statement the Cash Fund does not own any such
obligations and has no present intention of purchasing any. Such
obligations can be any obligation of any kind so guaranteed,
including, for example, obligations created by "securitizing"
various kinds of assets such as credit card receivables or
mortgages. If the Cash Fund invests in these assets, they will be
identified in the Prospectuses and described in the Additional
Statement.
Additional Information Regarding Municipal Obligations
Which The Tax-Free Fund May Purchase
Municipal Notes
The Tax-Free Fund may invest in municipal notes. Municipal
notes include, but are not limited to, tax anticipation notes
("TANs"), bond anticipation notes ("BANs"), revenue anticipation
notes ("RANs"), and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or
receipt of other revenues are usually general obligations of the
issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a
rise in delinquencies could adversely affect the issuer's ability
to meet its obligations on outstanding TANs. Furthermore, some
municipal issuers mix various tax proceeds into a general fund that
is used to meet obligations other than those of the outstanding
TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its
obligations on its BANs is primarily dependent on the issuer's
adequate access to the longer term municipal bond market and the
likelihood that the proceeds of such bond sales will be used to pay
the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on
outstanding RANs. In addition, the possibility that the revenues
would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal of, and
interest on, RANs.
Municipal Bonds
The two principal classifications of municipal bonds are
"general obligation" bonds and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit
and unlimited taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or projects or,
in a few cases, from the proceeds of a special excise or other tax,
but are not supported by the issuer's power to levy unlimited
general taxes. There are, of course, variations in the security of
municipal bonds, both within a particular classification and
between classifications, depending on numerous factors. The yields
of municipal bonds depend on, among other things, general financial
conditions, general conditions of the municipal bond market, size
of a particular offering, the maturity of the obligation and rating
of the issue.
Other Information
Since the Tax-Free Fund may invest in industrial development
bonds or private activity bonds, the Tax-Free Fund may not be an
appropriate investment for entities which are "substantial users"
of facilities financed by those industrial development bonds or
private activity bonds or for investors who are "related persons"
of such users. Generally, an individual will not be a "related
person" under the Internal Revenue Code unless such investor or his
or her immediate family (spouse, brothers, sisters and lineal
descendants) own directly or indirectly in the aggregate more than
50 percent of the equity of a corporation or is a partner of a
partnership which is a "substantial user" of a facility financed
from the proceeds of "industrial development bonds" or "private
activity bonds". A "substantial user" of such facilities is defined
generally as a "non-exempt person who regularly uses a part of [a]
facility" financed from the proceeds of industrial development
bonds or private activity bonds.
As indicated in the Prospectus, under the Tax Reform Act of
1986, there are certain Municipal Obligations the interest on which
is subject to the Federal alternative minimum tax on individuals.
While the Tax-Free Fund may purchase these obligations, it may, on
the other hand, refrain from purchasing them due to this tax
consequence. Also, as indicated in the Prospectus, the Tax-Free
Fund will not purchase Municipal Obligations the interest on which
is not exempt from regular Federal income taxes. The foregoing may
narrow the number of Municipal Obligations available to the
Tax-Free Fund.
Ratings
The ratings assigned by the nationally recognized statistical
rating organizations ("NRSROs") represent their opinions of the
quality of the debt securities which they undertake to rate.
Ratings are general and not absolute standards of quality;
consequently, obligations with the same maturity, stated interest
rate and rating may have different yields, while obligations of the
same maturity and stated interest rate with different ratings may
have the same yield. See Appendix A to this Additional Statement
for further information about the ratings of the NRSROs as to the
various rated Municipal Obligations and Taxable Obligations which
the Tax-Free Fund may purchase.
U.S. Government Securities
All of the Funds may invest in U.S Government Securities
(i.e., obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities), which include securities issued
by the U.S. Government, such as Treasury Bills (which mature within
one year of the date they are issued) and Treasury Notes and Bonds
(which are issued with longer maturities). All Treasury securities
are backed by the full faith and credit of the United States. These
types of U.S. Government securities are the only type in which the
Treasuries Fund invests.
The Cash Fund and the Tax-Free Fund may invest in securities
of U.S. Government agencies and instrumentalities that issue or
guarantee securities. These include, but are not limited to, the
Farmers Home Administration, Federal Farm Credit System, Federal
Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Housing Administration, Federal National Mortgage Association,
Financing Corporation, Government National Mortgage Association,
Resolution Funding Corporation, Small Business Administration,
Student Loan Marketing Association and the Tennessee Valley
Authority.
Securities issued or guaranteed by U.S. Government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States. Some, such as securities issued by
the Federal Home Loan Banks, are backed by the right of the agency
or instrumentality to borrow from the Treasury. Others, such as
securities issued by the Federal National Mortgage Association, are
supported only by the credit of the instrumentality and not by the
Treasury. If the securities are not backed by the full faith and
credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and
may not be able to assert a claim against the United States in the
event that the agency or instrumentality does not meet its
commitment. The Cash Fund and the Tax-Free Fund will invest in
government securities, including securities of agencies and
instrumentalities only if Hawaiian Trust Company, Limited (the
"Adviser"), acting under procedures approved by the Board of
Trustees, is satisfied that these obligations present minimal
credit risks.
Turnover
In general, the Funds will purchase securities with the
expectation of holding them to maturity. However, the Funds may to
some degree engage in short-term trading to attempt to take
advantage of short-term market variations. The Funds may also sell
securities prior to maturity to meet redemptions or as a result of
a revised management evaluation of the issuer. The Funds will have
a high portfolio turnover due to the short maturities of the
securities held, but this should not affect net asset value or
income, as brokerage commissions are not usually paid on the
securities in which the Funds invest. (In the usual calculation of
portfolio turnover, securities of the type in which the Funds
invests are excluded; consequently, the high turnover which the
Funds will have is not comparable to the turnover of non-money -
market investment companies.)
When-Issued and Delayed Delivery Securities
The Cash Fund and the Tax-Free Fund may purchase securities on
a when-issued or delayed delivery basis. For example, delivery and
payment may take place a month or more after the date of the
transaction. The purchase price and the interest rate payable on
the securities are fixed on the transaction date. At the time that
either Fund makes a commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value of such securities
each day in determining its net asset value. The Cash Fund and the
Tax-Free Fund will make commitments for such when-issued
transactions only when they have the intention of actually
acquiring the securities. The Cash Fund and the Tax-Free Fund will
each maintain with the Custodian and mark to market every business
day a separate account with portfolio securities in an amount at
least equal to such commitments. On delivery dates for such
transactions, the Cash Fund and the Tax-Free Fund will each meet
their obligations from maturities or sales of the securities held
in the separate account and/or from cash flow. If the Cash Fund or
the Tax-Free Fund chooses to dispose of any right to acquire a
when-issued security prior to its acquisition, they could, as with
the disposition of any other portfolio obligation, incur a gain or
loss due to market fluctuation. Neither the Cash Fund nor the
Tax-Free Fund may enter into when-issued commitments exceeding in
the aggregate 15% of the market value of their respective total
assets, less liabilities other than the obligations created by
when-issued commitments.
Diversification and Certain Industry Requirements
The Cash Fund has a rule, set forth in the Prospectus, under
which it cannot buy the securities of issuers in any one industry
if more than 25% of its total assets would then be invested in
securities of issuers of that industry. In applying this rule to
commercial paper issued by finance subsidiaries or affiliates of
operating companies, if the business of the issuer consists
primarily of financing the activities of the related operating
company, the Fund considers the industry of the issuer to be that
of the related operating company.
YIELD INFORMATION
There are two methods by which the yields for any Fund's two
classes of shares for a specified period of time are calculated.
The first method, which results in an amount referred to as
the "current yield," assumes an account containing exactly one
share of the class at the beginning of the period. (The net asset
value of this share will be $1.00 except under extraordinary
circumstances.) The net change in the value of the account during
the period is then determined by subtracting this beginning value
from the value of the account at the end of the period; however,
excluded from the calculation are capital changes, i.e., realized
gains and losses from the sale of securities and unrealized
appreciation and depreciation.
This net change in the account value is then divided by the
value of the account at the beginning of the period (i.e., normally
$1.00 as discussed above) and the resulting figure (referred to as
the "base period return") is then annualized by multiplying it by
365 and dividing it by the number of days in the period; the result
is the "current yield." Normally a seven-day period will be used in
determining yields (both the current and the effective yield
discussed below) in published or mailed advertisements.
The second method results in an amount referred to as the
"compounded effective yield." This represents an annualization of
the current yield with dividends reinvested daily. This compounded
effective yield for a seven-day period would be computed by
compounding the unannualized base period return by adding one to
the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result.
Since calculations of both kinds of yields do not take into
consideration any realized or unrealized gains or losses on any
Fund's portfolio securities which may have an effect on dividends,
the dividends declared during a period may not be the same on an
annualized basis as either kind of yield for that period.
Yield information may be useful to investors in reviewing a
Fund's performance. However, a number of factors should be taken
into account before using yield information as a basis for
comparison with alternative investments. An investment in any Fund
is not insured and its yields are not guaranteed. They normally
will fluctuate on a daily basis. The yields for any given past
period are not an indication or representation by any Fund of
future yields or rates of return on its shares and, therefore, they
cannot be compared to yields on savings accounts or other
investment alternatives which often provide a guaranteed fixed
yield for a stated period of time, and may be insured by a
government agency. In comparing the yields of one money market fund
to another, consideration should be given to each fund's investment
policy, portfolio quality, portfolio maturity, type of instruments
held and operating expenses.
Because a given class of a Fund's shares may bear certain
expenses allocated only to that class, it is expected that yields,
which are affected in part by expenses, will differ as between the
two classes of any Fund's shares. See "Dividend and Tax
Information" in the Prospectus.
INVESTMENT RESTRICTIONS
Each Fund has a number of policies concerning what it can and
cannot do. Those policies, which are called "fundamental policies,"
may not be changed unless the holders of a majority, as defined in
the Investment Company Act of 1940 (the "1940 Act"), of the Trust's
outstanding shares vote to change them. Under the 1940 Act, the
vote of the holders of a majority of the outstanding shares of a
Fund means the vote of the holders of the lesser of (a) 67% or more
of the Fund's shares present at a meeting or represented by proxy
if the holders of more than 50% of its shares are so present or
represented, or (b) more than 50% of its outstanding shares. Those
fundamental policies not set forth in the Prospectus are set forth
below.
1. The Funds invest only in certain limited securities.
The Funds cannot buy any voting securities, any commodities or
commodity contracts, any mineral related programs or leases, any
shares of other investment companies or any warrants, puts, calls
or combinations thereof, except that the Tax-Free Fund may purchase
Municipal Obligations with put rights in order to maintain
liquidity and may purchase shares of other investment companies.
The Cash Fund and the Tax-Free Fund cannot purchase or hold
the securities of any issuer if, to their knowledge, Trustees,
Directors or officers of the either or their Adviser individually
owning beneficially more than 0.5% of the securities of that issuer
together own in the aggregate more than 5% of such securities.
The Cash Fund and the Tax-Free Fund cannot buy real estate or
any non-liquid interests in real estate investment trusts; however,
they can buy any securities which they could otherwise buy even
though the issuer invests in real estate or interests in real
estate.
2. Almost all of the Cash Fund's assets must be in established
companies.
Only 5% of the Cash Fund's total assets may be in issuers less
than three years old, that is, which have not been in continuous
operation for at least three years. This includes the operations of
predecessor companies.
3. The Funds do not buy for control.
The Funds cannot invest for the purpose of exercising control
or management of other companies. This restriction is not
applicable to the Treasuries Fund.
4. The Funds do not sell securities they do not own or borrow from
brokers to buy securities.
Thus, they cannot sell short or buy on margin.
5. The Funds are not an underwriters.
The Funds cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, they cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
LOANS OF PORTFOLIO SECURITIES
Any Fund may, to increase its income, lend its securities on
a short- or long-term basis to broker-dealers, banks or certain
other financial institutions (see below) if (i) the loan is
collateralized in accordance with applicable regulatory
requirements (the "Guidelines") and if (ii) after any loan, the
value of the securities loaned does not exceed 10% of the value of
its total assets. As of the date of this Additional Statement, none
of the Funds foresee lending securities if after any loan the value
of loaned securities exceeds 5% of the value of its total assets.
The financial institutions other than broker-dealers or banks to
which a Fund can lend its securities are limited to "accredited
investors," as that term is defined in Section 2(15) of the
Securities Act of 1933. (In general, such institutions are
insurance companies, investment companies and certain employee
benefit plans.) Under the present Guidelines (which are subject to
change) the loan collateral must, on each business day, at least
equal the value of the loaned securities and must consist of cash,
bank letters of credit or U.S. Government securities. To be
acceptable as collateral, a letter of credit must obligate a bank
to pay amounts demanded by the Fund if the demand meets the terms
of the letter. Such terms and the issuing banks would have to be
satisfactory to the Fund. Any loan might be secured by any one or
more of the three types of collateral. In addition, any such
investment must meet the applicable requirements of the Rule. See
"Effect of the Rule on Portfolio Management" in the Prospectus.
A Fund receives amounts equal to the interest or other
distributions on loaned securities and also receives one or more of
the negotiated loan fees, interest on securities used as collateral
or interest on the securities purchased with such collateral,
either of which types of interest may be shared with the borrower.
A Fund may also pay reasonable finder's, custodian and
administrative fees but only to persons not affiliated with the
Fund. The terms of each Fund's loans will meet certain tests under
the Internal Revenue Code and permit the Fund to terminate the loan
and thus reacquire loaned securities on five days' notice.
DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act, which have substantially the
same terms. In the following material the "Plan" means the Plan of
any of the Funds. Rule 12b-1 provides in substance that an
investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in the
sale of its shares except pursuant to a plan adopted under Rule
12b-1. The Plan is in two parts.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of any Fund who are not "interested
persons" of the Fund shall be committed to the discretion of such
disinterested Trustees but that nothing in the Plan shall prevent
the involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved by
a majority of such disinterested Trustees.
Part I of the Plan
Part I of the Plan is designed to protect against any claim
involving the Fund that the administration fee and some of the
expenses which the Fund pays or may pay come within the purview of
Rule 12b-1. No Fund considers such fee or any payment enumerated in
Part I of the Plan as so financing any such activity. However, it
might be claimed that such fee and some of the expenses a Fund pays
come within the purview of Rule 12b-1. If and to the extent that
any payments (including fees) specifically listed in Part I of the
Plan are considered to be primarily intended to result in or are
indirect financing of any activity which is primarily intended to
result in the sale of a Fund's shares, these payments are
authorized under the Plan.
As used in Part I of the Plan, "Qualified Recipients" means
(i) any principal underwriter or underwriters of a Fund (other than
a principal underwriter which is an affiliated person, or an
affiliated person of an affiliated person, of the Administrator)
and (ii) broker-dealers or others selected by Aquila Management
Corporation (the "Administrator") with which it or a Fund has
entered into written agreements ("Plan Agreements") and which have
rendered assistance (whether direct, administrative or both) in the
distribution and/or retention of a Fund's shares or servicing
shareholder accounts. "Qualified Holdings" means, as to any
Qualified Recipient, all Fund shares beneficially owned by such
Qualified Recipient or by one or more customers (brokerage or
other) or other contacts and/or its investment advisory or other
clients, if the Qualified Recipient was, in the sole judgment of
the Administrator, instrumental in the purchase and/or retention of
such Fund shares and/or in providing administrative assistance in
relation thereto.
The Plan permits the Administrator to make payments
("Administrator's Permitted Payments") to Qualified Recipients.
These Administrator's Permitted Payments are made by the
Administrator and are not reimbursed by the Fund to the
Administrator. Permitted Payments may not exceed, for any fiscal
year of a Fund (pro-rated for any fiscal year which is not a full
fiscal year), in the case of the Cash Fund, 0.15 of 1% of the
average annual net assets of the Fund, and in the case of the
Tax-Free Fund and the Treasuries Fund 0.10 of 1% of their
respective average annual net assets. The Administrator shall have
sole authority (i) as to the selection of any Qualified Recipient
or Recipients; (ii) not to select any Qualified Recipient; and
(iii) to determine the amount of Administrator's Permitted
Payments, if any, to each Qualified Recipient, provided that the
total Administrator's Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Administrator is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area; and (c) the possibility that the Qualified Holdings
of the Qualified Recipient would be redeemed in the absence of its
selection or continuance as a Qualified Recipient. Notwithstanding
the foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified Recipient.
The Plan states that whenever the Administrator bears the costs,
not borne by a Fund's Distributor, of printing and distributing all
copies of the Fund's prospectuses, statements of additional
information and reports to shareholders which are not sent to the
Fund's shareholders, or the costs of supplemental sales literature
and advertising, such payments are authorized.
Part I of the Plan recognizes that, in view of the
Administrator's Permitted Payments and bearing by the Administrator
of certain distribution expenses, the profits, if any, of the
Administrator are dependent primarily on the administration fees
paid by the Fund to the Administrator and that its profits, if any,
would be less, or losses, if any, would be increased due to such
Administrator's Permitted Payments and the bearing by it of such
expenses. If and to the extent that any such administration fees
paid by the Fund might, in view of the foregoing, be considered as
indirectly financing any activity which is primarily intended to
result in the sale of shares issued by the Fund, the payment of
such fees is authorized by Part I of the Plan.
Part I of the Plan also states that if and to the extent that
any of the payments listed below are considered to be "primarily
intended to result in the sale of" shares issued by the Fund within
the meaning of Rule 12b-1, such payments are authorized under the
Plan: (i) the costs of the preparation of all reports and notices
to shareholders and the costs of printing and mailing such reports
and notices to existing shareholders, irrespective of whether such
reports or notices contain or are accompanied by material intended
to result in the sale of shares of the Fund or other funds or other
investments; (ii) the costs of the preparation and setting in type
of all prospectuses and statements of additional information and
the costs of printing and mailing all prospectuses and statements
of additional information to existing shareholders; (iii) the costs
of preparation, printing and mailing of any proxy statements and
proxies, irrespective of whether any such proxy statement includes
any item relating to, or directed toward, the sale of the Fund's
shares; (iv) all legal and accounting fees relating to the
preparation of any such reports, prospectuses, statements of
additional information, proxies and proxy statements; (v) all fees
and expenses relating to the registration or qualification of the
Fund and/or its shares under the securities or "Blue-Sky" laws of
any jurisdiction; (vi) all fees under the Securities Act of 1933
and the 1940 Act, including fees in connection with any application
for exemption relating to or directed toward the sale of the Fund's
shares; (vii) all fees and assessments of the Investment Company
Institute or any successor organization, irrespective of whether
some of its activities are designed to provide sales assistance;
(viii) all costs of the preparation and mailing of confirmations of
shares sold or redeemed or share certificates, and reports of share
balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
Part I of the Plan states that while Part I is in effect, the
Fund's Administrator shall report at least quarterly to the Fund's
Trustees in writing for its review on the following matters: (i)
all Administrator's Permitted Payments made to Qualified
Recipients, the identity of the Qualified Recipient of each Payment
and the purpose for which the amounts were expended; (ii) all costs
of each item specified in the second preceding paragraph (making
estimates of such costs where necessary or desirable) during the
preceding calendar or fiscal quarter; and (iii) all fees of the
Fund to the Administrator paid or accrued during such quarter.
Part I of the Plan defines as the Fund's Independent Trustees
those Trustees who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan. Part I of the Plan, unless
terminated as hereinafter provided, continues in effect from year
to year only so long as such continuance is specifically approved
at least annually by the Fund's Trustees and its Independent
Trustees with votes cast in person at a meeting called for the
purpose of voting on such continuance. In voting on the
implementation or continuance of Part I of the Plan, those Trustees
who vote to approve such implementation or continuance must
conclude that there is a reasonable likelihood that Part I of the
Plan will benefit the Fund and its shareholders. Part I of the Plan
may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority"
(as defined in the 1940 Act) of the outstanding voting securities
of the Fund. Part I of the Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval, and all amendments must be approved in the manner set
forth above as to continuance of Part I of the Plan.
Part I of the Plan states that in the case of a Qualified
Recipient which is a principal underwriter of the Fund the Plan
Agreement shall be the agreement contemplated by Section 15(b) of
the 1940 Act since each such agreement must be approved in
accordance with, and contain the provisions required by, Rule
12b-1. The Plan also states that in the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Plan Agreements with them shall be the agreements with the
Administrator with respect to payments under Part I of the Plan.
Under Rule 12b-1, all agreements related to implementation of
a plan must be in writing and must contain specified adoption and
continuance requirements, including a requirement that they
terminate automatically on their "assignment," as that term is
defined in the 1940 Act. The other adoption and continuance
requirements as to such agreements are the same as those described
above as to Part I of the Plan itself except that: (i) no
shareholder action is required for the approval of such agreements,
and (ii) termination by Trustee or shareholder action as there
described may be on not more than 60 days' written notice. The Plan
Agreement between the Fund and the Administrator is governed by the
foregoing requirements.
During the Funds' fiscal year ended March 31, 1995 only
immaterial Administrator's Permitted Payments (under $1,000) were
made by the Administrator to Qualified Recipients.
The formula under which the payments described above may be
made under Part I of the Plan by the Administrator was arrived at
by considering a number of factors. One of such factors is that
such payments are designed to provide incentives for Qualified
Recipients (i) in the case of Qualified Recipients which are
principal underwriters, to act as such and (ii) in the case of all
Qualified Recipients, to devote substantial time, persons and
effort to the sale of the shares of the Fund. Another factor is
that such payments by the Administrator to Qualified Recipients may
provide the only incentive for Qualified Recipients to do so; there
is no sales charge on the sale of the Fund's shares and, although
Part II of the Plan, as discussed below, permits certain payments
by the Fund to persons providing distribution and/or shareholder
service assistance, those payments are permitted only in connection
with one of the Fund's two classes of shares. Another factor is
that the Fund is one of a group of funds having certain common
characteristics. Each such fund (i) is a money market fund; and
(ii) has as its investment adviser a banking institution or an
affiliate which invests assets over which it has investment
authority in money market funds advised by other banking
institutions or affiliates. The marketing of the Fund's shares may
be facilitated since each such institution can, due to these common
characteristics, be fully and currently informed as to the quality
of the investments of and other aspects of the operations of each
of the other funds and if such an investment is otherwise
appropriate, can, although not required to do so, invest assets
over which it has investment authority in one or more of the other
funds.
Part II of the Plan
Part II of the Plan authorizes payment of certain distribution
or service fees by the Fund in connection with Service Shares of
the Fund.
As used in Part II of the Plan, "Designated Payees" means (i)
any principal underwriter or underwriters of the Fund and (ii)
broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor") with which it or the Fund has entered into written
agreements ("Distributor's Plan Agreements") and which have
rendered assistance (whether direct, administrative or both) in the
distribution and/or retention of shares of the specified class or
servicing shareholder accounts with respect to those shares.
"Qualified Holdings" means, as to any Designated Payee, all Service
Shares beneficially owned by such Designated Payee or by one or
more customers (brokerage or other) or other contacts and/or its
investment advisory or other clients, if the Designated Payee was,
in the sole judgment of the Distributor, instrumental in the
purchase and/or retention of such shares and/or in providing
administrative assistance in relation thereto.
Part II of the Plan permits the Fund to make payments ("Fund's
Permitted Payments") to Designated Payees. These Fund's Permitted
Payments are made by the Fund directly or through the Distributor
and may not exceed, for any fiscal year of the Fund (pro-rated for
any fiscal year which is not a full fiscal year), 0.25 of 1% of the
average annual net assets of the Fund represented by to the Service
Shares class of Fund shares. Such payments are to be made out of
the Fund assets allocable to Service Shares. The Distributor shall
have sole authority (i) as to the selection of any Designated Payee
or Payees; (ii) not to select any Designated Payee; and (iii) to
determine the amount of Fund's Permitted Payments, if any, to each
Designated Payee, provided that the total Fund's Permitted Payments
to all Designated Payees do not exceed the amount set forth above.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Designated Payee; (b) the extent to which the Designated Payee has,
at its expense, taken steps in the shareholder servicing area; and
(c) the possibility that the Qualified Holdings of the Designated
Payee would be redeemed in the absence of its selection or
continuance as a Designated Payee. Notwithstanding the foregoing
two sentences, a majority of the Independent Trustees (as defined
below) may remove any person as a Designated Payee.
Part II of the Plan states that while Part II is in effect,
the Distributor shall report at least quarterly to the Fund's
Trustees in writing for its review on the following matters: (i)
all Fund's Permitted Payments made to Designated Payees, the
identity of the Designated Payee of each Payment and the purpose
for which the amounts were expended; and (ii) all fees of the Fund
to the Distributor, sub-adviser or Administrator paid or accrued
during such quarter.
Part II of the Plan, unless terminated as hereinafter
provided, continues in effect from year to year only so long as
such continuance is specifically approved at least annually by the
Fund's Trustees and its Independent Trustees with votes cast in
person at a meeting called for the purpose of voting on such
continuance. In voting on the implementation or continuance of Part
II of the Plan, those Trustees who vote to approve such
implementation or continuance must conclude that there is a
reasonable likelihood that Part II of the Plan will benefit the
Fund and its shareholders. Part II of the Plan may be terminated at
any time by vote of a majority of the Independent Trustees or by
the vote of the holders of a "majority" (as defined in the 1940
Act) of the outstanding voting securities of the Service Shares
class. Part II of the Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval, and all amendments must be approved in the manner set
forth above as to continuance of Part II of the Plan.
Part II of the Plan states that in the case of a Designated
Payee, which is a principal underwriter of the Fund, the
Distributor's Plan Agreement shall be the agreement contemplated by
Section 15(b) of the 1940 Act since each such agreement must be
approved in accordance with, and contain the provisions required
by, Rule 12b-1. The Plan also states that in the case of Designated
Payees which are not principal underwriters of the Fund, the
Distributor's Plan Agreements with them shall be the agreements
with the Distributor with respect to payments under Part II of the
Plan.
Sales of Service Shares commenced on January 20, 1995. Through
the end of the fiscal year the following payments were made by each
of the Funds to Designated Payees: Cash Fund, $510; Tax-Free Fund,
$176; Treasuries Fund, $61.
LIMITATION OF REDEMPTIONS IN KIND
The Fund has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1 percent of the net
asset value of the Fund during any 90-day period for any one
shareholder. Should redemptions by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess
in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets
into cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "Net Asset Value Per Share" in
the Prospectus, and such valuation will be made as of the same time
the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Funds, their affiliations, if
any, with the Adviser or Distributor and their principal
occupations during at least the past five years are set forth
below. Each of the Trustees and officers of the Funds holds the
same position with all of the Funds. Each of the Trustees of the
Funds is also a Trustee of Hawaiian Tax-Free Trust, a tax-free
municipal bond fund which has the same Adviser and Administrator as
the Funds. Mr. Herrmann is an interested person of each of the
Funds, as that term is defined in the 1940 Act, as an officer of
the Funds, as a Director and officer of Aquila Distributors, Inc.
(the "Distributor") and as a shareholder of the Distributor. Mr.
Philpotts is an interested person as a director of the Adviser.
They are so designated by an asterisk. As of the date of this
Additional Statement, the Trustees and officers of the Funds owned
less than 1% of the outstanding shares of any of them.
