Registration Nos. 2-92164 and 811-4066
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. _______ [ ]
Post-Effective Amendment No. 22 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 21 [ X ]
CASH ASSETS TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[___] on (date) pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[_X_] on July 31, 1998 pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new effective
date for a previous post-effective amendment.
<PAGE>
CASH ASSETS TRUST
Original and Service Classes
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights
4..............Introduction; Investment of the Trust's
Assets; Investment Restrictions; General
Information
5..............Management Arrangements
5A.............*
6..............General Information; Dividend and Tax
Information
7..............Net Asset Value per Share; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Investment
Restrictions; Loans of Portfolio
Securities
14.............Trustees and Officers
15.............General Information
16.............Additional Information as to Management
Arrangements; General Information
17.............Investment of the Trust's Assets (Prospectus
caption)
18.............General Information
19.............Limitation of Redemptions in Kind; Amortized
Cost Valuation; Computation of Daily
Dividends; Automatic Withdrawal Plan
20.............*
21.............How to Invest in the Trust (Prospectus
caption); Distribution Plan; General
Information
22.............Yield Information; Financial Highlights
(Prospectus caption)
*Not applicable or negative answer
<PAGE>
The Pacific Capital Funds
of
Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-CATS-4-YOU (800-228-7496)
212-697-6666
Original Shares
Prospectus July 31, 1998
Cash Assets Trust (the "Trust") is a professionally
managed, diversified, 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.
Government Securities Cash Assets Trust (each a "Fund" and
collectively, the "Funds").
There are two classes of shares of each of the Funds:
"Original Shares" and "Service Shares"; see "General Information
- - Description of Classes." Only Original Shares are offered by
this Prospectus. Original shares of the Funds may be purchased
and redeemed at their next determined net asset value, which is
normally the constant price of $1.00 per share; see "Net Asset
Value Per Share." Purchases are made without any sales charge
through Aquila Distributors, Inc., which is the exclusive
Distributor of the Funds' shares. Only certain persons are
eligible to purchase Original Shares. See "How to Invest in the
Funds" and "How to Redeem Your Investment."
This Prospectus concisely states information about the
three Funds that you should know before investing in Original
Shares. A Statement of Additional Information about the Funds
dated July 31, 1998 (the "Additional Statement") has been filed
with the Securities and Exchange Commission and is available
without charge upon written request to the Funds' Shareholder
Servicing 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.
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. Government Securities Cash Assets
Trust (the "Government Securities Fund") is a money market mutual
fund which invests exclusively in short-term direct obligations
of the United States Treasury, in other obligations issued or
guaranteed by agencies or instrumentalities of the United States
Government (with remaining maturities of one year or less) and
certain repurchase agreements secured by U.S. government
securities. Shares of the Government Securities Fund are not
guaranteed or insured by the United States Government.
All investments must meet specific quality, maturity and
diversification standards. (See "Investment of the Funds'
Assets.")
Initial Investment - You may open your account in any Fund
with any purchase of $1,000 or more. There is no sales charge. An
Application is in the back of the Prospectus. (See "How to Invest
in the Funds.")
Additional Investments - There is no minimum on additional
investments and they can be made at any time.
Monthly Income - The securities in which the Funds invest
earn interest which is declared daily as dividends. Dividends are
paid monthly on or about the last day of each month. At your
choice, dividends are paid by check mailed to you, directly
deposited into your financial institution account or
automatically reinvested without sales charge in additional
Original Shares. (See "Dividend and Tax Information.")
Many Different Issues - Even a small investment in any Fund
allows an investor to have the advantages of a portfolio which
consists of a large number of issues. (See "Investment of the
Funds' Assets.")
Exchanges - You may exchange Original Shares of any Fund
into other money market funds and certain bond and equity funds.
(See "Exchange Privileges.")
Portfolio Management - Pacific Century Trust, a division
of the Bank of Hawaii serves as the Funds' Investment Adviser,
providing experienced professional management of each Fund's
investments. 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 Government
Securities 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 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 Government Securities Fund invests only in U.S.
government securities and certain repurchase agreements secured
by U.S. government 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.")
Liquidity - Redemptions - You may redeem any amount of your
Original Share account in any Fund on any business day by
telephone, fax or mail request by using the Funds' Expedited
Redemption procedure, with proceeds being sent to a predesignated
financial institution. If the amount of your redemption proceeds
is $1,000 or more, the proceeds will, wherever possible, be wired
or transferred through the facilities of the Automated Clearing
House; otherwise they will be mailed. You may also write checks
for any purpose in amounts of $500 or more. There are no
penalties or redemption fees. See "How to Redeem Your Investment"
for these and other redemption methods.
Statements and Reports - For each Fund in which you invest,
you will receive statements of your Original Share account
monthly as well as each time you add to your account or take
money out. Additionally, you will receive a Semi-Annual Report
and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST - ORIGINAL SHARES
TABLE OF EXPENSES
Government
Cash Tax-Free Securities
Shareholder Transaction Expenses Fund Fund Fund(1)
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases................ 0% 0% 0%
Maximum Sales Charge
Imposed on Reinvested Dividends..... 0% 0% 0%
Maximum 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.............. 0.36% 0.27% 0.31%
12b-1 Fees**......................... 0% 0% 0%
All Other Expenses................... 0.22% 0.28% 0.21%
Administration Fee................. 0.14% 0.13% 0.09%
Other Expenses ................... 0.08% 0.15% 0.12%
Total Fund Operating Expenses........ 0.58% 0.55% 0.52%
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 Government
Time Period Fund Fund Securities Fund(1)
<S> <C> <C> <C>
1 year................. $ 6 $ 6 $ 5
3 years................ $19 $18 $17
5 years................ $32 $31 $29
10 years............... $73 $69 $65
<FN>
(1) On April 1, 1998, the fund, formerly called Pacific Capital U.S.
Treasuries Cash Assets Trust, became Pacific Capital U.S. Government
Securities Cash Assets Trust.
</FN>
<FN>
*Based upon amounts incurred during the most recent fiscal year
of each Fund, restated to reflect current arrangements.
The respective rates for the investment advisory fee and the
administration fee shown in the table represent the effective
rates, taking into consideration the breakpoint in net assets
used in the calculation of fees. For the portion of net assets
above and below each breakpoint, the aggregate rate of fees is the
same but is allocated differently to the Adviser and the Administrator
so that Total Fund Operating Expenses shown remains unchanged.
(See "Management Arrangements.")
Other expenses for the Cash Fund 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 0.07%, 0.21% and 0.57%,
respectively.
</FN>
<FN>
** No payments designed to recognize sales of shares or to pay
advertising expenses out of the assets or income of any Fund are
permitted under the 12b(1) Plans for Original Shares. The Plans
authorize certain payments for such purposes to be made by the
Administrator, not any of the Funds. (See "Distribution Plan.")
</FN>
<FN>
+ The expense example is based upon an amount at the beginning of
each year which includes the prior year's assumed results. A year's
results consist of an assumed 5% annual return less operating expenses
as shown above; the expense ratio was applied to an assumed average
balance (the year's starting investment plus one-half the year's
results). Each column represents the cumulative expenses so
determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT
ALL MUTUAL FUNDS USE THE 5% RATE FOR PURPOSES OF PREPARING THE
ABOVE EXAMPLE.
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in
Original Shares of each Fund will bear directly or indirectly.
(See "Management Arrangements" for a more complete description of
the various investment advisory and administration fees.)
<PAGE>
[CAPTION]
<TABLE>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
CASH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights for the Original
Shares of the Cash Fund has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon is included with the Funds'
financial statements contained in its Annual Report, which are
incorporated by reference into the Additional Statement. The
information provided in the table should be read in conjunction
with the financial statements and related notes.
Year Ended March 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period....... $1.00 $1.00 $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income..... 0.05 0.05 0.05 0.04 0.03
Less distributions:
Dividends from net
investment income........ (0.05) (0.05) (0.05) (0.04) (0.03)
Net Asset Value, End
of Period................. $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)........... 5.15 4.88 5.32 4.40 2.74
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands).......... 418.8 421.4 308.7 486.7 407.1
Ratio of Expenses to Average
Net Assets (%)............ 0.57 0.60 0.60 0.59 0.59
Average Net Assets (%).... 5.04 4.79 5.24 4.40 2.71
For the years 1998, 1997 and 1996, net investment income per share and the
ratios of income and expenses to average net assets without the expense
offset in custodian fees for uninvested cash balances would have been:
Net investment income($).... 0.05 0.05 0.05
Ratio of Expenses to Average
Net Assets (%)............. 0.58 0.60 0.61
Ratio of Net Investment
Income to Average
Net Assets (%)............. 5.03 4.78 5.23
Unaudited: The Trust's "current yield" for the seven days ended March 31,
1998 was 5.14% and its "compounded effective yield" for that period
was 5.27%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights for the Original
Shares of the Tax-Free Fund has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon is included with the Funds'
financial statements contained in its Annual Report, which are
incorporated by reference into the Additional Statement. The information
provided in the table should be read in conjunction with the financial
statements and related notes.
Year Ended March 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income........ 0.03 0.03 0.03 0.03 0.02
Less distributions:
Dividends from net
investment income........... (0.03) (0.03) (0.03) (0.03) (0.02)
Net Asset Value, End
of Period.................... $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%).............. 3.08 3.00 3.37 2.74 2.02
Ratios/Supplemental Data
Net Assets, End of Period
($ in thousands)............. 76.6 91.0 125.2 138.3 113.9
Ratio of Expenses to Average
Net Assets(%)............... 0.63 0.55 0.54 0.55 0.56
Ratio of Net Investment Income
to Average Net Assets(%).... 3.04 2.97 3.32 2.74 1.99
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees and for the years 1998, 1997 and 1996, without
the expense offset in custodian fees for uninvested cash balances would
have been:
Net investment income($)...... 0.03 0.03 0.03 0.02
Ratio of Expenses to Average
Net Assets(%)................ 0.63 0.55 0.54 0.58
Ratio of Net Investment Income
to Average Net Assets(%)..... 3.04 2.97 3.32 1.97
Unaudited: The Trust's "current yield" for the seven days ended March 31,
1998 was 3.15% and its "compounded effective yield" for that period
was 3.20%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
ORIGINAL SHARES
GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights for the Original
Shares of the Government Securities Fund has been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon is
included with the Funds' financial statements contained in its Annual
Report, which are incorporated by reference into the Additional
Statement. The information provided in the table should be read in
conjunction with the financial statements and related notes. On
April 1, 1998, the fund, formerly called Pacific Capital U.S.
Treasuries Cash Assets Trust, became Pacific Capital U.S. Government
Securities Cash Assets Trust.
Year Ended March 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00
Income from
Investment Operations:
Net investment income........ 0.05 0.05 0.05 0.04 0.03
Less distributions:
Dividends from net
investment income........... (0.05) (0.05) (0.05) (0.04) (0.03)
Net Asset Value, End
of Period.................... $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%).............. 4.95 4.76 5.20 4.20 2.59
Ratios/Supplemental Data
Net Assets,End of Period
($ in thousands)............ 100.8 65.7 74.0 64.0 91.7
Ratio of Expenses to Average
Net Assets (%).............. 0.52 0.55 0.54 0.54 0.52
Ratio of Net Investment Income
to Average Net Assets (%)... 4.85 4.66 5.07 4.04 2.58
Net investment income per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's
voluntary waiver of fees and for the years 1998, 1997 and 1996, without
the expense offset in custodian fees for uninvested cash balances would
have been:
Net investment income($)...... 0.05 0.05 0.05 0.04 0.03
Ratio of Expenses to Average
Net Assets (%)............... 0.52 0.56 0.63 0.59 0.52
Ratio of Net Investment Income
to Average Net Assets(%)..... 4.85 4.65 4.98 3.99 2.58
Unaudited: The Trust's "current yield" for the seven days ended March 31,
1998 was 5.08% and its "compounded effective yield" for that period
was 5.21%; see the Additional Statement for the method of calculating
these yields.
</TABLE>
<PAGE>
INTRODUCTION
Cash Assets Trust (the "Trust") is a professionally
managed, open-end investment company formed in 1984 as a
Massachusetts business trust. The Trust consists of three
separate funds: Pacific Capital Cash Assets Trust, (the "Cash
Fund"), Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free
Fund"), and Pacific Capital U.S. Government Securities Cash
Assets Trust (the "Government Securities 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 Government Securities
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 only in short-term direct
obligations of the United States Treasury, in other obligations
issued or guaranteed by agencies or instrumentalities of the
United States Government (with remaining maturities of one year
or less) and certain repurchase agreements secured by U.S.
government securities.
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 "Adviser"), the Funds' investment 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) bank 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); 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, the term "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 not 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 U.S. 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 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.
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
indicates that the real Gross State Product growth for 1997 was
1.3%, lower than the 2% that was projected in 1996. Payroll
employment stabilized in 1997 from declines experienced between
1992 and 1996. Employment growth in 1998 is forecast to be less
than 1.0%. Although some local companies have left the State,
major retailers have entered the State and are expected to begin
operations within the next six months. The State of Hawaii
Convention Center has been completed and has had several "soft"
openings in preparation for a scheduled grand opening in July,
1999. During 1998, delegates and exhibitors at the center are
expected to spend upwards of $800 million.
Hawaii's inflation rate is forecast to be flat for 1998.
Although local housing costs have been in a deflationary trend,
recent anecdotal evidence suggests that sales volumes are
improving which could stabilize housing costs in 1998. Hawaii's
cost of living differential continues to decline as well. In the
early 1990's it peaked at 1.39 of the U.S. urban average, but in
1997 it fell to 1.33 and is projected to fall to 1.30 in
1998.
In 1997, tourism, the State's principal industry, increased
slightly by 0.7% over 1996 with 6.9 million visitors. Westbound
arrivals increased by 1.8%, offsetting the decline in eastbound
arrivals. Visitor arrivals for 1998 are projected to increase by
1.0% over 1997. Under new authorizations by the U.S. Department
of Transportation, several airlines will either begin service
between Japan and Hawaii or increase the number of weekly flights
currently in service.
During 1997, a twenty-seven member Economic Revitalization
Task Force was established to make recommendations for economic
change. The Hawaii legislature recently passed many of the
recommendations of the Task Force, including a decrease in the
personal income tax; increased funding for tourism promotion; a
finite time frame for regulatory permitting and licensing
processes; and allowing for privatization of government services
under certain conditions. These changes, along with continuation
of the $1 billion capital improvement program approved in the
last legislative session, are positive factors for economic
growth. The State's strong reliance on tourism and the
uncertainties in Asia, have, however, prompted Moody's Investors
Service to lower its rating on the State's General Obligation
debt to A1 from Aa3. Standard & Poors affirmed the State's debt
rating at A+. The A1/A+ rating on the State's debt is still
recognized "investment grade" by both rating agencies. (See the
Additional Statement for and explanation of municipal debt
ratings.)
Diversification Under the Rule
Under the Rule, the Tax-Free Fund cannot, with respect to
75% of its total assets (valued at amortized cost), buy the
securities (not including U.S. Government Securities) of any
issuer if more than 5% of its total assets would then be invested
in securities of that issuer; with respect to the remaining 25%
of its total assets, the Fund may invest more than 5% of its
total assets in the securities of a single issuer only if those
securities are First Tier Securities. In addition, the Rule
limits investment in Second Tier Securities that are "conduit
securities," as defined in the Rule (generally, "conduit
securities" are Municipal Obligations issued to finance non-
government projects, such as private hospitals, housing projects
or industrial development projects, and whose ultimate obligors
are not government or municipal entities), to 5% of the Fund's
total assets in the aggregate and to no more than the greater of
1% of the Fund's total assets or $1,000,000 in the securities of
any one issuer. (In general, the Tax-Free Fund does not intend to
own Second Tier Securities.)
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 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 GOVERNMENT SECURITIES FUND AND ITS INVESTMENTS
Management Policies of the Government Securities Fund
The Government Securities Fund invests only in short-term
direct obligations of the United States Treasury, in other
obligations issued or guaranteed by agencies or instrumentalities
of the United States Government (with remaining maturities of one
year or less) and certain repurchase agreements secured by U.S.
Government Securities. Shares of the Government Securities 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.
Information On Other U.S. Government Securities
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 Government Securities 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.
The investment by the Government Securities Fund in such
short-term direct obligations of the U.S. government and its
agencies and instrumentalities may result in a lower yield than a
policy of investing in other types of instruments, and therefore
the yield of the Government Securities 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 Government Securities Fund may purchase securities
subject to repurchase agreements provided that such securities are
U.S. Government Securities. 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 Government Securities Fund. (See "Repurchase Agreements" under
the caption "Matters Applicable to All The Funds" below.)
Other Information about the Government Securities Fund's
Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Government Securities 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 Government Securities 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 Government Securities Fund
The following restrictions on the Government Securities
Fund's investments are fundamental policies and cannot be changed
without approval of the shareholders of the Government Securities
Fund.
1. The Government Securities Fund can make loans only by
lending securities or entering into repurchase agreements.
The Government Securities 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
Government Securities 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 Government Securities 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 Government Securities 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 Government Securities Fund can borrow only in
limited amounts for special purposes.
The Government Securities 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 Government Securities Fund's income.
The Government Securities 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
Government Securities 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 Government Securities 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. Under the Rule, the Tax-Free Fund
is subject to the diversification requirements set forth above
under "The Tax-Free Fund and its Investments, Diversification Under
the Rule." The Rule has specific provisions relating to
determination 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
Fund's 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 the Fund
allocable to the class (i.e., the value of the assets less
liabilities, exclusive of surplus) by the total number of shares of
that class of the Fund then 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 the
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, the 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 Original Shares are sold on a continuous basis at
the net asset value next determined after an order is entered and
deemed effective. There is no sales charge. The minimum initial
investment is $1,000 in the shares of a Fund. Subsequent
investments may be in any amount. Aquila Distributors, Inc. (the
"Distributor") is the exclusive Distributor of the Funds' shares.
The Distributor sells shares only for purchase orders received.
Original Shares are sold solely to (1) financial institutions for
their own account or for the investment of funds for which they act
in a fiduciary, agency, investment advisory or custodial capacity;
(2) persons entitled to exchange into such shares under the Fund's
exchange privilege; and (3) shareholders of record on January 20,
1995, the date on which the Funds first offered two classes of
shares.
Opening an Account
To open a new Original Shares account, you must send a
properly completed Application to the Shareholder Servicing Agent
(the "Agent"). Redemption of Original Shares purchased by wire
payment will not be honored until a properly completed Application
has been received by the Agent.
Initial investments in Original Shares may be made in any of
these three ways:
1. By Mail. Payment may be made by check, money order,
Federal Reserve Draft or other negotiable bank draft drawn in
United States dollars on a United States commercial or savings bank
or credit union (each of which is a "Financial Institution")
payable to the order of Pacific Capital Cash Assets Trust, Pacific
Capital Tax-Free Cash Assets Trust or Pacific Capital U.S.
Government Securities 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
(Indicate Original Shares or 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
(Indicate Original Shares or Service Shares)
the Government Securities Fund:
PNC BANK, NA
Philadelphia, PA
ABA#0310-0005-3
Account #85-0216-4714
FFC: Pacific Capital U.S. Government Securities
Cash Assets Trust
(Indicate Original Shares or Service Shares)
In addition, add:
Account Name and Number (if an existing account) or the name in
which the investment is to be registered (if a new account).
Your bank may impose a charge for wiring funds.
3. Through Brokers. If you wish, you may invest in a Fund by
purchasing Original Shares through registered broker-dealers.
There is no sales or service charge imposed by any Fund on
purchases of Original Shares, although broker-dealers may make
reasonable charges to their customers for their services. The
services to be provided and the fees therefor are established by
each broker-dealer acting independently; broker-dealers may also
determine to establish, as to accounts serviced by them, higher
initial or subsequent investment requirements than those required
by the Funds. Broker-dealers are responsible for prompt
transmission of orders placed through them.
Additional Investments
You may make additional investments in Original Shares in
any amount after an account has been established by mailing
directly to the Agent a check, money order or other negotiable
bank draft made payable to the Fund, or by wiring funds as
described above. In each case you should indicate your name and
account number to insure prompt and proper crediting of your
account. The pre-printed stub attached to each Fund's
confirmations is provided as a convenient identification method
to accompany additional investments made by mail. You may also
make subsequent investments of $50 or more using electronic funds
transfers from your demand account at a Financial Institution if
it is a member of the Automated Clearing House and if the Agent
has received a completed Application designating this feature,
or, after your account has been opened, a Ready Access Features
form available from the Distributor or the Agent. A
pre-determined amount can be regularly transferred for investment
("Automatic Investment") or single investments can be made upon
receipt by the Agent of telephone instructions from anyone
("Telephone Investment"). The maximum amount of each Telephone
Investment is $50,000. Upon 30 days' written notice to
shareholders, the Funds may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
When Shares Are Issued and Dividends Are Declared On Them
There are three methods as to when Original Shares are
issued. Under each method, shares are issued at the net asset
value per share next determined after the purchase order is
effective, as discussed below. Under each method, the Application
must be properly completed and have been received and accepted by
the Agent; each Fund or the Distributor may also reject any
purchase order for shares of that Fund. Under each method,
Federal funds (see above) must either be available to the Fund in
question or the payment thereof must be guaranteed to the Fund so
that the Fund can be as fully invested as practicable.
The first method under which Original Shares are issued
involves ordinary investments. Under this method, payments
transmitted by wire in Federal funds and payments made by Federal
Reserve Draft received by the Custodian prior to 4:00 p.m. New
York time on any Business Day will be invested (i.e., the
purchase order will be effective) at the net asset value per
Original Share determined as of 4:00 p.m. on that day; if either
such type of payment is received after that time, the purchase
order will be effective as of 4:00 p.m. on the next 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 Original Shares are issued
involves a bank or broker-dealer making special arrangements with
the Funds under which (i) either (a) payment is made in Federal
funds or by check in New York Clearing House funds delivered to
the Agent prior to 5:00 p.m. New York time or (b) the Agent is
advised prior to that time of a dollar amount to be invested;
(ii) the Agent is advised prior to that time of the form of
registration of the shares to be issued; (iii) the bank or
broker-dealer will prior to noon New York time on the next
Business Day wire Federal funds to the Custodian (but in the case
of prior payment by check under (i)(a) above only if the check is
not converted into Federal funds in the normal course on the next
Business Day); and (iv) arrangements satisfactory to the Funds
are made between it and the bank or broker-dealer under which if
Federal funds are not so received by the Custodian, the Fund is
reimbursed for any costs or loss of income arising out of such
non-receipt. New York Clearing House funds are funds represented
by a check drawn on a bank which is a member of the New York
Clearing House. Under this second method, the purchase order is
effective on the day the check or the advice is received under
(i) above. Dividends on shares issued under this second method
are declared starting on the day (whether or not a Business Day)
after the purchase order is effective and are declared on the day
on which such shares are redeemed.
The third method under which Original Shares are issued
involves broker-dealers or banks which have requested that this
method be used, to which request the Funds have consented. Under
this third method (i) the Agent must be advised prior to noon New
York time on any Business Day of a dollar amount to be invested;
and (ii) Federal funds must be wired to the Custodian on that
day; under this method, the purchase order is effective on that
day. Dividends on shares issued under this third investment
method are declared beginning on that day but not on the day such
shares are redeemed.
This third investment method is available to prospective
investors in Original Shares who wish to use it so that the
dividends on their shares will commence to be declared on the day
the purchase order is effective. Upon written or phone request to
a Fund by such a prospective investor, the Fund will advise as to
the broker-dealers or banks through which such purchases may be
made.
Confirmations and Share Certificates
All purchases of Original Shares will be confirmed and
credited to you in an account maintained for you by the Agent in
full and fractional shares of the Fund being purchased (rounded
to the nearest 1/1000th of a share). Share certificates will not
be issued unless you so request from the Agent in writing and
declare a need for such certificates, such as a pledge of shares
or an estate situation. If certificates are issued at your
request, Expedited Redemption Methods described below will not be
available and delay and expense may be incurred if you lose the
certificates. No certificates will be issued for fractional
shares or to shareholders who have elected the checking account
or predesignated bank account methods of withdrawing cash from
their accounts. (See "How to Redeem Your Investment" below.)
