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 30, 1999
Cash Assets Trust consists of three separate portfolios:
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 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 and
in certain repurchase agreements secured by U.S. government
securities.
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
The Securities and Exchange Commission has not approved or
disapproved the Trust's securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
The Cash Fund: Objective, Investment Strategies, Main Risks
"What is the Cash Fund's objective?"
The 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.
"What does the Cash Fund invest in?"
The Cash Fund seeks to attain this objective by investing in
short-term money-market securities denominated in U.S. dollars
that are of high quality and present minimal credit risks.
Under the current management policies, the Cash Fund invests
only in the following types of obligations:
(1) U.S. government securities or obligations guaranteed by
the U.S. government or its agencies or instrumentalities.
(2) Bank obligations and instruments secured by them.
("Banks" includes commercial banks, savings banks and savings and
loan associations.)
(3) Short-term corporate debt known as "commercial paper."
(4) Corporate debt obligations (for example, bonds and
debentures). Debentures are a form of unsecured corporate debt.
(5) Variable amount master demand notes which are repayable
on not more than 30 days' notice.
(6) Repurchase agreements.
The Cash Fund seeks to maintain a net asset value of $1.00
per share.
There are limits on the percentage of the Cash Fund's assets
that can be invested in the securities of any issuer.
The dollar weighted average maturity of the Cash Fund will
be 90 days or less and the Cash Fund may buy only those
instruments that have a remaining maturity of 397 days or less.
Securities the Cash Fund buys must present minimal credit
risks and at the time of purchase be rated in the two highest
rating categories for short-term securities by any two of the
nationally recognized statistical rating organizations
("NRSROs"); if they are unrated, they must be determined by the
Board of Trustees to be of comparable quality. Some securities
may have third-party guarantees to meet these rating
requirements.
Pacific Century Trust (the "Adviser") seeks to develop an
appropriate portfolio by considering the differences among
securities of different issuers, yields, maturities and market
sectors.
The Cash Fund may change any of its management policies
without shareholder approval.
"What are the main risks of investing in the Cash Fund?"
Although the Cash Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Cash Fund.
Investment in the Cash Fund is not a deposit in Pacific
Century Trust, Bank of Hawaii, Pacific Century Financial Corp. or
their bank or non-bank affiliates or any other bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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. 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. These notes are also
subject to credit risk.
Repurchase agreements involve some risk to the Cash Fund if
the other party does not fulfill its obligations under the
agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
Corporate bonds and debentures are subject to interest rate
and credit risks.
Investments in foreign banks and foreign branches of United
States banks involve certain risks. Foreign banks and foreign
branches of domestic banks may not be subject to regulations that
meet U.S. standards. 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.
<PAGE>
PACIFIC CAPITAL CASH ASSETS TRUST- ORIGINAL SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in the Cash Fund Original Shares by showing
changes in the Fund's performance from year to year over a
10-year period and by showing the Fund's average annual returns
for one, five, ten years and since inception. How the Fund has
performed in the past is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns (Original Shares)
1989-1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10%
9.12
8% XXXX 7.97
XXXX XXXX
6% XXXX XXXX 5.94
XXXX XXXX XXXX 5.45 5.09 5.06
4% XXXX XXXX XXXX 3.48 3.72 XXXX 4.88 XXXX XXXX
XXXX XXXX XXXX XXXX 2.74 XXXX XXXX XXXX XXXX XXXX
2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Years
During the 10-year period shown in the bar chart, the highest
return for a quarter was 2.35% (quarter ended June 30, 1989) and
the lowest return for a quarter was 0.67% (quarter ended June 30,
1993).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 2.17%.
</TABLE>
Average Annual Total Return
For the period ended
December 31, 1998
Since
1-Year 5-Year 10-Years inception
Pacific Capital Cash Assets Trust- Original Shares
5.06% 4.84% 5.33% 5.82%*
* From commencement of operations on December 4, 1984.
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL
CASH ASSETS TRUST
ORIGINAL SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if
you buy and hold Original Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.37%
Distribution and/or Service (12b-1) Fee......0.00%
All Other Expenses:
Administration Fee....................0.13%
Other Expenses........................0.07%
Total All Other Expenses....................0.20%
Total Annual Fund Operating Expenses.........0.63%
Example
This Example is intended to help you compare the cost of
investing in the Original Shares of the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Original Shares of
the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
1 year 3 years 5 years 10 years
$58 $183 $318 $714
<PAGE>
The Tax-Free Fund: Objective, Investment Strategies, Main Risks
"What is the Tax-Free Fund's objective?"
The 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 State of
Hawaii income taxes.