Lacy B. Herrmann*, President and Chairman of the Board of Trustees,
380 Madison Avenue, New York, New York 10017
Founder , President and Chairman of the Board of Aquila
Management Corporation since 1984, the sponsoring organization and
Administrator and/or Sub-Adviser to the following open-end
investment companies, and Founder, Chairman of the Board of
Trustees, and President of each: Churchill Cash Reserves Trust
since 1985; a money market fund, which together with Capital Cash
Management Trust ("CCMT") and the three Funds of this Trust are
called the Aquila Money-Market Funds; and Hawaiian Tax-Free Trust
since 1984; Tax-Free Trust of Arizona since 1986; Tax-Free Trust of
Oregon since 1986; Tax-Free Fund of Colorado since 1987 ; Churchill
Tax-Free Fund of Kentucky since 1987; Tax-Free Fund For Utah since
1992; and Narragansett Insured Tax-Free Income Fund since 1992;
each of which is a tax-free municipal bond fund, and an equity
fund, Aquila Rocky Mountain Equity Fund since 1993, which are
called the Aquila Bond and Equity Funds; Vice President, Director,
Secretary and formerly Treasurer of Aquila Distributors, Inc. since
1981, distributor of the above funds; President and Chairman of the
Board of Trustees of CCMT, a money market fund since 1981, and an
Officer and Trustee/Director of its predecessors since 1974;
Chairman of the Board of Trustees, and President of Prime Cash Fund
1982-1996 and Short term asset Reserves 1984-1996; President and a
Director of STCM Management Company, Inc., sponsor and sub-adviser
to CCMT; Chairman, President, and a Director since 1984, of InCap
Management Corporation, formerly sub-adviser and administrator of
Prime Cash Fund and Short Term Asset Reserves, and Founder and
Chairman of several other money market funds; Director or Trustee
of OCC Cash Reserves, Inc., Oppenheimer Quest Global Value Fund,
Inc., Oppenheimer Quest Value Fund, Inc., and Trustee of Quest For
Value Accumulation Trust, The Saratoga Advantage Trust, and of the
Rochester Group of Funds, each of which is an open-end investment
company; Trustee of Brown University since 1990; actively involved
for many years in leadership roles with university, school and
charitable organizations.
Vernon R. Alden, Trustee, 420 Boylston Street, Suite 403, Boston,
Massachusetts 02116
Director of Augat Inc., a manufacturing corporation, since 1979,
Colgate Palmolive Company since 1974, Digital Equipment
Corporation, a computer manufacturing corporation, since 1959,
Intermet Corporation, an independent foundry, since 1986, and
Sonesta International Hotels Corporation since 1978; Chairman of
the Board and Executive Committee of The Boston Company, Inc., a
financial services company, 1969-1978; Trustee of Tax-Free Trust of
Oregon since 1988 , of Hawaiian Tax-Free Trust since 1989, of
Cascades Cash Fund, 1989-1994 and of Narragansett Insured Tax-Free
Income Fund since 1992; Associate Dean and member of the faculty of
Harvard University Graduate School of Business Administration,
1951-1962; member of the faculty and Program Director of Harvard
Business School - University of Hawaii Advanced Management Program,
summer of 1959 and 1960; President of Ohio University, 1962-1969;
Chairman of The Japan Society of Boston, Inc., and member of
several Japan-related advisory councils; Chairman of the
Massachusetts Business Development Council and the Massachusetts
Foreign Business Council, 1978-1983; Trustee of the Boston Symphony
Orchestra since 1975; Chairman of the Massachusetts Council on the
Arts and Humanities, 1972-1984; Member of the Board of Fellows of
Brown University, 1969-1986; Trustee and member of the Executive
Committee, Plymouth Plantation; trustee of various other cultural
and educational organizations; Honorary Consul General of the Royal
Kingdom of Thailand.
Arthur K. Carlson, Trustee, 8702 North Via La Serena, Paradise
Valley, Arizona 85253
Retired; Advisory Director of the Renaissance Companies (design
and construction companies of commercial, industrial and upscale
residential properties) since 1996; Senior Vice President and
Manager of the Trust Division of The Valley National Bank of
Arizona, 1977-1987; Trustee of Tax-Free Fund of Colorado, Hawaiian
Tax-Free Trust and Tax-Free Trust of Arizona since 1987 and of
Aquila Rocky Mountain Equity Fund since 1993; previously Vice
President of Investment Research at Citibank, New York City, and
prior to that Vice President and Director of Investment Research
of Irving Trust Company, New York City; past President of The New
York Society of Security Analysts and currently a member of the
Phoenix Society of Financial Analysts; formerly Director of the
Financial Analysts Federation; past Chairman of the Board and,
currently, Director of Mercy Healthcare of Arizona, Phoenix,
Arizona since 1990; Director of Northern Arizona University
Foundation since 1990; present or formerly an officer and/or
director of various other community and professional
organizations.
William M. Cole, Trustee, 852 Ramapo Way, Westfield, New Jersey
07090
President of Cole International, Inc., financial and shipping
consultants, since 1974; President of Cole Associates, shopping
center and real estate developers, 1974-1976; President of Seatrain
Lines, Inc., 1970-1974; former General Partner of Jones & Thompson,
international shipping brokers; Trustee of Hawaiian Tax-Free Trust
since 1985 and of Tax-Free Fund of Colorado since 1987; Chairman of
Cole Group, a financial consulting and real estate firm, since
1985.
Thomas W. Courtney, C.F.A., Trustee, P.O. Box 8186, Naples,
Florida 33941
President of Courtney Associates, Inc., a venture capital firm,
since 1988; General Partner of Trivest Venture Fund, 1983-1988;
President of Federated Investment Counseling Inc., 1975-1982;
President of Boston Company Institutional Investors, Inc.,
1970-1975; formerly a Director of the Financial Analysts
Federation; Trustee of Hawaiian Tax-Free Trust since 1984 and of
Tax-Free Trust of Arizona since 1986; Director or Trustee of OCC
Cash Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Value Fund, Inc., and Trustee of Quest For Value
Accumulation Trust and of the Rochester Group of Funds, each of
which is an open-end investment company.
Richard W. Gushman, II, Trustee, 700 Bishop Street, Suite 200,
Honolulu, Hawaii 96813
President and Chief Executive Officer of OKOA, INC., a private
Hawaii corporation involved in real estate; adviser to RAMPAC,
Inc., a wholly-owned subsidiary of the Bank of Hawaii, involved
with commercial real estate finance; Trustee of Hawaiian Tax-Free
Trust since 1992; Trustee of Pacific Capital Funds, which includes
bond and stock funds, since 1993; Chairman of the Board of Aloha
United Way; member of the Board of Trustees of the Mari-Med
Foundation, Downtown Improvement Association, Boys and Girls Club
of Honolulu.
Stanley W. Hong, Trustee, 4976 Poola Street, Honolulu, Hawaii 96821
President and Chief Executive Officer of The Chamber of
Commerce of Hawaii since 1996; Business consultant since 1994;
Senior Vice President of McCormack Properties, Ltd., 1993-1994;
President and Chief Executive of the Hawaii Visitors Bureau,
1984-1993; Vice President, General Counsel and Corporate Secretary
at TheoDavies & Co., Ltd., a multiple business company, 1973-1984;
formerly Legislative Assistant to U.S. Senator Hiram L. Fong;
member of the Boards of Directors of several community
organizations; Trustee of Hawaiian Tax-Free Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Trustee of Nature Conservancy of Hawaii since
1990; Regent of Chaminade University of Honolulu since 1990.
Theodore T. Mason, Trustee, 26 Circle Drive, Hastings-on-Hudson,
New York 10706
Managing Director of EastWind Power Partners, Ltd. since 1994;
Director of Cogeneration Development of Willamette Industries,
Inc., a forest products company, 1991-1993; Vice President of
Corporate Development of Penntech Papers, Inc., 1978-1991; Vice
President of Capital Projects for the same company, 1977-1978; Vice
Chairman of the Board of Trustees of CCMT since 1981; Trustee and
Vice President, 1976-1981, and formerly Director of its
predecessor; Director of STCM Management Company, Inc.; Vice
Chairman of the Board of Trustees and Trustee of Prime Cash Fund
since 1982; Trustee of Short Term Asset Reserves, 1984-1986 and
since 1989, of Hawaiian Tax-Free Trust since 1984, of Churchill
Cash Reserves Trust since 1985 and of Churchill Tax-Free Fund of
Kentucky since 1992; Vice President and Trustee of Oxford Cash
Management Fund, 1983-1989; Vice President of Trinity Liquid Assets
Trust, 1983-1985; President and Director of Ted Mason Venture
Associates, Inc., a venture capital consulting firm, 1972-1980;
Advisor to the Commander, U.S. Maritime Defense Zone Atlantic,
1984-1988; National Vice President, Surface/Subsurface, Naval
Reserve Association, 1985-1987; National Vice President, Budget and
Finance, for the same Association, 1983-1985; Commanding Officer of
four Naval Reserve Units, 1974-1985; Captain, USNR, 1978-1988.
Russell K. Okata, Trustee, 888 Mililani Street, Suite 601,
Honolulu, Hawaii 96813-298
Executive Director, Hawaii Government Employees Association AFSCME
Local 152, AFL-CIO; Trustee of Hawaiian Tax-Free Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Chairman of the Royal State Insurance Group
since 1988; Trustee of several charitable organizations.
Douglas Philpotts*, Trustee, Financial Plaza of the Pacific, P.O.
Box 3170, Honolulu, Hawaii, 96802
Retired; Director of Hawaiian Trust Company, Limited since 1986,
Chairman of the Board, 1992-1994 and President, 1986-1992; Director
of Victoria Ward, Limited; Trustee of Hawaiian Tax-Free Trust since
1992; Trustee of Pacific Capital Funds, which includes bond and
stock funds, since 1993; Trustee of the Strong Foundation; present
or former director or trustee of a number of civic and charitable
organizations in Hawaii.
Oswald K. Stender, Trustee, P.O. Box 3466, Honolulu, Hawaii 96801
Trustee of the Bernice Pauahi Bishop Estate since 1990; Director
of Hawaiian Electric Industries, Inc., a public utility holding
company, since 1993; Senior Advisor to the Trustees of The Estate
of James Campbell, 1987-1989 and Chief Executive Officer,
1976-1988; Director of several housing and real estate
associations; Director, member or trustee of several community
organizations; Trustee of Hawaiian Tax-Free Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Board Member, KBPS Public Radio Foundation.
William C. Wallace, Vice President, 380 Madison Avenue, New York,
New York 10017
Vice President of Capital Cash Management Trust since 1984;
Senior Vice President of Hawaiian Tax-Free Trust since 1985 and
Vice President, 1984-1985; Senior Vice President of Tax-Free Trust
of Arizona since 1989 and Vice President, 1986-1988; Vice President
of Tax-Free Trust of Oregon since 1986, of Churchill Tax-Free Fund
of Kentucky and Tax-Free Fund of Colorado since 1987 and of
Narragansett Insured Tax-Free Income Fund since 1992; Secretary and
Director of STCM Management Company, Inc. since 1974; President of
the Distributor since 1995 and formerly Vice President of the
Distributor, 1986-1992; Member of the Panel of Arbitrators,
American Arbitration Association, since 1978; Assistant Vice
President, American Stock Exchange, Market Development Division,
and Director of Marketing, American Gold Coin Exchange, a
subsidiary of the American Stock Exchange, 1976-1984.
Diana P. Herrmann, Senior Vice President, 380 Madison Avenue, New
York, New York 10017
Senior Vice President and Secretary and formerly Vice President
of the Administrator since 1986 and Director since 1984; Trustee of
Tax-Free Trust of Arizona and Tax-Free Trust of Oregon since 1994
and of Churchill Tax-Free Fund of Kentucky and Churchill Cash
Reserves Trust since 1995; Vice President of InCap Management
Corporation since 1986 and Director since 1983; Vice President and
formerly Assistant Vice President of the Money Funds since 1986;
Assistant Vice President of Oxford Cash Management Fund, 1986-1988;
Assistant Vice President and formerly Loan Officer of European
American Bank, 1981-1986; daughter of the Trust's President;
Trustee of the Leopold Schepp Foundation (academic scholarships)
since 1995; actively involved in mutual fund and trade associations
and in college and other volunteer organizations.
Charles E. Childs, III, Vice President, 380 Madison Avenue, New
York, New York 10017
Vice President - Administration and formerly Assistant Vice
President and Associate of the Administrator since 1987; Vice
President or Assistant Vice President of the Money Funds since
1988; Northeastern University, 1986-1987 (M.B.A., 1987); Financial
Analyst, Unisys Corporation, 1986; Associate Analyst at National
Economic Research Associates, Inc. (NERA), a micro-economic
consulting firm, 1979-1985.
John M. Herndon, Vice President and Assistant Secretary, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995 and Vice President of the
Aquila Money-Market Funds since 1990; Vice President of the
Administrator since 1990; Investment Services Consultant and Bank
Services Executive of Wright Investors' Service, a registered
investment adviser, 1983-1989; Member of the American Finance
Association, the Western Finance Association and the Society of
Quantitative Analysts.