The Funds and the Distributor reserve the right to reject
any order for the purchase of Original Shares. In addition, the
offering of shares may be suspended at any time and resumed at
any time thereafter.
Distribution Plan
Each Fund has adopted a Distribution Plan under Rule
12b-1 ("Rule 12b-1") under the 1940 Act. Rule 12b-1 provides in
substance that an investment company may not engage directly or
indirectly in financing any activity which is primarily intended
to result in the sale of its shares except pursuant to a plan
adopted under that rule. One section of the first part of the
Distribution Plan of each Fund is designed to protect against any
claim against or involving the Fund that some of the expenses
which the Fund pays or may pay come within the purview of Rule
12b-1. Another section of the first part of the Distribution Plan
authorizes Aquila Management Corporation (the "Administrator"),
not the Fund, to make certain payments to certain Qualified
Recipients (as defined in the Distribution Plan) which have
rendered assistance in the distribution and/or retention of the
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 Government Securities
Fund, the rate is 0.10 of 1%.
The second part of the Distribution Plan of each Fund,
discussed more fully below under "General Information
- -Description of Classes," provides for payment by the Fund of
fees to certain financial institutions with respect to Service
Shares (not to Original Shares, to which this Prospectus
relates). These fees are treated as expenses allocable
specifically to the Service Shares class and are therefore borne
only by that class.
See the Additional Statement for further information about
the Distribution Plan.
With the exception of its provisions relating specifically
to Service Shares, each Fund's Distribution Plan is solely a
defensive plan designed to protect that Fund and its affiliates
against any claim described above. The Distribution Plan does not
involve payments, out of assets or income allocated to Original
Shares, designed to recognize sales of shares of any Fund or to
pay advertising expenses.
HOW TO REDEEM YOUR INVESTMENT
Each Fund provides day-to-day liquidity. You may redeem all
or any part of your Original Shares at any time at the net asset
value next determined after acceptance of your redemption request
at the Agent. Redemptions can be made by the various methods
described below. Except for shares recently purchased by check as
discussed below, there is no minimum time period for any
investment in any Fund. There are no redemption fees or
withdrawal penalties. If you purchase Original Shares of any Fund
through broker-dealers, banks and other financial institutions
which serve as shareholders of record you must redeem through
those institutions, which are responsible for prompt transmission
of redemption requests. In all other cases, you may redeem
directly, but a completed purchase Application must have been
received by the Agent before redemption requests can be honored.
A redemption may result in a taxable transaction to you, but only
if there has been a change in the net asset value per share,
which will occur only under extraordinary circumstances.
For your convenience each Fund offers expedited redemption
to provide you with a high level of liquidity for your
investment.
Expedited Redemption Methods (Non-Certificate Shares)
You have the flexibility of three expedited methods of
initiating redemptions. These are available as to Original Shares
not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem Original Shares and
make payments to a Financial Institution account you
have predesignated. See "Redemption Payments" below for
payment methods. Your name and your account number must
be supplied.
To redeem an investment in Original Shares by this method,
telephone:
800-255-2287 toll free
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.,
by FAX at 302-791-1777 or by mail at 400 Bellevue
Parkway, Wilmington, DE 19809, indicating Fund name,
account number, amount to be redeemed and any payment
directions, signed by the registered holder(s).
Signature guarantees are not required. See "Redemption
Payments" below for payment methods.
If you wish to 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
your 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 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 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 Original
Shares, you should be certain that adequate shares for which
certificates have not been issued and which were not recently
purchased by check are in the account to cover the amount of the
check. See "Redemption Payments" below for more details as to
special problems as to Original Shares recently purchased by
check. If insufficient redeemable shares are in the account, the
redemption check will be returned marked "insufficient funds."
The fact that redemption checks are drafts may also permit a bank
in which they are deposited to delay crediting the account in
question until that bank has received payment funds for the
redemption check.
Checks may not be directly presented to any branch of the
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 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 Original Shares to be redeemed
should be sent to the Funds' Shareholder Servicing
Agent: PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809, with 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 Original Shares registered on the books
of a Fund, and you have not elected Expedited
Redemption to a predesignated Financial Institution
account, you must use the Regular Redemption Method.
Under this redemption method you should send a letter
of instruction to: 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 Original Shares other than by checks you
have written, redemption payments will ordinarily be mailed to
you at your address of record. If you so request and the amount
of your redemption proceeds is $1,000 or more, the proceeds will,
wherever possible, be wired or transferred through the facilities
of the Automated Clearing House to the Financial Institution
account specified in the Expedited Redemption section of your
Application or Ready Access Features form. Any Fund may impose a
charge, not exceeding $5.00 per wire redemption, after written
notice to shareholders who have elected this redemption
procedure. No Fund has any present intention of making this
charge. Upon 30 days' written notice to shareholders, any Fund
may modify or terminate the use of the Automated Clearing House
to make redemption payments at any time or charge a service fee,
although no such fee is currently contemplated. If any such
changes are made, the Prospectus will be supplemented to reflect
them. If you use a broker or dealer to arrange for a redemption,
you may be charged a fee for this service.
Redemption proceeds on Original Shares issued under the
third method under which shares are issued (see "When Shares Are
Issued and Dividends Are Declared on Them" under "How to Invest
in the Funds") will be wired in Federal funds on the date of
redemption, if practicable, and, if not practicable, as soon
thereafter as practicable, irrespective of amount. Redemption
requests as to such shares may be made by telephone.
Except as indicated above, each Fund will normally make
payment for all Original Shares redeemed on the next Business Day
following receipt of request. Except as set forth below, in no
event will payment be made more than seven days after receipt of
a redemption request made in compliance with one of the
redemption methods specified above. However, the right of
redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for
other than weekends and holidays or when trading on such exchange
is restricted as determined by the Securities and Exchange
Commission by rule or regulation; (ii) during periods in which an
emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities of the Fund to be
unreasonable or impracticable; or (iii) for such other periods as
the Securities and Exchange Commission may permit. Payment for
redemption by any method (including redemption by check) of
Original Shares recently purchased by check (irrespective of
whether the check is a regular check or a certified, cashier's or
official bank check) or by Automatic Investment or Telephone
Investment may be delayed up to 15 days or until (i) the purchase
check or Automatic Investment or Telephone Investment has been
honored or (ii) the Agent has received assurances by telephone or
in writing from the bank on which the purchase check was drawn or
from which the funds for Automatic Investment or Telephone
Investment were transferred, satisfactory to the Agent and the
Fund, that the purchase check or Automatic Investment or
Telephone Investment will be honored. Original Shares so
purchased within the prior 15 days will not be redeemed under the
check writing redemption procedure and a shareholder must not
write a check if (i) it will be presented to the Custodian for
payment within 15 days of a purchase of Original Shares by check
and (ii) the redemption check would cause the redemption of some
or all of those shares. Possible delays in payment of redemption
proceeds can be eliminated by using wire payments or Federal
Reserve drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders
of any Fund to make payment wholly or partly in cash, that Fund
may pay the redemption price in whole or in part by the
distribution in kind of securities from the portfolio of the
Fund, in lieu of cash, in conformity with applicable rules of the
Securities and Exchange Commission. See the Additional Statement
for details.
Each Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 due to shareholder redemptions. If the
Board of Trustees elects to do this, shareholders who are
affected will receive prior written notice and will be permitted
60 days to bring their accounts up to the minimum before this
redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Original Shares of a Fund having a
net asset value of at least $5,000 you may establish an Automatic
Withdrawal Plan under which you will receive a monthly or
quarterly check in a stated amount, not less than $50. If such a
plan is established, all dividends and distributions must be
reinvested in your shareholder's account. See the Automatic
Withdrawal Plan provisions of the Application included in 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"), a division of the
Bank of Hawaii, supervises the investment program of each Fund
and the composition of its portfolio. On September 30, 1997, the
operations of Hawaiian Trust Company, Ltd., formerly a subsidiary
of the Bank of Hawaii, became a division of the Bank of Hawaii
and assumed the name Pacific Century Trust.
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 most
recently approved by each Fund's shareholders on March 22,
1996.
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 Government Securities 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
Government Securities 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 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 Government Securities 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 Government Securities
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 Bancorp Hawaii, Inc. ("Bancorp") and Bank of
Hawaii's directors (each of whom owns qualifying shares as
required by Hawaii law). Bancorp is a bank holding company
registered under the Bank Holding Company Act of 1956, as
amended, and its common stock is registered under the Securities
Exchange Act of 1934 and is listed and traded on the New York
Stock Exchange. Bancorp files annual and periodic reports with
the Securities and Exchange Commission which are available for
public inspection. See the Additional Statement as to the
legality, under the Federal banking laws, of the Adviser's acting
as the Funds' investment adviser.
The Funds' Administrator is founder of, and administrator
to, the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, two equity funds and money market funds. As
of March 31, 1998, these funds had aggregate assets of
approximately $2.9 billion, of which approximately $900 million
consisted of assets of money market funds. The Administrator,
which was founded in 1984, is controlled by Mr. Lacy B. Herrmann
(directly, through a trust and through share ownership by his
wife). See the Additional Statement for information on Mr.
Herrmann and these arrangements.
For each Fund's fiscal year ended March 31, 1998, under
its Advisory Agreement and its Administration Agreement, the Cash
Fund, the Tax-Free Fund and the Government Securities Fund paid
or accrued to the Adviser fees of $1,791,797, $271,071 and
$588,596, respectively, and paid or accrued to the Administrator
fees of $669,595, $125,970 and $168,490, respectively.
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
and Ms. Herrmann.
DIVIDEND AND TAX INFORMATION
All of the Funds' net income for dividend purposes (see
below) will be declared daily as dividends; see "When Shares Are
Issued and Dividends Are Declared on Them" under "How to Invest
in the Funds" for information as to when dividends on Original
Shares are declared. Dividends are paid within a week before or
after the end of each month and invested in additional shares at
net asset value on the payable date, or, at your election, paid
in cash by check. This election may be made in the Application or
by subsequent written notice to the Agent. You may also elect to
have dividends deposited without charge by electronic funds
transfers into an account at a Financial Institution which is a
member of the Automated Clearing House by completing a Ready
Access Features form. If you redeem all of your Original Shares
you will be credited on the redemption payment date with the
amount of all dividends declared for the month through the date
of redemption, or through the day preceding the date of
redemption in the case of shares on which income dividends were
declared on the same day on which the shares were issued.
You will receive monthly a summary of your account,
including information as to dividends paid during the month and
the shares credited to the account through reinvestment of
dividends.
Daily dividends for a Fund will be calculated as follows:
the net income for dividend purposes will be calculated
immediately prior to the calculation of net asset value and will
include accrued interest and original issue and market discount
earned since the last valuation, less the estimated expenses of
the Fund (including expenses allocable to each particular class
of shares) and amortized original issue and market premium for
the period. However, the calculation of the dividend could change
under certain circumstances under the procedures adopted by the
Board of Trustees relating to "amortized cost" valuation; see the
Additional Statement.
Dividends paid by each Fund with respect to Original Shares
and Service Shares will be calculated in the same manner, at the
same time, on the same day, and will be in the same amount except
that any class expenses (including payments made by Service
Shares under the Distribution Plan) will be borne exclusively by
that class. Dividends on Original Shares are expected generally
to be higher than those on Service Shares because expenses
allocated to Service Shares will generally be higher.
Dividends so paid will be taxable to shareholders as
ordinary income (except as described in "Tax Information
Concerning the Tax-Free Fund" below), even though reinvested,
unless the net income, computed as above, exceeds "earnings and
profits," as determined for tax purposes; this could occur
because net income as so determined will include certain
unrealized appreciation and discount which is not included for
tax purposes. If dividends exceed a shareholder's ratable share
of "earnings and profits," the excess will reduce the cost or
other tax basis for his or her shares; any reduction which would
otherwise result in a negative basis will cause the basis to be
reduced to zero, with any remaining amount being taxed as capital
gain. The dividends paid by the Funds will not be eligible for
the 70% dividends received deduction for corporations. Statements
as to the tax status of each investor's dividends will be mailed
annually.
It is possible but unlikely that a Fund may have realized
long-term capital gains or losses in a year. If it has any net
long-term gains realized through October 31st of a year, it will
pay a capital gains distribution after that date. It may also pay
a supplemental distribution after the end of its fiscal year. Any
capital gains distribution will be taxed at the same rate as
ordinary income, except that for individuals, trusts and estates
the maximum tax rate on capital gains distributions is 28% even
if the applicable rate on ordinary income for such taxpayers is
higher than 28%.
Each Fund will be required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to
shareholders and on redemption proceeds, if a correct Taxpayer
Identification Number, certified when required, is not on file
with it.
Each Fund, during its last fiscal year, qualified and
intends to continue to qualify under subchapter M of the Internal
Revenue Code; if so qualified it will not be liable for Federal
income taxes on amounts distributed by the Fund.
Tax Information Concerning the Tax-Free Fund
The Tax-Free Fund seeks to pay "exempt-interest dividends."
In the case of the Tax-Free Fund, these are dividends derived
from net income received by the Tax-Free Fund on its Municipal
Obligations, provided that, as the Tax-Free Fund intends, at
least 50% of the value of its assets is invested in tax-exempt
obligations. Such dividends are exempt from regular Federal
income tax. Classification of dividends as exempt-interest or
non-exempt-interest is made by one designated percentage applied
uniformly to all income dividends made during the Tax-Free Fund's
tax year. Such designation will normally be made in the first
month after the end of each of the Tax-Free Fund's fiscal years
as to income dividends paid in the prior year. The percentage of
income designated as tax-exempt for any particular dividend may
be different from the percentage of the Tax-Free Fund's income
that was tax-exempt during the period covered by the dividend.
A shareholder receiving a dividend from net interest income
earned by the Tax-Free Fund from one or more of (i) Taxable
Obligations and (ii) income from repurchase agreements and
securities loans, treats the dividend as a receipt of ordinary
income in the computation of the shareholder's gross income
regardless of whether it is reinvested in Tax-Free Fund shares;
such dividends and capital gains distributions are not included
in exempt-interest dividends.
Under the Code, interest on loans to purchase or carry
shares of the Tax-Free Fund may not be deducted for Federal tax
purposes unless the Tax-Free Fund realizes taxable income, in
which case interest would be deductible in proportion to the
Tax-Free Fund's taxable income. In addition, under rules used by
the Internal Revenue Service for determining when borrowed funds
are deemed used for the purpose of purchasing or carrying
particular assets, the purchase of shares of the Tax-Free Fund
may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the
purchase of shares. Moreover, the receipt of tax-exempt dividends
from the Tax-Free Fund by an individual shareholder may result in
some portion of the social security payments or railroad
retirement benefits received by the shareholder or the
shareholder's spouse being included in taxable income.
Furthermore, persons who are "substantial users" (or persons
related thereto) of facilities financed by industrial development
bonds or private activity bonds should consult their own tax
advisers before purchasing shares.
While interest from all Municipal Obligations is tax-exempt
under the Code for purposes of computing the regular tax,
interest from so-called private activity bonds issued after
August 7, 1986 constitutes a tax preference for both individuals
and corporations and thus will enter into a computation of the
alternative minimum tax. Whether or not that computation will
result in a tax will depend on the entire content of the
taxpayer's return. The Tax-Free Fund will not invest in the types
of Municipal Obligations which would give rise to interest that
would be subject to alternative minimum taxation if more than 20%
of its assets would be so invested, and may refrain from
investing in that type of Municipal Obligation completely. The
20% limit is a fundamental policy of the Tax-Free Fund.
Corporations receiving exempt-interest dividends from the
Tax-Free Fund are subject to additional provisions applying the
alternative minimum tax.
Hawaiian Tax Information
The Tax-Free Fund, and dividends and distributions made
by the Tax-Free Fund to Hawaii residents, will generally be
treated for Hawaii income tax purposes in the same manner as they
are treated under the Code for Federal income tax purposes. Under
Hawaii law, however, interest derived from obligations of states
(and their political subdivisions) other than Hawaii will not be
exempt from Hawaii income taxation. (Interest derived from bonds
or obligations issued by or under the authority of the following
is exempt from Hawaii income taxation: Guam, Northern Mariana
Islands, Puerto Rico, and the Virgin Islands.) For the calendar
years 1997, 1996 and 1995, the percentage of the Tax-Free Fund's
dividends exempt from State of Hawaii income taxes was 44.9%,
41.3% and 34.8%, 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 Government Securities
Fund
The Director of Taxation of Hawaii has stated to the
Government Securities 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 1997, 1996 and 1995, the percentage
of the Government Securities Fund's dividends exempt from State
of Hawaii income taxes was 69.8%, 71.5% and 82.6%, 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
There are two exchange privileges available to holders of
Original Shares of the Funds: the Pacific Capital Exchange
Privilege and the Aquilasm Group Exchange Privilege.
Pacific Capital Exchange Privilege
Shareholders may exchange their Original Shares in any Fund
for Institutional Class shares of any of the existing or future
funds (series) of Pacific Capital Funds, each of which represents
a different portfolio. As of the date of this Prospectus, the
existing funds are Growth Stock Fund, Growth and Income Fund, New
Asia Growth Fund Diversified Fixed Income Fund, Tax Free
Securities Fund, Tax Free Short Intermediate Securities Fund,
U.S. Treasuries Securities Fund and Short Intermediate U.S.
Treasury Securities Fund. Each of these funds is referred to in
the Prospectus as a "Pacific Capital Fund" and collectively they
are referred to as the "Pacific Capital Funds" or the "Pacific
Capital Exchange Group." The Adviser acts as investment adviser
for the Pacific Capital Funds. All exchanges are subject to
certain conditions described below.
Aquilasm Group Exchange Privilege
Shareholders may exchange their Original Shares of any Fund
into certain related tax-free municipal bond funds and two equity
funds (the "Aquila Bond and Equity Funds") and money market funds
(the "Aquila Money Market Funds"), all of which (the "Aquila
Exchange Group") are sponsored by Aquila Management Corporation
and Aquila Distributors, Inc., and have the same Administrator
and Distributor as the Funds. All exchanges are subject to
certain conditions described below. As of the date of this
Prospectus, the Aquila Bond and Equity Funds are Hawaiian
Tax-Free Trust, Tax-Free Trust of Oregon, Tax-Free Trust of
Arizona, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of
Kentucky, Tax-Free Fund For Utah, Narragansett Insured Tax-Free
Income Fund, Aquila Rocky Mountain Equity Fund and Aquila
Cascadia Equity Fund; the Aquila Money Market Funds are the
Funds, Capital Cash Management Trust and Churchill Cash Reserves
Trust. (With respect to exchanges of Original Shares of any Fund
into shares of any other Fund, only exchanges for Original Shares
of those funds are permitted.)
Terms and conditions of both Exchange Privileges
The Institutional Class shares of each Pacific Capital Fund
have an exchange privilege which allows further exchanges among
the Institutional Class shares of each other Pacific Capital Fund
at relative net asset values. The Institutional Class shares of
each Pacific Capital Fund also have another exchange privilege
with certain funds in the Aquila Exchange Group under which their
shares and Original Shares of Funds may be exchanged, also
without payment of an additional sales charge.
The funds in the Aquila Exchange Group also have exchange
privileges, as described below. Under the exchange privileges of
both Exchange Groups, once any applicable sales charge has been
paid with respect to exchangeable shares of a fund in one of the
Exchange Groups, those shares (and any shares acquired as a
result of reinvestment of dividends and/or distributions) may be
exchanged any number of times among the other funds of the same
Exchange Group without the payment of any additional sales
charge. An exchange between the two Exchange Groups will,
however, result in the applicable sales charge if the shares of
the fund being acquired in the exchange carry a sales charge,
unless the shares being exchanged are the Eligible Shares (see
below) of that Exchange Group.
The "Pacific Capital Eligible Shares" of any Pacific Capital
Fund are those Institutional shares which were (a) acquired by
direct purchase with payment of any applicable sales charge, or
which were received in exchange for shares of another Pacific
Capital Fund on which any applicable sales charge was paid; (b)
acquired with payment of any applicable sales charge by exchange
for Original Shares of any Fund; (c) acquired in one or more
exchanges between Original Shares of the Funds and shares of the
Pacific Capital Funds so long as the Pacific Capital Fund shares
were originally purchased as set forth in (a) or (b); or (d)
acquired as a result of reinvestment of dividends and/or
distributions on Pacific Capital Eligible Shares.
If you own Pacific Capital Eligible Shares of any Fund, you
may exchange them for shares of any Pacific Capital Fund or any
Aquila Money Market Fund without payment of any sales charge. The
shares received will continue to be Pacific Capital Eligible
shares. You may also exchange them for the shares of any Aquila
Bond or Equity Fund, but only upon payment of the appropriate
sales charges.
The Aquila Group Exchange Privilege
The Aquila Bond and Equity Funds offer Classes of Shares:
Class A Shares ("Front-Payment Shares") and Class C Shares
("Level-Payment Shares") which can be purchased by anyone and
Class Y Shares ("Institutional Class Shares"), which are offered
only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity, and are not
offered directly to retail customers. Some funds also offer
Financial Intermediary Class Shares ("Class I Shares"). The
Exchange Privilege has different provisions for exchanges for
each class.
(1) Originally purchased Money Market Fund shares.
Shares of a Money Market Fund (and any shares acquired as a
result of reinvestment of dividends and/or distributions on these
shares) acquired directly in a purchase (or in exchange for Money
Market Fund Shares that were themselves directly purchased),
rather than in exchange for shares of a Bond or Equity Fund, may
be exchanged for shares of any class of any Bond or Equity Fund
that the investor is otherwise qualified to purchase, but the
shares received in such an exchange will be subject to the same
sales charge, if any, that they would have been subject to had
they been purchased rather than acquired in exchange for Money
Market Fund shares. If the shares received in exchange are shares
that would be subject to a contingent deferred sales charge
("CDSC") if purchased directly, the holding period governing the
CDSC will run from the date of the exchange, not from the date of
the purchase of Money Market Shares.
(2) CDSCs upon redemptions of shares acquired through
exchanges. If you exchange shares of the following categories, no
CDSC will be imposed at the time of exchange, but the shares you
receive in exchange for them will be subject to the applicable
CDSC if you redeem them before the requisite holding period
(extended, if required) has expired:
- CDSC Class A Shares;
- Class C Shares: and
- Shares of a Money Market Fund that were received in
exchange for CDSC Class A Shares or Class C Shares.
If the shares you redeem would have incurred a CDSC if
you had not made any exchanges, then the same CDSC will be
imposed upon the redemption regardless the exchanges that have
taken place since the original purchase.
(3) Extension of Holding Periods by owning Money-Market
Funds. Any period of 30 days or more during which Money-Market
shares received on an exchange of CDSC Class A Shares or Class C
Shares are held is not counted in computing the applicable
holding period for CDSC Class A Shares or Class C Shares.
Each Fund, as well as the other Money-Market Funds and
Bond or Equity Funds, reserves the right to reject any exchange
into its shares, if shares of the fund into which exchange is
desired are not available for sale in your state of residence.
The Funds may also modify or terminate this exchange privilege at
any time. In the case of termination, the Prospectus will be
appropriately supplemented. No such modification or termination
shall take effect on less than 60 days' written notice to
shareholders.
All exercises of the exchange privilege are subject to
the conditions that (i) the shares being acquired are available
for sale in your state of residence; and (ii) the aggregate net
asset value of the shares surrendered for exchange is at least
equal to the applicable minimum investment requirement of the
investment company whose shares are being acquired.
To effect an exchange, you must complete a form which is
available from the Distributor, unless you have elected the
Telephone Exchange feature on the Application. The exchange will
be effected at the relative exchange prices of the shares being
exchanged next determined after receipt by the Distributor of a
properly completed form or Telephone Exchange request. The
exchange prices will be the respective net asset values of the
shares (unless a sales charge is to be deducted in connection
with an exchange of shares as described above, in which case the
exchange price of shares of the Pacific Capital Fund or Aquila
Bond or Equity Fund will be its public offering price).