"What does the Tax-Free Fund invest in?"
The Tax-Free Fund seeks to attain this objective by
investing in municipal obligations of Hawaiian issuers to the
extent that obligations of the desired quality, maturity and
interest rate are available; otherwise by investing in similar
obligations of non-Hawaii issuers. These obligations must have
remaining maturities not exceeding one year, must be of high
quality and must present minimal credit risks. At least 80% of
the Tax-Free Fund's assets must be invested in tax-exempt
obligations.
Under the current management policies, the Tax-Free Fund
invests only in the following types of obligations:
Municipal Obligations
As used in this Prospectus, 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 Guam, the Northern Mariana Islands, Puerto
Rico and the Virgin Islands, paying interest which, in the
opinion of bond counsel or other appropriate counsel, is also
exempt from Hawaii state income taxes.
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.
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.
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 purchase only
those with a remaining maturity of 13 months or less.
Municipal Notes
Municipal notes generally have maturities at the time of
issuance of three years or less. 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.
Concentration
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 Tax-Free Fund may purchase shares of investment
companies with money market portfolios consisting only of
Municipal Obligations.
The Tax-Free Fund seeks to maintain a net asset value of
$1.00 per share.
The dollar weighted average maturity of the Tax-Free Fund
will be 90 days or less and the Tax-Free Fund may buy only those
instruments that have a remaining maturity of 397 days or less.
Securities the Tax-Free Fund buys must present minimal
credit risks and at the time of purchase be rated in the two
highest rating categories for short-term securities by any two of
the NRSROs or, if they are unrated, must be determined by the
Board of Trustees to be of comparable quality. Some securities
may have third-party guarantees to meet these rating
requirements.
The Adviser seeks to develop an appropriate portfolio by
considering the differences among securities of different
issuers, yields, maturities and market sectors.
The Tax-Free Fund may change any of its management policies
without shareholder approval.
"What are the main risks of investing in the Tax-Free Fund?"
Although the Tax-Free Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money
by investing in the Tax-Free Fund.
Hawaiian Obligations
The Tax-Free Fund's assets, being primarily Hawaiian issues,
are subject to economic and other conditions affecting Hawaii.
Adverse local events, such as a downturn in the Hawaiian economy,
could affect the value of the Tax-Free Fund's portfolio.
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 Hawaiian Obligations that the
Tax-Free Fund owns. The Tax-Free Fund has derived this
information from sources that are generally available to
investors and believes it to be accurate, but it has not been
independently verified and it may not be complete.
As of the date of this prospectus, the economic data
available indicate that much of Hawaii's economic slowdown in
1998 was attributable to the financial crisis in Asia. Gross
State Product grew by 1.0 percent compared to the 1.5 percent
growth experienced in 1997. Real personal income growth, which
began to accelerate in 1997, continued into most of 1998,
registering an average annual growth rate of approximately 2.0
percent. Much of the growth is attributable to external sources
such as dividends and interest, as growth in wages and salaries
has slowed over the past year. Hawaii experienced slight
deflation in 1998, with the consumer price index decreasing 0.2
percent. The index is expected to be flat to negative 0.5 percent
in 1999. Hawaii's cost of living differential continued to
decline in 1998 and was recently 1.30 times the national average
compared to its peak of 1.40 times in the early 1990s.
Statewide the total number of jobs dropped 1.0 percent in
1998. However, the number of persons employed has been increasing
for the past several years and currently totals 560,950. In
addition, Hawaii's unemployment rate has declined from 6.2
percent in 1997 to 5.8 percent in 1998. The future for Hawaii's
job market is considered promising with several new business
ventures and a revival of the film industry.
Hawaii home prices have stabilized over the past year
causing increases in sales volume. In addition, the decline in
prices over the past several years has created an attractive
market for investors seeking resort homes and lots, especially on
the neighboring islands. The decline in property values has had a
negative impact on the financial conditions of the City and
County of Honolulu. In early 1999, both Moody's Investors Service
and Standard & Poor's lowered the rating of the City's
outstanding general obligation debt one notch to AA3 and AA-,
respectively. The ratings for the City's bonds are currently
stable. This downgrade was anticipated as the declining tax base
and prolonged period of economic recovery has limited the City's
financial flexibility for several years.
In 1998, tourism, the state's principal industry,
experienced an overall decline of 1.7 percent. Total visitor
arrivals declined from 6.88 million in 1997 to 6.76 million in
1998. The strong U.S. economy helped to boost westbound arrivals
by 4.1 percent which helped to offset the 10 percent decline in
eastbound arrivals. Occupancy figures also reflected the strong
westbound visitor numbers as several neighboring islands, a
favorite destination for the repeat westbound visitor, registered
increases over the prior year. The increased westbound arrivals
have prompted several airlines to increase service between the
continental U.S. and Hawaii. In addition, several of the
neighboring islands have lengthened their runways to accommodate
larger aircraft.
