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
Service Shares Prospectus
July 31, 1997
As Supplemented November 19, 1997
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, 1997 (the "Additional Statement") has been filed with the
Securities and Exchange Commission and is available without
charge upon written request to PFPC Inc., 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 PACIFIC CENTURY TRUST (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 Purchase, Redemption or Account inquiries contact
the Funds' Shareholder Servicing Agent: PFPC Inc.
400 Bellevue Parkway, Wilmington, DE 19809
Call 800-255-2287 toll free
For General Inquiries & Yield Information,
Call 800-228-7496 toll free or 212-697-6666
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
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 - Pacific Century Trust (the "Adviser")
serves as the Funds' Investment Adviser, providing experienced
professional management of each Fund's investments. It is a
division of Bank of Hawaii, was founded in 1898 and is the oldest
and largest trust company in Hawaii, administering approximately
$12 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 Hawaiian 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 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 $100 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% 0.30%
12b-1 Fees..................... 0.25% 0.25% 0.25%
All Other Expenses............. 0.25% 0.26% 0.25%
Administration Fee.......... 0.15% 0.11% 0.10%
Other Expenses.............. 0.10% 0.15% 0.15%
Total Fund Operating Expense...s 0.85% 0.80% 0.80%
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 $ 8
3 years $ 27 $26 $26
5 years $ 47 $44 $44
10 years $105 $99 $99
<FN>
*Based upon amounts incurred during the most recent fiscal year of
each Fund.
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 break point, 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 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 would have been 0.14%, 0.24%, and 0.79%.
</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
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 their 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 Year Period
Ended Ended Ended
March 31,1997 March 31,1996 March 31,1995**
<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 0.05 0.01
Less Distributions:
Dividends from net investment
income......................... (0.05) (0.05) (0.01)
Net Asset Value, End of Period.. $1.00 $1.00 $1.00
Total Return (%)................ 4.62 5.06 0.85+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) ($)............ 65,763 32,856 3,501
Ratio of Expenses to Average
Net Assets(%)................. 0.85 0.86 0.83*
Ratio of Net Investment Income
to Average Net Assets (%)..... 4.53 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 years 1997 and 1996, without the
offset in custodian fees for invested cash balances, would have been
Net Investment Income(%)........ 0.05 0.05 0.01
Ratio of Expenses to Average
Net Assets(%).................. 0.85 0.86 0.83*
Ratio of Net Investment Income
to Average Net Assets(%)....... 4.53 4.84 5.26*
<CAPTION>
TAX-FREE FUND
Year Year Period
Ended Ended Ended
March 31, 1997 March 31, 1996 March 31, 1995**
<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 0.01
Less Distributions:
Dividends from net investment
income........................... (0.03) (0.03) (0.01)
Net Asset Value, End of Period.... $1.00 $1.00 $1.0
Total Return (%).................. 2.75 3.11 0.52+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands)($)............... 25,516 17,609 1,378
Ratio of Expenses to Average
Net Assets(%)................... 0.80 0.80 0.77*
Ratio of Net Investment Income
to Average Net Assets........... 2.70 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 years 1997 and 1996, without the offset
in custodian fees for invested cash balances, would have been
Net Investment Income($).......... 0.03 0.03 0.01
Ratio of Expenses to Average
Net Assets(%).................... 0.80 0.80 0.77*
Ratio of Net Investment Income
to Average Net Assets(%)......... 2.70 2.97 3.22*
<CAPTION>
TREASURIES FUND
Year Year Period
Ended Ended Ended
March 31, 1997 March 31, 1996 March 31, 1995*
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period............... $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income............. 0.04 0.05 0.01
Less Distributions:
Dividends from net investment
income............................ (0.04) (0.05) (0.01)
Net Asset Value, End of Period..... $1.0 $1.00 $1.00
Total Return(%).................... 4.50 4.94 0.94+
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) ($)............... 83,424 11,806 506
Ratio of Expenses to Average
Net Assets(%).................... 0.79 0.79 0.85*
Ratio of Net Investment Income
to Average Net Assets(%)......... 4.43 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 years 1997 and 1996, without the
offset in custodian fees for invested cash balances, would have been
Net Investment Income............. 0.04 0.05 0.01
Ratio of Expenses to Average
Net Assets....................... 0.80 0.88 0.98*
Ratio of Net Investment Income
to Average Net Assets............ 4.42 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 ........................ 4.65% 4.76%
Tax-Free Fund .................... 2.69% 2.73%
Treasuries Fund .................. 4.54% 4.64%
</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 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").
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 Pacific
Century Trust, 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.
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."