Dividends paid by the Aquila Money Market Funds are
taxable, except to the extent that dividends paid by the Tax-Free
Fund (which invests in tax-free municipal obligations) are exempt
from regular Federal income tax and Hawaiian income tax, and to
the extent that dividends paid by the Government Securities Fund
(which invests in U.S. government obligations) are exempt from
state income taxes. Dividends paid by the Aquila Rocky Mountain
Equity Fund and Aquila Cascadia Equity Fund are taxable. If your
state of residence is not the same as that of the issuers of
obligations in which a tax-free municipal bond fund or a tax-free
money market fund invests, the dividends from that fund may be
subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a fund under the exchange privilege
arrangement.
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the
realization of a capital gain or loss, depending on the cost or
other tax basis of the shares exchanged and the holding period
(see the Additional Statement); no representation is made as to
the deductibility of any such loss that may occur.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Description of Shares
The Trust issues three series of shares, each series
constituting the shares of a Fund. Each series has separate
assets and liabilities and is comprised of two classes of shares:
Original Shares and Service Shares; only Original Shares of the
Funds are offered by this Prospectus. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and
fractional shares and to divide or combine the shares into a
greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Trust. Each share
represents an equal proportionate interest in a Fund. Income,
direct liabilities and direct operating expenses of each series
will be allocated directly to each series, and general
liabilities and expenses, if any, of the Trust will be allocated
among the series in a manner acceptable to the Board of Trustees.
Certain expenses of a series specifically allocable to a
particular class will be borne by that class; the expense of the
series not so allocated will be allocated among the classes in a
manner acceptable to the Board of Trustees and in accordance with
any applicable exemptive order or Rule of the SEC. Upon
liquidation of a series, shareholders of each class of the series
are entitled to share pro-rata (subject to liabilities, if any,
allocated specifically to that class) in the net assets of that
series available for distribution to shareholders and upon
liquidation of the Trust, the respective series are entitled to
share proportionately in the assets available to the Trust after
allocation to the various series. If they deem it advisable and
in the best interests of shareholders, the Board of Trustees of
the Trust may create additional classes of shares (subject to
rules and regulations of the Securities and Exchange Commission
or by exemptive order) or the Board of Trustees may, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such
series will have a designation including the word "Series"). See
the Additional Statement for further information about possible
additional classes or series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
The Year 2000
Like other financial and business organizations, the
Funds could be adversely affected if computer systems the Funds
relies on do not properly process date-related information and
data involving the year 2000 and after. The Administrator is
taking steps that it believes are reasonable to address this
problem in its own computer systems and to obtain assurances that
comparable steps are being taken by the other major service
providers to the Funds. The Administrator has also requested the
Funds's portfolio manager to attempt to evaluate the potential
impact of this problem on the issuers of securities in which the
Funds invests. At this time there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the
Funds.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) represented by the shares held (and
proportionate fractional votes for fractional dollar amounts).
Shareholders will vote on the election of Trustees and on other
matters submitted to the vote of shareholders. No amendment may
be made to the Declaration of Trust without the affirmative vote
of the holders of a majority of the outstanding shares of the
Trust. The Trust may be terminated (i) upon the sale of its
assets to another issuer, or (ii) upon liquidation and
distribution of the assets of the Trust, in either case if such
action is approved by the vote of the holders of a majority of
the outstanding shares of each series. If not so terminated, the
Trust will continue indefinitely. Rule 18f-2 under the Investment
Company Act of 1940 provides that matters submitted to
shareholders be approved by a majority of the outstanding voting
securities of each series, unless it is clear that the interests
of each series in the matter are identical or the matter does not
affect a series. However, the rule exempts the selection of
accountants and the election of Trustees from the separate voting
requirement. Classes do not vote separately except that, as to
matters exclusively affecting one class (such as the adoption or
amendment of class-specific provisions of the Distribution Plan),
only shares of that class are entitled to vote.
Description of Classes
As stated above, each Fund has two classes of shares:
Original Shares, which are offered by this Prospectus, and
Service Shares. Potential investors in Original Shares may also
be eligible to purchase Service Shares, which are offered in a
separate prospectus that may be obtained by contacting the
transfer agent of the Funds at the address or telephone number(s)
given on the front cover of this Prospectus.
Original Shares include all currently outstanding shares of
the Funds that were issued prior to January 20, 1995, the date on
which the capital structure of the Funds was changed to include
two classes rather than one. Original Shares are sold solely to
(1) financial institutions for their own account or for the
investment of funds for which they act in a fiduciary, agency,
investment advisory or custodial capacity; (2) persons entitled
to exchange into such shares under the Funds' exchange privilege;
and (3) shareholders of record on January 20, 1995, the date on
which the Funds first offered two classes of shares.
Under each Fund's Distribution Plan, the Fund pays certain
fees to "Service Organizations," that are borne only by the
Services Shares; no payments under the Distribution Plan are
borne by Original Shares. For this reason, dividends on the two
classes generally will differ. In addition, certain other
expenses directly attributable to a particular class of shares
may be allocated, in the discretion of the Board of Trustees,
solely to that class; such action would also differentially
affect dividends on the two classes.
A financial institution that holds Original Shares of a Fund
on behalf its clients receives no compensation from the Fund for
any services it provides in connection with those shares,
although it may receive compensation from its clients and/or from
the Administrator out of the Administrator's own resources.
Accordingly, any compensation that a financial institution may
receive for services provided in connection with Original Shares
may be expected to differ both as to source and amount from that
received in connection with Service Shares.
<PAGE>
[LOGO] Application for
The Pacific Capital Funds of Cash Assets Trust - Original Shares
Please complete steps 1 through 4 and mail to:
PFPC Inc.
400 Bellevue Parkway, Wilmington, DE 19809
Tel.# 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 (810)
___ Pacific Capital Tax-Free Cash Assets Trust (820)
___ Pacific Capital U.S. Government Securities Cash Assets Trust (830)
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. Government Securities 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, N A
ABA No. 0310-0005-3
CR A/C 04-01787
For further credit to (specify the Fund you are investing in)
Pacific Capital Cash Assets Trust (Original Shares) A/C 85-0216-4589
Pacific Capital Tax-Free Cash Assets Trust (Original Shares)
A/C 85-0216-4626
Pacific Capital U.S. Government Securities Cash Assets Trust
(Original Shares) A/C 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 1B.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your account. To establish this program, please complete Step 4,
Sections A & B of this Application.
I/We wish to make regular monthly investments of $______ (minimum $50)
on the ___ 1st day or ___ 16th day of the month (or on the first
business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply
calling the Agent toll-free at 1-800-255-2287. To establish this
program, please complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks
prior to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions
set forth below. To realize the amount stated below, the Agent is
authorized to redeem sufficient shares from this account at the
then current Net Asset Value, in accordance with the terms below:
Dollar Amount of each withdrawal $____________ beginning_______________
Minimum:$50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is
payable to a Financial Institution for your account, indicate
Financial Institution name, address and your account number.
_______________________________________ __________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________________ __________________________
Street Financial Institution
Street Address
_______________________________________ __________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the Aquilasm Group of Funds 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, N A,
in my (our) name(s) as registered and send me (us) a supply of
checks. I (we) understand that this checking account will be subject to
the rules and regulations of PNC Bank, N.A., pertaining
thereto and as amended from time to time. For joint account: Check
here whether either owner ___ is authorized, or all owners ___ are
required to sign checks. IF NO BOX IS CHECKED, TWO SIGNATURES WILL BE
REQUIRED ON JOINT ACCOUNTS.
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, 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, Senior Vice President
Charles E. Childs, III, Senior Vice President
Sherri Foster, 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, Delaware 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 Government Securities 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. Government Securities Cash Assets Trust
A cash management
investment
[LOGO]
PROSPECTUS
Original Shares
<PAGE>
The Pacific Capital Funds
of
Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-CATS-4-YOU (800-228-7496)
212-697-6666
Service Shares Prospectus
July 31, 1998
Cash Assets Trust (the "Trust") is a professionally managed,
diversified, 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.
Government Securities 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, 1998 (the "Additional Statement") has been filed
with the Securities and Exchange Commission and is available
without charge upon written request to the Funds' Shareholder
Servicing 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.
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. Government Securities Cash Assets
Trust (the " Government Securities Fund") is a money market
mutual fund which invests exclusively in short-term direct
obligations of the United States Treasury, in other obligations
issued or guaranteed by agencies or instrumentalities of the
United States Government (with remaining maturities of one year
or less) and certain repurchase agreements secured by U.S.
government securities. Shares of the Government Securities Fund
are not guaranteed or insured by the United States
Government.
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, a division
of the Bank of Hawaii serves as the Funds' Investment Adviser,
providing experienced professional management of each Fund's
investments. 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 Government
Securities 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 Government Securities Fund invests only in U.S.
government securities and certain repurchase agreements secured
by U.S. government 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.")
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 $500 or
more. There are no penalties or redemption fees. See "How to
Redeem Your Investment" for these and other redemption methods.
If a financial intermediary is the record holder of your Service
Shares you must redeem those shares through the intermediary, and
the foregoing redemption methods will not apply.
Statements and Reports - For each Fund in which you invest,
you will receive statements of your Service Share account monthly
as well as each time you add to your account or take money out.
Additionally, you will receive a Semi-Annual Report and an
audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST - SERVICE SHARES
TABLE OF EXPENSES
Cash Tax-Free Government
Shareholder Transaction Expenses Fund Fund Securities Fund(1)
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases........... 0% 0% 0%
Maximum Sales Charge
Imposed on Reinvested Dividends 0% 0% 0%
Maximum 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........ 0.36% 0.27% 0.31%
12b-1 Fees..................... 0.25% 0.25% 0.25%
All Other Expenses............. 0.22% 0.28% 0.21%
Administration Fee.......... 0.14% 0.13% 0.09%
Other Expenses.............. 0.08% 0.15% 0.12%
Total Fund Operating Expenses.. 0.83% 0.80% 0.77%
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 Government
Time Period Fund Fund Securities Fund(1)
<S> <C> <C> <C>
1 year $ 8 $ 8 $ 8
3 years $ 26 $26 $25
5 years $ 46 $44 $43
10 years $103 $99 $95
<FN>
(1) On April 1, 1998, the fund, formerly called Pacific Capital U.S.
Treasuries Cash Assets Trust, became Pacific Capital U.S. Government
Securities Cash Assets Trust.
</FN>
<FN>
*Based upon amounts incurred during the most recent fiscal year of
each Fund, restated to reflect current arrangements.
The respective rates for the investment advisory fee and the
administration fee shown in the table represent the effective rates,
taking into consideration the breakpoint in net assets used in the
calculation of fees. For the portion of net assets above and below
each 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 Cash 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 0.07%, 0.21%, and 0.82%.
</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 with the Funds' financial statements contained in its Annual
Report, which are incorporated by reference into the Additional Statement.
The information provided in the table should be read in conjunction
with the financial statements and related notes. On April 1, 1998, the
fund, formerly called Pacific Capital U.S. Treasuries Cash Assets Trust,
became Pacific Capital U.S. Government Securities Cash Assets Trust.
CASH FUND
Year Ended March 31, Period
Ended
1998 1997 1996 3/31/95**
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income............ 0.05 0.05 0.05 0.01
Less Distributions:
Dividends from net investment
income........................... (0.05) (0.05) 0.05 (0.01)
Net Asset Value, End of Period.... $1.00 $1.00 $1.00 $1.00
Total Return (%).................. 4.88 4.62 5.06 0.85+
Ratios/Supplemental Data
Net Assets, End of Period
($ in thousands) ............... 113.4 65.8 32.9 3.5
Ratio of Expenses to Average
Net Assets(%)................... 0.82 0.85 0.86 0.83*
Ratio of Net Investment Income
to Average Net Assets (%)....... 4.78 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 1998, 1997 and 1996, without
the offset in custodian fees for invested cash balances, would have been:
Net Investment Income(%).......... 0.05 0.05 0.05
Ratio of Expenses to Average
Net Assets(%).................... 0.83 0.85 0.86
Ratio of Net Investment Income
to Average Net Assets(%)......... 4.77 4.53 4.84
<CAPTION>
TAX-FREE FUND
Period
Year Ended March 31, Ended
1998 1997 1996 3/31/95**
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income............ 0.03 0.03 0.03 0.01
Less Distributions:
Dividends from net investment
income........................... (0.03) (0.03) (0.03) (0.01)
Net Asset Value, End of Period.... $1.00 $1.00 $1.00 $1.00
Total Return (%).................. 2.83 2.75 3.11 0.52+
Ratios/Supplemental Data
Net Assets, End of Period
($ in thousands) .............. 37.1 25.5 17.6 1.4
Ratio of Expenses to Average
Net Assets(%)................... 0.88 0.80 0.80 0.77*
Ratio of Net Investment Income
to Average Net Assets........... 2.79 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 1998, 1997 and 1996, without
the offset in custodian fees for invested cash balances, would have been:
Net Investment Income($).......... 0.03 0.03 0.03
Ratio of Expenses to Average
Net Assets(%).................... 0.88 0.80 0.80
Ratio of Net Investment Income
to Average Net Assets(%)......... 2.79 2.70 2.97
<CAPTION>
GOVERNMENT SECURITIES FUND
Period
Year Ended March 31, Ended
1998 1997 1996 3/31/95**
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $1.00 $1.00 $1.00 $1.00
Income from Investment Operations:
Net investment income............ 0.05 0.04 0.05 0.01
Less Distributions:
Dividends from net investment
income........................... (0.05) (0.04) (0.05) (0.01)
Net Asset Value, End of Period.... $1.00 $1.00 $1.00 $1.00
Total Return(%)................... 4.69 4.50 4.94 0.94+
Ratios/Supplemental Data
Net Assets, End of Period
($ in thousands) ............... 149.9 83.4 11.8 0.50
Ratio of Expenses to Average
Net Assets(%)................... 0.79 0.77 0.79 0.85*
Ratio of Net Investment Income
to Average Net Assets(%)........ 4.60 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 1998, 1997 and 1996, without
the offset in custodian fees for invested cash balances, would have been:
Net Investment Income............. 0.05 0.04 0.05 0.01
Ratio of Expenses to Average
Net Assets....................... 0.77 0.80 0.88 0.98*
Ratio of Net Investment Income
to Average Net Assets............ 4.60 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>
Unaudited: The "current yield" and "compounded yield" for the seven-day
period ended March 31, 1998 for each fund was:
CURRENT YIELD COMPOUNDED YIELD
<S> <C> <C>
Cash Fund ........................ 4.88% 5.00%
Tax-Free Fund .................... 2.90% 2.94%
Government Securities Fund ............ 4.82% 4.94%
</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. Government Securities Cash
Assets Trust (the "Government Securities 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 Government Securities
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 only in short-term direct
obligations of the United States Treasury, in other obligations
issued or guaranteed by agencies or instrumentalities of the
United States Government (with remaining maturities of one year
or less) and certain repurchase agreements secured by U.S.
government securities.
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 "Adviser"), the Funds' investment 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) bank 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); 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,
the term "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 not 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 U.S. 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 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.
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
indicates that the real Gross State Product growth for 1997 was
1.3%, lower than the 2% that was projected in 1996. Payroll
employment stabilized in 1997 from declines experienced between
1992 and 1996. Employment growth in 1998 is forecast to be less
than 1.0%. Although some local companies have left the State,
major retailers have entered the State and are expected to begin
operations within the next six months. The State of Hawaii
Convention Center has been completed and has had several "soft"
openings in preparation for a scheduled grand opening in July,
1999. During 1998, delegates and exhibitors at the center are
expected to spend upwards of $800 million.
Hawaii's inflation rate is forecast to be flat for 1998.
Although local housing costs have been in a deflationary trend,
recent anecdotal evidence suggests that sales volumes are
improving which could stabilize housing costs in 1998. Hawaii's
cost of living differential continues to decline as well. In the
early 1990's it peaked at 1.39 of the U.S. urban average, but in
1997 it fell to 1.33 and is projected to fall to 1.30 in
1998.
In 1997, tourism, the State's principal industry, increased
slightly by 0.7% over 1996 with 6.9 million visitors. Westbound
arrivals increased by 1.8%, offsetting the decline in eastbound
arrivals. Visitor arrivals for 1998 are projected to increase by
1.0% over 1997. Under new authorizations by the U.S. Department
of Transportation, several airlines will either begin service
between Japan and Hawaii or increase the number of weekly flights
currently in service.
During 1997, a twenty-seven member Economic Revitalization
Task Force was established to make recommendations for economic
change. The Hawaii legislature recently passed many of the
recommendations of the Task Force, including a decrease in the
personal income tax; increased funding for tourism promotion; a
finite time frame for regulatory permitting and licensing
processes; and allowing for privatization of government services
under certain conditions. These changes, along with continuation
of the $1 billion capital improvement program approved in the
last legislative session, are positive factors for economic
growth. The State's strong reliance on tourism and the
uncertainties in Asia, have, however, prompted Moody's Investors
Service to lower its rating on the State's General Obligation
debt to A1 from Aa3. Standard & Poors affirmed the State's debt
rating at A+. The A1/A+ rating on the State's debt is still
recognized "investment grade" by both rating agencies. (See the
Additional Statement for and explanation of municipal debt
ratings.)
Diversification Under the Rule
Under the Rule, the Tax-Free Fund cannot, with respect to
75% of its total assets (valued at amortized cost), buy the
securities (not including U.S. Government Securities) of any
issuer if more than 5% of its total assets would then be invested
in securities of that issuer; with respect to the remaining 25%
of its total assets, the Fund may invest more than 5% of its
total assets in the securities of a single issuer only if those
securities are First Tier Securities. In addition, the Rule
limits investment in Second Tier Securities that are "conduit
securities," as defined in the Rule (generally, "conduit
securities" are Municipal Obligations issued to finance non-
government projects, such as private hospitals, housing projects
or industrial development projects, and whose ultimate obligors
are not government or municipal entities), to 5% of the Fund's
total assets in the aggregate and to no more than the greater of
1% of the Fund's total assets or $1,000,000 in the securities of
any one issuer. (In general, the Tax-Free Fund does not intend to
own Second Tier Securities.)
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 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 GOVERNMENT SECURITIES FUND AND ITS INVESTMENTS
Management Policies of the Government Securities Fund
The Government Securities Fund invests only in short-term
direct obligations of the United States Treasury, in other
obligations issued or guaranteed by agencies or instrumentalities
of the United States Government (with remaining maturities of one
year or less) and certain repurchase agreements secured by U.S.
Government Securities. Shares of the Government Securities 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.
Information On Other U.S. Government Securities
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 Government Securities 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.
The investment by the Government Securities Fund in such
short-term direct obligations of the U.S. government and its
agencies and instrumentalities may result in a lower yield than a
policy of investing in other types of instruments, and therefore
the yield of the Government Securities 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 Government Securities Fund may purchase securities
subject to repurchase agreements provided that such securities are
U.S. Government Securities. 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 Government Securities Fund. (See "Repurchase Agreements" under
the caption "Matters Applicable to All The Funds" below.)
Other Information about the Government Securities Fund's
Investments
Additional Management Policy as to Rating. In addition to
the foregoing management policies, as a non-fundamental policy, the
Government Securities 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 Government Securities 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 Government Securities Fund
The following restrictions on the Government Securities
Fund's investments are fundamental policies and cannot be changed
without approval of the shareholders of the Government Securities
Fund.
1. The Government Securities Fund can make loans only by
lending securities or entering into repurchase agreements.
The Government Securities 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
Government Securities 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 Government Securities 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 Government Securities 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 Government Securities Fund can borrow only in
limited amounts for special purposes.
The Government Securities 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 Government Securities Fund's income.
The Government Securities 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
Government Securities 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 Government Securities 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. Under the Rule, the Tax-Free Fund
is subject to the diversification requirements set forth above
under "The Tax-Free Fund and its Investments, Diversification Under
the Rule." The Rule has specific provisions relating to
determination 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
Fund's 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 the Fund
allocable to the class (i.e., the value of the assets less
liabilities, exclusive of surplus)by the total number of shares of
that class of the Fund then 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, the 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 the
Shareholder Servicing Agent (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.
Government Securities 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
(Indicate Original Shares or 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
(Indicate Original Shares or Service Shares)
the Government Securities Fund:
PNC BANK, NA
Philadelphia, PA
ABA#0310-0005-3
Account #85-0216-4714
FFC: Pacific Capital U.S. Government Securities
Cash Assets Trust
(Indicate Original Shares or Service Shares)
In addition, add:
Account Name and Number (if an existing account) or the
name in which the investment is to be registered (if a new
account).
Your bank may impose a charge for wiring funds.
3. Through Brokers. If you wish, you may invest in a Fund by
purchasing Service Shares through registered broker-dealers.
There is no sales or service charge imposed by any Fund on
purchases of Service Shares, although financial intermediaries may
make reasonable charges to their customers for their services. The
services to be provided and the fees therefor are established by
each financial intermediary acting independently; financial
intermediaries may also determine to establish, as to accounts
serviced by them, higher initial or subsequent investment
requirements than those required by the Funds. Financial
intermediaries are responsible for prompt transmission of orders
placed through them.
The Bank of Hawaii offers an arrangement whereby its
customers may invest in Service Shares of any Fund by establishing
a "sweep account" with the Bank of Hawaii, which connects an
FDIC-insured Bank of Hawaii checking account with a brokerage
account provided through Bancorp Investment Group, a subsidiary of
the Bank of Hawaii. When money is transferred out of your checking
account for investment in any of the Funds, it is no longer covered
by FDIC insurance. Other banks or broker-dealers may offer a
similar facility for automatic investment of account balances in
Service Shares of the Funds. Because of the special arrangements
for automated purchases and redemptions of Service Shares that
sweep accounts involve, certain options or other features described
in this Prospectus (such as alternative purchase and redemption
procedures, dividend and distribution arrangements or share
certificates) may not be available to persons investing through
such accounts. Investments through a sweep account are governed by
the terms and conditions of the account (including fees and
expenses associated with the account), which are typically set
forth in agreements and accompanying disclosure statements used to
establish the account. You should review copies of these materials
before investing in a Fund through a sweep account.
Additional Investments
If you invest in a Fund directly, rather than through a
financial intermediary, you may make additional investments in
Service Shares in any amount after an account has been established
by mailing directly to the Agent a check, money order or other
negotiable bank draft made payable to the Fund, or by wiring funds
as described above. In each case you should indicate your name and
account number to insure prompt and proper crediting of your
account. The pre-printed stub attached to each Fund's confirmations
is provided as a convenient identification method to accompany
additional investments made by mail. You may also make subsequent
investments of $50 or more using electronic funds transfers from
your demand account at a Financial Institution if it is a member of
the Automated Clearing House and if the Agent has received a
completed Application designating this feature, or, after your
account has been opened, a Ready Access Features form available
from the Distributor or the Agent. A pre-determined amount can be
regularly transferred for investment ("Automatic Investment") or
single investments can be made upon receipt by the Agent of
telephone instructions from anyone ("Telephone Investment"). The
maximum amount of each Telephone Investment is $50,000. Upon 30
days' written notice to shareholders, the Funds may modify or
terminate these investment methods at any time or charge a service
fee, although no such fee is currently contemplated.
If you make additional investments in Service Shares through
an account with a financial intermediary, the procedures for such
investments will be those provided in connection with the account
rather than the foregoing.
When Shares Are Issued and Dividends Are Declared On Them
There are three methods as to when Service Shares are issued.
Under each method, shares are issued at the net asset value per
share next determined after the purchase order is effective, as
discussed below. Under each method, the Application must be
properly completed and have been received and accepted by the
Agent; each Fund or the Distributor may also reject any purchase
order for shares of that Fund. Under each method, Federal funds
(see above) must either be available to the Fund in question or the
payment thereof must be guaranteed to the Fund so that the Fund can
be as fully invested as practicable.
The first method under which Service Shares are issued
involves ordinary investments. Under this method, payments
transmitted by wire in Federal funds and payments made by Federal
Reserve Draft received by the Custodian prior to 4:00 p.m. New York
time on any 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
to the Custodian (but in the case of prior payment by check under
(i)(a) above only if the check is not converted into Federal funds
in the normal course on the next Business Day); and (iv)
arrangements satisfactory to the Funds are made between it and the
bank or broker-dealer under which if Federal funds are not so
received by the Custodian, the Fund is reimbursed for any costs or
loss of income arising out of such non-receipt. New York Clearing
House funds are funds represented by a check drawn on a bank which
is a member of the New York Clearing House. Under this second
method, the purchase order is effective on the day the check or the
advice is received under (i) above. Dividends on shares issued
under this second method are declared starting on the day (whether
or not a Business Day) after the purchase order is effective and
are declared on the day on which such shares are redeemed.