Other Main Risks
Investment in the Tax-Free Fund is not a deposit in Pacific
Century Trust, Bank of Hawaii, Pacific Century Financial Corp. or
their bank or non-bank affiliates or any other bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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. Such obligations are
also subject to credit risk.
Repurchase agreements involve some risk to the Tax-Free Fund
if the other party does not fulfill its obligations under the
agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
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.
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST- ORIGINAL SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in Original Shares of the Tax-Free Fund by
showing changes in the Tax-Free Fund's performance from year to
year over a 9-year period and by showing the Tax-Free Fund's
average annual returns for one and five years and since
inception. How the Tax-Free Fund has performed in the past is not
necessarily an indication of how the Tax-Free Fund will perform
in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns (Original Shares)
1990-1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% 5.77
XXXX 4.34
4% XXXX XXXX 3.46 3.01 3.08
XXXX XXXX 2.79 2.03 2.39 XXXX XXXX XXXX 3.00
2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Years
During the 9 year period shown in the bar chart, the highest
return for a quarter was 1.45% (quarter ended December 31, 1990)
and the lowest return for a quarter was 0.47% (quarter ended
March 31, 1994).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 1.32%.
</TABLE>
Average Annual Total Return
For the period ended
December 31, 1998
Since
1-Year 5-Year inception
Pacific Capital Tax-Free Cash Assets Trust- Original Shares
3.00% 2.99% 3.54%*
* From commencement of operations on April 4, 1989.
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST
ORIGINAL SHARES
FEES AND EXPENSES OF THE TAX-FREE FUND
This table describes the fees and expenses that you may pay if
you buy and hold Original Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.29%
Distribution and/or Service (12b-1) Fee............0.00%
All Other Expenses:
Administration Fee..........................0.13%
Other Expenses..............................0.07%
Total All Other Expenses...........................0.20%
Total Annual Fund Operating Expenses................0.63%
Example
This Example is intended to help you compare the cost of
investing in Original Shares of the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Original Shares of
the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year, that you reinvest
all dividends and distributions, and that the Fund's operating
expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
$58 $183 $318 $714
The Government Securities Fund: Objective, Investment Strategies,
Main Risks
"What is the Government Securities Fund's objective?"
The 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.
"What does the Government Securities Fund invest in?"
The Government Securities Fund 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 in
certain repurchase agreements secured by U.S. government
securities.
Under the current management policies, the Government
Securities Fund invests only in the following types of
obligations:
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. 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.
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.
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.
The Government Securities Fund seeks to maintain a net asset
value of $1.00 per share.
The dollar weighted average maturity of the Government
Securities Fund will be 90 days or less and the Government
Securities Fund may buy only those instruments that have a
remaining maturity of 397 days or less.
Securities the Government Securities Fund buys must present
minimal credit risks and at the time of purchase be rated in the
two highest rating categories for short-term securities by any two
of the NRSROs or, if they are unrated, must be determined by the
Board of Trustees to be of comparable quality. Some securities may
have third-party guarantees to meet these rating requirements.
The Adviser seeks to develop an appropriate portfolio by
considering the differences in yields among securities of different
issuers, yields, maturities and market sectors.
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.
The Government Securities Fund may change any of its
management policies without shareholder approval.
"What are the main risks of investing in the Government Securities
Fund?"
Although the Government Securities Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the Government Securities Fund.
Investment in the Government Securities Fund is not a deposit
in Pacific Century Trust, Bank of Hawaii, Pacific Century Financial
Corp. or their bank or non-bank affiliates or any other bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Repurchase agreements involve some risk to the Government
Securities Fund if the other party does not fulfill its obligations
under the agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST
ORIGINAL SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in The Government Securities Fund - Original
Shares by showing changes in the Fund's performance from year to
year over a 9 year period and by showing the Fund's average annual
returns for one, five, ten years and since inception. How the Fund
has performed in the past is not necessarily an indication of how
the Fund will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns (Original Shares)
1990-1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10%
8%
7.82
6% XXXX 5.81 5.29
XXXX XXXX XXXX 4.79 4.89 4.96
4% XXXX XXXX 3.28 3.57 XXXX XXXX XXXX XXXX
XXXX XXXX XXXX 2.58 XXXX XXXX XXXX XXXX XXXX
2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Years
During the 9 year period shown in the bar chart, the highest
return for a quarter was 1.95% (quarter ended September 30, 1990)
and the lowest return for a quarter was 0.61% (quarter ended June
30, 1995).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 2.14%.