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. With
respect to 75% of the total assets of the Tax-Free Fund, the 5%
diversification requirement is applicable. (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 the real Gross State Product growth for 1996 was
1.0%, slightly lower than the 1.3% that was projected in 1995.
Although total employment continues to contract, it is
anticipated that most downsizing has been completed, and that
there will be minor job growth of 0.0-0.5% in 1997. Although some
local companies have left the State, other substantial
organizations have indicated interest in new Hawaiian operations.
The State of Hawaii Convention Center is nearing completion with
a projected opening date in mid-1998.
Local economic sources expect that the deflationary trend,
apparent in 1995, has continued through 1996. Retailers have kept
retail prices down and the Honolulu Consumer Price Index is
projected to remain at the current 2.2% annual rate. Rents have
dropped as more rental inventory builds up and property
valuations remain soft, both in the residential and commercial
sectors. State tax credits for hotel renovations will provide
incentives to modernize and improve competitiveness while
providing a stimulus to the construction industry.
In 1996, tourism, the State's principal industry, increased
by 3.6% over 1995 to 6.8 million visitors for the year. Eastbound
visitors accounted for the majority of the increase, attributable
in part to the introduction of direct flights to Kona from Japan.
Trends indicate that tourism as the State's major export
industry, will continue to improve in 1997.
Uncertainties regarding sovereignty and privatization of
government contracts will be outstanding issues that will have
significant impact over the long term for the State. Limited
revenue growth and the need to reduce expenditures will continue
to be of paramount concern for the State government. The Hawaii
legislature recently approved a $1 billion capital improvement
program to stimulate the economy through construction spending.
The attendant accelerated issuance of debt to fund the program at
a time when revenue growth has remained stagnant prompted
Standard & Poor's to downgrade the State's General Obligation
debt from AA to A+. Moody's rates the State's debt as AA3, which
is at the lowest end of the AA range.
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 two NRSROs. 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 each Funds'
shares is determined as of 4:00 p.m. New York time on each day
that the New York Stock Exchange and the Custodian are open (a
"Business Day") by dividing the value of the net assets of
allocable to each class of each Fund (i.e., the value of the
assets less liabilities, exclusive of surplus)by the total number
of shares of each class of each Fund 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 is based on a valuation of
each Fund's investments at amortized cost; see the Additional
Statement.
The New York Stock Exchange is normally not open on the
following days: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. However, that
Exchange may close on other days. In addition, the Custodian is
not open on Columbus Day and Veterans Day.
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 Service 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 PFPC Inc.
(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)
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
2. By Wire. Payment may be wired in Federal funds (monies
credited to a bank's account with a Federal Reserve Bank) to PNC
Bank, NA.
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) and then instruct your bank to
wire funds as indicated below for the appropriate Fund:
the Cash Fund:
PNC BANK, NA
Philadelphia, PA
ABA #0310-0005-3
Account #85-0216-4589
FFC: Pacific Capital Cash Assets Trust - Service Shares
the Tax-Free Fund:
PNC BANK, NA
Philadelphia, PA
ABA #0310-0005-3
Account #85-0216-4626
FFC: Pacific Capital Tax-Free Cash Assets Trust - Service
Shares
the Treasuries Fund:
PNC BANK, NA
Philadelphia, PA
ABA #0310-0005-3
Account #85-0216-4714
FFC: Pacific Capital U.S. Treasuries Cash Assets Trust -
Service Shares
In each case please provide 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).
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 Pacific Century Investment
Services, 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 prior to 4:00 p.m. New York time on any
Business Day 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 Business Day. Wire payments not in
Federal funds will normally be converted into Federal funds on
the next Business Day 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 it is a Business Day, and otherwise at 4:00 p.m. on the
next Business Day 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
Business Day 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 Business
Day, in which case the order will be executed at the net asset
value determined on the next Business Day. 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 Business Day will be the price determined on the following
Business Day. 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 (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, 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 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 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.) 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
Funds' 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 Funds' 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 Pacific Century Investment Services,
"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 of 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
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: PFPC Inc., 400 Bellevue Parkway, Wilmington,
DE 19809 or by fax at 302-791-3370. This letter must provide Fund
name, account name(s), 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 have redemption proceeds sent to a Financial
Institution Account, you should so elect on the Expedited
Redemption section of the Application or the 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 PNC Bank, NA (the "Bank").
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 $100. 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 Bank for this purpose. You
will be subject to the Bank'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 to you for the maintenance of this
special check writing privilege or for the clearance of any
checks.