The third method under which Service Shares are issued
involves broker-dealers or banks which have requested that this
method be used, to which request the Funds have consented. Under
this third method (i) the Agent must be advised prior to noon New
York time on any Business Day of a dollar amount to be invested;
and (ii) Federal funds must be wired to the Custodian on that day;
under this method, the purchase order is effective on that day.
Dividends on shares issued under this third investment method are
declared beginning on that day but not on the day such shares are
redeemed.
This third investment method is available to prospective
investors in Service Shares who wish to use it so that the
dividends on their shares will commence to be declared on the day
the purchase order is effective. Upon written or phone request to
a Fund by such a prospective investor, the Fund will advise as to
the broker-dealers or banks through which such purchases may be
made.
Confirmations and Share Certificates
If you invest in a Fund directly, rather than through a
financial intermediary, all purchases of Service Shares will be
confirmed and credited to you in an account maintained for you by
the Agent in full and fractional shares of the Fund 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 Government Securities 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 Bancorp Investment Group, "affiliated persons," as defined in
the 1940 Act, of the Adviser, are among those who, indirectly
through one or more Designated Payees, will receive payments
authorized by the Plan in consideration of their services in
connection with investments in Service Shares by their customers.
Because payments by each Fund under this part of its
Distribution Plan relate to sales and services in connection solely
with Service Shares, they are borne only by that class of shares.
Accordingly, dividends on Service Shares generally will differ
from those paid on Original Shares; see "Dividend and Tax
Information."
If you purchase Service Shares directly from the Fund, some or
all of the services offered by recipients of payments under the
Distribution Plan may not be available to you.
A financial institution that holds Original Shares of any Fund
on behalf 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., by FAX at
302-791-1777 or by mail at 400 Bellevue Parkway,
Wilmington, DE 19809, indicating Fund name, account
number, amount to be redeemed and any payment directions,
signed by the registered holder(s). Signature guarantees
are not required. See "Redemption Payments" below for
payment methods.
If you wish to 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 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 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 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 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 Custodian for payment within 15 days of a purchase of Service
Shares by check and (ii) the redemption check would cause the
redemption of some or all of those shares. Possible delays in
payment of redemption proceeds can be eliminated by using wire
payments or Federal Reserve drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders of
any Fund to make payment wholly or partly in cash, that Fund may
pay the redemption price in whole or in part by the distribution in
kind of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. See the Additional Statement for details.
Each Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such shares
is less than $500 due to shareholder redemptions. If the Board of
Trustees elects to do this, shareholders who are affected will
receive prior written notice and will be permitted 60 days to bring
their accounts up to the minimum before this redemption is
processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Service Shares of any Fund having a net
asset value of at least $5,000 and these shares have been purchased
directly rather than through a financial intermediary, you may
establish an Automatic Withdrawal Plan under which you will receive
a monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions must
be reinvested in your shareholder's account. See the Automatic
Withdrawal Plan provisions of the Application included in 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"), a division of the
Bank of Hawaii, supervises the investment program of each Fund and
the composition of its portfolio. On September 30, 1997, the
operations of Hawaiian Trust Company, Ltd., formerly a subsidiary
of the Bank of Hawaii, became a division of the Bank of Hawaii and
assumed the name Pacific Century Trust.
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 most recently
approved by each Fund's shareholders on March 22, 1996.
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 Government Securities 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 Government Securities 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 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 Government Securities 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 Government Securities 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 Bancorp Hawaii, Inc. ("Bancorp") and Bank of
Hawaii's directors (each of whom owns qualifying shares as required
by Hawaii law). Bancorp is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended, and its common
stock is registered under the Securities Exchange Act of 1934 and
is listed and traded on the New York Stock Exchange. Bancorp files
annual and periodic reports with the Securities and Exchange
Commission which are available for public inspection. See the
Additional Statement as to the legality, under the Federal banking
laws, of the Adviser's acting as the Funds' investment adviser.
The Funds' Administrator is founder of, and administrator
to, the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, two equity funds and money market funds. As
of March 31, 1998, these funds had aggregate assets of
approximately $2.9 billion, of which approximately $900 million
consisted of assets of money market funds. The Administrator, which
was founded in 1984, is controlled by Mr. Lacy B. Herrmann
(directly, through a trust and through share ownership by his
wife). See the Additional Statement for information on Mr. Herrmann
and these arrangements.
For each Fund's fiscal year ended March 31, 1998, under its
Advisory Agreement and its Administration Agreement, the Cash Fund,
the Tax-Free Fund and the Government Securities Fund paid or
accrued to the Adviser fees of $1,791,797, $271,071 and $588,596,
respectively, and paid or accrued to the Administrator fees of
$669,595, $125,970 and $168,490, respectively.
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 and
Ms. 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 1997,
1996 and 1995, the percentage of the Tax-Free Fund's dividends
exempt from State of Hawaii income taxes was 44.9%, 41.3% and
34.8%, 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 Government Securities
Fund
The Director of Taxation of Hawaii has stated to the
Government Securities 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 1997, 1996 and 1995, the percentage of
the Government Securities Fund's dividends exempt from State of
Hawaii income taxes was 69.8%, 71.5% and 82.6%, 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 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 the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; and (ii) the aggregate net asset
value of the shares surrendered for exchange is at least equal to
the applicable minimum investment requirement of the investment
company whose shares are being acquired.
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 Government Securities Fund (which invests in
U.S. Government 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 Year 2000
Like other financial and business organizations, the Funds
could be adversely affected if computer systems the Funds relies on
do not properly process date-related information and data involving
the year 2000 and after. The Administrator is taking steps that it
believes are reasonable to address this problem in its own computer
systems and to obtain assurances that comparable steps are being
taken by the other major service providers to the Funds. The
Administrator has also requested the Funds's portfolio manager to
attempt to evaluate the potential impact of this problem on the
issuers of securities in which the Funds invests. At this time
there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Funds.
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.
<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
Tel.# 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. Government Securities 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. Government Securities 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, N A
ABA No. 0310-0005-3
CR A/C 04-01787
For further credit to (specify the Fund you are investing in)
Pacific Capital Cash Assets Trust (Original Shares) A/C 85-0216-4589
Pacific Capital Tax-Free Cash Assets Trust (Original Shares)
A/C 85-0216-4626
Pacific Capital U.S. Government Securities Cash Assets Trust
(Original Shares) A/C 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 1B.
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, N A,
in my (our) name(s) as registered and send me (us) a supply of
checks. I (we) understand that this checking account will be subject
to the rules and regulations of PNC Bank, N A, pertaining
thereto and as amended from time to time. For joint account: Check
here whether either owner ___ is authorized, or all owners ___ are
required to sign checks. IF NO BOX IS CHECKED, TWO SIGNATURES WILL BE
REQUIRED ON JOINT ACCOUNTS.
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, 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, Senior Vice President
Charles E. Childs, III, Senior Vice President
Sherri Foster, 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, Delaware 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 Government Securities 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. Government Securities Cash Assets Trust
Service Shares
<PAGE>
The Pacific Capital Funds
of
CASH ASSETS TRUST
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Government Securities Cash Assets Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
212-697-6666
800-CATS-4-YOU (800-228-7496)
Statement of Additional Information July 31, 1998
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. It relates to Cash Assets Trust
(the "Trust") which has three separate funds, Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and
Pacific Capital U.S. Government Securities Cash Assets Trust(each
a "Fund" and collectively, the "Funds"). There are two Prospectuses
for the Funds dated July 31, 1998: one describes Original Class
Shares ("Original Shares"), the other describes Service Class
shares "Service Shares") of the Funds. References in the Additional
Statement to "the Prospectus" refer to either of these
Prospectuses. The Additional Statement should be read in
conjunction with the Prospectus for the class of shares in which
you are considering investing. Either or both Prospectuses may be
obtained from the Fund's Shareholder Servicing Agent, PFPC Inc., by
writing to: 400 Bellevue Parkway, Wilmington, DE 19809 or by
calling:
800-255-2287 toll free
or from Aquila Distributors, Inc., the Fund's Distributor, by
writing to it at 380 Madison Avenue, Suite 2300, New York, New York
10017; or by calling:
800-228-7496 toll free or 212-697-6666
The Annual Report of the Funds for the fiscal year ended
March 31, 1998 will be delivered with the Additional Statement.
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . . .3
Yield Information . . . . . . . . . . . . . . . . . . . . . . .8
Investment Restrictions . . . . . . . . . . . . . . . . . . . .9
Loans of Portfolio Securities . . . . . . . . . . . . . . . . 10
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . 10
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 16
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 16
Additional Information as to Management Arrangements . . . . . 23
Amortized Cost Valuation . . . . . . . . . . . . . . . . . . . 27
Computation of Daily Dividends . . . . . . . . . . . . . . . . 28
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 28
General Information . . . . . . . . . . . . . . . . . . . . . 29
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The Pacific Capital Funds of Cash Assets Trust are Pacific
Capital Cash Assets Trust (the "Cash Fund"), Pacific Capital
Tax-Free Cash Assets Trust (the "Tax-Free Fund") and Pacific
Capital U.S. Government Securities Cash Assets Trust (the
"Government Securities Fund"). They are collectively referred to as
the "Funds." Until April 1, 1998, the Government Securities Fund
was called the Treasuries Fund. Each Prospectus contains
information as to the purchase and redemption of one class of the
Funds' shares. The investment objective and policies of each Fund
are described in the Prospectus, which refers to the investments
and investment methods described below.
Information on Variable Amount Master Demand Notes
The Cash Fund may buy variable amount master demand notes. The
nature and terms of these obligations are as follows. They permit
the investment of fluctuating amounts by the Fund at varying rates
of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts
borrowed. The Cash Fund has the right to increase the amount under
the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay
up to the full amount of the note without penalty. Because these
notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that they will be
traded, and there is no secondary market for them. They are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time on not more than thirty
days' notice. Except for those notes which are payable at principal
amount plus accrued interest within seven days after demand, such
notes fall within the Fund's overall 10% limitation on securities
with possible limited liquidity. There is no limitation on the type
of issuer from which these notes will be purchased; however, all
such notes must be First Tier Securities and in connection with
such purchases and on an ongoing basis, Hawaiian Trust Company,
Limited (the "Adviser") will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay
principal and interest on demand, including a situation in which
all holders of such notes make demand simultaneously. Master
demand notes as such are not typically rated by credit rating
agencies and if not so rated the Fund may, under its minimum rating
standards, invest in them only if at the time of an investment they
are determined to be comparable in quality to rated issues in which
the Fund can invest.
Information On Insured Bank Obligations
The Federal Deposit Insurance Corporation ("FDIC") insures the
deposits of Federally insured banks and, effective August 9, 1989,
savings institutions (collectively herein, "banks") up to $100,000.
On that date the FDIC assumed the insurance functions of the
Federal Savings and Loan Insurance Corporation, which was
abolished. The Cash Fund may purchase bank obligations which are
fully insured as to principal by the FDIC. To remain fully insured
as to principal, these investments must currently be limited to
$100,000 per bank; if the principal amount and accrued interest
together exceed $100,000 then the excess accrued interest will not
be insured. Insured bank obligations may have limited
marketability; unless the Board of Trustees determines that a
readily available market exists for such obligations, the Cash Fund
and the Tax-Free Fund will invest in them only within the 10% limit
of each Fund mentioned in the Prospectus unless such obligations
are payable at principal amount plus accrued interest on demand or
within seven days after demand.
Information about Certain Other Obligations
The Cash Fund may purchase obligations other than those listed
in categories 1 through 5 under "The Cash Fund and its
Investments," in the Prospectus, but only if such other obligations
are guaranteed as to principal and interest by either a bank in
whose obligations the Cash Fund may invest or a corporation in
whose commercial paper it may invest. If any such guarantee is
unconditional and is itself an Eligible Security, the obligation
may be purchased based on the guarantee; if any such guarantee is
not unconditional, purchase of the obligation can only be made if
the underlying obligation is an Eligible Security and meets all
other applicable requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission. See "Effect of the Rule on
Portfolio Management" in the Prospectus. As of the date of the
Additional Statement the Cash Fund does not own any such
obligations and has no present intention of purchasing any. Such
obligations can be any obligation of any kind so guaranteed,
including, for example, obligations created by "securitizing"
various kinds of assets such as credit card receivables or
mortgages. If the Cash Fund invests in these assets, they will be
identified in the Prospectuses and described in the Additional
Statement.
Additional Information Regarding Municipal Obligations
Which The Tax-Free Fund May Purchase
Municipal Notes
The Tax-Free Fund may invest in municipal notes. Municipal
notes include, but are not limited to, tax anticipation notes
("TANs"), bond anticipation notes ("BANs"), revenue anticipation
notes ("RANs"), and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or
receipt of other revenues are usually general obligations of the
issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise
taxes as a result of such things as a decline in its tax base or a
rise in delinquencies could adversely affect the issuer's ability
to meet its obligations on outstanding TANs. Furthermore, some
municipal issuers mix various tax proceeds into a general fund that
is used to meet obligations other than those of the outstanding
TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its
obligations on its BANs is primarily dependent on the issuer's
adequate access to the longer term municipal bond market and the
likelihood that the proceeds of such bond sales will be used to pay
the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could
adversely affect an issuer's ability to meet its obligations on
outstanding RANs. In addition, the possibility that the revenues
would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal of, and
interest on, RANs.
Municipal Bonds
The two principal classifications of municipal bonds are
"general obligation" bonds and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit
and unlimited taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or projects or,
in a few cases, from the proceeds of a special excise or other tax,
but are not supported by the issuer's power to levy unlimited
general taxes. There are, of course, variations in the security of
municipal bonds, both within a particular classification and
between classifications, depending on numerous factors. The yields
of municipal bonds depend on, among other things, general financial
conditions, general conditions of the municipal bond market, size
of a particular offering, the maturity of the obligation and rating
of the issue.
Other Information
Since the Tax-Free Fund may invest in industrial development
bonds or private activity bonds, the Tax-Free Fund may not be an
appropriate investment for entities which are "substantial users"
of facilities financed by those industrial development bonds or
private activity bonds or for investors who are "related persons"
of such users. Generally, an individual will not be a "related
person" under the Internal Revenue Code unless such investor or his
or her immediate family (spouse, brothers, sisters and lineal
descendants) own directly or indirectly in the aggregate more than
50 percent of the equity of a corporation or is a partner of a
partnership which is a "substantial user" of a facility financed
from the proceeds of "industrial development bonds" or "private
activity bonds". A "substantial user" of such facilities is defined
generally as a "non-exempt person who regularly uses a part of [a]
facility" financed from the proceeds of industrial development
bonds or private activity bonds.
As indicated in the Prospectus, under the Tax Reform Act of
1986, there are certain Municipal Obligations the interest on which
is subject to the Federal alternative minimum tax on individuals.
While the Tax-Free Fund may purchase these obligations, it may, on
the other hand, refrain from purchasing them due to this tax
consequence. Also, as indicated in the Prospectus, the Tax-Free
Fund will not purchase Municipal Obligations the interest on which
is not exempt from regular Federal income taxes. The foregoing may
narrow the number of Municipal Obligations available to the
Tax-Free Fund.
Ratings
The ratings assigned by the nationally recognized statistical
rating organizations ("NRSROs") represent their opinions of the
quality of the debt securities which they undertake to rate.
Ratings are general and not absolute standards of quality;
consequently, obligations with the same maturity, stated interest
rate and rating may have different yields, while obligations of the
same maturity and stated interest rate with different ratings may
have the same yield. See Appendix A to this Additional Statement
for further information about the ratings of the NRSROs as to the
various rated Municipal Obligations and Taxable Obligations which
the Tax-Free Fund may purchase.
U.S. Government Securities
All of the Funds may invest in U.S Government Securities
(i.e., obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities), which include securities issued
by the U.S. Government, such as Treasury Bills (which mature within
one year of the date they are issued) and Treasury Notes and Bonds
(which are issued with longer maturities). All Treasury securities
are backed by the full faith and credit of the United States.
The Funds may invest in securities of U.S. government
agencies and instrumentalities that issue or guarantee securities.
These include, but are not limited to, the Farmers Home
Administration, Federal Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal National Mortgage Association, Financing
Corporation, Government National Mortgage Association, Resolution
Funding Corporation, Small Business Administration, Student Loan
Marketing Association and the Tennessee Valley Authority.
Securities issued or guaranteed by U.S. government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States. Some, such as securities issued by
the Federal Home Loan Banks, are backed by the right of the agency
or instrumentality to borrow from the Treasury. Others, such as
securities issued by the Federal National Mortgage Association, are
supported only by the credit of the instrumentality and not by the
Treasury. If the securities are not backed by the full faith and
credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and
may not be able to assert a claim against the United States in the
event that the agency or instrumentality does not meet its
commitment. The Funds will invest in government securities,
including securities of agencies and instrumentalities only if
Pacific Century Trust (the "Adviser"), acting under procedures
approved by the Board of Trustees, is satisfied that these
obligations present minimal credit risks.
Turnover
In general, the Funds will purchase securities with the
expectation of holding them to maturity. However, the Funds may to
some degree engage in short-term trading to attempt to take
advantage of short-term market variations. The Funds may also sell
securities prior to maturity to meet redemptions or as a result of
a revised management evaluation of the issuer. The Funds will have
a high portfolio turnover due to the short maturities of the
securities held, but this should not affect net asset value or
income, as brokerage commissions are not usually paid on the
securities in which the Funds invest. (In the usual calculation of
portfolio turnover, securities of the type in which the Funds
invests are excluded; consequently, the high turnover which the
Funds will have is not comparable to the turnover of non-money-
market investment companies.)
When-Issued and Delayed Delivery Securities
The Cash Fund and the Tax-Free Fund may purchase securities on
a when-issued or delayed delivery basis. For example, delivery and
payment may take place a month or more after the date of the
transaction. The purchase price and the interest rate payable on
the securities are fixed on the transaction date. At the time that
either Fund makes a commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value of such securities
each day in determining its net asset value. The Cash Fund and the
Tax-Free Fund will make commitments for such when-issued
transactions only when they have the intention of actually
acquiring the securities. The Cash Fund and the Tax-Free Fund will
each maintain with the Custodian and mark to market every business
day a separate account with portfolio securities in an amount at
least equal to such commitments. On delivery dates for such
transactions, the Cash Fund and the Tax-Free Fund will each meet
their obligations from maturities or sales of the securities held
in the separate account and/or from cash flow. If the Cash Fund or
the Tax-Free Fund chooses to dispose of any right to acquire a
when-issued security prior to its acquisition, they could, as with
the disposition of any other portfolio obligation, incur a gain or
loss due to market fluctuation. Neither the Cash Fund nor the
Tax-Free Fund may enter into when-issued commitments exceeding in
the aggregate 15% of the market value of their respective total
assets, less liabilities other than the obligations created by
when-issued commitments.
Diversification and Certain Industry Requirements
The Cash Fund has a rule, set forth in the Prospectus, under
which it cannot buy the securities of issuers in any one industry
if more than 25% of its total assets would then be invested in
securities of issuers of that industry. In applying this rule to
commercial paper issued by finance subsidiaries or affiliates of
operating companies, if the business of the issuer consists
primarily of financing the activities of the related operating
company, the Fund considers the industry of the issuer to be that
of the related operating company.
YIELD INFORMATION
There are two methods by which the yields for any Fund's two
classes of shares for a specified period of time are calculated.
The first method, which results in an amount referred to as
the "current yield," assumes an account containing exactly one
share of the class at the beginning of the period. (The net asset
value of this share will be $1.00 except under extraordinary
circumstances.) The net change in the value of the account during
the period is then determined by subtracting this beginning value
from the value of the account at the end of the period; however,
excluded from the calculation are capital changes, i.e., realized
gains and losses from the sale of securities and unrealized
appreciation and depreciation.
This net change in the account value is then divided by the
value of the account at the beginning of the period (i.e.,
normally $1.00 as discussed above) and the resulting figure
(referred to as the "base period return") is then annualized by
multiplying it by 365 and dividing it by the number of days in the
period; the result is the "current yield." Normally a seven-day
period will be used in determining yields (both the current and the
effective yield discussed below) in published or mailed
advertisements.
The second method results in an amount referred to as the
"compounded effective yield." This represents an annualization of
the current yield with dividends reinvested daily. This compounded
effective yield for a seven-day period would be computed by
compounding the unannualized base period return by adding one to
the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result.
Since calculations of both kinds of yields do not take into
consideration any realized or unrealized gains or losses on any
Fund's portfolio securities which may have an effect on dividends,
the dividends declared during a period may not be the same on an
annualized basis as either kind of yield for that period.
Yield information may be useful to investors in reviewing a
Fund's performance. However, a number of factors should be taken
into account before using yield information as a basis for
comparison with alternative investments. An investment in any Fund
is not insured and its yields are not guaranteed. They normally
will fluctuate on a daily basis. The yields for any given past
period are not an indication or representation by any Fund of
future yields or rates of return on its shares and, therefore, they
cannot be compared to yields on savings accounts or other
investment alternatives which often provide a guaranteed fixed
yield for a stated period of time, and may be insured by a
government agency. In comparing the yields of one money market fund
to another, consideration should be given to each fund's investment
policy, portfolio quality, portfolio maturity, type of instruments
held and operating expenses.
Because a given class of a Fund's shares may bear certain
expenses allocated only to that class, it is expected that yields,
which are affected in part by expenses, will differ as between the
two classes of any Fund's shares. See "Dividend and Tax
Information" in the Prospectus.
INVESTMENT RESTRICTIONS
Each Fund has a number of policies concerning what it can and
cannot do. Those policies, which are called "fundamental policies,"
may not be changed unless the holders of a majority, as defined in
the Investment Company Act of 1940 (the "1940 Act"), of the Trust's
outstanding shares vote to change them. Under the 1940 Act, the
vote of the holders of a majority of the outstanding shares of a
Fund means the vote of the holders of the lesser of (a) 67% or
more of the Fund's shares present at a meeting or represented by
proxy if the holders of more than 50% of its shares are so present
or represented, or (b) more than 50% of its outstanding shares.
Those fundamental policies not set forth in the Prospectus are set
forth below.
1. The Funds invest only in certain limited securities.
The Funds cannot buy any voting securities, any commodities or
commodity contracts, any mineral related programs or leases, any
shares of other investment companies or any warrants, puts, calls
or combinations thereof, except that the Tax-Free Fund may purchase
Municipal Obligations with put rights in order to maintain
liquidity and may purchase shares of other investment companies.
The Cash Fund and the Tax-Free Fund cannot purchase or hold
the securities of any issuer if, to their knowledge, Trustees,
Directors or officers of the either or their Adviser individually
owning beneficially more than 0.5% of the securities of that issuer
together own in the aggregate more than 5% of such securities.
The Cash Fund and the Tax-Free Fund cannot buy real estate or
any non-liquid interests in real estate investment trusts; however,
they can buy any securities which they could otherwise buy even
though the issuer invests in real estate or interests in real
estate.
2. Almost all of the Cash Fund's assets must be in established
companies.
Only 5% of the Cash Fund's total assets may be in issuers less
than three years old, that is, which have not been in continuous
operation for at least three years. This includes the operations of
predecessor companies.
3. The Funds do not buy for control.
The Funds cannot invest for the purpose of exercising
control or management of other companies. This restriction is not
applicable to the Government Securities Fund.
4. The Funds do not sell securities they do not own or borrow from
brokers to buy securities.
Thus, they cannot sell short or buy on margin.
5. The Funds are not an underwriters.
The Funds cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, they cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
LOANS OF PORTFOLIO SECURITIES
Any Fund may, to increase its income, lend its securities on
a short- or long-term basis to broker-dealers, banks or certain
other financial institutions (see below) if (i) the loan is
collateralized in accordance with applicable regulatory
requirements (the "Guidelines") and if (ii) after any loan, the
value of the securities loaned does not exceed 10% of the value of
its total assets. As of the date of this Additional Statement, none
of the Funds foresee lending securities if after any loan the value
of loaned securities exceeds 5% of the value of its total assets.