Sherri Foster, Assistant Vice President, c/o Kaanapali, Alii IV-
702, Nohea Kai Drive, Lahaina, Hawaii 96761
Senior Vice President of Hawaiian Tax-Free Trust since 1993, Vice
President, 1988-1992 and Assistant Vice President, 1985-1988;
Registered Representative of the Distributor since 1985;
Realtor-Associate of Sherrian Bender Realty, successor to John
Wilson Enterprises, 1983-1994; Executive Secretary of the Hyatt
Regency, Maui, 1981-1983.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer of
Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of the
Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New York
10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond
and Equity Funds and of Aquila Distributors, Inc. since 1992;
Associate Director of Furman Selz Incorporated, 1991-1992; Vice
President of Scudder, Stevens & Clark, Inc. and Treasurer of
Scudder Institutional Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer of Lazard Freres Group
of Investment Companies and HT Insight Funds, Inc., 1986-1988; Vice
President of Lehman Management Co., Inc. and Assistant Treasurer of
Lehman Money Market Funds, 1981-1985; Controller of Seligman Group
of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New York
10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-1986; Secretary of Oxford
Cash Management Fund, 1982-1988.
Patricia A. Craven, Assistant Secretary & Compliance Officer,
380 Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995; Counsel to the
Administrator and the Distributor since 1995; formerly a Legal
Associate for Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
&&&&&&&&&&&&&& UPDATE
The Funds do not pay fees to Trustees affiliated with the
Administrator or Adviser or to any of the Fund's officers. During
the fiscal year ended March 31, 1995, the Cash Fund, the Tax-Free
Fund and the Treasuries Fund paid, respectively $85,532, $39,285
and $24,393, in compensation and reimbursement of expenses to its
other Trustees. The Funds are among the 13 funds in the Aquilasm
Group of Funds, which consists of tax-free municipal bond funds,
money market funds and an equity fund. The following tables list
the compensation of all Trustees who received compensation from the
Funds, the compensation each received during each Fund's fiscal
year from all funds in the Aquilasm Group of Funds and the number
of such funds. None of such Trustees has any pension or retirement
benefits from the Fund or any of the other funds in the Aquila
group.
<TABLE>
<CAPTION>
Compensation Compensation Compensation
Name from CAT from TFCAT from USTCAT
<S> <C> <C> <C>
Vernon R. $7,514 $4,099 $2,136
Alden
Arthur K. $7,467 $3,428 $2,269
Carlson
William M. $7,106 $3,219 $2,161
Cole
Thomas W. $8,674 $3,317 $2,200
Courtney
Richard W. $7,437 $3,456 $2,307
Gushman
Stanley W. $7,055 $3,375 $2,238
Hong
Theodore T. $7,877 $3,292 $2,187
Mason
Russell K. $7,531 $3,226 $2,165
Okata
Douglas $2,686 $1,422 $1,093
Philpotts
Oswald K. $6,439 $3,088 $2,026
Stender
<CAPTION>
Compensation from Number of Aquila Group
from all funds in boards on which the
Name the Aquila Group Trustee serves
<S> <C> <C>
Vernon R. $47,210 6
Alden
Arthur K. $39,290 7
Carlson
William M. $31,403 5
Cole
Thomas W. $32,871 5
Courtney
Richard W. $23,650 4
Gushman
Stanley W. $23,967 4
Hong
Theodore T. $43,015 8
Mason
Russell K. $23,070 4
Okata
Douglas $10,307 4
Philpotts
Oswald K. $20,302 4
Stender
</TABLE>
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Advisory Agreements
The Investment Advisory Agreement (the "Advisory Agreement")
between each of the Funds and Hawaiian Trust Company, Limited (the
"Adviser") contains the provisions described below, in addition to
those described in the Prospectus.
Each Advisory Agreement may be terminated by the Adviser at
any time without penalty upon giving the Fund sixty days' written
notice, and may be terminated by the Fund at any time without
penalty upon giving the Adviser sixty days' written notice,
provided that such termination by the Fund shall be directed or
approved by the vote of a majority of all its Trustees in office at
the time or by the vote of the holders of a majority (as defined in
the 1940 Act) of its voting securities at the time outstanding and
entitled to vote; it automatically terminates in the event of its
assignment (as so defined).
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
Each Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, the Adviser is not liable
for any loss sustained by the adoption of any investment policy or
the purchase, sale or retention of any security and permits the
Adviser to act as investment adviser for any other person, firm or
corporation. Each Fund agrees to indemnify the Adviser to the full
extent permitted under the Business Trust's Declaration of Trust.
The Advisory Agreement states that it is agreed that the
Adviser shall have no responsibility or liability for the accuracy
or completeness of the Fund's Registration Statement under the
Securities Act of 1933 and the 1940 Act, except for the information
supplied by the Adviser for inclusion therein.
Each Advisory Agreement contains the following provisions as
to the Fund's portfolio transactions. In connection with its duties
to arrange for the purchase and sale of the Fund's portfolio
securities, the Adviser shall select such broker-dealers
("dealers") as shall, in the Adviser's judgment, implement the
policy of the Fund to achieve "best execution," i.e., prompt,
efficient and reliable execution of orders at the most favorable
net price. The Adviser shall cause the Fund to deal directly with
the selling or purchasing principal or market maker without
incurring brokerage commissions unless the Adviser determines that
better price or execution may be obtained by paying such
commissions; the Fund expects that most transactions will be
principal transactions at net prices and that the Fund will incur
little or no brokerage costs. The Fund understands that purchases
from underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions placed
through dealers include a spread between the bid and asked prices.
In allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion. If,
on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Fund or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, Administrator or
principal underwriter as the Fund. Such research may be in written
form or through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic or
institutional activities. The Fund recognizes that no dollar value
can be placed on such research services or on execution services,
that such research services may or may not be useful to the Fund
and/or other accounts of the Adviser and that research received by
such other accounts may or may not be useful to the Fund.
The Adviser has been advised by legal counsel that in its
opinion, as a subsidiary of Bank of Hawaii, the Adviser is
permitted under current Federal banking laws to perform the
services for each of the Funds required by each Advisory Agreement,
provided that the Adviser remains in compliance with applicable
statutes and regulations. However, such counsel has pointed out
that future changes in federal or state statutes and regulations
relating to the permissible activities of bank and bank holding
companies, including their bank and non-bank subsidiaries, as well
as future judicial or administrative decisions and interpretations
of present and future statutes and regulations, might prevent the
Adviser from continuing to serve as the investment adviser to the
Funds.
In the event the Adviser is prohibited from acting as any
Fund's investment adviser, it is expected that the Fund's Board of
Trustees would probably recommend to the shareholders the selection
of another qualified adviser or, if that course of action then
appeared impractical, that the Fund be liquidated.
During each Fund's fiscal year ended March 31, 1995, all of
its transactions were principal transactions and no brokerage
commissions were paid.
For each Fund's fiscal year ended March 31, 1996, The Cash
Fund, the Tax-Free Fund and the Treasuries Fund paid or accrued to
the Adviser fees of $1,353,593, $394,009 and $210,982 respectively,
and paid or accrued to the Administrator fees of $597,533, $152,543
and $88,287, respectively under the Advisory and Administration
Agreements. For the Treasury Fund, the Adviser waived $44,372 and
the Administrator waived $14,790 of such fees.
For the fiscal year ended March 31, 1995, the Cash Fund,
the Tax-Free Fund and the Treasuries Fund paid or accrued to the
Adviser fees of $1,515,705, $412,599 and $215,004, respectively,
and paid or accrued to the Administrator fees of $624,649, $156,612
and $89,228, respectively under the Advisory and Administration
Agreements. For the Treasury Fund, the Adviser waived $30,974 and
the Administrator waived $10,325 of such fees.
For the fiscal year ended March 31, 1994 fees of $1,018,616
were paid or accrued to the Adviser by the Cash Fund under a former
advisory agreement in effect from until November 1, 1993 and under
the Advisory Agreement in effect thereafter. For the fiscal year
ended March 31, 1994 respectively, fees of $509,942 and $821,369
were paid or accrued to Aquila Management Corporation by the Cash
Fund under a former administration agreement in effect until
November 1, 1993 and under the Administration Agreement in effect
thereafter.
For the fiscal year ended March 31, 1994, under the
advisory and administration agreements in effect until November 1,
1993 and under the Advisory Agreement and Administration Agreements
in effect thereafter, fees of $259,127 and $118,944 were accrued to
the Adviser and Administrator, respectively by the Tax-Free Fund,
of which $14,840 and $4,947, respectively, were waived.
For the fiscal year ended March 31, 1994, fees of $192,040
and $83,098, respectively, were paid and/or accrued to the Adviser
and to the Administrator by the Treasuries Fund under the former
advisory and administration agreements in effect until November 1,
1993 and under the Advisory and Administration Agreements in effect
thereafter.
Additional Information as to the Administration Agreement
The Administration Agreement (the "Administration Agreement")
between Aquila Management Corporation, as Administrator, and each
Fund contains the provisions described below in addition to those
described in the Prospectus.
Subject to the control of the Fund's Board of Trustees, the
Administrator provides all administrative services to the Fund
other than those relating to its investment portfolio and the
maintenance of its accounting books and records (see below for
discussion); as part of such duties, the Administrator (i) provides
office space, personnel, facilities, and equipment for the
performance of the following functions and for the maintenance of
the Fund's headquarters; (ii) oversees all relationships between
the Fund and its transfer agent, custodian, legal counsel, auditors
and principal underwriter, including the negotiation of agreements
in relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Fund and for the sale, servicing, or
redemption of the Fund's shares; (iii) provides to the Adviser and
to the Fund statistical and other factual information and advice
regarding economic factors and trends, but does not generally
furnish advice or make recommendations regarding the purchase or
sale of securities; (iv) maintains the Fund's books and records
(other than accounting books and records), and prepares (or assists
counsel and auditors in the preparation of) all required proxy
statements, reports to shareholders and Trustees, reports to and
other filings with the Securities and Exchange Commission and any
other governmental agencies, and tax returns, and oversees the
Fund's insurance relationships; (v) prepares, on the Fund's behalf
and at its expense, such applications and reports as may be
necessary to register or maintain its registration or that of its
shares under the securities or "Blue-Sky" laws of all such
jurisdictions as may be required from time to time; and (vi)
responds to any inquiries or other communications from shareholders
and broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Fund's shareholder servicing and
transfer agent or distributor, oversees such shareholder servicing
and transfer agent's or distributor's response thereto. Since each
Fund pays its own legal and audit expenses, to the extent that the
Fund's counsel and accountants prepare or assist in the preparation
of prospectuses, proxy statements and reports to shareholders, the
costs of such preparation or assistance are paid by the Fund.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Fund and the Adviser; it may be terminated by the
Fund at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Fund shall be directed or approved by a vote of a majority of the
Trustees in office at the time, including a majority of the
Trustees who are not interested persons of the Fund. In either case
the notice provision may be waived.
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Fund in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Fund agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
(References to the Fund in "ADDITIONAL INFORMATION AS TO
MANAGEMENT ARRANGEMENTS" refer to the Business Trust where the
documents being described so specify.)
AMORTIZED COST VALUATION
Each Fund operates under the Rule (Rule 2a-7 under the 1940
Act) which permits it to value its portfolio on the basis of
amortized cost. The amortized cost method of valuation is
accomplished by valuing a security at its cost and thereafter
assuming a constant amortization rate to maturity of any discount
or premium, and does not reflect the impact of fluctuating interest
rates on the market value of the security. This method does not
take into account unrealized gains or losses.
While the amortized cost method provides certainty in
valuation, there may be periods during which value, as determined
by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. During periods of declining
interest rates, the daily yield on the Fund's shares may tend to be
higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio
instruments and changing its dividends based on these changing
prices. The converse would apply in a period of rising interest
rates.
Under the Rule, each Fund's Board of Trustees must establish,
and has established, procedures (the "Procedures") designed to
stabilize at $1.00, to the extent reasonably possible, the price
per share for each of each Fund's two classes as computed for the
purpose of sales and redemptions. Such procedures must include
review of the Fund's portfolio holdings by the Board of Trustees at
such intervals as it may deem appropriate and at such intervals as
are reasonable in light of current market conditions to determine
whether the Fund's per share value calculated by using available
market quotations deviates from the per share value based on
amortized cost. "Available market quotations" may include actual
market quotations (valued at the mean between bid and asked
prices), estimates of market value reflecting current market
conditions based on quotations or estimates of market value for
individual portfolio instruments or values obtained from yield data
relating to a directly comparable class of securities published by
reputable sources.
Under the Rule, if the extent of any deviation between the net
asset value per share based upon "available market quotations" (see
above) and the net asset value per share based on amortized cost
exceeds $0.005, the Board of Trustees must promptly consider what
action, if any, will be initiated. When the Board of Trustees
believes that the extent of any deviation may result in material
dilution or other unfair results to investors or existing
shareholders, it is required to take such action as it deems
appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results. Such actions could
include the sale of portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends or payment of distributions from
capital or capital gains, redemptions of shares in kind, or
establishing a net asset value per share using available market
quotations.
The Procedures include changes in the dividends payable by the
Fund under specified conditions, as described below under
"Computation of Daily Dividends." This portion of the Procedures
provides that actions that the Trustees would consider under
certain circumstances can be taken automatically.
COMPUTATION OF DAILY DIVIDENDS
Under the Procedures which each Fund's Board of Trustees has
adopted relating to amortized cost valuation, the calculation of
the Fund's daily dividends will change under certain circumstances
from that indicated in the Prospectus. If on any day the deviation
between net asset value per share of a given class determined on an
amortized cost basis and that determined using market quotations is
$0.003 or more, the amount of such deviation will be added to or
subtracted from the daily dividend for that class to the extent
necessary to reduce such deviation to within $0.003.
If on any day there is insufficient net income to absorb any
such reduction, the Board of Trustees would be required under the
Rule to consider taking other action if the deviation, after
eliminating the dividend for that day, exceeds $0.005. One of the
actions which the Board of Trustees might take could be the
elimination or reduction of dividends for more than one day.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase shares of any Fund having a net asset
value of at least $5,000 you may establish an Automatic Withdrawal
Plan under which you will receive a monthly or quarterly check in
a stated amount, not less than $50. Stock certificates will not be
issued for shares held under an Automatic Withdrawal Plan. All
dividends must be reinvested.