When such a check is presented to the Bank for payment,
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 Bank 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
Bank. 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 your 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 Bank 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
your 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 in blank (unsigned)
representing Service Shares to be redeemed should be sent to the
Funds' Shareholder Servicing Agent: PFPC Inc., 400 Bellevue
Parkway, Wilmington, DE 19809, 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 the 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. Additional documentation may be
required where shares are held by a corporation, partnership,
trustee or executor, or if redemption is requested by other than
the shareholder of record. If redemption proceeds of less than
$50,000 are payable to the record holder and are to be sent to
the record address, no signature guarantee is required.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: PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809, 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 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 broker or dealer to arrange for a redemption,
you may be charged a fee 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 Bank 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 the 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
Pacific Century Trust (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 is a division of Bank of Hawaii, all of whose
shares are owned by Pacific Century Financial Corporation
("Pacific Century") and Bank of Hawaii's directors (each of whom
owns qualifying shares as required by Hawaii law). Pacific
Century 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. Pacific Century
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, two equity funds and money market funds. As
of June 30, 1997, these funds had aggregate assets of
approximately $2.6 billion, of which approximately $720 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, 1997, the Cash
Fund, the Tax-Free Fund and the Treasuries Fund paid or accrued
to the Adviser fees of $1,424,936, $410,547 and $379,291
respectively, and paid or accrued to the Administrator fees of
$609,175, $156,130 and $124,062, respectively under the Advisory
and Administration Agreements.
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 75% by Mr. Herrmann and 25% by Diana P.
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 1996, 1995 and 1994, the percentage of the Tax-Free Fund's
dividends exempt from State of Hawaii income taxes was 41.3%,
34.8% and 38.9%, 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 1996, 1995 and 1994, the percentage of the
Treasuries Fund's dividends exempt from State of Hawaii income
taxes was 71.5%, 82.6% and 85.6%, 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 the outstanding shares of
each Fund on July 3, 1997, was as follows:
The Cash Fund: Of the Cash Fund's Original Shares, Hawaiian
Trust Company, Limited, Financial Plaza of the Pacific, Honolulu,
Hawaii held of record 262,271,692 shares (67.1%) and Mercantile
Bank, N.A., P.O. Box 387, St. Louis, Missouri held of record
124,685,412 shares (31.9%). Of the Cash Fund's Service Shares,
BHC Securities, Inc., 2005 Market Street, Philadelphia, PA held
of record 80,978,718 shares (99.9%).
The Tax-Free Fund: Of the Tax-Free Fund's Original Shares,
Hawaiian Trust Company, Limited, Financial Plaza of the Pacific,
Honolulu, Hawaii held of record 64,370,267 shares (89.6%); Of the
Tax-Free Fund's Service Shares, BHC Securities, Inc., 2005 Market
Street, Philadelphia, PA held of record 23,482,786 shares
(99.9%).
The Treasuries Fund: Of the Treasuries Fund's Original
Shares, Hawaiian Trust Company, Limited, Financial Plaza of the
Pacific, Honolulu, Hawaii held of record 61,294,917 shares
(88.6%); Mercantile Bank, N.A., P.O. Box 387, St. Louis, Missouri
held of record 6,488,434 shares (9.4%). Of the Treasuries Fund's
Service Shares, BHC Securities, Inc., 2005 Market Street,
Philadelphia, PA held of record 87,516,811 shares (99.9%).
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:
PFPC Inc.
400 Bellevue Parkway, Wilmington, DE 19809
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 (910)
___ Pacific Capital Tax-Free Cash Assets Trust (920)
___ Pacific Capital U.S. Treasuries Cash Assets Trust (930)
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) and then instruct your Financial Institution to
wire funds as indicated below for the appropriate Fund:
Wire Instructions:
PNC BANK, NA
Philadelphia, PA
ABA #0310-0005-3
For further credit to (specify the Fund you are investing in)
Pacific Capital Cash Assets Trust (Original Shares)
Account #85-0216-4589
Pacific Capital Tax-Free Cash Assets Trust (Original Shares)
Account #85-0216-4626
Pacific Capital U.S. Treasuries Cash Assets Trust (Original Shares)
Account #85-0216-4714
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 PNC Bank, NA, 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 PNC Bank, NA, 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, PFPC Inc., 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
Pacific Century Trust
a division of
Bank of Hawaii
111 South King Street
Honolulu, Hawaii 96813
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
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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
Table of Expenses
Financial Highlights
Introduction
Investment Of The Funds' Assets
The Cash Fund And Its Investments
The Tax-Free Fund And Its Investments
The Treasuries Fund And Its Investments
Net Asset Value Per Share
How To Invest In The Funds
How To Redeem Your Investment
Automatic Withdrawal Plan
Management Arrangements
Dividend And Tax Information
Exchange Privileges
General Information
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
Service Shares