The financial institutions other than broker-dealers or banks to
which a Fund can lend its securities are limited to "accredited
investors," as that term is defined in Section 2(15) of the
Securities Act of 1933. (In general, such institutions are
insurance companies, investment companies and certain employee
benefit plans.) Under the present Guidelines (which are subject to
change) the loan collateral must, on each business day, at least
equal the value of the loaned securities and must consist of cash,
bank letters of credit or U.S. Government Securities. To be
acceptable as collateral, a letter of credit must obligate a bank
to pay amounts demanded by the Fund if the demand meets the terms
of the letter. Such terms and the issuing banks would have to be
satisfactory to the Fund. Any loan might be secured by any one or
more of the three types of collateral. In addition, any such
investment must meet the applicable requirements of the Rule. See
"Effect of the Rule on Portfolio Management" in the Prospectus.
A Fund receives amounts equal to the interest or other
distributions on loaned securities and also receives one or more of
the negotiated loan fees, interest on securities used as collateral
or interest on the securities purchased with such collateral,
either of which types of interest may be shared with the borrower.
A Fund may also pay reasonable finder's, custodian and
administrative fees but only to persons not affiliated with the
Fund. The terms of each Fund's loans will meet certain tests under
the Internal Revenue Code and permit the Fund to terminate the loan
and thus reacquire loaned securities on five days' notice.
DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act, which have substantially the
same terms. In the following material the "Plan" means the Plan of
any of the Funds. Rule 12b-1 provides in substance that an
investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in the
sale of its shares except pursuant to a plan adopted under Rule
12b-1. The Plan is in two parts.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of any Fund who are not "interested
persons" of the Fund shall be committed to the discretion of such
disinterested Trustees but that nothing in the Plan shall prevent
the involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved by
a majority of such disinterested Trustees.
Part I of the Plan
Part I of the Plan is designed to protect against any claim
involving the Fund that the administration fee and some of the
expenses which the Fund pays or may pay come within the purview of
Rule 12b-1. No Fund considers such fee or any payment enumerated in
Part I of the Plan as so financing any such activity. However, it
might be claimed that such fee and some of the expenses a Fund pays
come within the purview of Rule 12b-1. If and to the extent that
any payments (including fees) specifically listed in Part I of the
Plan are considered to be primarily intended to result in or are
indirect financing of any activity which is primarily intended to
result in the sale of a Fund's shares, these payments are
authorized under the Plan.
As used in Part I of the Plan, "Qualified Recipients" means
(i) any principal underwriter or underwriters of a Fund (other than
a principal underwriter which is an affiliated person, or an
affiliated person of an affiliated person, of the Administrator)
and (ii) broker-dealers or others selected by Aquila Management
Corporation (the "Administrator") with which it or a Fund has
entered into written agreements ("Plan Agreements") and which have
rendered assistance (whether direct, administrative or both) in the
distribution and/or retention of a Fund's shares or servicing
shareholder accounts. "Qualified Holdings" means, as to any
Qualified Recipient, all Fund shares beneficially owned by such
Qualified Recipient or by one or more customers (brokerage or
other) or other contacts and/or its investment advisory or other
clients, if the Qualified Recipient was, in the sole judgment of
the Administrator, instrumental in the purchase and/or retention of
such Fund shares and/or in providing administrative assistance in
relation thereto.
The Plan permits the Administrator to make payments
("Administrator's Permitted Payments") to Qualified Recipients.
These Administrator's Permitted Payments are made by the
Administrator and are not reimbursed by the Fund to the
Administrator. Permitted Payments may not exceed, for any fiscal
year of a Fund (pro-rated for any fiscal year which is not a full
fiscal year), in the case of the Cash Fund, 0.15 of 1% of the
average annual net assets of the Fund, and in the case of the
Tax-Free Fund and the Government Securities Fund 0.10 of 1% of
their respective average annual net assets. The Administrator
shall have sole authority (i) as to the selection of any Qualified
Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) to determine the amount of Administrator's
Permitted Payments, if any, to each Qualified Recipient, provided
that the total Administrator's Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Administrator is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area; and (c) the possibility that the Qualified Holdings
of the Qualified Recipient would be redeemed in the absence of its
selection or continuance as a Qualified Recipient. Notwithstanding
the foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified Recipient.
The Plan states that whenever the Administrator bears the costs,
not borne by a Fund's Distributor, of printing and distributing all
copies of the Fund's prospectuses, statements of additional
information and reports to shareholders which are not sent to the
Fund's shareholders, or the costs of supplemental sales literature
and advertising, such payments are authorized.
Part I of the Plan recognizes that, in view of the
Administrator's Permitted Payments and bearing by the Administrator
of certain distribution expenses, the profits, if any, of the
Administrator are dependent primarily on the administration fees
paid by the Fund to the Administrator and that its profits, if any,
would be less, or losses, if any, would be increased due to such
Administrator's Permitted Payments and the bearing by it of such
expenses. If and to the extent that any such administration fees
paid by the Fund might, in view of the foregoing, be considered as
indirectly financing any activity which is primarily intended to
result in the sale of shares issued by the Fund, the payment of
such fees is authorized by Part I of the Plan.
Part I of the Plan also states that if and to the extent that
any of the payments listed below are considered to be "primarily
intended to result in the sale of" shares issued by the Fund within
the meaning of Rule 12b-1, such payments are authorized under the
Plan: (i) the costs of the preparation of all reports and notices
to shareholders and the costs of printing and mailing such reports
and notices to existing shareholders, irrespective of whether such
reports or notices contain or are accompanied by material intended
to result in the sale of shares of the Fund or other funds or other
investments; (ii) the costs of the preparation and setting in type
of all prospectuses and statements of additional information and
the costs of printing and mailing all prospectuses and statements
of additional information to existing shareholders; (iii) the costs
of preparation, printing and mailing of any proxy statements and
proxies, irrespective of whether any such proxy statement includes
any item relating to, or directed toward, the sale of the Fund's
shares; (iv) all legal and accounting fees relating to the
preparation of any such reports, prospectuses, statements of
additional information, proxies and proxy statements; (v) all fees
and expenses relating to the registration or qualification of the
Fund and/or its shares under the securities or "Blue-Sky" laws of
any jurisdiction; (vi) all fees under the Securities Act of 1933
and the 1940 Act, including fees in connection with any application
for exemption relating to or directed toward the sale of the Fund's
shares; (vii) all fees and assessments of the Investment Company
Institute or any successor organization, irrespective of whether
some of its activities are designed to provide sales assistance;
(viii) all costs of the preparation and mailing of confirmations of
shares sold or redeemed or share certificates, and reports of share
balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
Part I of the Plan states that while Part I is in effect, the
Fund's Administrator shall report at least quarterly to the Fund's
Trustees in writing for its review on the following matters: (i)
all Administrator's Permitted Payments made to Qualified
Recipients, the identity of the Qualified Recipient of each Payment
and the purpose for which the amounts were expended; (ii) all costs
of each item specified in the second preceding paragraph (making
estimates of such costs where necessary or desirable) during the
preceding calendar or fiscal quarter; and (iii) all fees of the
Fund to the Administrator paid or accrued during such quarter.
Part I of the Plan defines as the Fund's Independent Trustees
those Trustees who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan. Part I of the Plan, unless
terminated as hereinafter provided, continues in effect from year
to year only so long as such continuance is specifically approved
at least annually by the Fund's Trustees and its Independent
Trustees with votes cast in person at a meeting called for the
purpose of voting on such continuance. In voting on the
implementation or continuance of Part I of the Plan, those Trustees
who vote to approve such implementation or continuance must
conclude that there is a reasonable likelihood that Part I of the
Plan will benefit the Fund and its shareholders. Part I of the Plan
may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority"
(as defined in the 1940 Act) of the outstanding voting securities
of the Fund. Part I of the Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval, and all amendments must be approved in the manner set
forth above as to continuance of Part I of the Plan.
Part I of the Plan states that in the case of a Qualified
Recipient which is a principal underwriter of the Fund the Plan
Agreement shall be the agreement contemplated by Section 15(b) of
the 1940 Act since each such agreement must be approved in
accordance with, and contain the provisions required by, Rule
12b-1. The Plan also states that in the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Plan Agreements with them shall be the agreements with the
Administrator with respect to payments under Part I of the Plan.
Under Rule 12b-1, all agreements related to implementation of
a plan must be in writing and must contain specified adoption and
continuance requirements, including a requirement that they
terminate automatically on their "assignment," as that term is
defined in the 1940 Act. The other adoption and continuance
requirements as to such agreements are the same as those described
above as to Part I of the Plan itself except that: (i) no
shareholder action is required for the approval of such agreements,
and (ii) termination by Trustee or shareholder action as there
described may be on not more than 60 days' written notice. The Plan
Agreement between the Fund and the Administrator is governed by the
foregoing requirements.
During the Funds' fiscal year ended March 31, 1998 no
Administrator's Permitted Payments (under $1,000) were made by the
Administrator to Qualified Recipients.
The formula under which the payments described above may be
made under Part I of the Plan by the Administrator was arrived at
by considering a number of factors. One of such factors is that
such payments are designed to provide incentives for Qualified
Recipients (i) in the case of Qualified Recipients which are
principal underwriters, to act as such and (ii) in the case of all
Qualified Recipients, to devote substantial time, persons and
effort to the sale of the shares of the Fund. Another factor is
that such payments by the Administrator to Qualified Recipients may
provide the only incentive for Qualified Recipients to do so; there
is no sales charge on the sale of the Fund's shares and, although
Part II of the Plan, as discussed below, permits certain payments
by the Fund to persons providing distribution and/or shareholder
service assistance, those payments are permitted only in connection
with one of the Fund's two classes of shares. Another factor is
that the Fund is one of a group of funds having certain common
characteristics. Each such fund (i) is a money market fund; and
(ii) has as its investment adviser a banking institution or an
affiliate which invests assets over which it has investment
authority in money market funds advised by other banking
institutions or affiliates. The marketing of the Fund's shares may
be facilitated since each such institution can, due to these common
characteristics, be fully and currently informed as to the quality
of the investments of and other aspects of the operations of each
of the other funds and if such an investment is otherwise
appropriate, can, although not required to do so, invest assets
over which it has investment authority in one or more of the other
funds.
Part II of the Plan
Part II of the Plan authorizes payment of certain distribution
or service fees by the Fund in connection with Service Shares of
the Fund.
As used in Part II of the Plan, "Designated Payees" means (i)
any principal underwriter or underwriters of the Fund and (ii)
broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor") with which it or the Fund has entered into written
agreements ("Distributor's Plan Agreements") and which have
rendered assistance (whether direct, administrative or both) in the
distribution and/or retention of shares of the specified class or
servicing shareholder accounts with respect to those shares.
"Qualified Holdings" means, as to any Designated Payee, all Service
Shares beneficially owned by such Designated Payee or by one or
more customers (brokerage or other) or other contacts and/or its
investment advisory or other clients, if the Designated Payee was,
in the sole judgment of the Distributor, instrumental in the
purchase and/or retention of such shares and/or in providing
administrative assistance in relation thereto.
Part II of the Plan permits the Fund to make payments ("Fund's
Permitted Payments") to Designated Payees. These Fund's Permitted
Payments are made by the Fund directly or through the Distributor
and may not exceed, for any fiscal year of the Fund (pro-rated for
any fiscal year which is not a full fiscal year), 0.25 of 1% of the
average annual net assets of the Fund represented by to the Service
Shares class of Fund shares. Such payments are to be made out of
the Fund assets allocable to Service Shares. The Distributor shall
have sole authority (i) as to the selection of any Designated Payee
or Payees; (ii) not to select any Designated Payee; and (iii) to
determine the amount of Fund's Permitted Payments, if any, to each
Designated Payee, provided that the total Fund's Permitted Payments
to all Designated Payees do not exceed the amount set forth above.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Designated Payee; (b) the extent to which the Designated Payee has,
at its expense, taken steps in the shareholder servicing area; and
(c) the possibility that the Qualified Holdings of the Designated
Payee would be redeemed in the absence of its selection or
continuance as a Designated Payee. Notwithstanding the foregoing
two sentences, a majority of the Independent Trustees (as defined
below) may remove any person as a Designated Payee.
Part II of the Plan states that while Part II is in effect,
the Distributor shall report at least quarterly to the Fund's
Trustees in writing for its review on the following matters: (i)
all Fund's Permitted Payments made to Designated Payees, the
identity of the Designated Payee of each Payment and the purpose
for which the amounts were expended; and (ii) all fees of the Fund
to the Distributor, sub-adviser or Administrator paid or accrued
during such quarter.
Part II of the Plan, unless terminated as hereinafter
provided, continues in effect from year to year only so long as
such continuance is specifically approved at least annually by the
Fund's Trustees and its Independent Trustees with votes cast in
person at a meeting called for the purpose of voting on such
continuance. In voting on the implementation or continuance of Part
II of the Plan, those Trustees who vote to approve such
implementation or continuance must conclude that there is a
reasonable likelihood that Part II of the Plan will benefit the
Fund and its shareholders. Part II of the Plan may be terminated at
any time by vote of a majority of the Independent Trustees or by
the vote of the holders of a "majority" (as defined in the 1940
Act) of the outstanding voting securities of the Service Shares
class. Part II of the Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval, and all amendments must be approved in the manner set
forth above as to continuance of Part II of the Plan.
Part II of the Plan states that in the case of a Designated
Payee, which is a principal underwriter of the Fund, the
Distributor's Plan Agreement shall be the agreement contemplated by
Section 15(b) of the 1940 Act since each such agreement must be
approved in accordance with, and contain the provisions required
by, Rule 12b-1. The Plan also states that in the case of Designated
Payees which are not principal underwriters of the Fund, the
Distributor's Plan Agreements with them shall be the agreements
with the Distributor with respect to payments under Part II of the
Plan.
During the fiscal year ended March 31, 1998, the following
payments were made by each of the Funds to Designated Payees: Cash
Fund, $225,212; Tax-Free Fund, $125,970; Government Securities Fund
(then called the Treasuries Fund), $168,490. All such payments were
for compensation.
LIMITATION OF REDEMPTIONS IN KIND
The Fund has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1 percent of the net
asset value of the Fund during any 90-day period for any one
shareholder. Should redemptions by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess
in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets
into cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "Net Asset Value Per Share"
in the Prospectus, and such valuation will be made as of the same
time the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Funds, their affiliations, if
any, with the Adviser or Distributor and their principal
occupations during at least the past five years are set forth
below. Each of the Trustees and officers of the Funds holds the
same position with all of the Funds. Each of the Trustees of the
Funds is also a Trustee of Hawaiian Tax-Free Trust, a tax-free
municipal bond fund which has the same Adviser and Administrator as
the Funds. Mr. Herrmann is an interested person of each of the
Funds, as that term is defined in the 1940 Act, as an officer of
the Funds, as a Director and officer of Aquila Distributors, Inc.
(the "Distributor") and as a shareholder of the Distributor. Mr.
Philpotts is an interested person as a director of the Adviser.
They are so designated by an asterisk. As of the date of this
Additional Statement, the Trustees and officers of the Funds owned
less than 1% of the outstanding shares of any of them.
Lacy B. Herrmann*, President and Chairman of the Board of
Trustees, 380 Madison Avenue, New York, New York 10017
Founder, President and Chairman of the Board of Aquila
Management Corporation since 1984, the sponsoring organization and
Manager and/or Administrator and/or Adviser or Sub-Adviser to the
following open-end investment companies, and Founder, Chairman of
the Board of Trustees, and President of each: Churchill Cash
Reserves Trust since 1985, a money market fund, which together with
the Funds and Capital Cash Management Trust ("CCMT") are called the
Aquila Money-Market Funds; Hawaiian Tax-Free Trust since 1984;
Tax-Free Trust of Arizona since 1986; Tax-Free Trust of Oregon
since 1986; Tax-Free Fund of Colorado since 1987; Churchill
Tax-Free Fund of Kentucky since 1987; Tax-Free Fund For Utah since
1992; and Narragansett Insured Tax-Free Income Fund since 1992;
each of which is a tax-free municipal bond fund, and two equity
funds, Aquila Rocky Mountain Equity Fund since 1993 and Aquila
Cascadia Equity Fund, since 1996, which, together are called the
Aquila Bond and Equity Funds; Vice President and Director, and
formerly Secretary and Treasurer of Aquila Distributors, Inc. since
1981, distributor of the above funds; President and Chairman of the
Board of Trustees of CCMT, a money market fund since 1981, and an
Officer and Trustee/Director of its predecessors since 1974;
Chairman of the Board of Trustees and President of Prime Cash Fund
(which is inactive), since 1982 and of Short Term Asset Reserves
1984-1996; President and a Director of STCM Management Company,
Inc., sponsor and sub-adviser to CCMT; Chairman, President, and a
Director since 1984, of InCap Management Corporation, formerly
sub-adviser and administrator of Prime Cash Fund and Short Term
Asset Reserves, and Founder and Chairman of several other money
market funds; Director or Trustee of OCC Cash Reserves, Inc.,
Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Value
Fund, Inc., and Trustee of Quest For Value Accumulation Trust, The
Saratoga Advantage Trust, and of the Rochester Group of Funds, each
of which is an open-end investment company; Trustee of Brown
University, 1990-1996 and currently Trustee Emeritus; actively
involved for many years in leadership roles with university, school
and charitable organizations.
Vernon R. Alden, Trustee, 420 Boylston Street, Suite 403, Boston,
Massachusetts 02116
Director of Digital Equipment Corporation, a computer
manufacturing corporation, since 1959, Intermet Corporation, an
independent foundry, since 1986, and Sonesta International Hotels
Corporation since 1978; Former Director of Colgate Palmolive,
McGraw Hill and the Mead Corporation; Chairman of the Board and
Executive Committee of The Boston Company, Inc., a financial
services company, 1969-1978; Trustee of Tax-Free Trust of Oregon
since 1988, of Hawaiian Tax-Free Trust since 1989, of Cascades Cash
Fund, 1989-1994, of Narragansett Insured Tax-Free Income Fund since
1992 and of Aquila Cascadia Equity Fund since 1996; Associate Dean
and member of the faculty of Harvard University Graduate School of
Business Administration, 1951-1962; member of the faculty and
Program Director of Harvard Business School -University of Hawaii
Advanced Management Program, summer of 1959 and 1960; President of
Ohio University, 1962-1969; Chairman of The Japan Society of
Boston, Inc., and member of several Japan-related advisory
councils; Chairman of the Massachusetts Business Development
Council and the Massachusetts Foreign Business Council, 1978-1983;
Trustee of the Boston Symphony Orchestra since 1975; Chairman of
the Massachusetts Council on the Arts and Humanities, 1972-1984;
Member of the Board of Fellows of Brown University, 1969-1986;
Trustee of various other cultural and educational organizations;
Honorary Consul General of the Royal Kingdom of Thailand; Received
Decorations from the Emperor of Japan (1986) and the King of
Thailand (1996 and 1997).
Arthur K. Carlson, Trustee, 8702 North Via La Serena, Paradise
Valley, Arizona 85253
Retired; Advisory Director of the Renaissance Companies (design and
construction companies of commercial, industrial and upscale
residential properties) since 1996; Senior Vice President and
Manager of the Trust Division of The Valley National Bank of
Arizona, 1977-1987; Trustee of Tax-Free Fund of Colorado, Hawaiian
Tax-Free Trust, Tax-Free Trust of Arizona since 1987 and of Aquila
Rocky Mountain Equity Fund since 1993; previously Vice President of
Investment Research at Citibank, New York City, and prior to that
Vice President and Director of Investment Research of Irving Trust
Company, New York City; past President of The New York Society of
Security Analysts and currently a member of the Phoenix Society of
Financial Analysts; formerly Director of the Financial Analysts
Federation;present or formerly an officer and/or director of
various other community and professional organizations.
William M. Cole, Trustee, 852 Ramapo Way, Westfield, New Jersey
07090
President of Cole International, Inc., financial and shipping
consultants, since 1974; President of Cole Associates, shopping
center and real estate developers, 1974-1976; President of Seatrain
Lines, Inc., 1970-1974; former General Partner of Jones & Thompson,
international shipping brokers; Trustee of Hawaiian Tax-Free Trust
since 1985 and of Tax-Free Fund of Colorado since 1987; Chairman of
Cole Group, a financial consulting and real estate firm, since
1985.
Thomas W. Courtney, C.F.A., Trustee, P.O. Box 8186, Naples,
Florida 33941
President of Courtney Associates, Inc., a venture capital firm,
since 1988; General Partner of Trivest Venture Fund, 1983-1988;
President of Federated Investment Counseling Inc., 1975-1982;
President of Boston Company Institutional Investors, Inc.,
1970-1975; formerly a Director of the Financial Analysts
Federation; Trustee of Hawaiian Tax-Free Trust and of Tax-Free
Trust of Arizona since 1986; Director or Trustee of OCC Cash
Reserves, Inc., Oppenheimer Quest Global Value Fund, Inc.,
Oppenheimer Quest Value Fund, Inc., and Trustee of Quest For Value
Accumulation Trust and of the Rochester Group of Funds, each of
which is an open-end investment company.
Richard W. Gushman, II, Trustee, 700 Bishop Street, Suite 200,
Honolulu, Hawaii 96813
President and Chief Executive Officer of OKOA, INC., a private
Hawaii corporation involved in real estate; adviser to RAMPAC,
Inc., a wholly owned subsidiary of the Bank of Hawaii, involved
with commercial real estate finance; Trustee of Hawaiian Tax-Free
Trust since 1992; Trustee of Pacific Capital Funds, which includes
bond and stock funds, since 1993; Member of the Boards of Aloha
United Way, Downtown Improvement Association, Boys and Girls Club
of Honolulu and Oceanic Cablevision, Inc.
Stanley W. Hong, Trustee, 4976 Poola Street, Honolulu, Hawaii
96821
President and Chief Executive Officer of The Chamber of Commerce
of Hawaii since 1996; Business consultant since 1994; Senior Vice
President of McCormack Properties, Ltd., 1993-1994; President and
Chief Executive of the Hawaii Visitors Bureau, 1984-1993; Vice
President, General Counsel and Corporate Secretary at Theo, Davies
& Co., Ltd., a multiple business company, 1973-1984; formerly
Legislative Assistant to U.S. Senator Hiram L. Fong; member of the
Boards of Directors of several community organizations; Trustee of
Hawaiian Tax-Free Trust since 1992; Trustee of Pacific Capital
Funds, which includes bond and stock funds, since 1993; Director of
Capital Investment of Hawaii, Inc. since 1995 (Real Estate and
Wholesale Bakery); Director, Central Pacific Bank since 1985;
Trustee of Nature Conservancy of Hawaii since 1990; Regent of
Chaminade University of Honolulu since 1990.
Theodore T. Mason, Trustee, 26 Circle Drive, Hastings-on-Hudson,
New York 10706
Managing Director of EastWind Power Partners, Ltd. since 1994;
Second Vice President, Alumni Association, SUNY Maritime College
1998; Director for the same organization, 1997; Director of
Cogeneration Development of Willamette Industries, Inc., a forest
products company, 1991-1993; Vice President of Corporate
Development of Penntech Papers, Inc., 1978-1991; Vice President of
Capital Projects for the same company, 1977-1978; Vice Chairman of
the Board of Trustees of CCMT since 1981; Trustee and Vice
President, 1976-1981, and formerly Director of its predecessor;
Director of STCM Management Company, Inc.; Vice Chairman of the
Board of Trustees and Trustee of Prime Cash Fund (which is
inactive) since 1982; Trustee of Short Term Asset Reserves,
1984-1986 and 1989-1996, of Hawaiian Tax-Free Trust since 1984, of
Churchill Cash Reserves Trust since 1985 and of Churchill Tax-Free
Fund of Kentucky since 1992; Vice President and Trustee of Oxford
Cash Management Fund, 1983-1989; Vice President of Trinity Liquid
Assets Trust, 1983-1985; President and Director of Ted Mason
Venture Associates, Inc., a venture capital consulting firm,
1972-1980; Advisor to the Commander, U.S. Maritime Defense Zone
Atlantic, 1984-1988; National Vice President, Surface/Subsurface,
Naval Reserve Association, 1985-1987; National Vice President,
Budget and Finance, for the same Association, 1983-1985; Commanding
Officer of four Naval Reserve Units, 1974-1985; Captain, USNR,
1978-1988.