</TABLE>
Average Annual Total Return
For the period ended
December 31, 1998
Since
1-Year 5-Year inception
Pacific Capital U.S. Government Cash Assets Trust- Original Shares
4.96% 4.70% 5.07%*
* From commencement of operations on April 4, 1989.
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST
ORIGINAL SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if
you buy and hold Original Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.32%
Distribution and/or Service (12b-1) Fee......0.00%
All Other Expenses:
Administration Fee....................0.08%
Other Expenses........................0.09%
Total All Other Expenses....................0.17%
Total Annual Fund Operating Expenses.........0.49%
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Original Shares of
the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year, you reinvest all
dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
$50 $157 $274 $616
General Risks
Year 2000. Like other financial and business organizations,
the Funds could be adversely affected if computer systems the Funds
rely 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 steps are
being taken by the other major service providers to the Funds to
achieve comparable results. Certain vendors have advised the
Administrator that they are currently compliant. The Funds' mission
critical vendors -- the shareholder servicing agent, the custodian
and the fund accounting agent -- as well as other support
organizations, have advised the Administrator that they are
actively working on necessary changes. These three vendors have
advised the Administrator that they expect to be ready and will
additionally be prepared to implement contingency plans if
necessary. All such expenses are being borne, and are expected to
continue to be borne, by the respective service providers. The
Funds have not incurred, nor are they anticipated to incur any
costs related to these matters. The Administrator has also
requested the Funds' portfolio managers to attempt to evaluate the
potential impact of this problem on the issuers of securities in
which the Funds invest. At this time there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the
Funds.
MANAGEMENT OF THE FUNDS
"How are the Funds managed?"
Pacific Century Trust, a division of Bank of Hawaii, Financial
Plaza of the Pacific, P.O. Box 3170, Honolulu, HI 96813 (the
"Adviser") is the investment adviser for each of the Funds. Aquila
Management Corporation, 380 Madison Avenue, Suite 2300, New York,
NY 10017, the Administrator, is responsible for administrative
services, including providing for the maintenance of the
headquarters of the Funds, overseeing relationships between the
Funds and the service providers to the Funds, maintaining the
Funds' books and records and providing other administrative
services.
Under the Advisory Agreements, the Adviser provides for
investment supervision including supervising continuously the
investment program of each Fund and the composition of its
portfolio; determining what securities will be purchased or sold by
each Fund; arranging for the purchase and the sale of securities
held in the portfolio of each Fund; and, at the Adviser's expense,
pricing of each Fund's portfolio daily.
Under the Advisory Agreements, during the fiscal year ended
March 31, 1999, each Fund paid 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 was 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 was 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 stated 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 paid were 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.
Information about the Adviser and the Administrator
The Adviser is a division of Bank of Hawaii, all of whose
shares are owned by Pacific Century Financial Corp. ("PCF") and
Bank of Hawaii's directors (each of whom owns qualifying shares as
required by Hawaii law). PCF 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. PCF
files annual and periodic reports with the Securities and Exchange
Commission which are available for public inspection.
The Funds' Administrator is founder and Administrator and/or
Manager to the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, money-market funds and equity funds. As of
December 31, 1998, these funds had aggregate assets of
approximately $3.2 billion, of which approximately $2.0 billion
consisted of assets of the tax-free municipal bond 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.
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) by the total number of shares of that class of the
Fund then outstanding. The price at which a purchase or
redemption of shares is effected is the next calculated net asset
value after your purchase or redemption order is received in
proper form.
The net asset value per share will normally remain constant
at $1.00 per share except under extraordinary circumstances. The
net asset value per share is based on a valuation of each Fund's
investments at amortized cost.
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 as well. In addition, the
Custodian is not open on Columbus Day and Veterans Day.
PURCHASES
Opening an Account
To open a new Original Shares account, you must send a
properly completed Application to PFPC Inc. (the "Agent"). The
Funds will not honor redemption of shares purchased by wire
payment until a properly completed Application has been received
by the Agent. The minimum initial investment is $1,000.
Subsequent investments may be in any amount.
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.
You can make investments in Original Shares in any of these
three ways:
1. By Mail. You can make payment 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. You can wire 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-
Original 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-
Original 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- Original Shares
In addition you should supply:
Account name and number (if an existing account)
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 the Funds
by purchasing shares through registered broker-dealers.
The Funds impose no sales or service charge, 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 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.