Shares will be redeemed on the last business day of the month
as may be necessary to meet withdrawal payments. Shares acquired
with reinvested dividends will be redeemed first to provide such
withdrawal payments and thereafter other shares will be redeemed to
the extent necessary, and, depending upon the amount withdrawn,
your principal may be depleted.
Redemption of shares for withdrawal purposes may reduce or
even liquidate your account. Monthly or quarterly payments paid to
you may not be considered as a yield or income on investment.
GENERAL INFORMATION
Net Asset Value Per Share
As indicated in the Prospectus, the net asset value per share
for each class of each Fund's shares will be determined on each day
that the New York Stock Exchange is open. That Exchange annually
announces the days on which it will not be open; the most recent
announcement indicates that it will not open on the following days:
New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, that Exchange may close on days not included in that
announcement.
Voting by Series of Shares
Shares of each Series of the Business Trust created by the
Board of Trustees are entitled to vote as a Series only to the
extent permitted by the 1940 Act (see below) or as permitted by the
Board of Trustees. Income and operating expenses are allocated
among Series in a manner acceptable to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, as to any investment
company which has two or more series outstanding, on any matter
required to be submitted to shareholder vote, such matter is not
deemed to have been effectively acted upon unless approved by the
holders of a majority (as defined in that Rule) of the voting
securities of each series affected by the matter. Such separate
voting requirements do not apply to the election of Trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, series. A change in
investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not
obtained as to the holders of the other affected series.
Shareholder and Trustee Indemnification
The Business Trust is an entity of the type commonly known as
a Massachusetts business trust. Under Massachusetts law,
shareholders of a trust such as the Business Trust may, under
certain circumstances, be held personally liable as partners for
the obligations of the trust. However, for the protection of
shareholders, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the
Business Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or
executed by any Fund or the Trustees. The Declaration of Trust
provides for indemnification out of the Business Trust's property
of any shareholder held personally liable for the obligations of
the Business Trust. The Declaration of Trust also provides that the
Business Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the
Business Trust and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to the relatively remote circumstances in
which the Business Trust itself would be unable to meet its
obligations. If any series or class is unable to meet the
obligations attributable to it (which, in the case of the Business
Trust, is a remote possibility), other series or classes would be
subject to such obligations with a corresponding increase in the
risk of the shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees out
of the assets of each Fund and provides that they will not be
liable for errors of judgment or mistakes of fact or law; but
nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Custodian and Auditors
Each Fund's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Fund's assets.
Each Fund's auditors, KPMG Peat Marwick LLP, perform an annual
audit of the Fund's financial statements.
The financial statements of each of the Funds for the
fiscal year ended March 31, 1996, which are contained in the Annual
Report of The Pacific Capital Funds of Cash Assets Trust for that
fiscal year, are incorporated by reference into the Additional
Statement. The financial statements of the Funds for the fiscal
year ended March 31, 1996 have been audited by KPMG Peat Marwick
LLP, independent auditors, whose report thereon is incorporated
herein by reference.
<PAGE>
APPENDIX A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS
Bond Ratings
At the date of this Additional Statement there are six
organizations considered as Nationally Recognized Statistical
Rating Organizations ("NRSROs") for purposes of Rule 15c3-1 under
the Securities Exchange Act of 1934. Their names, a brief summary
of their respective rating systems, some of the factors considered
by each of them in issuing ratings and their individual procedures
are described below.
STANDARD AND POOR'S CORPORATION
Commercial paper consists of unsecured promissory notes issued
to raise short-term funds. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. S&P's
commercial paper ratings are graded into several categories from
"A-1" for the highest-quality obligations (which can also have a
plus (+) sign designation) to "D" for the lowest. The two highest
categories are:
A-1: This highest category indicates the degree of safety
regarding timely payment is strong. Those issues
determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign.
A-2: Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree
of safety is not as high for issues designated A-1.
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific
obligation. The ratings are based, in varying degrees, on the
following considerations:
1) Likelihood of default -- capacity and willingness of
the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligations;
2) Nature of and provisions of the obligation; and
3) Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.
The two highest categories are:
AAA: Capacity to pay interest and repay principal is
extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in a degree.
MOODY'S INVESTORS SERVICE
Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior debt obligations which have an
original maturity not exceeding one year. Obligations relying upon
support mechanisms such as letters of credit and bonds of indemnity
are excluded unless explicitly rated. The two highest categories
are:
Prime-1: Issuers rated P-1 have a superior ability for
repayment of senior short-term debt obligations,
evidenced by the following characteristics:
* Leading market positions in well-established
industries.
* High rates of return on funds employed.
* Conservative capital structure with moderate
reliance on debt and ample asset protection.
* Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
* Well-established access to a range of
markets and assured sources of alternative
liquidity.
Prime-2: Issuers rated P-2 have a strong ability for
repayment of senior short-term debt obligations,
evidenced by the above-mentioned characteristics, but to
a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample
alternative liquidity is maintained.
Corporate bonds 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 edged." Interest payments are
protected by large or exceptionally stable margin and principal is
secure. Corporate bonds 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. Aa bonds are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa
securities.
DUFF & PHELPS, INC.
The ratings apply to all obligations with maturities of under
one year, including commercial paper, the unsecured portion of
certificates of deposit, unsecured bank loans, master notes,
bankers' acceptances, irrevocable letters of credit and current
maturities of long-term debt. The two highest categories are:
D-1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
access to alternative sources of funds is outstanding and
safety is just below risk-free U.S. Treasury short-term
obligations.
D-1: Very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
D-1 -: High certainty of timely payment. Liquidity
factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are very
small.
Long-term debt rated AAA represents the highest credit
quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt. Debt rated AA represents
high credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic
conditions.
IBCA
In determining the creditworthiness of financial institutions,
IBCA assigns ratings within the following categories: Legal,
Individual, Short and Long Term. A legal rating deals solely with
the question of whether an institution would receive support if it
ran into difficulties and not whether it is "good" or "bad". An
individual rating looks purely at the strength of a financial
institution without receiving any support. Short and long-term
ratings assess the borrowing capabilities and the capacity for
timely repayment of debt obligations. A short-term rating relates
to debt which has a maturity of less than one year, while a long-
term rating applies to a instrument of longer duration. The legal
ratings are:
1: A bank for which there is a clear legal guarantee on
the part of its home state to provide any necessary
support or a bank of such importance both internationally
and domestically that support from the state would be
forthcoming, if necessary.
2: A bank for which there is no legal obligation on the
part of its sovereign entity to provide support but for
which state support would be forthcoming, for example,
because of its importance to the total economy or its
historic relationship with the government.
The individual ratings are:
A: A bank with a strong balance sheet, favorable credit
profile and a consistent record of above average
profitability.
B: A bank with a sound credit profile and without
significant problems. The bank's performance has
generally been in line with or better than that of its
peers.
The short-term ratings are:
A-1+: Obligations supported by the highest capacity for
timely repayment.
A-1: Obligations supported by a very strong capacity for
timely repayment.
A-2: Obligations supported by a very strong capacity for
timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or
financial conditions.
The long-term ratings are:
AAA: Obligations for which there is the lowest
expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk.
AA: Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase
investment risk albeit not significantly.
Thomson BankWatch, Inc. (TBW)
The TBW short-term ratings apply to commercial paper, other
senior short-term obligations and deposit obligations of the
entities to which the rating has been assigned. TBW's two highest
short-term ratings are:
TBW-1: Indicates a very high degree of likelihood that
principal and interest will paid on a timely basis.
TBW-2: While the degree of safety regarding timely
repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues
rated "TBW-1".
The TBW long-term rating specifically assess the likelihood of
an untimely repayment of principal or interest over the term to
maturity of the rated instrument. TBW's two highest long-term
ratings are:
AAA: Indicates ability to repay principal and interest on
a timely basis is very strong.
AA: Indicates a superior ability to repay principal and
interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
Fitch Investors Service, Inc.
The Fitch short-term ratings apply to debt obligations that
are payable on demand which include commercial paper, certificates
of deposit, medium-term notes and municipal and investment notes.
Short-term ratings places greater emphasis than long-term ratings
on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are:
F-1+: Issues assigned this rating are regarded as having
the strongest degree of assurance for timely payment.
F-1: Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than issues
rated "F-1+".
The Fitch long-term rating represents their assessment of the
issuer's ability to meet the obligations of a specific debt issue
or class of debt in a timely manner. The rating takes into
consideration special features of the issue, its relationship to
other obligations of the issuer, the current and prospective
financial and operating performance of the issuer and any
guarantor, as well as the economic and political environment that
might affect the issuer's future financial strength and credit
quality. The Fitch long-term rating are:
AAA: Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay
interest and repay principal is very strong.
DESCRIPTION OF MUNICIPAL BOND AND COMMERCIAL PAPER RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers or
lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA 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.
A 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.
BBB 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.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Standard & Poor's ratings for municipal note issues are
designated SP in order to help investors distinguish more clearly
the credit quality of notes as compared to bonds. Notes bearing the
designation SP-1 are deemed very strong or to have strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Notes bearing the designation SP-2 are deemed to have
a satisfactory capacity to pay principal and interest.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa 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.
Aa 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.
A 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 some
time in the future.
Baa 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.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated
by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's Investment
Grade as MIG 1 through MIG 4. In the case of variable rate demand
obligations (VRDOs), two ratings are assigned; one representing an
evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When no rating is applied to the long
or short-term aspect of a VRDO, it will be designated NR. Issues or
the features associated with MIG or VMIG ratings are identified by
date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any
other similar issue of the same obligor. MIG ratings terminate at
the retirement of the obligation while VMIG rating expiration will
be a function of each issuer's specific structural or credit
features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality. Margins
of protection are ample although not so large
as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access for
refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although
not distinctly or predominantly speculative,
there is specific risk.
Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations. Moody's
employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of
rated issuers: Prime 1 -- Highest Quality; Prime 2 -- Higher
Quality; Prime 3 -- High Quality.
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment. Ratings are graded
into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having
the greatest capacity for timely payment. Issues in this category
are designed with the numbers 1, 2 and 3 to indicate the relative
degree of safety. The designation A-1 indicates that the degree of
safety regarding timely payment is either overwhelming or very
strong. A "+" designation is applied to those issues rated "A-1"
which possess safety characteristics. Capacity for timely payment
on issues with the designation A-2 is strong. However, the
relative degree of safety is not as high as for issues designated
A-1. Issues carrying the designation A-3 have a satisfactory
capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, Vice President
Sherri Foster, Assistant Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
The Pacific Capital Funds
of
Cash Assets Trust
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
A cash management
investment
[LOGO]
STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
CASH ASSETS TRUST
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements of the Pacific Capital Funds
of Cash Assets Trust:
Included in Part A:
Financial Highlights of
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Incorporated by reference into Part B:
Report of Independent Auditors
Statement of Assets and Liabilities as of
March 31, 1996:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Statement of Operations for the Year Ended
March 31, 1996:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Statement of Changes in Net Assets for the
Years Ended March 31, 1996 and 1995:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Statement of Investments as of March 31, 1996:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Notes to Financial Statements:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital
U.S. Treasuries Cash Assets Trust
Included in Part C:
Consent of Independent Auditors
(b) Exhibits:
(1) Amended and Restated Declaration of Trust (x)
(2) By-laws (xii)
(3) Not applicable
(4) (a) Specimen share certificate for Pacific
Capital Cash Assets Trust Series,
Original Shares (xi)
(b) Specimen share certificate for Pacific
Capital Cash Assets Trust Series,
Service Shares Class (xi)
(c) Specimen share certificate for Pacific
Capital Tax-Free Cash Assets Trust
Series, Original Shares (xi)
(d) Specimen share certificate for Pacific
Capital Tax-Free Cash Assets Trust
Series, Service Shares (xi)
(e) Specimen share certificate for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series, Original Shares (xi)
(f) Specimen share certificate for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series, Service Shares (xi)
(5) (a) Investment Advisory Agreement for Pacific
Capital Cash Assets Trust Series (xiii)
(b) Investment Advisory Agreement for Pacific
Capital Tax-Free Cash Assets Trust
Series (xiii)
(c) Investment Advisory Agreement for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (xiii)
(6) (a) Distribution Agreement for Pacific Capital
Cash Assets Trust Series (vi)
(b) Distribution Agreement for Pacific Capital
Tax-Free Cash Assets Trust Series (vi)
(c) Distribution Agreement for Pacific Capital
U.S. Treasuries Cash Assets Trust
Series (vi)
(d) Distribution Assistance Agreement for All
Series (viii)
(e) Distribution Assistant Agreement for All
Series with BHC Securities, Inc. (x)
(7) Not applicable
(8) (a) Custody Agreement for All Series (xii)
(9) (a) Transfer Agency Agreement for All
Series (v)
(b) Administration Agreement for Pacific
Capital Cash Assets Trust Series (ix)
(c) Administration Agreement for Pacific
Capital Tax-Free Cash Assets Trust
Series (ix)
(d) Administration Agreement for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (ix)
(e) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific Capital
Cash Assets Trust Series (viii)
(f) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital Cash Assets Trust Series
(viii)
(g) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital Cash Assets Trust Series
(viii)
(h) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific Capital
Tax-Free Cash Assets Trust Series
(viii)
(i) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital Tax-Free Cash Assets Trust
Series (viii)
(j) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital Tax-Free Cash Assets Trust
Series (viii)
(k) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (viii)
(l) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (viii)
(m) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (viii)
(10) (a) Opinion and consent
of counsel to the Trust (xi)
(11) Not applicable
(12) Not applicable
(13) Agreement with initial shareholder (ii)
(14) Not applicable
(15) (a) Distribution Plan for Pacific Capital Cash
Assets Trust Series (x)
(b) Distribution Plan for Pacific Capital
Tax-Free Cash Assets Trust Series
(x)
(c) Distribution Plan for Pacific Capital U.S.