Russell K. Okata, Trustee, 888 Mililani Street, Suite 601,
Honolulu, Hawaii 96813-298
Executive Director, Hawaii Government Employees Association AFSCME
Local 152, AFL-CIO; Trustee of Hawaiian Tax-Free Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Chairman of the Royal State Insurance Group
since 1988; Trustee of several charitable organizations.
Douglas Philpotts, Trustee, Financial Plaza of the Pacific, P.O.
Box 3170, Honolulu, Hawaii, 96802
Retired; Director of Hawaiian Trust Company, Limited since 1986,
Chairman of the Board, 1992-1994 and President, 1986-1992; Director
of Victoria Ward, Limited; Trustee of Hawaiian Tax-Free Trust since
1992; Trustee of Pacific Capital Funds, which includes bond and
stock funds, since 1993; Trustee of the Strong Foundation; present
or former director or trustee of a number of civic and charitable
organizations in Hawaii.
Oswald K. Stender, Trustee, P.O. Box 3466, Honolulu, Hawaii 96801
Trustee of the Bernice Pauahi Bishop Estate since 1990; Director of
Hawaiian Electric Industries, Inc., a public utility holding
company, since 1993; Senior Advisor to the Trustees of The Estate
of James Campbell, 1987-1989 and Chief Executive Officer,
1976-1988; Director of several housing and real estate
associations; Director, member or trustee of several community
organizations; Trustee of Hawaiian Tax-Free Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993.
Diana P. Herrmann, Senior Vice President, 380 Madison Avenue, New
York, New York 10017
Trustee of Tax-Free Trust of Arizona and Tax-Free Trust of Oregon
since 1994, of Churchill Tax-Free Fund of Kentucky and Churchill
Cash Reserves Trust since 1995, of Aquila Cascadia Equity Fund
since 1996 and of Aquila Rocky Mountain Equity Fund and Tax-Free
Fund for Utah since 1997; President and Chief Operating Officer of
the Administrator since 1997; Senior Vice President and Secretary,
formerly Vice President of the Administrator since 1986 and
Director since 1984; Senior Vice President or Vice President and
formerly Assistant Vice President of the Aquila Money-Market Funds
since 1986; Vice President of the Aquila Bond and Equity Funds
since 1997; Vice President of InCap Management Corporation since
1986 and Director since 1983; Assistant Vice President of Oxford
Cash Management Fund, 1986-1988; Assistant Vice President and
formerly Loan Officer of European American Bank, 1981-1986;
daughter of the Trust's President; Trustee of the Leopold Schepp
Foundation (academic scholarships) since 1995; actively involved in
mutual fund and trade associations and in college and other
volunteer organizations.
William C. Wallace, Vice President, 380 Madison Avenue, New York,
New York 10017
Vice President of Capital Cash Management Trust and Pacific
Capital Cash Assets Trust since 1984; Senior Vice President of
Hawaiian Tax-Free Trust since 1985 and Vice President, 1984-1985;
Senior Vice President of Tax-Free Trust of Arizona since 1989 and
Vice President, 1986-1988; Vice President of Tax-Free Trust of
Oregon since 1986, of Churchill Tax-Free Fund of Kentucky and
Tax-Free Fund of Colorado since 1987, and of Narragansett Insured
Tax-Free Income Fund since 1992; Secretary and Director of STCM
Management Company, Inc. since 1974; President of the Distributor
since 1995 and formerly Vice President of the Distributor,
1986-1992; Member of the Panel of Arbitrators, American Arbitration
Association, since 1978; Assistant Vice President, American Stock
Exchange, Market Development Division, and Director of Marketing,
American Gold Coin Exchange, a subsidiary of the American Stock
Exchange, 1976-1984.
Charles E. Childs, III, Vice President, 380 Madison Avenue, New
York, New York 10017
Vice President - Administration and formerly Assistant Vice
President and Associate of the Administrator since 1987; Senior
Vice President, Vice President or Assistant Vice President of the
Money-Market Funds since 1988; Northeastern University, 1986-1987
(M.B.A., 1987); Financial Analyst, Unisys Corporation, 1986;
Associate Analyst at National Economic Research Associates, Inc.
(NERA), a micro-economic consulting firm, 1979-1985.
John M. Herndon, Vice President and Assistant Secretary, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds since 1995 and Vice President of the Aquila
Money-Market Funds since 1990; Vice President of the Administrator
since 1990; Investment Services Consultant and Bank Services
Executive of Wright Investors' Service, a registered investment
adviser, 1983-1989; Member of the American Finance Association, the
Western Finance Association and the Society of Quantitative
Analysts.
Sherri Foster, Assistant Vice President, 100 Ridge Road, Suite
1813-15, Lahaina, Hawaii 96761
Senior Vice President of Hawaiian Tax-Free Trust since 1993,
Vice President, 1988-1992 and Assistant Vice President, 1985-1988;
Registered Representative of the Distributor since 1985;
Realtor-Associate of Sherrian Bender Realty, successor to John
Wilson Enterprises, 1983-1994; Executive Secretary of the Hyatt
Regency, Maui, 1981-1983.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer of
Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of the
Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New York
10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond and
Equity Funds and of Aquila Distributors, Inc. since 1992;
Associate Director of Furman Selz Incorporated, 1991-1992; Vice
President of Scudder, Stevens & Clark, Inc. and Treasurer of
Scudder Institutional Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer of Lazard Freres Group
of Investment Companies and HT Insight Funds, Inc., 1986-1988; Vice
President of Lehman Management Co., Inc. and Assistant Treasurer of
Lehman Money Market Funds, 1981-1985; Controller of Seligman Group
of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New
York 10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-1986; Secretary of Oxford
Cash Management Fund, 1982-1988.
Patricia A. Craven, Assistant Secretary & Compliance Officer, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995; Counsel to the
Administrator and the Distributor since 1995; Secretary of the
Distributor since 1997; formerly a Legal Associate for Oppenheimer
Management Corporation, 1993-1995.
Compensation of Trustees
The Funds do not pay fees to Trustees affiliated with the
Administrator or Adviser or to any of the Fund's officers. During
the fiscal year ended March 31, 1997, the Cash Fund, the Tax-Free
Fund and the Government Securities Fund (1) paid, respectively,
$137,796, $60,868 and $60,372 in compensation and reimbursement of
expenses to its other Trustees. The Funds are among the 14 funds in
the Aquilasm Group of Funds, which consists of tax-free municipal
bond funds, money market funds and two equity funds. The following
tables list the compensation of all Trustees who received
compensation from the Funds, the compensation each received during
each Fund's fiscal year from all funds in the Aquilasm Group of
Funds and the number of such funds. None of such Trustees has any
pension or retirement benefits from the Fund or any of the other
funds in the Aquila group.
<TABLE>
<CAPTION>
Compensation Compensation Compensation
Name from CAT from TFCAT from USTCAT (1)
<S> <C> <C> <C>
Vernon R. $11,032 $5,144 $4,824
Alden
Arthur K. $10,541 $5,749 $5,432
Carlson
William M. $11,418 $5,645 $4,864
Cole
Thomas W. $11,106 $5,761 $6,588
Courtney
Richard W. $11,161 $5,617 $4,621
Gushman
Stanley W. $10,206 $6,000 $4,844
Hong
Theodore T. $10,253 $5,406 $4,799
Mason
Russell K. $9,843 $4,559 $4,568
Okata
Douglas $10,460 $4,089 $5,649
Philpotts
Oswald K. $10,646 $5,307 $4,801
Stender
<CAPTION>
Compensation from Number of Aquila Group
from all funds in boards on which the
Name the Aquila Group Trustee serves
<S> <C> <C>
Vernon R. $53,118 7
Alden
Arthur K. $56,955 7
Carlson
William M. $44,625 5
Cole
Thomas W. $48,135 5
Courtney
Richard W. $35,550 4
Gushman
Stanley W. $37,626 4
Hong
Theodore T. $49,460 8
Mason
Russell K. $33,464 4
Okata
Douglas $33,560 4
Philpotts
Oswald K. $36,350 4
Stender
<FN>
(1) During the fiscal year ended March 31, 1998, the Government Securities
Fund was called the Treasuries Fund.
</FN>
</TABLE>
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Advisory Agreements
The Investment Advisory Agreement (the "Advisory
Agreement") between each of the Funds and Pacific Century Trust
(the "Adviser"), a division of Bank of Hawaii, contains the
provisions described below, in addition to those described in the
Prospectus.
Each Advisory Agreement may be terminated by the Adviser at
any time without penalty upon giving the Fund sixty days' written
notice, and may be terminated by the Fund at any time without
penalty upon giving the Adviser sixty days' written notice,
provided that such termination by the Fund shall be directed or
approved by the vote of a majority of all its Trustees in office at
the time or by the vote of the holders of a majority (as defined in
the 1940 Act) of its voting securities at the time outstanding and
entitled to vote; it automatically terminates in the event of its
assignment (as so defined).
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
Each Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, the Adviser is not liable
for any loss sustained by the adoption of any investment policy or
the purchase, sale or retention of any security and permits the
Adviser to act as investment adviser for any other person, firm or
corporation. Each Fund agrees to indemnify the Adviser to the full
extent permitted under the Business Trust's Declaration of Trust.
The Advisory Agreement states that it is agreed that the
Adviser shall have no responsibility or liability for the accuracy
or completeness of the Fund's Registration Statement under the
Securities Act of 1933 and the 1940 Act, except for the information
supplied by the Adviser for inclusion therein.
Each Advisory Agreement contains the following provisions as
to the Fund's portfolio transactions. In connection with its duties
to arrange for the purchase and sale of the Fund's portfolio
securities, the Adviser shall select such broker-dealers
("dealers") as shall, in the Adviser's judgment, implement the
policy of the Fund to achieve "best execution," i.e., prompt,
efficient and reliable execution of orders at the most favorable
net price. The Adviser shall cause the Fund to deal directly with
the selling or purchasing principal or market maker without
incurring brokerage commissions unless the Adviser determines that
better price or execution may be obtained by paying such
commissions; the Fund expects that most transactions will be
principal transactions at net prices and that the Fund will incur
little or no brokerage costs. The Fund understands that purchases
from underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions placed
through dealers include a spread between the bid and asked prices.
In allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion. If,
on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Fund or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, Administrator or
principal underwriter as the Fund. Such research may be in written
form or through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic or
institutional activities. The Fund recognizes that no dollar value
can be placed on such research services or on execution services,
that such research services may or may not be useful to the Fund
and/or other accounts of the Adviser and that research received by
such other accounts may or may not be useful to the Fund.
The Adviser has advised the Funds that it is a subsidiary of
Bank of Hawaii, and after September 30, 1997, will be a division of
the Bank of Hawaii, which is a state-chartered bank. The Adviser
has advised the Funds that it is not at the date of the Additional
Statement, and after September 30, 1997, will not be, prohibited
under current Federal banking laws from performing the services for
the Funds required by the Advisory Agreements. The Adviser
recognizes however, that future changes in federal or state
statutes and regulations relating to the permissible activities of
bank and bank holding companies, including their bank and non-bank
subsidiaries, as well as future judicial or administrative
decisions and interpretations of present and future statutes and
regulations, might prevent the Adviser from continuing to serve as
the investment adviser to the Funds.
During each Fund's fiscal year ended March 31, 1998, all of
its transactions were principal transactions and no brokerage
commissions were paid.
For each Fund's fiscal year ended March 31, 1998, under its
Advisory Agreement and its Administration Agreement, the Cash Fund,
the Tax-Free Fund and the Government Securities Fund paid or
accrued to the Adviser fees of $1,791,797, $271,071 and $588,596,
respectively, and paid or accrued to the Administrator fees of
$669,595, $125,970 and $168,490, respectively.
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.
For each Fund's fiscal year ended March 31, 1996, the Cash
Fund, the Tax-Free Fund and the Treasuries Fund paid or accrued to
the Adviser fees of $1,353,593, $394,009 and $210,982 respectively,
and paid or accrued to the Administrator fees of $597,533, $152,543
and $88,287, respectively under the Advisory and Administration
Agreements. For the Treasuries Fund, the Adviser waived $44,372 and
the Administrator waived $14,790 of such fees.
Additional Information as to the Administration Agreement
The Administration Agreement (the "Administration Agreement")
between Aquila Management Corporation, as Administrator, and each
Fund contains the provisions described below in addition to those
described in the Prospectus.
Subject to the control of the Fund's Board of Trustees, the
Administrator provides all administrative services to the Fund
other than those relating to its investment portfolio and the
maintenance of its accounting books and records (see below for
discussion); as part of such duties, the Administrator (i) provides
office space, personnel, facilities, and equipment for the
performance of the following functions and for the maintenance of
the Fund's headquarters; (ii) oversees all relationships between
the Fund and its transfer agent, custodian, legal counsel, auditors
and principal underwriter, including the negotiation of agreements
in relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Fund and for the sale, servicing, or
redemption of the Fund's shares; (iii) provides to the Adviser and
to the Fund statistical and other factual information and advice
regarding economic factors and trends, but does not generally
furnish advice or make recommendations regarding the purchase or
sale of securities; (iv) maintains the Fund's books and records
(other than accounting books and records), and prepares (or assists
counsel and auditors in the preparation of) all required proxy
statements, reports to shareholders and Trustees, reports to and
other filings with the Securities and Exchange Commission and any
other governmental agencies, and tax returns, and oversees the
Fund's insurance relationships; (v) prepares, on the Fund's behalf
and at its expense, such applications and reports as may be
necessary to register or maintain its registration or that of its
shares under the securities or "Blue-Sky" laws of all such
jurisdictions as may be required from time to time; and (vi)
responds to any inquiries or other communications from shareholders
and broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Fund's shareholder servicing and
transfer agent or distributor, oversees such shareholder servicing
and transfer agent's or distributor's response thereto. Since each
Fund pays its own legal and audit expenses, to the extent that the
Fund's counsel and accountants prepare or assist in the preparation
of prospectuses, proxy statements and reports to shareholders, the
costs of such preparation or assistance are paid by the Fund.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Fund and the Adviser; it may be terminated by the
Fund at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Fund shall be directed or approved by a vote of a majority of the
Trustees in office at the time, including a majority of the
Trustees who are not interested persons of the Fund. In either case
the notice provision may be waived.
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Fund in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Fund agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
(References to the Fund in "ADDITIONAL INFORMATION AS TO
MANAGEMENT ARRANGEMENTS" refer to the Business Trust where the
documents being described so specify.)
AMORTIZED COST VALUATION
Each Fund operates under the Rule (Rule 2a-7 under the 1940
Act) which permits it to value its portfolio on the basis of
amortized cost. The amortized cost method of valuation is
accomplished by valuing a security at its cost and thereafter
assuming a constant amortization rate to maturity of any discount
or premium, and does not reflect the impact of fluctuating interest
rates on the market value of the security. This method does not
take into account unrealized gains or losses.
While the amortized cost method provides certainty in
valuation, there may be periods during which value, as determined
by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. During periods of declining
interest rates, the daily yield on the Fund's shares may tend to be
higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio
instruments and changing its dividends based on these changing
prices. The converse would apply in a period of rising interest
rates.
Under the Rule, each Fund's Board of Trustees must establish,
and has established, procedures (the "Procedures") designed to
stabilize at $1.00, to the extent reasonably possible, the price
per share for each of each Fund's two classes as computed for the
purpose of sales and redemptions. Such procedures must include
review of the Fund's portfolio holdings by the Board of Trustees at
such intervals as it may deem appropriate and at such intervals as
are reasonable in light of current market conditions to determine
whether the Fund's per share value calculated by using available
market quotations deviates from the per share value based on
amortized cost. "Available market quotations" may include actual
market quotations (valued at the mean between bid and asked
prices), estimates of market value reflecting current market
conditions based on quotations or estimates of market value for
individual portfolio instruments or values obtained from yield data
relating to a directly comparable class of securities published by
reputable sources.
Under the Rule, if the extent of any deviation between the net
asset value per share based upon "available market quotations" (see
above) and the net asset value per share based on amortized cost
exceeds $0.005, the Board of Trustees must promptly consider what
action, if any, will be initiated. When the Board of Trustees
believes that the extent of any deviation may result in material
dilution or other unfair results to investors or existing
shareholders, it is required to take such action as it deems
appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results. Such actions could
include the sale of portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends or payment of distributions from
capital or capital gains, redemptions of shares in kind, or
establishing a net asset value per share using available market
quotations.
The Procedures include changes in the dividends payable by the
Fund under specified conditions, as described below under
"Computation of Daily Dividends." This portion of the Procedures
provides that actions that the Trustees would consider under
certain circumstances can be taken automatically.
COMPUTATION OF DAILY DIVIDENDS
Under the Procedures which each Fund's Board of Trustees has
adopted relating to amortized cost valuation, the calculation of
the Fund's daily dividends will change under certain circumstances
from that indicated in the Prospectus. If on any day the deviation
between net asset value per share of a given class determined on an
amortized cost basis and that determined using market quotations is
$0.003 or more, the amount of such deviation will be added to or
subtracted from the daily dividend for that class to the extent
necessary to reduce such deviation to within $0.003.
If on any day there is insufficient net income to absorb any
such reduction, the Board of Trustees would be required under the
Rule to consider taking other action if the deviation, after
eliminating the dividend for that day, exceeds $0.005. One of the
actions which the Board of Trustees might take could be the
elimination or reduction of dividends for more than one day.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase shares of any Fund having a net asset
value of at least $5,000 you may establish an Automatic Withdrawal
Plan under which you will receive a monthly or quarterly check in
a stated amount, not less than $50. Stock certificates will not be
issued for shares held under an Automatic Withdrawal Plan. All
dividends must be reinvested.
Shares will be redeemed on the last business day of the month
as may be necessary to meet withdrawal payments. Shares acquired
with reinvested dividends will be redeemed first to provide such
withdrawal payments and thereafter other shares will be redeemed to
the extent necessary, and, depending upon the amount withdrawn,
your principal may be depleted.
Redemption of shares for withdrawal purposes may reduce or
even liquidate your account. Monthly or quarterly payments paid to
you may not be considered as a yield or income on investment.
GENERAL INFORMATION
Net Asset Value Per Share
As indicated in the Prospectus, the net asset value per share
for each class of each Fund's shares will be determined on each day
that the New York Stock Exchange is open. That Exchange annually
announces the days on which it will not be open; the most recent
announcement indicates that it will not open on the following days:
New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, that Exchange may close on days not included in that
announcement.
Voting by Series of Shares
Shares of each Series of the Business Trust created by the
Board of Trustees are entitled to vote as a Series only to the
extent permitted by the 1940 Act (see below) or as permitted by the
Board of Trustees. Income and operating expenses are allocated
among Series in a manner acceptable to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, as to any investment
company which has two or more series outstanding, on any matter
required to be submitted to shareholder vote, such matter is not
deemed to have been effectively acted upon unless approved by the
holders of a majority (as defined in that Rule) of the voting
securities of each series affected by the matter. Such separate
voting requirements do not apply to the election of Trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, series. A change in
investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not
obtained as to the holders of the other affected series.
Shareholder and Trustee Indemnification
The Business Trust is an entity of the type commonly known as
a Massachusetts business trust. Under Massachusetts law,
shareholders of a trust such as the Business Trust may, under
certain circumstances, be held personally liable as partners for
the obligations of the trust. However, for the protection of
shareholders, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the
Business Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or
executed by any Fund or the Trustees. The Declaration of Trust
provides for indemnification out of the Business Trust's property
of any shareholder held personally liable for the obligations of
the Business Trust. The Declaration of Trust also provides that the
Business Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the
Business Trust and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to the relatively remote circumstances in
which the Business Trust itself would be unable to meet its
obligations. If any series or class is unable to meet the
obligations attributable to it (which, in the case of the Business
Trust, is a remote possibility), other series or classes would be
subject to such obligations with a corresponding increase in the
risk of the shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees out
of the assets of each Fund and provides that they will not be
liable for errors of judgment or mistakes of fact or law; but
nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Ownership of Securities
The ownership of more than 5% of the outstanding shares of
each Fund on July ***, 1998, was as follows:
[To be updated within 30 days of effectiveness]
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.
Custodian and Auditors
Each Fund's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Fund's assets.
The Trust's auditors, KPMG Peat Marwick LLP, perform an annual
audit of each Fund's financial statements.
Financial Statements
The financial statements of each of the Funds for the
fiscal year ended March 31, 1998, which are contained in the Annual
Report of The Pacific Capital Funds of Cash Assets Trust for that
fiscal year, are incorporated by reference into the Additional
Statement. The financial statements of the Funds for that fiscal
year have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon is incorporated herein by
reference.
<PAGE>
APPENDIX A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS
Bond Ratings
At the date of this Additional Statement there are six
organizations considered as Nationally Recognized Statistical
Rating Organizations ("NRSROs") for purposes of Rule 15c3-1 under
the Securities Exchange Act of 1934. Their names, a brief summary
of their respective rating systems, some of the factors considered
by each of them in issuing ratings and their individual procedures
are described below.
STANDARD AND POOR'S CORPORATION
Commercial paper consists of unsecured promissory notes issued
to raise short-term funds. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. S&P's
commercial paper ratings are graded into several categories from
"A-1" for the highest-quality obligations (which can also have a
plus (+) sign designation) to "D" for the lowest. The two highest
categories are:
A-1: This highest category indicates the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus (+) sign.
A-2: Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high for issues designated A-1.
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific
obligation. The ratings are based, in varying degrees, on the
following considerations:
1) Likelihood of default -- capacity and willingness of the
obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligations;
2) Nature of and provisions of the obligation; and
3) Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
The two highest categories are:
AAA: Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in a degree.
MOODY'S INVESTORS SERVICE
Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior debt obligations which have an
original maturity not exceeding one year. Obligations relying upon
support mechanisms such as letters of credit and bonds of indemnity
are excluded unless explicitly rated. The two highest categories
are:
Prime-1: Issuers rated P-1 have a superior ability for
repayment of senior short-term debt obligations, evidenced by
the following characteristics:
* Leading market positions in well-established
industries.
* High rates of return on funds employed.
* Conservative capital structure with moderate reliance
on debt and ample asset protection.
* Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
* Well-established access to a range of markets and
assured sources of alternative liquidity.
Prime-2: Issuers rated P-2 have a strong ability for repayment
of senior short-term debt obligations, evidenced by the above-
mentioned characteristics, but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
Corporate bonds rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are
protected by large or exceptionally stable margin and principal is
secure. Corporate bonds rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. Aa bonds are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa
securities.
DUFF & PHELPS, INC.
The ratings apply to all obligations with maturities of under
one year, including commercial paper, the unsecured portion of
certificates of deposit, unsecured bank loans, master notes,
bankers' acceptances, irrevocable letters of credit and current
maturities of long-term debt. The two highest categories are:
D-1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access
to alternative sources of funds is outstanding and safety is
just below risk-free U.S. Treasury short-term obligations.
D-1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1 -: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are very small.
Long-term debt rated AAA represents the highest credit
quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt. Debt rated AA represents
high credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic
conditions.
IBCA
In determining the creditworthiness of financial institutions,
IBCA assigns ratings within the following categories: Legal,
Individual, Short and Long Term. A legal rating deals solely with
the question of whether an institution would receive support if it
ran into difficulties and not whether it is "good" or "bad". An
individual rating looks purely at the strength of a financial
institution without receiving any support. Short and long-term
ratings assess the borrowing capabilities and the capacity for
timely repayment of debt obligations. A short-term rating relates
to debt which has a maturity of less than one year, while a long-
term rating applies to a instrument of longer duration. The legal
ratings are:
1: A bank for which there is a clear legal guarantee on the
part of its home state to provide any necessary support or a
bank of such importance both internationally and domestically
that support from the state would be forthcoming, if
necessary.