Treasuries Cash Assets Trust Series
(x)
(16) Not applicable
(17) (a) Principles of Cooperation for All Series
(viii)
(b) Information Sharing Agreement (x)
(c) Financial Data Schedule (xiii)
(18) Plan pursuant to Rule 18f-3
under the 1940 Act (xiii)
(i) Filed as an exhibit to Registrant's Initial
Registration Statement dated July 11, 1984 and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 dated October 24, 1984 and
incorporated herein by reference.
(iii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 4 dated June 16, 1988 and incorporated
herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 5 dated August 1, 1988 and incorporated
herein by reference.
(v) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 6 dated July 31, 1989 and incorporated
herein by reference.
(vi) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 7 dated June 1, 1990 and incorporated
herein by reference.
(vii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 12 dated May 28, 1993 and incorporated
herein by reference.
(viii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 13 dated June 30, 1993 and incorporated
herein by reference.
(ix) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 14 dated July 29, 1994 and incorporated
herein by reference.
(x) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 16 dated November 17, 1994 and
incorporated herein by reference.
(xi) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 18 dated January 17, 1995 and
incorporated herein by reference.
(xii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 19 dated June 7, 1995 and
incorporated herein by reference.
(xiii) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control
with Registrant
None
ITEM 26. Number of Holders of Securities
As of May 23, 1996, the number of record holders of the
Registrant's securities in each of its portfolios was as
follows:
Pacific Capital Cash Assets Trust
Original Shares 29
Service Shares 4
Pacific Capital Tax-Free Cash Assets Trust
Original Shares 78
Service Shares 3
Pacific Capital U.S. Treasuries Cash Assets Trust
Original Shares 14
Service Shares 2
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Amended and Restated Declaration of
Trust, filed as Exhibit 1 herewith, is incorporated
herein by reference.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to Trustees, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in that Act and is, therefore, unenforce-
able. In the event that a claim for indemnifica-
tion against such liabilities (other than the pay-
ment by Registrant of expenses incurred or paid by
a Trustee, officer, or controlling person of Regis-
trant 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, 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 of
whether such indemnification by it is against pub-
lic policy as expressed in the Act and will be go-
verned by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment
Adviser
Hawaiian Trust Company, Limited, Registrant's in-
vestment adviser, is a trust company. Hawaiian
Trust Company, Limited is a subsidiary of Bank of
Hawaii. Bank of Hawaii is a state-chartered bank.
Bank of Hawaii is a subsidiary of Bancorp Hawaii,
Inc. Bancorp Hawaii, Inc. is a bank holding com-
pany.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal un-
derwriter to Aquila Rocky Mountain Equity Fund,
Capital Cash Management Trust, Churchill Cash Re-
serves Trust, Churchill Tax-Free Fund of Kentucky,
Hawaiian Tax-Free Trust, Narragansett Insured Tax-
Free Income Fund, Prime Cash Fund, Short Term Asset
Reserves, Tax-Free Fund for Utah, Tax-Free Fund of
Colorado, Tax-Free Trust of Arizona, and Tax-Free
Trust of Oregon, in addition to serving as the Re-
gistrant's principal underwriter.
(b) For information about the Directors and officers
of Aquila Distributors, Inc., reference is made to
the Form BD filed by it under the Securities Ex-
change Act of 1934.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectuses
and Statements of Additional Information of the
three Portfolios of the Trust.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
<PAGE>
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Consent
To the Trustees and Shareholders of
Cash Assets Trust:
We consent to the use of our report dated May 10, 1996 incorporated
herein by reference and to the reference to our firm under the
heading "Financial Highlights" in the Prospectus.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
New York, New York
May 24, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement or Amendment to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New
York and State of New York, on the 30th day of May, 1996.
CASH ASSETS TRUST
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 5/30/96
______________________ President, Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Vernon R. Alden 5/30/96
______________________ Trustee ___________
Vernon R. Alden
/s/Arthur K. Carlson 5/30/96
______________________ Trustee ___________
Arthur K. Carlson
/s/William M. Cole 5/30/96
______________________ Trustee ___________
William M. Cole
/s/Thomas W. Courtney 5/30/96
______________________ Trustee ___________
Thomas W. Courtney
/s/Richard W. Gushman, II 5/30/96
______________________ Trustee ___________
Richard W. Gushman, II
/s/Stanley W. Hong 5/30/96
______________________ Trustee ___________
Stanley W. Hong
/s/Theodore T. Mason 5/30/96
______________________ Trustee ___________
Theodore T. Mason
/s/Russell K. Okata 5/30/96
______________________ Trustee ___________
Russell K. Okata
/s/Douglas Philpotts 5/30/96
_______________________ Trustee ___________
Douglas Philpotts
/s/Oswald K. Stender 5/30/96
_______________________ Trustee ___________
Oswald K. Stender
/s/Rose F. Marotta 5/30/96
_______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
CASH ASSETS TRUST
EXHIBIT INDEX
Exhibit Exhibit Page
Number Name Number
(5) (a) Investment Advisory Agreement for Pacific
Capital Cash Assets Trust Series
(b) Investment Advisory Agreement for Pacific
Capital Tax-Free Cash Assets Trust Series
(c) Investment Advisory Agreement for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series
(17) (c) Financial Data Schedule
(18) Plan pursuant to Rule 18f-3
under the 1940 Act
Correspondence
PACIFIC CAPITAL CASH ASSETS TRUST
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made , 1995 by and between
Cash Assets Trust (the "Business Trust"), a Massachusetts business
trust, 380 Madison Avenue, Suite 2300, New York, NY 10017, and
Hawaiian Trust Company, Limited (the "Adviser"), Financial Plaza of
the Pacific, P.O. Box 3170, Honolulu, Hawaii 96802,
W I T N E S S E T H :
WHEREAS, the Business Trust and the Adviser have
previously entered into an Amended and Restated Investment Advisory
Agreement with respect to a portfolio of the Business Trust
entitled Pacific Capital Cash Assets Trust (the "Trust"); and
WHEREAS, the Business Trust and the Adviser now wish
to amend and restate their agreement as herein set forth, referred
to hereafter as "this Agreement"; and
WHEREAS, this Agreement has been approved by the
Board of Trustees of the Business Trust at a meeting held on
September 26, 1994 and in addition has been approved by the holders
of a "majority" of the outstanding voting securities of the Trust,
as defined in the Investment Company Act of 1940 (the "Act"), at a
meeting held on January 6, 1995;
NOW THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth
herein, to act as managerial investment adviser to the Trust with
respect to the investment of the Trust's assets, and to supervise
and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Trust.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Trust
(a) Subject to the succeeding provisions of
this section and subject to the direction and control of the Board
of Trustees of the Business Trust, the Adviser shall:
(i) Supervise continuously the investment
program of the Trust and the composition of
its portfolio;
(ii) Determine what securities shall be
purchased or sold by the Trust;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Trust;
and
(iv) Furnish information as to such securities
to any provider of fund accounting services to
the Trust; monitor records of the Trust as to
the portfolio, including prices, maintained by
such provider of such services; and supply,
monthly or more frequently as may be
necessary, pricing of the Trust's portfolio
based on available market quotations using a
pricing service or other source of pricing
information satisfactory to the Trust.
(b) Any investment program furnished by the
Adviser under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Act and any
rules or regulations in force thereunder; (2) any other applicable
laws, rules and regulations; (3) the Declaration of Trust and By-
Laws of the Business Trust as amended from time to time; (4) any
policies and determinations of the Board of Trustees of the
Business Trust; and (5) the fundamental policies of the Trust, as
reflected in its registration statement under the Act or as amended
by the shareholders of the Trust.
(c) The Adviser shall give the Trust the
benefit of its best judgment and effort in rendering services
hereunder, but the Adviser shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and research made
by any other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other individual,
firm or corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed to
protect the Adviser against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this
Agreement.
(d) Nothing in this Agreement shall prevent the
Adviser or any affiliated person (as defined in the Act) of the
Adviser from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own accounts
or for the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it
will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Trust under this
Agreement. It is agreed that the Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Business Trust's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Business Trust as to any information concerning the Adviser
appropriate for inclusion in such Registration Statement, or as to
any transaction or proposed transaction which might result in an
assignment of the Agreement. The Business Trust agrees to
indemnify the Adviser to the full extent permitted by the Business
Trust's Declaration of Trust.
(e) In connection with its duties to arrange
for the purchase and sale of the Trust's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as shall, in
the Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Adviser
shall cause the Trust to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Adviser determines that better price or
execution may be obtained by paying such commissions; the Trust
expects that most transactions will be principal transactions at
net prices and that the Trust will incur little or no brokerage
costs. The Business Trust understands that purchases from
underwriters include a commission or concession paid by the issuer
to the underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion.
If, on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, administrator or
principal underwriter as the Trust. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market, economic,
or institutional activities. The Business Trust recognizes that no
dollar value can be placed on such research services or on
execution services, that such research services may or may not be
useful to the Trust and/or other accounts of the Adviser, and that
research received by such other accounts may or may not be useful
to the Trust.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Trust,
at the Adviser's expense, all office space, facilities, equipment
and clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser agrees that it will supply, or cause
to be supplied, to any sub-adviser, administrator or principal
underwriter of the Trust all necessary financial information in
connection with such sub-adviser's, administrator's or principal
underwriter's duties under any agreement between such sub-adviser,
administrator or principal underwriter and the Business Trust. The
Adviser will also pay all compensation of the Trust's officers,
employees, and Trustees, if any, who are affiliated persons of the
Adviser, provided that if any Trustee is an affiliate of the
Adviser solely by reason of being a member of its Board of
Directors, the Trust may pay compensation to such Trustee, but at
a rate no greater than the rate it pays to its other Trustees. The
Trust agrees to bear the costs of preparing and setting in type its
prospectuses, statements of additional information and reports to
its shareholders, and the costs of printing or otherwise producing
and distributing those copies of such prospectuses, statements of
additional information and reports as are sent to its shareholders.
All costs and expenses not expressly assumed by the Adviser under
this Agreement or by such sub-adviser, administrator or principal
underwriter shall be paid by the Trust, including, but not limited
to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its Trustees
other than those affiliated with the Adviser or such sub-adviser,
administrator or principal underwriter; (v) legal and audit
expenses; (vi) custodian and transfer agent, or shareholder
servicing agent, fees and expenses; (vii) expenses incident to the
issuance of its shares (including issuance on the payment of, or
reinvestment of, dividends); (viii) fees and expenses incident to
the registration under Federal or State securities laws of the
Trust or its shares; (ix) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders of
the Trust; (x) all other expenses incidental to holding meetings of
the Trust's shareholders; and (xi) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal
obligations for which the Business Trust may have to indemnify its
officers and Trustees.
4. Compensation of the Adviser
(a) The Business Trust agrees to pay the
Adviser, and the Adviser agrees to accept as full compensation for
all services rendered by the Adviser as such, a management fee
payable monthly and computed on the net asset value of the Trust as
of the close of business each business day at the annual rate of
0.33 of 1% of such net asset value on net assets of up to $325
million and on net assets above that amount at an annual rate of
0.43 of 1% of such net assets.
(b) The Adviser agrees that the fee under (a)
above shall be reduced, but not below zero, by an amount equal to
its pro-rata portion (hereafter described) of the amount, if any,
by which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net
assets of the Trust plus 2% of the next $70 million of such net
assets of the Trust plus 1.5% of its average annual net assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above at the
end of any month will be reduced or postponed so that at no time
will there be any accrued but unpaid liability under this expense
limitation, subject to readjustment during the year. The pro rata
portion, as between the Administrator and Adviser, is based on the
aggregate of the fee of the Adviser and the fee of the
Administrator (exclusive of amounts paid or to be paid out for the
applicable period pursuant to the Trust's Distribution Plan).
5. Duration and Termination
(a) This Amended and Restated Investment
Advisory Agreement shall become effective upon the date first
written above following approval by the shareholders of the Trust
and shall, unless terminated as hereinafter provided, continue in
effect until the June 30 next preceding the first anniversary of
the effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Business Trust's
Board of Trustees, including a vote of a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, with votes cast in person at
a meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the
Adviser at any time without penalty upon giving the Business Trust
sixty days' written notice (which notice may be waived by the
Business Trust) and may be terminated by the Business Trust at any
time without penalty upon giving the Adviser sixty days' written
notice (which notice may be waived by the Adviser), provided that
such termination by the Business Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Trust outstanding and entitled
to vote. This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act).
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of
this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Business Trust's property; the
Adviser represents that it has notice of the provisions of the
Business Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
7. Notices of Meetings
The Business Trust agrees that notice of each
meeting of the Board of Trustees of the Business Trust will be sent
to the Adviser and that the Business Trust will make appropriate
arrangements for the attendance (as persons present by invitation)
of such person or persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their duly
authorized officers and their seals to be hereunto affixed, all as
of the day and year first above written.
ATTEST: Cash Assets Trust
________________________ By:___________________________________
ATTEST: Hawaiian Trust Company, Limited
________________________ By:___________________________________
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made , 1995 by and between
Cash Assets Trust (the "Business Trust"), a Massachusetts business
trust, 380 Madison Avenue, Suite 2300, New York, NY 10017, and
Hawaiian Trust Company, Limited (the "Adviser"), Financial Plaza of
the Pacific, P.O. Box 3170, Honolulu, Hawaii 96802,
W I T N E S S E T H :
WHEREAS, the Business Trust and the Adviser have
previously entered into an Amended and Restated Investment Advisory
Agreement with respect to a portfolio of the Business Trust
entitled Pacific Capital Tax-Free Cash Assets Trust (the "Trust");
and
WHEREAS, the Business Trust and the Adviser now wish
to amend and restate their agreement as herein set forth, referred
to hereafter as "this Agreement"; and
WHEREAS, this Agreement has been approved by the
Board of Trustees of the Business Trust at a meeting held on
September 26, 1994 and in addition has been approved by the holders
of a "majority" of the outstanding voting securities of the Trust,
as defined in the Investment Company Act of 1940 (the "Act"), at a
meeting held on January 6, 1995;
NOW THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth
herein, to act as managerial investment adviser to the Trust with
respect to the investment of the Trust's assets, and to supervise
and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Trust.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Trust
(a) Subject to the succeeding provisions of
this section and subject to the direction and control of the Board
of Trustees of the Business Trust, the Adviser shall:
(i) Supervise continuously the investment
program of the Trust and the composition of
its portfolio;
(ii) Determine what securities shall be
purchased or sold by the Trust;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Trust;
and
(iv) Furnish information as to such securities
to any provider of fund accounting services to
the Trust; monitor records of the Trust as to
the portfolio, including prices, maintained by
such provider of such services; and supply,
monthly or more frequently as may be
necessary, pricing of the Trust's portfolio
based on available market quotations using a
pricing service or other source of pricing
information satisfactory to the Trust.
(b) Any investment program furnished by the
Adviser under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Act and any
rules or regulations in force thereunder; (2) any other applicable
laws, rules and regulations; (3) the Declaration of Trust and By-
Laws of the Business Trust as amended from time to time; (4) any
policies and determinations of the Board of Trustees of the
Business Trust; and (5) the fundamental policies of the Trust, as
reflected in its registration statement under the Act or as amended
by the shareholders of the Trust.
(c) The Adviser shall give the Trust the
benefit of its best judgment and effort in rendering services
hereunder, but the Adviser shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and research made
by any other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other individual,
firm or corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed to
protect the Adviser against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this
Agreement.
(d) Nothing in this Agreement shall prevent the
Adviser or any affiliated person (as defined in the Act) of the
Adviser from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own accounts
or for the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it
will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Trust under this
Agreement. It is agreed that the Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Business Trust's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Business Trust as to any information concerning the Adviser
appropriate for inclusion in such Registration Statement, or as to
any transaction or proposed transaction which might result in an
assignment of the Agreement. The Business Trust agrees to
indemnify the Adviser to the full extent permitted by the Business
Trust's Declaration of Trust.
(e) In connection with its duties to arrange
for the purchase and sale of the Trust's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as shall, in
the Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Adviser
shall cause the Trust to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Adviser determines that better price or
execution may be obtained by paying such commissions; the Trust
expects that most transactions will be principal transactions at
net prices and that the Trust will incur little or no brokerage
costs. The Business Trust understands that purchases from
underwriters include a commission or concession paid by the issuer
to the underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion.
If, on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, administrator or
principal underwriter as the Trust. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market, economic,
or institutional activities. The Business Trust recognizes that no
dollar value can be placed on such research services or on
execution services, that such research services may or may not be
useful to the Trust and/or other accounts of the Adviser, and that
research received by such other accounts may or may not be useful
to the Trust.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Trust,
at the Adviser's expense, all office space, facilities, equipment
and clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser agrees that it will supply, or cause
to be supplied, to any sub-adviser, administrator or principal
underwriter of the Trust all necessary financial information in
connection with such sub-adviser's, administrator's or principal
underwriter's duties under any agreement between such sub-adviser,
administrator or principal underwriter and the Business Trust. The
Adviser will also pay all compensation of the Trust's officers,
employees, and Trustees, if any, who are affiliated persons of the
Adviser, provided that if any Trustee is an affiliate of the
Adviser solely by reason of being a member of its Board of
Directors, the Trust may pay compensation to such Trustee, but at
a rate no greater than the rate it pays to its other Trustees. The
Trust agrees to bear the costs of preparing and setting in type its
prospectuses, statements of additional information and reports to
its shareholders, and the costs of printing or otherwise producing
and distributing those copies of such prospectuses, statements of
additional information and reports as are sent to its shareholders.
All costs and expenses not expressly assumed by the Adviser under
this Agreement or by such sub-adviser, administrator or principal
underwriter shall be paid by the Trust, including, but not limited
to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its Trustees
other than those affiliated with the Adviser or such sub-adviser,
administrator or principal underwriter; (v) legal and audit
expenses; (vi) custodian and transfer agent, or shareholder
servicing agent, fees and expenses; (vii) expenses incident to the
issuance of its shares (including issuance on the payment of, or
reinvestment of, dividends); (viii) fees and expenses incident to
the registration under Federal or State securities laws of the
Trust or its shares; (ix) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders of
the Trust; (x) all other expenses incidental to holding meetings of
the Trust's shareholders; and (xi) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal
obligations for which the Business Trust may have to indemnify its
officers and Trustees.
4. Compensation of the Adviser
(a) The Business Trust agrees to pay the
Adviser, and the Adviser agrees to accept as full compensation for
all services rendered by the Adviser as such, a management fee
payable monthly and computed on the net asset value of the Trust
as of the close of business each business day at the annual rate of
0.27 of 1% of such net asset value on net assets of up to $95
million and on net assets above that amount at an annual rate of
0.33 of 1% of such net assets.
(b) The Adviser agrees that the fee under (a)
above shall be reduced, but not below zero, by an amount equal to
its pro-rata portion (hereafter described) of the amount, if any,
by which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net
assets of the Trust plus 2% of the next $70 million of such net
assets of the Trust plus 1.5% of its average annual net assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above at the
end of any month will be reduced or postponed so that at no time
will there be any accrued but unpaid liability under this expense
limitation, subject to readjustment during the year. The pro rata
portion, as between the Administrator and Adviser, is based on the
aggregate of the fee of the Adviser and the fee of the
Administrator (exclusive of amounts paid or to be paid out for the
applicable period pursuant to the Trust's Distribution Plan).
5. Duration and Termination
(a) This Amended and Restated Investment
Advisory Agreement shall become effective upon the date first
written above following approval by the shareholders of the Trust
and shall, unless terminated as hereinafter provided, continue in
effect until the June 30 next preceding the first anniversary of
the effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Business Trust's
Board of Trustees, including a vote of a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, with votes cast in person at
a meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the
Adviser at any time without penalty upon giving the Business Trust
sixty days' written notice (which notice may be waived by the
Business Trust) and may be terminated by the Business Trust at any
time without penalty upon giving the Adviser sixty days' written
notice (which notice may be waived by the Adviser), provided that
such termination by the Business Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Trust outstanding and entitled
to vote. This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act).
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of
this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Business Trust's property; the
Adviser represents that it has notice of the provisions of the
Business Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
7. Notices of Meetings
The Business Trust agrees that notice of each
meeting of the Board of Trustees of the Business Trust will be sent
to the Adviser and that the Business Trust will make appropriate
arrangements for the attendance (as persons present by invitation)
of such person or persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their duly
authorized officers and their seals to be hereunto affixed, all as
of the day and year first above written.
ATTEST: Cash Assets Trust
________________________ By:___________________________________
ATTEST: Hawaiian Trust Company, Limited
________________________ By:___________________________________
PACIFIC CAPITAL U.S. TREASURIES CASH ASSETS TRUST
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made , 1995 by and between
Cash Assets Trust (the "Business Trust"), a Massachusetts business
trust, 380 Madison Avenue, Suite 2300, New York, NY 10017, and
Hawaiian Trust Company, Limited (the "Adviser"), Financial Plaza of
the Pacific, P.O. Box 3170, Honolulu, Hawaii 96802,
W I T N E S S E T H :
WHEREAS, the Business Trust and the Adviser have
previously entered into an Amended and Restated Investment Advisory
Agreement with respect to a portfolio of the Business Trust
entitled Pacific Capital U.S. Treasuries Cash Assets Trust (the
"Trust"); and
WHEREAS, the Business Trust and the Adviser now wish
to amend and restate their agreement as herein set forth, referred
to hereafter as "this Agreement";
WHEREAS, this Agreement has been approved by the
Board of Trustees of the Business Trust at a meeting held on
September 26, 1994 and in addition has been approved by the holders
of a "majority" of the outstanding voting securities of the Trust,
as defined in the Investment Company Act of 1940 (the "Act"), at a
meeting held on January 6, 1995; and
NOW THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth
herein, to act as managerial investment adviser to the Trust with
respect to the investment of the Trust's assets, and to supervise
and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Trust.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Trust
(a) Subject to the succeeding provisions of
this section and subject to the direction and control of the Board
of Trustees of the Business Trust, the Adviser shall:
(i) Supervise continuously the investment
program of the Trust and the composition of
its portfolio;
(ii) Determine what securities shall be
purchased or sold by the Trust;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Trust;
and
(iv) Furnish information as to such securities
to any provider of fund accounting services to
the Trust; monitor records of the Trust as to
the portfolio, including prices, maintained by
such provider of such services; and supply,
monthly or more frequently as may be
necessary, pricing of the Trust's portfolio
based on available market quotations using a
pricing service or other source of pricing
information satisfactory to the Trust.
(b) Any investment program furnished by the
Adviser under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Act and any
rules or regulations in force thereunder; (2) any other applicable
laws, rules and regulations; (3) the Declaration of Trust and By-
Laws of the Business Trust as amended from time to time; (4) any
policies and determinations of the Board of Trustees of the
Business Trust; and (5) the fundamental policies of the Trust, as
reflected in its registration statement under the Act or as amended
by the shareholders of the Trust.
(c) The Adviser shall give the Trust the
benefit of its best judgment and effort in rendering services
hereunder, but the Adviser shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and research made
by any other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other individual,
firm or corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed to
protect the Adviser against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this
Agreement.
(d) Nothing in this Agreement shall prevent the
Adviser or any affiliated person (as defined in the Act) of the
Adviser from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own accounts
or for the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it
will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Trust under this
Agreement. It is agreed that the Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Business Trust's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Business Trust as to any information concerning the Adviser
appropriate for inclusion in such Registration Statement, or as to
any transaction or proposed transaction which might result in an
assignment of the Agreement. The Business Trust agrees to
indemnify the Adviser to the full extent permitted by the Business
Trust's Declaration of Trust.
(e) In connection with its duties to arrange
for the purchase and sale of the Trust's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as shall, in
the Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Adviser
shall cause the Trust to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Adviser determines that better price or
execution may be obtained by paying such commissions; the Trust
expects that most transactions will be principal transactions at
net prices and that the Trust will incur little or no brokerage
costs. The Business Trust understands that purchases from
underwriters include a commission or concession paid by the issuer
to the underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion.
If, on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, administrator or
principal underwriter as the Trust. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market, economic,
or institutional activities. The Business Trust recognizes that no
dollar value can be placed on such research services or on
execution services, that such research services may or may not be
useful to the Trust and/or other accounts of the Adviser, and that
research received by such other accounts may or may not be useful
to the Trust.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Trust,
at the Adviser's expense, all office space, facilities, equipment
and clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser agrees that it will supply, or cause
to be supplied, to any sub-adviser, administrator or principal
underwriter of the Trust all necessary financial information in
connection with such sub-adviser's, administrator's or principal
underwriter's duties under any agreement between such sub-adviser,
administrator or principal underwriter and the Business Trust. The
Adviser will also pay all compensation of the Trust's officers,
employees, and Trustees, if any, who are affiliated persons of the
Adviser, provided that if any Trustee is an affiliate of the
Adviser solely by reason of being a member of its Board of
Directors, the Trust may pay compensation to such Trustee, but at
a rate no greater than the rate it pays to its other Trustees. The
Trust agrees to bear the costs of preparing and setting in type its
prospectuses, statements of additional information and reports to
its shareholders, and the costs of printing or otherwise producing
and distributing those copies of such prospectuses, statements of
additional information and reports as are sent to its shareholders.
All costs and expenses not expressly assumed by the Adviser under
this Agreement or by such sub-adviser, administrator or principal
underwriter shall be paid by the Trust, including, but not limited
to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its Trustees
other than those affiliated with the Adviser or such sub-adviser,
administrator or principal underwriter; (v) legal and audit
expenses; (vi) custodian and transfer agent, or shareholder
servicing agent, fees and expenses; (vii) expenses incident to the
issuance of its shares (including issuance on the payment of, or
reinvestment of, dividends); (viii) fees and expenses incident to
the registration under Federal or State securities laws of the
Trust or its shares; (ix) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders of
the Trust; (x) all other expenses incidental to holding meetings of
the Trust's shareholders; and (xi) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal
obligations for which the Business Trust may have to indemnify its
officers and Trustees.
4. Compensation of the Adviser
(a) The Business Trust agrees to pay the
Adviser, and the Adviser agrees to accept as full compensation for
all services rendered by the Adviser as such, a management fee
payable monthly and computed on the net asset value of the Trust
as of the close of business each business day at the annual rate of
0.27 of 1% of such net asset value on net assets of up to $60
million and on net assets above that amount at an annual rate of
0.33 of 1% of such net assets.
(b) The Adviser agrees that the fee under (a)
above shall be reduced, but not below zero, by an amount equal to
its pro-rata portion (hereafter described) of the amount, if any,
by which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net
assets of the Trust plus 2% of the next $70 million of such net
assets of the Trust plus 1.5% of its average annual net assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above at the
end of any month will be reduced or postponed so that at no time
will there be any accrued but unpaid liability under this expense
limitation, subject to readjustment during the year. The pro rata
portion, as between the Administrator and Adviser, is based on the
aggregate of the fee of the Adviser and the fee of the
Administrator (exclusive of amounts paid or to be paid out for the
applicable period pursuant to the Trust's Distribution Plan).