2: A bank for which there is no legal obligation on the part
of its sovereign entity to provide support but for which state
support would be forthcoming, for example, because of its
importance to the total economy or its historic relationship
with the government.
The individual ratings are:
A: A bank with a strong balance sheet, favorable credit
profile and a consistent record of above average
profitability.
B: A bank with a sound credit profile and without significant
problems. The bank's performance has generally been in line
with or better than that of its peers.
The short-term ratings are:
A-1+: Obligations supported by the highest capacity for timely
repayment.
A-1: Obligations supported by a very strong capacity for
timely repayment.
A-2: Obligations supported by a very strong capacity for
timely repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
The long-term ratings are:
AAA: Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial, such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk.
AA: Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk
albeit not significantly.
Thomson BankWatch, Inc. (TBW)
The TBW short-term ratings apply to commercial paper, other
senior short-term obligations and deposit obligations of the
entities to which the rating has been assigned. TBW's two highest
short-term ratings are:
TBW-1: Indicates a very high degree of likelihood that
principal and interest will paid on a timely basis.
TBW-2: While the degree of safety regarding timely repayment
of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
The TBW long-term rating specifically assess the likelihood of
an untimely repayment of principal or interest over the term to
maturity of the rated instrument. TBW's two highest long-term
ratings are:
AAA: Indicates ability to repay principal and interest on a
timely basis is very strong.
AA: Indicates a superior ability to repay principal and
interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
Fitch Investors Service, Inc.
The Fitch short-term ratings apply to debt obligations that
are payable on demand which include commercial paper, certificates
of deposit, medium-term notes and municipal and investment notes.
Short-term ratings places greater emphasis than long-term ratings
on the existence of liquidity necessary to meet the issuer's
obligations in a timely manner. Fitch short-term ratings are:
F-1+: Issues assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1: Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than issues rated
"F-1+".
The Fitch long-term rating represents their assessment of the
issuer's ability to meet the obligations of a specific debt issue
or class of debt in a timely manner. The rating takes into
consideration special features of the issue, its relationship to
other obligations of the issuer, the current and prospective
financial and operating performance of the issuer and any
guarantor, as well as the economic and political environment that
might affect the issuer's future financial strength and credit
quality. The Fitch long-term rating are:
AAA: Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong.
DESCRIPTION OF MUNICIPAL BOND AND COMMERCIAL PAPER RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers or
lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Standard & Poor's ratings for municipal note issues are
designated SP in order to help investors distinguish more clearly
the credit quality of notes as compared to bonds. Notes bearing the
designation SP-1 are deemed very strong or to have strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Notes bearing the designation SP-2 are deemed to have
a satisfactory capacity to pay principal and interest.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some
time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated
by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's Investment
Grade as MIG 1 through MIG 4. In the case of variable rate demand
obligations (VRDOs), two ratings are assigned; one representing an
evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When no rating is applied to the long
or short-term aspect of a VRDO, it will be designated NR. Issues or
the features associated with MIG or VMIG ratings are identified by
date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any
other similar issue of the same obligor. MIG ratings terminate at
the retirement of the obligation while VMIG rating expiration will
be a function of each issuer's specific structural or credit
features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality. Margins
of protection are ample although not so large
as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access for
refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although
not distinctly or predominantly speculative,
there is specific risk.
Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations. Moody's
employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of
rated issuers: Prime 1 -- Highest Quality; Prime 2 -- Higher
Quality; Prime 3 -- High Quality.
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment. Ratings are graded
into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having
the greatest capacity for timely payment. Issues in this category
are designed with the numbers 1, 2 and 3 to indicate the relative
degree of safety. The designation A-1 indicates that the degree of
safety regarding timely payment is either overwhelming or very
strong. A "+" designation is applied to those issues rated "A-1"
which possess safety characteristics. Capacity for timely payment
on issues with the designation A-2 is strong. However, the
relative degree of safety is not as high as for issues designated
A-1. Issues carrying the designation A-3 have a satisfactory
capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
<PAGE>
INVESTMENT ADVISER
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, Delaware 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
The Pacific Capital Funds
of
Cash Assets Trust
Pacific Capital Cash Assets Trust
Pacific Capital Tax-Free Cash Assets Trust
Pacific Capital U.S. Government Securities Cash Assets Trust
A cash management
investment
[LOGO]
STATEMENT OF
ADDITIONAL INFORMATION
<PAGE>
CASH ASSETS TRUST
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements of the Pacific Capital Funds
of Cash Assets Trust:
Included in Part A:
Financial Highlights of
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Government
Securities Cash Assets Trust
Incorporated by reference into Part B:
Report of Independent Auditors
Statement of Assets and Liabilities as of
March 31, 1997:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
Statement of Operations for the Year Ended
March 31, 1997:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
Statement of Changes in Net Assets for the
Years Ended March 31, 1997 and 1996:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
Statement of Investments as of March 31, 1997:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
Notes to Financial Statements:
Pacific Capital Cash Assets Trust
Pacific Capital Tax-free Cash Assets Trust
Pacific Capital U.S. Treasuries Cash Assets Trust
Included in Part C:
Consent of Independent Auditors
(b) Exhibits:
(1) Amended and Restated Declaration of Trust (ii)
(2) By-laws (ii)
(3) Not applicable
(4) (a) Specimen share certificate for Pacific
Capital Cash Assets Trust Series,
Original Shares (ii)
(b) Specimen share certificate for Pacific
Capital Cash Assets Trust Series,
Service Shares Class (ii)
(c) Specimen share certificate for Pacific
Capital Tax-Free Cash Assets Trust
Series, Original Shares (ii)
(d) Specimen share certificate for Pacific
Capital Tax-Free Cash Assets Trust
Series, Service Shares (ii)
(e) Specimen share certificate for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series, Original Shares (ii)
(f) Specimen share certificate for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series, Service Shares (ii)
(5) (a) Investment Advisory Agreement for Pacific
Capital Cash Assets Trust Series (i)
(b) Investment Advisory Agreement for Pacific
Capital Tax-Free Cash Assets Trust
Series (i)
(c) Investment Advisory Agreement for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (i)
(6) (a) Distribution Agreement for Pacific Capital
Cash Assets Trust Series (ii)
(b) Distribution Agreement for Pacific Capital
Tax-Free Cash Assets Trust Series (ii)
(c) Distribution Agreement for Pacific Capital
U.S. Treasuries Cash Assets Trust
Series (ii)
(d) Distribution Assistance Agreement for All
Series (ii)
(e) Distribution Assistant Agreement for All
Series with BHC Securities, Inc. (ii)
(7) Not applicable
(8) (a) Custody Agreement for All Series (ii)
(9) (a) Transfer Agency Agreement for All
Series (iii)
(b) Administration Agreement for Pacific
Capital Cash Assets Trust Series (ii)
(c) Administration Agreement for Pacific
Capital Tax-Free Cash Assets Trust
Series (ii)
(d) Administration Agreement for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (ii)
(e) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific Capital
Cash Assets Trust Series (ii)
(f) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital Cash Assets Trust Series
(ii)
(g) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital Cash Assets Trust Series
(ii)
(h) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific Capital
Tax-Free Cash Assets Trust Series
(ii)
(i) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital Tax-Free Cash Assets Trust
Series (ii)
(j) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital Tax-Free Cash Assets Trust
Series (ii)
(k) Agreement between the Trust and Aquila
Distributors, Inc. for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (ii)
(l) Agreement between the Trust and Aquila
Management Corporation for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (ii)
(m) Agreement between the Trust and Hawaiian
Trust Company, Limited for Pacific
Capital U.S. Treasuries Cash Assets
Trust Series (ii)
(10) (a) Opinion and consent of counsel
to the Trust (ii)
(11) Not applicable
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (a) Distribution Plan for Pacific Capital
Cash Assets Trust Series (ii)
(b) Distribution Plan for Pacific Capital
Tax-Free Cash Assets Trust Series (ii)
(c) Distribution Plan for Pacific Capital U.S.
Treasuries Cash Assets Trust Series (ii)
(16) Not applicable
(17) (a) Principles of Cooperation for All Series (ii)
(b) Information Sharing Agreement (ii)
(c) Financial Data Schedules (iii)
(18) Plan pursuant to Rule 18f-3 under the
1940 Act (i)
(i) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 20 dated May 25, 1996 and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 21 dated July 27, 1997 and
incorporated herein by reference.
(iii) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control
with Registrant
None
ITEM 26. Number of Holders of Securities
As of May 23, 1996, the number of record holders of
the Registrant's securities in each of its portfolios
was as follows:
Pacific Capital Cash Assets Trust
Original Shares 29
Service Shares 4
Pacific Capital Tax-Free Cash Assets Trust
Original Shares 78
Service Shares 3
Pacific Capital U.S. Government Securities Cash Assets Trust
Original Shares 14
Service Shares 2
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Amended and Restated Declaration of
Trust, filed as Exhibit 1 herewith, is incorporated
herein by reference.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to Trustees, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable.
In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant
of expenses incurred or paid by a Trustee, officer, or
controlling person of Registrant in the successful
defense of any action, suit, or proceeding) is asserted
by such Trustee, officer, or controlling person in
connection with the securities being registered,
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is
against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment
Adviser
Pacific Century Trust, Registrant's investment
adviser, is a division of Bank of Hawaii. Bank of
Hawaii is a state-chartered bank. Bank of Hawaii is
a subsidiary of Bancorp Hawaii, Inc. Bancorp Hawaii,
Inc. is a bank holding company.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal
underwriter to Aquila Cascadia Equity Fund, Aquila
Rocky Mountain Equity Fund, Capital Cash Management
Trust, Churchill Cash Reserves Trust, Churchill
Tax-Free Fund of Kentucky, Hawaiian Tax-Free Trust,
Narragansett Insured Tax-Free Income Fund, Tax-Free
Fund for Utah, Tax-Free Fund of Colorado, Tax-Free
Trust of Arizona, and Tax-Free Trust of Oregon, in
addition to serving as the Registrant's principal
underwriter.
(b) For information about the Directors and officers
of Aquila Distributors, Inc., reference is made
to the Form BD filed by it under the Securities
Exchange Act of 1934.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectuses
and Statements of Additional Information of the
three Portfolios of the Trust.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
<PAGE>
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Consent of Independent Auditors
To The Shareholders and Board of Trustees
Cash Assets Trust:
We consent to the use of our report, dated May 8, 1998,
incorporated herein by reference, and to the reference to our firm
under the headings "Financial Highlights" in the Prospectus and
"Custodian and Auditors" and "Financial Statements" in the
Statement of Additional Information.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
New York, New York
May 26, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement or Amendment to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New
York and State of New York, on the 28th day of May, 1998.
CASH ASSETS TRUST
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 5/28/98
______________________ President, Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Vernon R. Alden 5/28/98
______________________ Trustee ___________
Vernon R. Alden
/s/Arthur K. Carlson 5/28/98
______________________ Trustee ___________
Arthur K. Carlson
/s/William M. Cole 5/28/98
______________________ Trustee ___________
William M. Cole
/s/Thomas W. Courtney 5/28/98
______________________ Trustee ___________
Thomas W. Courtney
/s/Richard W. Gushman, II 5/28/98
______________________ Trustee ___________
Richard W. Gushman, II
/s/Stanley W. Hong 5/28/98
______________________ Trustee ___________
Stanley W. Hong
/s/Theodore T. Mason 5/28/98
______________________ Trustee ___________
Theodore T. Mason
/s/Russell K. Okata 5/28/98
______________________ Trustee ___________
Russell K. Okata
/s/Douglas Philpotts 5/28/98
_______________________ Trustee ___________
Douglas Philpotts
/s/Oswald K. Stender 5/28/98
_______________________ Trustee ___________
Oswald K. Stender
/s/Rose F. Marotta 5/28/98
_______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
CASH ASSETS TRUST
EXHIBIT INDEX
Exhibit Exhibit
Number Name
9 (a) Transfer Agency Agreement for All
Series
17 (c) Financial Data Schedules
Correspondence
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of November 7, 1997 by and between
PFPC INC., a Delaware corporation ("PFPC"), and CASH ASSETS
TRUST, a Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder
servicing agent to its investment portfolios listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A may be
amended from time to time (each a "Portfolio"), and PFPC wishes
to furnish such services, on the terms and for the considerations
set forth in this agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. As used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of
1934, as amended.
(c) "Authorized Person" means any officer of the Fund
and any other person duly authorized by the Fund's Board of
Trustees to give Oral Instructions and Written Instructions on
behalf of the Fund and listed on the Authorized Persons Appendix
attached hereto and made a part hereof or any amendment thereto
as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such
limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as
amended.
(e) "Oral Instructions" mean oral instructions
received by PFPC from an Authorized Person or from a person
reasonably believed by PFPC to be an Authorized Person.
(f) "SEC" means the Securities and Exchange
Commission.
(g) "Securities Laws" mean the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(h) "Shares" mean the shares of beneficial interest
of any series or class of the Fund.
(i) "Written Instructions" mean written instructions
signed by an Authorized Person and received by PFPC. The
instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as
transfer agent, registrar, dividend disbursing agent and
shareholder servicing agent to the Fund in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment
and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where
applicable, will provide PFPC with the following:
(a) Certified or authenticated copies of the
resolutions of the Fund's Board of Trustees,
approving the appointment of PFPC or its
affiliates to provide services to the Fund and
approving this Agreement;
(b) A copy, and all amendments thereto, of the Fund's
most recent effective registration statement;
(c) A copy of the applicable administration, advisory
and/or sub-advisory agreements, and all amendments
thereto, with respect to each Portfolio;
(d) A copy of the distribution agreement, and all
amendments thereto, with respect to each class of
Shares;
(e) Copies of any shareholder servicing agreements,
and all amendments thereto, made in respect of the
Fund or a Portfolio;
(f) The Fund's Declaration of Trust filed with the
Secretary of State of the Commonwealth of
Massachusetts and all amendments thereto (such
Declaration of Trust, as presently in effect and
as it shall from time to time be amended, is
herein called the "Declaration of Trust"); and
(g) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they
shall from time to time be amended, are
hereinafter called the "By-Laws").
PFPC has furnished the Fund with copies properly
certified or authenticated of its Registration Statement on Form
TA-1 under the Securities and Exchange Act of 1934, as amended
and all other public reports filed with the SEC related to the
services provided to the Fund as may be requested from time to
time by the Fund.
4. Compliance with Rules and Regulations. PFPC undertakes
to comply with all applicable requirements of the Securities Laws
and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by
PFPC hereunder. Except as specifically set forth herein, PFPC
assumes no responsibility for such compliance by the Fund or any
of its investment portfolios.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC
shall act only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral
Instructions and Written Instructions it receives from an
Authorized Person (or from a person reasonably believed by PFPC
to be an Authorized Person) pursuant to this Agreement. PFPC may
assume that any Oral Instruction or Written Instruction received
hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote,
resolution or proceeding of the Fund's Board of Trustees or of
the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written
Instructions confirming Oral Instructions so that PFPC receives
the Written Instructions by the close of business on the same day
that such Oral Instructions are received. The fact that such
confirming Written Instructions are not received by PFPC shall in
no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral
Instructions or Written Instructions reasonably appear to have
been received from an Authorized Person, PFPC shall incur no
liability to the Fund in acting upon such Oral Instructions or
Written Instructions provided that PFPC's actions comply with the
other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any
action it should or should not take, PFPC may request directions
or advice, including Oral Instructions or Written Instructions,
from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as
to any question of law pertaining to any action it should or
should not take, PFPC may request advice at its own cost from
such counsel of its own choosing (who may be counsel for the
Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral Instructions or Written
Instructions PFPC receives from the Fund, and the advice it
receives from counsel, PFPC may rely upon and follow the advice
of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the
part of PFPC which constitutes willful misfeasance, bad faith,
negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in
any action it takes or does not take in reliance upon directions,
advice or Oral Instructions or Written Instructions it receives
from the Fund or from counsel and which PFPC believes, in good
faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PFPC (i) to
seek such directions, advice or Oral Instructions or Written
Instructions, or (ii) to act in accordance with such directions,
advice or Oral Instructions or Written Instructions unless, under
the terms of other provisions of this Agreement, the same is a
condition of PFPC's properly taking or not taking such action.
Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad
faith, negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
7. Records; Visits. The books and records pertaining to
the Fund which are in the possession or under the control of PFPC
shall be the property of the Fund. Such books and records shall
be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. PFPC will,
if so requested by counsel to the Fund, work with such counsel to
develop an acceptable modification to the manner in which such
books and records are prepared and maintained so as to comply
with the reasonable opinion of such counsel as to such laws and
rules. Such modification will be subject to additional mutually-
agreed upon pricing, if any. The Fund and Authorized Persons
shall have access to such books and records at all times during
PFPC's normal business hours. Copies of any such books and
records shall be provided by PFPC to the Fund or to an Authorized
Person at the Fund's expense. Prior to any destruction of any
books or records, PFPC will advise the Fund of the proposed
destruction and in accordance with instructions of the Fund, the
records will be destroyed or, at the expense of the Fund,
delivered to the Fund or as it may otherwise direct.
8. Confidentiality. PFPC agrees to keep confidential all
records of the Fund and information relating to the Fund and its
shareholders, unless the release of such records or information
is otherwise consented to, in writing, by the Fund, and shall
maintain procedures reasonably designed to protect such
confidentiality. The Fund agrees that its consent shall not be
unreasonably withheld and may not be withheld where PFPC may be
exposed to civil or criminal contempt proceedings or when
required to divulge such information or records to duly
constituted authorities, and that such consent shall not be
required where consent or notice to the Fund is not permitted by
law or regulation.
9. Cooperation with Accountants. PFPC shall cooperate
with the Fund's independent public accountants and shall take all
reasonable actions in the performance of its obligations under
this Agreement to ensure that the necessary information is made
available on a timely basis to such accountants for the
expression of their opinion, as required by the Fund.
10. Adequate Facilities; Disaster Recovery. PFPC shall
maintain adequate personnel and facilities, as well as adequate
and reliable computer and other equipment, necessary and
appropriate to carry out its obligations under this Agreement,
including appropriate duplicate files (which shall be readable
by computer or otherwise or maintained in hard copy form, and
shall be maintained at a frequency and in a detail reasonably
designed pursuant to industry standards to provide for protection
of such files in the event of a disaster to PFPC's facilities).
PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making adequate and
reliable provisions for emergency use of electronic data
processing equipment to the extent appropriate equipment is
available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize
service interruptions. PFPC shall periodically back up data
(including all predecessor transfer agent data delivered to PFPC
by the Fund's prior transfer agent in a machine readable format
and converted by PFPC) on appropriate media to be stored at an
offsite facility of PFPC's choosing. PFPC shall have no
liability with respect to the loss of data or service
interruptions caused by equipment failure or otherwise, provided
such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its
duties or obligations under this Agreement.
11. Insurance. PFPC shall maintain adequate fidelity,
error and omissions and other insurance coverage in connection
with its transfer agent services throughout the duration of this
Agreement.
12. Compensation. As compensation for services rendered by
PFPC during the term of this Agreement, for the period commencing
on the date upon which PFPC becomes transfer agent for the Fund,
the Fund will pay to PFPC a fee or fees as agreed to from time to
time in writing by the Fund and PFPC. All services detailed in
this Agreement and expenses incurred in the performance of these
services will be provided by PFPC without cost to the Fund except
as otherwise stated in this Agreement or otherwise agreed to in
writing.
13. Indemnification. The Fund agrees to indemnify and hold
harmless PFPC and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any
state and foreign securities and blue sky laws, and amendments
thereto), and expenses, including (without limitation) attorneys'
fees and disbursements, arising directly or indirectly from (i)
any action or omission to act which PFPC takes (a) at the request
or on the direction of or in reliance on the advice of the Fund
or (b) upon Oral Instructions or Written Instructions or (ii) the
acceptance, processing and/or negotiation of checks or other
methods utilized for the purchase of Shares. Neither PFPC nor
any of its affiliates shall be indemnified against any liability
(or any expenses incident to such liability) arising out of
PFPC's or its affiliates' own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations
under this Agreement.
14. Release. PFPC understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; PFPC represents
that it has notice of the provision in the Fund's Declaration of
Trust disclaiming shareholder liability for acts or obligations
of the Fund.
15. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be
obligated to exercise care and diligence in the performance of
its duties hereunder, to act in good faith and to use its best
efforts, within reasonable limits, to ensure the accuracy and
completeness of all services performed under this Agreement.
PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent
such damages arise out of PFPC's willful misfeasance, bad faith,
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing
or of any other provision of this Agreement, (i) PFPC shall not
be liable for losses beyond its control, provided that PFPC has
acted in accordance with the standard of care set forth above;
and (ii) PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction
or Written Instruction, notice or other instrument which conforms
to the applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or
military authority, national emergencies, labor difficulties,
fire, flood, catastrophe, acts of God, insurrection, war, riots
or failure of the mails, transportation, communication or power
supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the
Fund for any consequential, special or indirect losses or damages
which the Fund may incur or suffer by or as a consequence of
PFPC's or its affiliates' performance of the services provided
hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
16. Description of Services.
(a) Itemized Services. PFPC shall:
(i) Calculate 12b-1 payments and payments under
any Shareholder Services Plan of the Fund,
produce and mail statements and checks where
applicable or generate payments through the
National Securities Clearing Corp. (the
"NSCC") to all eligible dealers, and forward
ineligible checks and statements to Aquila
Distributors, Inc. (the "Distributor");
(ii) Make weekly payment of direct commissions,
including settlement through NSCC;
(iii) Establish and maintain proper shareholder
registrations;
(iv) Review new applications for required
information and correspond with shareholders
to complete or correct information;
(v) Provide payment processing of checks or
wires;
(vi) Prepare and certify stockholder lists in
conjunction with proxy solicitations;
(vii) Issue and countersign share certificates
(when requested in writing by a shareholder)
and cancel share certificates;
(viii) Prepare and mail to shareholders confirmation
of activity;
(ix) Provide toll-free lines and voice response
unit for direct shareholder use, plus
customer liaison staff for on-line inquiry
response (generally until 6 p.m., New York
time, on days on which the New York Stock
Exchange is open), including the ability to
receive redirected toll-free calls from the
Distributor on an as-needed basis;
(x) On a monthly basis, mail duplicate statements
to: (1) broker-dealers of their clients'
activity, whether executed through the
broker-dealer or directly with PFPC, and (2)
other parties (e.g., lawyers and accountants)
as requested by the shareholders;
(xi) Provide periodic shareholder lists and
statistics to the Fund;
(xii) Provide detailed data for underwriter/broker
confirmations, including daily outstanding
confirmed purchases, redemptions, and paid
not issued shares;
(xiii) Prepare periodic mailing of year-end tax and
statement information;
(xiv) Provide reports, notification, and where
applicable reconciliation on a timely basis
to the investment adviser, sub-adviser,
administrator, accounting agent, and
custodian of fund activity;
(xv) Perform other participating broker-dealer
shareholder services, including Fund/Serv,
Automated Customer Account Transfer System
("ACATS"), Networking and terminal access for
selected dealers, and such other services as
may be agreed upon from time to time;
(xvi) Promptly transmit to the Fund all reports,
documents and information as are requested by
the Fund and agreed to by PFPC, which
agreement shall not be unreasonably withheld,
that are necessary to enable the Fund and its
service providers to comply with the
requirements of the Internal Revenue Service,
the SEC, the National Association of
Securities Dealers, Inc, the National
Securities Clearing Corp., the state blue sky
authorities and any other regulatory bodies
having jurisdiction over the Fund, it being
understood and agreed that such reports shall
include those on the list contained in
Exhibit B hereto, as such list may be
amended from time to time by agreement
between the parties;
(xvii) Process all clerical transactions;
(xviii) Screen and maintain Transfer on Death
registrations according to Fund guidelines
(except those guidelines hereafter adopted by
the Fund which are considered in PFPC's sole
good-faith discretion to be more burdensome
than the guidelines in effect on the date of
this Agreement);
(xix) Provide electronic imaging and time-stamping
of all incoming mail;
(xx) Compute and track all front-end and
contingent deferred sales charges imposed
upon the purchase and redemption of Shares;
(xxi) Track and convert Shares in accordance with
the share conversion features described in
the prospectus of the Fund;
(xxii) Answer written or telephonic correspondence
relating to its duties hereunder (including
providing written acknowledgement of address
changes to previous addresses of record) and
such other correspondence as may from time to
time be mutually agreed upon between PFPC and
the Fund; inquiries of a non-routine nature
shall be referred to the Fund;
(xxiii) Remit supporting detail of underwriter fees
to the Distributor on a semi-monthly basis;
(xxiv) Until such time as Fund management and legal
counsel to the Fund determine otherwise and
so inform PFPC in Written Instructions,
establish, maintain for the benefit of the
Fund and control the flow of funds through
separate subscription, redemption and
dividend disbursement accounts (each an
"Operational Account") provided by PNC Bank,
N.A. or by such other financial institution
as may be agreed upon by the Fund and PFPC;
(xxv) To the extent reasonably feasible, reverse
trades (including backing out dividends) due
to nonreceipt of funds, improper
registration, or other sufficient reason;
(xxvi) Compute and track all letters of intent;
(xxvii) Screen all transactions with respect to the
Fund's Blue Sky requirements of which PFPC is
informed by the Fund by Written Instructions,
and comply with the Written Instructions of
the Fund in effect from time to time limiting
issuance of Shares to specified states (based
on address of registration), including
screening for Shares sold in states other
than those so specified (but relating only to
those Shares sold after PFPC commences its
duties as transfer agent hereunder);
(xxviii) Provide abandoned property reporting and
filing to meet the escheat requirements of
each of the states named by the Fund in
Written Instructions;
(xxix) Maintain a record of all incoming checks, new
account applications and documentation set
forth in Section 16(g), on filmstrips,
another microfilm retrieval method or
otherwise so as to be retrievable and
reproducible, upon reasonable request, within
time frames that meet reasonable industry
standards;
(xxx) Process W-9 or similar forms received by PFPC
and review taxpayer identification numbers
for all same number (e.g., 888 88 8888),
sequential numbering (e.g., 123 45 6789) and
non-numeric numbers (e.g., 128 4A 3927) and
other conditions of obvious irregularity in
accordance with PFPC's normal operating
procedures;
(xxxi) On a semi-monthly or other basis acceptable
to PFPC and the Fund (but in no event more
frequently than once per month per
shareholder account) initiate, accept and
process pre-authorized checks or, when
available, electronic funds transfers drawn
against shareholders' checking accounts;
(xxxii) In accordance with policies and procedures
established by the Fund and PFPC, furnish to
shareholders dividend and redemption checks
alleged to have been lost, stolen, destroyed
or not received; and
(xxxiii) Record all incoming telephone conversations
and telephonic transactions that are received
via the Fund's published customer service
numbers and retain such recordings for a
minimum of six months.