5. Duration and Termination
(a) This Amended and Restated Investment
Advisory Agreement shall become effective upon the date first
written above following approval by the shareholders of the Trust
and shall, unless terminated as hereinafter provided, continue in
effect until the June 30 next preceding the first anniversary of
the effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Business Trust's
Board of Trustees, including a vote of a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, with votes cast in person at
a meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the
Adviser at any time without penalty upon giving the Business Trust
sixty days' written notice (which notice may be waived by the
Business Trust) and may be terminated by the Business Trust at any
time without penalty upon giving the Adviser sixty days' written
notice (which notice may be waived by the Adviser), provided that
such termination by the Business Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Trust outstanding and entitled
to vote. This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act).
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of
this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Business Trust's property; the
Adviser represents that it has notice of the provisions of the
Business Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
7. Notices of Meetings
The Business Trust agrees that notice of each
meeting of the Board of Trustees of the Business Trust will be sent
to the Adviser and that the Business Trust will make appropriate
arrangements for the attendance (as persons present by invitation)
of such person or persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their duly
authorized officers and their seals to be hereunto affixed, all as
of the day and year first above written.
ATTEST: Cash Assets Trust
________________________ By:___________________________________
ATTEST: Hawaiian Trust Company, Limited
________________________ By:___________________________________
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL CASH ASSETS TRUST ORIGINAL SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 342,933,803
<INVESTMENTS-AT-VALUE> 342,933,803
<RECEIVABLES> 118,819
<ASSETS-OTHER> 81,923
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 343,134,545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,611,652
<TOTAL-LIABILITIES> 1,611,652
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 309,435,696
<SHARES-COMMON-STOCK> 309,435,696
<SHARES-COMMON-PRIOR> 487,540,712
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,687,557)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 308,666,941
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,839,472
<OTHER-INCOME> 0
<EXPENSES-NET> 2,256,562
<NET-INVESTMENT-INCOME> 19,582,910
<REALIZED-GAINS-CURRENT> 117,496
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19,700,406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,582,910
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,151,381,874
<NUMBER-OF-SHARES-REDEEMED> (1,329,689,125)
<SHARES-REINVESTED> 202,235
<NET-CHANGE-IN-ASSETS> (177,987,520)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,295,234
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,309,132
<AVERAGE-NET-ASSETS> 374,007,673
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL CASH ASSETS TRUST SERVICE SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 342,933,803
<INVESTMENTS-AT-VALUE> 342,933,803
<RECEIVABLES> 118,819
<ASSETS-OTHER> 81,923
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 343,134,545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,611,652
<TOTAL-LIABILITIES> 1,611,652
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,849,912
<SHARES-COMMON-STOCK> 32,849,912
<SHARES-COMMON-PRIOR> 3,501,410
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6040
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 32,849,912
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 959,575
<OTHER-INCOME> 0
<EXPENSES-NET> 144,179
<NET-INVESTMENT-INCOME> 815,396
<REALIZED-GAINS-CURRENT> 6040
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 821,437
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 815,396
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155,686,423
<NUMBER-OF-SHARES-REDEEMED> (127,041,609)
<SHARES-REINVESTED> 703,688
<NET-CHANGE-IN-ASSETS> 29,354,542
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58,359
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104,041
<AVERAGE-NET-ASSETS> 16,851,482
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST ORIGINAL SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 142,231,930
<INVESTMENTS-AT-VALUE> 142,231,930
<RECEIVABLES> 990,493
<ASSETS-OTHER> 25,912
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,248,335
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 461,082
<TOTAL-LIABILITIES> 461,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,179,215
<SHARES-COMMON-STOCK> 125,179,215
<SHARES-COMMON-PRIOR> 138,334,680
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (995)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 125,178,220
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,853,442
<OTHER-INCOME> 0
<EXPENSES-NET> (682,367)
<NET-INVESTMENT-INCOME> 4,503,165
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,505,982
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,503,165)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 351,726,327
<NUMBER-OF-SHARES-REDEEMED> (349,085,551)
<SHARES-REINVESTED> 430,911
<NET-CHANGE-IN-ASSETS> 3,074,503
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 361,819
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (682,367)
<AVERAGE-NET-ASSETS> 125,631,780
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST - SERVICE SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 142,231,930
<INVESTMENTS-AT-VALUE> 142,231,930
<RECEIVABLES> 990,493
<ASSETS-OTHER> 25,912
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,248,335
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 461,082
<TOTAL-LIABILITIES> 461,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,608,764
<SHARES-COMMON-STOCK> 17,608,764
<SHARES-COMMON-PRIOR> 1,378,070
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 269
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17,609,033
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 421,073
<OTHER-INCOME> 0
<EXPENSES-NET> (88,893)
<NET-INVESTMENT-INCOME> 332,090
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 332,359
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (332,090)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,774,005
<NUMBER-OF-SHARES-REDEEMED> (17,825,199)
<SHARES-REINVESTED> 281,888
<NET-CHANGE-IN-ASSETS> 16,230,963
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 58,359
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (104,041)
<AVERAGE-NET-ASSETS> 11,177,345
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL US TREASURIES CASH ASSETS TRUST - ORIGINAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 86,256,191
<INVESTMENTS-AT-VALUE> 86,256,191
<RECEIVABLES> 7,815
<ASSETS-OTHER> 12,433
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,276,439
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434,165
<TOTAL-LIABILITIES> 434,165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,031,245
<SHARES-COMMON-STOCK> 74,031,245
<SHARES-COMMON-PRIOR> 64,033,873
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4717
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 74,035,962
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,896,276
<OTHER-INCOME> 0
<EXPENSES-NET> (375,169)
<NET-INVESTMENT-INCOME> 3,521,107
<REALIZED-GAINS-CURRENT> 4717
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,525,825
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,521,107
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 297,398,080
<NUMBER-OF-SHARES-REDEEMED> (287,477,003)
<SHARES-REINVESTED> 76,296
<NET-CHANGE-IN-ASSETS> 10,002,090
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 195,734
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 448,104
<AVERAGE-NET-ASSETS> 69,504,072
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL U.S. TREASURIES CASH ASSETS TRUST - SERVICE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 86,256,191
<INVESTMENTS-AT-VALUE> 86,256,191
<RECEIVABLES> 7,815
<ASSETS-OTHER> 12,433
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,276,439
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434,165
<TOTAL-LIABILITIES> 434,165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,805,950
<SHARES-COMMON-STOCK> 11,805,950
<SHARES-COMMON-PRIOR> 505,727
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 362
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,806,312
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 296,328
<OTHER-INCOME> 0
<EXPENSES-NET> (42,692)
<NET-INVESTMENT-INCOME> 253,636
<REALIZED-GAINS-CURRENT> 362
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 253,998
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 253,636
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,654,749
<NUMBER-OF-SHARES-REDEEMED> (21,563,607)
<SHARES-REINVESTED> 209,080
<NET-CHANGE-IN-ASSETS> 11,300,584
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,248
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,908
<AVERAGE-NET-ASSETS> 5,414,480
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
DRAFT 10/16/95
CASH ASSETS TRUST
Rule 18f-3
Multiple Class Plan
Pacific Capital Cash Assets Trust, Pacific Capital Tax-
Free Cash Assets Trust and Pacific Capital U.S. Treasuries Cash
Assets Trust (the "Portfolios"), each a portfolio of Cash Assets
Trust (the "Trust"), have elected to rely on Rule 18f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act") in
offering multiple classes of shares in each Portfolio with
differing distribution arrangements, voting rights and expense
allocations. Prior to the adoption of Rule 18f-3, the Portfolios
relied upon an exemptive order granted by the Securities and
Exchange Commission (the "SEC") permitting the Portfolios to
offer multiple classes of shares (the "Order").*
* Investment Company Act Release Nos. IC-20707 (November 16,
1994) and IC-20768 (December 13, 1994).
Pursuant to Rule 18f-3, the board of trustees of a fund
must approve a written plan specifying all of the differences
among classes. However, since this proposed plan (the "Plan")
does not make any changes to the Trust's current arrangements and
expense allocations which were previously approved by the Board
of Trustees of the Trust under the Order, it is not necessary
that the Board approve the Plan in regard to its current
structure. The Board must approve any material amendments to the
Plan prior to their implementation. Prior to offering classes of
shares pursuant to Rule 18f-3, the Plan will be filed as an
exhibit to the Portfolios' registration statement. The Plan sets
forth the differences among classes, including shareholder
services, distribution arrangements, expense allocations, and
conversion or exchange options.
I. Attributes of Share Classes
This section discusses the attributes of the various classes
of shares. Each share of a Portfolio represents an equal pro
rata interest in the Portfolio and has identical voting rights,
powers, qualifications, terms and conditions, and in proportion
to each share's net asset value, liquidation rights and
preferences. Each class differs in that: (a) each class has a
different class designation; (b) only the Service Shares (as
described below) bear the expenses applicable to a plan adopted
pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan")
and any expenses applicable to a non-Rule 12b-1 administrative
services plan (an "Administrative Services Plan"); (c) each class
of shares may bear certain other expenses that are directly
attributable only to that class ("Class Expenses");* (d) classes
vote separately with respect to matters relating to a Portfolio's
Rule 12b-1 Plan; and (e) the exchange privileges could vary among
the classes.
* Class Expenses are limited to any or all of the following
(i) transfer agent fees as identified by the transfer agent
as being attributable to a specific class; (ii) printing and
postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses, and
proxies to the current shareholders of a specific class;
(iii) Blue Sky registration fees incurred by a class; (iv)
SEC registration fees incurred by a class; (v) the expense
of administrative personnel and services as required to
support the shareholders of a specific class; (vi)
litigation or other legal expenses relating solely to one
class; and (vii) trustees fees incurred as a result of
issues relating to one class.
A. Original Shares
Each Portfolio offers Original Shares which are sold
solely to (1) financial institutions for the investment of
funds for which they act in a fiduciary, agency, investment
advisory or custodial capacity; (2) persons entitled to
exchange into Original Shares under the exchange privileges
of the Trust; and (3) shareholders owning shares of the
Trust of record on the date that both classes of shares are
first made available.
1. Sales Loads. Original Shares will be sold without
the imposition of any sales charges.
2. Distribution and Service Fees. Original Shares
will not be subject to any distribution charges
pursuant to Rule 12b-1 or any charges applicable to an
Administrative Services Plan.
3. Class Expenses. Class Expenses which are
attributable to a particular class of shares are
allocated to that particular class.
4. Exchange Privileges and Conversion Features.
Original Shares may differ from Service Shares with
respect to exchange privileges among the Portfolios.
Original Shares of the Portfolios have no conversion
features.
B. Service Shares
Each Portfolio offers Service Shares, which are offered
to customers of banks and other financial institutions
("Service Organizations") that typically are compensated by
service or distribution fees paid by the mutual funds
offered to their customers rather than by transaction or
other fees paid directly by such customers.
1. Sales Loads. Service Shares will be sold without
the imposition of any sales charges.
2. Distribution and Service Fees. Service Shares are
subject to a distribution fee and/or fee pursuant to an
Administrative Services Plan equal to .25% of the
average daily net assets of Service Shares. The Trust,
on behalf of each Portfolio, enters into agreements
with and pays the distributor or the Service
Organization for performing certain services, some of
which could be construed as distribution assistance.
3. Class Expenses. Class Expenses which are
attributable to a particular class of shares are
allocated to that particular class.
4. Exchange Privileges and Conversion Features.
Service Shares may differ from Original Shares with
respect to exchange privileges among the Portfolios.
Service Shares of the Portfolios have no conversion
features.
C. Additional Classes
In the future, the Portfolios may offer additional
classes of shares which differ from the classes discussed
above. However, any additional classes of shares would need
to be approved by the Board and the Plan would need to be
amended to describe those classes.
II. Approval of Multiple Class Plan
The Board of each Portfolio, including a majority of
the independent Trustees, does not need to approve the Plan
initially because the Plan does not make any change in the
arrangements and expense allocations previously approved by the
Board under the Order. However, the Board must approve any
material changes to the classes and the Plan prior to their
implementation. The Board must find that the Plan is in the best
interests of each class individually and the Portfolio as a
whole. In making its findings, the Board should focus on, among
other things, the relationship among the classes and examine
potential conflicts of interest among classes regarding the
allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. Most significantly, the Board
should evaluate the level of services provided to each class and
the cost of those services to ensure that the services are
appropriate and that the allocation of expenses is reasonable.
III. Calculation of Dividends
Dividends paid by a Portfolio with respect to each
class of its shares, to the extent any dividends are paid, must
be calculated in the same manner, at the same time, on the same
day and in the same amount, except that (i) distribution and
administrative service payments associated with any Rule 12b-1
Plan or Administrative Services Plan relating to each respective
class of shares (including any costs relating to implementing
such plans or any amendment thereto) will be borne exclusively by
that class; (ii) any incremental transfer agency fees relating to
a particular class will be borne exclusively by that class; and
(iii) Class Expenses relating to a particular class will be borne
exclusively by that class.
IV. Expense Allocations
The methodology and procedures for calculating the net
asset value and dividends and distributions of the various
classes of shares and the proper allocation of income and
expenses among the various classes of shares are set forth in the
"Report on Design of the System for Calculating Net Asset Value,
Dividend Distribution of the Two Classes of Shares, Allocation of
Expenses Between the Two Classes of Fund Shares and the Internal
Control Environment" of the Portfolios. This report was rendered
by Peat Marwick and states that the Portfolios' methodology and
procedures are adequate to ensure that such calculations and
allocations will be made in an appropriate manner. Peat
Marwick's Report is attached hereto as Exhibit A.
_____________, 1995