(xxxiv) Post and perform shareholder transfers and
post and perform exchanges for shares of
other funds with which the Fund has exchange
privileges, pursuant to shareholder
instructions; and
(xxxv) Reconcile to Fund accounting records and pay
dividends and other distributions, including
direct deposit credits through the Automatic
Clearing House ("ACH") upon proper written
shareholder authorization.
(b) Purchase of Shares. PFPC shall issue Shares and
credit an account of an investor, in the manner described in the
Fund's prospectus, once it has screened for blue sky compliance
pursuant to Section 16(a)(xxvii) and Transfer on Death
registration compliance pursuant to Section 16(a)(xviii) and
receives:
(i) A purchase order or application, either
directly from an investor or otherwise,
complying with requirements for purchases
prescribed by the prospectus;
(ii) Proper information to establish a shareholder
account; and
(iii) A purchase check or confirmation of receipt
or crediting of available funds for such
order to the Fund's custodian.
In opening new shareholder accounts, PFPC will assign account
numbers. PFPC shall assign Aquila Distributors, Inc. as broker
of record whenever dealer information is omitted and send a copy
of any related application to Aquila Distributors, Inc.
PFPC must receive a completed application before any
redemption orders are accepted and processed for an account
opened directly by an investor.
(c) Redemption of Shares. PFPC shall redeem Shares
only if that function is properly authorized by the Declaration
of Trust or resolution of the Fund's Board of Trustees. If the
Fund is a money-market fund, PFPC shall arrange, in accordance
with the Fund's prospectus, for a shareholder's redemption of
shares from a shareholder's account with a checkwriting
privilege. Shares shall be redeemed and payment therefor shall
be made in accordance with the Fund's prospectus, including
provisions set forth therein for automatic redemption, telephone
redemption requests and check-writing privileges, when the
recordholder tenders Shares in proper form and amount and
properly directs the method of redemption. If Shares are
received in proper form, Shares shall be redeemed before the
funds are provided to PFPC from the Fund's custodian. If the
recordholder has not directed that redemption proceeds be wired,
when the custodian provides PFPC with funds, a redemption check
shall be sent to and made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the
order of an assignee or holder and transfer
authorization is signed by the recordholder;
(ii) Transfer authorizations are signed by the
recordholder when Shares are held in
book-entry form;
(iii) Such redemption is through money market fund
check-writing capabilities; or
(iv) such redemption is in settlement of dealer
confirmed redemptions via Fund/Serv.
Consistent with provisions set forth in the prospectus,
redemption proceeds shall be wired upon request. When a
broker-dealer notifies PFPC of a redemption desired by a
customer, and the Fund's custodian provides PFPC with funds, PFPC
shall prepare and send the redemption check to the broker-dealer,
made payable to the broker-dealer on behalf of its customer.
PFPC shall establish procedures reasonably designed to
ensure that redemption requirements established by PFPC and
agreed to by the Fund have been met, including the receipt and
examination of stock certificates and related endorsements,
signature guarantees and obtaining any needed papers or
documents, including a properly completed application, where
required. No redemptions in accounts represented in whole or in
part by certificates shall be effected without cancellation of an
adequate number of certificate Shares, if necessary. No
signature guarantees shall be acceptable if received by facsimile
and signature guarantees must reasonably appear to have been
provided by an eligible guarantor institution of a type described
as such in the prospectus which is a participant in a medallion
program recognized by the Securities Transfer Association or in
instructions received from the Fund; provided, however, that PFPC
may accept a signature guarantee received by facsimile if so
instructed by Oral or Written Instructions.
(d) Dividends and Distributions. Upon receipt of a
resolution of the Fund's Board of Trustees authorizing the
declaration and payment of dividends and distributions, PFPC
shall issue dividends and distributions declared by the Fund in
Shares, or, upon shareholder election, pay such dividends and
distributions in cash, if and as provided for in the Fund's
prospectus. Such issuance or payment, as well as payments upon
redemption as described above, shall be made after deduction and
payment of the required amount of funds to be withheld in
accordance with any applicable tax laws or other laws, rules or
regulations. PFPC shall timely mail to the Fund's shareholders
and appropriate taxing authorities such tax forms and other
information, or permissible substitute notice, relating to
dividends and distributions paid by the Fund as are required to
be filed and mailed by applicable law, rule or regulation. PFPC
shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends
paid by the Fund to its shareholders as required by tax or other
law, rule or regulation.
(e) Communications to Shareholders. PFPC shall
address, enclose and mail all communications by the Fund to its
shareholders (pre-sorting where reasonably practicable),
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of
Shares;
(iii) Monthly or quarterly statements (with extra
print lines for additional information, such
as additional dividend information, to
shareholders), generally by the fifth
business day after the dividend payable date,
providing a combined check and statement to
shareholders electing cash distributions;
(iv) Dividend and distribution notices (at year-
end, such notices will be upon Written
Instructions);
(v) Tax form information (upon Written
Instructions);
(vi) Forms W-9 or W-8 as appropriate;
(vii) Prospectuses;
(viii) Account-related shareholder correspondence
that is considered in PFPC's sole discretion
to be routine; and
(ix) Any other routine shareholder communications
as agreed to between the Fund and PFPC.
(f) Third Party Proxy Provider. PFPC shall assist the
Fund in obtaining competitive bids for proxy services. Proxy
services shall be provided by a third party. The Fund
understands and agrees that PFPC bears no responsibility for the
provision of any proxy services or the manner in which any proxy
services are provided, that PFPC will not be considered the
Fund's agent in connection with the provision of any proxy
services, and that any party providing proxy services to the Fund
shall not be considered to be the agent of PFPC or to have any
other relationship with PFPC with respect to such services. Such
proxy services, which will be decided upon solely between the
Fund and the third party provider, shall include proxy mailing,
receiving and tabulating proxy cards for the meetings of the
Fund's shareholders, communicating to the Fund daily and final
results of such tabulation accompanied by appropriate
certificates, and preparing and furnishing to the Fund certified
lists of shareholders as of such date, and in such form and
containing such information as may be required by the Fund to
comply with any applicable provisions of law or its Declaration
of Trust and/or By-Laws relating to such meetings.
Notwithstanding the foregoing provisions of this Subsection (f),
PFPC shall furnish to the third-party proxy provider such
information as is reasonably requested by such provider
pertaining to shareholder registration information and record-
date share positions to permit the Fund to obtain the benefits of
the services necessary for conduct of its shareholder meetings.
(g) Records. PFPC shall maintain records of the
accounts for each shareholder showing the following information:
(i) Name, address, United States Tax
Identification or Social Security number, and
any pertinent beneficiary information;
(ii) Number and class of Shares held and number
and class of Shares for which certificates,
if any, have been issued, including
certificate numbers and denominations;
(iii) Historical information regarding the account
of each shareholder, including dividends and
distributions paid and the date and price for
all transactions in a shareholder's account;
(iv) Any stop or restraining order placed against
a shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings,
including withholdings in the case of a
foreign account and accounts subject to
backup withholding; and
(vii) Any information required in order for the
transfer agent to perform any calculations
contemplated or required by this Agreement.
PFPC shall use its best efforts to convert for use in
its system such data of the predecessor transfer agent that has
been provided to PFPC as shall permit PFPC to maintain on its
system such converted data covering a minimum of 18 months prior
to commencement of its services as transfer agent of the Fund.
PFPC is not responsible for errors or omissions in or caused by
the records of any predecessor transfer agent. PFPC shall inform
the Fund of material errors coming to its attention in the course
of performance of its duties hereunder. PFPC shall maintain on
its system in a readily viewable form pertinent account
information (i.e., the information listed in this Section 16(g))
relating to shareholders of the Fund (including all predecessor
transfer agent data delivered to PFPC by the Fund's prior
transfer agent in a machine readable format and converted by
PFPC) for a minimum of 13 months after the date of the
transaction or other matter to which the information relates and
shall thereafter maintain such information in a readily
accessible format to the extent required by the 1940 Act and
other applicable securities laws, rules and regulations.
(h) Lost or Stolen Certificates. PFPC shall place a
stop notice against any certificate reported to be lost, stolen,
destroyed or not received and comply with all applicable federal
regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and
issued only upon:
(i) The shareholder's pledge of a lost instrument
bond or such other appropriate indemnity bond
issued by a surety company approved by PFPC;
and
(ii) Completion of a release and indemnification
agreement signed by the shareholder to
protect PFPC and its affiliates.
(i) Shareholder Inspection of Fund Records. Upon a
request from any Fund shareholder to inspect Fund records, PFPC
will notify the Fund and the Fund will issue instructions
granting or denying each such request. Unless PFPC has acted
contrary to the Fund's instructions, the Fund agrees and does
hereby release PFPC from any liability for refusal of permission
for a particular shareholder to inspect the Fund's records.
(j) Withdrawal of Shares and Cancellation of
Certificates. Upon receipt of Written Instructions, PFPC shall
cancel outstanding certificates surrendered by the Fund to reduce
the total amount of outstanding Shares by the number of Shares
surrendered by the Fund.
(k) Fraud Detection Procedures. PFPC shall establish
procedures that are reasonably designed to detect fraudulent
purchase, redemption and distribution checks (including
fraudulent or forged endorsements and altered payment amounts);
however, PFPC shall have no liability for loss resulting from any
fraud perpetrated or attempted to be perpetrated on the Fund,
unless PFPC has acted with willful misfeasance, bad faith,
negligence or reckless disregard of its duties hereunder. Such
procedures shall take into account the type of accounts involved,
the sums involved and cost/benefit considerations.
(l) Third Party Checks. PFPC shall not accept any
third party check (i.e., an investment check whose payee is other
than the Fund or PFPC) except pursuant to Written Instructions.
(m) Relationship Officer. PFPC agrees to provide a
Relationship Officer to serve as the primary point of contact
between the Fund and PFPC. PFPC will exercise due care in
assigning an individual who is conversant with standard
investment company practices.
(n) Additional Services.
(i) PFPC shall, in addition to the services
herein itemized, if so requested by the Fund
and agreed to by PFPC, which shall bargain in
good faith regarding such requests and the
fees and charges to be paid therefor, for
such additional fees and charges as the Fund
and PFPC may from time to time agree, perform
and do all other acts and services as
required by the Fund's prospectus or the law
or that are customarily performed and done by
transfer agents, dividend disbursing agents,
and shareholder servicing agents of open-end
mutual funds such as the Fund.
(ii) PFPC shall, in addition to the services
herein itemized, provide such additional
services to the Fund and in such manner as
are normally provided by PFPC to its mutual
fund transfer agency customers in the normal
course of business, subject to additional
mutually-agreed upon pricing, if any.
(o) Procedures. In order to facilitate the carrying
out of the services set forth in this Agreement, PFPC shall
follow the procedures attached hereto as Exhibit C and PFPC and
the Fund may from time to time mutually agree to changes thereto.
17. Duration and Termination. This Agreement shall
continue until terminated by the Fund on sixty (60) days' prior
written notice or by PFPC on one-hundred-twenty (120) days' prior
written notice to the other party, provided, however, that
without the Fund's consent PFPC shall not for a period of three
years after the date of this Agreement terminate this Agreement
with the intent to enter into a new agreement with the Fund that
provides for higher fees.
18. Notices. All notices and other communications,
including Written Instructions, shall be in writing or by
confirming telegram, cable, telex or facsimile sending device.
Notices shall be addressed (a) if to PFPC, at 400 Bellevue
Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at 380
Madison Avenue, Suite 2300, New York, NY 10017, Attn: President
or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such
notice or other communication by the other party. If notice is
sent by confirming telegram, cable, telex or facsimile sending
device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the
day it is delivered.
19. Amendments. This Agreement, or any term thereof, may
be changed or waived only by a written amendment, signed by the
party against whom enforcement of such change or waiver is
sought.
20. Delegation; Assignment. PFPC may assign its rights and
delegate its duties hereunder only to any wholly-owned direct or
indirect subsidiary of PNC Bank, National Association or PNC Bank
Corp., provided that (i) PFPC gives the Fund thirty (30) days'
prior written notice; (ii) the delegate (or assignee) agrees with
PFPC and the Fund to comply with all relevant provisions of the
1940 Act; and (iii) PFPC and such delegate (or assignee) promptly
provide such information as the Fund may request, and respond to
such questions as the Fund may ask, relative to the delegation
(or assignment), including (without limitation) the capabilities
of the delegate (or assignee).
21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
22. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary
to effectuate the purposes hereof.
23. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties and
supersedes all prior agreements and understandings relating to
the subject matter hereof, provided that the parties may embody
in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their
construction or effect.
(c) Governing Law. This Agreement shall be deemed to
be a contract made in Delaware and governed by Delaware law,
without regard to principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of
any party to this Agreement shall constitute the valid and
binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
PFPC INC.
By: /s/Robert J. Perlsveg
Title: E V P
CASH ASSETS TRUST
By: /s/Diana P. Herrmann
Title: Senior Vice President
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of November 7, 1997, is Exhibit A
to that certain Transfer Agency Services Agreement dated as of
November 7, 1997 between PFPC Inc. and Cash Assets Trust.
PORTFOLIOS
PACIFIC CAPITAL CASH ASSETS TRUST
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST
PACIFIC CAPITAL U.S. TREASURIES CASH ASSETS TRUST
<PAGE>
AUTHORIZED PERSONS APPENDIX
On the date of the Agreement and thereafter until further
notice, the following persons shall be Authorized Persons as
defined therein:
Name (Type) Signature
Lacy B. Herrmann
Lacy B. Herrmann
William C. Wallace
William C. Wallace
Diana P. Herrmann
Diana P. Herrmann
Charles E. Childs, III
Charles E. Childs, III
John M. Herndon
John M. Herndon
Rose F. Marotta
Rose F. Marotta
Richard F. West
Richard F. West
Patricia A. Craven
Patricia A. Craven
Stephen J. Caridi
Stephen J. Caridi
William Killeen
William Killeen
<PAGE>
Exhibit B
Report List for Aquila Group of Funds
12b-1 Report
5 Percent or More Shareholder Listing
5 Percent or More Shareholder Listing - sorted by ssn
Account Analysis by Type
Asset Report by Dealer for Management Company
Asset Report by Fund and Dealer
Blue Sky Sales Report
Capital Stock Reporting
Daily Transaction Journal
Dealer Commission Check Register/Dealer Commission Statement
DTS Activity Summary
DTS Liquidation Placements
DTS Outstanding Trades by Fund
DTS Posted Transactions
DTS Purchase Placement
Matrix Summary by Fund With Dealer Name
Matrix Summary by Management Company With Dealer Name
Month to Sales (Demographics by Account Group)
Monthly Statistical Report
Monthly Wire Order (Purchases/Redemptions)
New Account Journal
Next Day NSCC Settlement Detail
NSAR Based on trade date
Transactions at a Glance
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL CASH ASSETS TRUST - ORIGINAL SHARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 534,690,521
<INVESTMENTS-AT-VALUE> 534,690,521
<RECEIVABLES> 87,649
<ASSETS-OTHER> 10,628
<OTHER-ITEMS-ASSETS> 723
<TOTAL-ASSETS> 534,789,521
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,591,727
<TOTAL-LIABILITIES> 2,591,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 532,829,194
<SHARES-COMMON-STOCK> 419,420,910
<SHARES-COMMON-PRIOR> 422,093,185
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (631,400)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 418,765,636
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,620,689
<OTHER-INCOME> 0
<EXPENSES-NET> 3,053,885
<NET-INVESTMENT-INCOME> 24,566,804
<REALIZED-GAINS-CURRENT> 89,803
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,656,607
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,260,825
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,215,049,334
<NUMBER-OF-SHARES-REDEEMED> 1,217,844,005
<SHARES-REINVESTED> 122,396
<NET-CHANGE-IN-ASSETS> 45,069,336
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (715,938)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,791,797
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,074,316
<AVERAGE-NET-ASSETS> 402,372,746
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such Financial Statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST - ORIGINAL SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 113,104,597
<INVESTMENTS-AT-VALUE> 113,104,597
<RECEIVABLES> 1,084,885
<ASSETS-OTHER> 551
<OTHER-ITEMS-ASSETS> 94,272
<TOTAL-ASSETS> 114,284,305
<PAYABLE-FOR-SECURITIES> 245,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 364,309
<TOTAL-LIABILITIES> 609,932
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,674,578
<SHARES-COMMON-STOCK> 76,561,158
<SHARES-COMMON-PRIOR> 90,993,746
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (205)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 76,562,453
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,637,941
<OTHER-INCOME> 0
<EXPENSES-NET> 688,398
<NET-INVESTMENT-INCOME> 2,949,543
<REALIZED-GAINS-CURRENT> (205)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,949,338
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,237,687
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 145,166,331
<NUMBER-OF-SHARES-REDEEMED> 159,715,064
<SHARES-REINVESTED> 116,145
<NET-CHANGE-IN-ASSETS> (2,837,136)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,131
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 271,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 689,063
<AVERAGE-NET-ASSETS> 73,721,149
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAP US GOV'T SECURITIES CASH ASSETS TRUST - ORIGINAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 250,802,687
<INVESTMENTS-AT-VALUE> 250,802,687
<RECEIVABLES> 953,290
<ASSETS-OTHER> 7,269
<OTHER-ITEMS-ASSETS> 549
<TOTAL-ASSETS> 251,763,795
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,058,697
<TOTAL-LIABILITIES> 1,058,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 250,688,067
<SHARES-COMMON-STOCK> 100,804,315
<SHARES-COMMON-PRIOR> 65,699,376
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,031
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,817,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,159,402
<OTHER-INCOME> 0
<EXPENSES-NET> 1,262,078
<NET-INVESTMENT-INCOME> 8,897,324
<REALIZED-GAINS-CURRENT> 17,031
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,914,355
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,695,429
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 323,059,102
<NUMBER-OF-SHARES-REDEEMED> 288,014,215
<SHARES-REINVESTED> 60,052
<NET-CHANGE-IN-ASSETS> 101,574,384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9,555
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 588,596
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,262,918
<AVERAGE-NET-ASSETS> 76,182,320
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such Financial Statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL CASH ASSETS TRUST - SERVICE SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 534,690,521
<INVESTMENTS-AT-VALUE> 534,690,521
<RECEIVABLES> 87,649
<ASSETS-OTHER> 10,628
<OTHER-ITEMS-ASSETS> 723
<TOTAL-ASSETS> 534,789,521
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,591,727
<TOTAL-LIABILITIES> 2,591,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 532,829,194
<SHARES-COMMON-STOCK> 113,403,019
<SHARES-COMMON-PRIOR> 65,751,211
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (631,400)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 113,432,158
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,620,689
<OTHER-INCOME> 0
<EXPENSES-NET> 3,053,885
<NET-INVESTMENT-INCOME> 24,566,804
<REALIZED-GAINS-CURRENT> 89,803
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,656,007
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,305,979
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 287,984,097
<NUMBER-OF-SHARES-REDEEMED> 244,416,529
<SHARES-REINVESTED> 4,084,240
<NET-CHANGE-IN-ASSETS> 45,069,336
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (715,938)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,791,797
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,074,316
<AVERAGE-NET-ASSETS> 90,098,002
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such Financial Statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST - SERVICE SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 113,104,597
<INVESTMENTS-AT-VALUE> 113,104,597
<RECEIVABLES> 1,084,885
<ASSETS-OTHER> 551
<OTHER-ITEMS-ASSETS> 94,272
<TOTAL-ASSETS> 114,284,305
<PAYABLE-FOR-SECURITIES> 245,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 364,309
<TOTAL-LIABILITIES> 609,932
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,674,578
<SHARES-COMMON-STOCK> 37,111,289
<SHARES-COMMON-PRIOR> 25,515,631
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (205)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,111,920
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,637,941
<OTHER-INCOME> 0
<EXPENSES-NET> 688,398
<NET-INVESTMENT-INCOME> 2,949,543
<REALIZED-GAINS-CURRENT> (205)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,949,338
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 711,856
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66,068,395
<NUMBER-OF-SHARES-REDEEMED> 55,172,286
<SHARES-REINVESTED> 699,548
<NET-CHANGE-IN-ASSETS> (2,837,136)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,131
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 271,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 689,063
<AVERAGE-NET-ASSETS> 25,539,152
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated March 31, 1998 and is qualified in its entirety
by reference to such Financial Statements.
</LEGEND>
<CIK> 0000749748
<NAME> PACIFIC CAP US GOV'T SECURITIES CASH ASSETS TRUST - SERVICE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 250,802,687
<INVESTMENTS-AT-VALUE> 250,802,687
<RECEIVABLES> 953,290
<ASSETS-OTHER> 7,269
<OTHER-ITEMS-ASSETS> 549
<TOTAL-ASSETS> 251,763,795
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,058,697
<TOTAL-LIABILITIES> 1,058,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 250,688,067
<SHARES-COMMON-STOCK> 149,874,197
<SHARES-COMMON-PRIOR> 83,421,783
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,031
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 149,887,163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,159,402
<OTHER-INCOME> 0
<EXPENSES-NET> 1,262,078
<NET-INVESTMENT-INCOME> 8,897,324
<REALIZED-GAINS-CURRENT> 17,031
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,914,355
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,201,895
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 858,192,771
<NUMBER-OF-SHARES-REDEEMED> 796,725,850
<SHARES-REINVESTED> 4,985,493
<NET-CHANGE-IN-ASSETS> 101,574,384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9,555
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 588,596
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,262,918
<AVERAGE-NET-ASSETS> 113,089,320
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