Opening an Account Adding to An Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to payable to
the appropriate Fund. the appropriate Fund.
* Complete the Application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to each Fund's confirmations
you wish to authorize. or supply the name(s)
of account owner(s),
the account number and
the name of the Fund.
* Send your check and * Send your check
completed application to your dealer or
to your dealer or to the Funds' Agent, PFPC
to the Funds' Agent, PFPC Inc., or
Inc., or
* Wire funds as described above. * Wire funds as described
above.
Be sure to supply the name(s) of account owner(s), the account
number, the name of the Fund.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of
$50 or more from your Financial Institution if it is a member of
the Automated Clearing House. You may make investments through
two electronic transfer features, "Automatic Investment" and
"Telephone Investment."
* Automatic Investment You can authorize a pre-determined
amount to be regularly transferred from your account.
* Telephone Investment You can make single investments of up
to $50,000 to be made by telephone instructions to the
Agent.
Before you can transfer funds electronically, the Agent must
have your completed Application authorizing these features. If
you initially decide not to choose these conveniences and then
later wish to do so, you must complete a Ready Access Features
Form which is available from the Distributor or Agent. The Funds
may modify or terminate these investment methods or charge a
service fee, upon 30 days' written notice to shareholders.
When Shares Are Issued and Dividends Are Declared On Them
The Funds issue shares three ways.
First Method - ordinary investments. You will be paid
dividends starting on the day (whether or not a Business Day)
after the first Business Day on which your purchase order has
been received in proper form and funds have become available for
investment. You will be paid a dividend on the day on which your
shares are redeemed.
"When will funds be available so that my order will become
effective?"
The Funds must have payment for your purchase available for
investment before 4:00 p.m. New York time on a Business Day for
your order to be effective on that Business Day. Your order is
effective and you will receive the next determined net asset
value per share depending on the method of payment you choose, as
follows.
Payment Method When will an order When will an order
received before received after
4:00 p.m on a 4:00 p.m. on a
Business Day Business Day
be deemed be deemed
effective? effective?
By wire in
Federal Funds or
Federal Reserve
Draft That day Next Business Day
By wire not
in Federal Funds 4:00 p.m. on the 4:00 p.m. on the
Business Day Business Day
converted to converted to
Federal Funds Federal Funds
(normally the (normally the
next Business next Business
Day) Day)
By Check 4:00 p.m. on the 4:00 p.m. on the
Business Day Business Day
converted to converted to
Federal Funds Federal Funds
(normally (normally
two Business two Business
Days for checks Days for checks
on banks in the on banks in the
Federal Reserve Federal Reserve
System, longer System, longer
for other banks) for other banks)
Automatic
Investment The day you specify;
if it is not a
Business Day, on the
next Business Day
Telephone
Investment That day Next Business Day
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. (The Agent will convert wires and checks to Federal Funds
as your agent.)
Second Method - For banks or broker-dealers which have made
special arrangements with the Funds. You will be paid dividends
starting on the day (whether or not a Business Day) after the
Business Day on which your purchase order is received in proper
form. You will be paid a dividend on the day on which your shares
are redeemed.
"When will my order be effective under the Second Method?"
Your purchase order is effective on the Business Day it is
received if
1) your 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
2) (i) you advise the Agent prior to 5:00 p.m. New York time
of a dollar amount to be invested and the form of
registration of the shares to be issued; (ii) your bank or
broker-dealer wires payment for your order in Federal funds,
before noon New York time on the next Business Day; and
(iii) arrangements satisfactory to the Funds are made with
your bank or broker-dealer under which if Federal funds are
not so received, the Funds are reimbursed for any costs or
loss of income arising out of such non-receipt.
If you pay by check under No. 1 above, and the check is not
converted into Federal funds in the normal course on the next
Business Day, you must arrange to have payment wired in Federal
Funds before noon on the next Business Day.
Third Method- For broker-dealers or banks which have
requested that this method be used, to which request any Fund has
consented. You will be paid dividends starting on the day on
which your purchase order has been received in proper form and
funds have become available for investment. You will not be paid
a dividend on the day on which your shares are redeemed.
"When will my order be effective under the Third Method?"
Your purchase order is effective and your funds are invested
as follows:
On that day, if
(i) you advise the Agent before 2:00 p.m. New York time on a
Business Day of a dollar amount to be invested in the Cash Fund
or Government Securities Fund and prior to noon of a dollar
amount to be invested in the Tax-Free Fund; and
(ii) Your payment in Federal funds is received by wire on
that day.
The third investment method is available to prospective
investors in shares of a Fund 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
the Funds will advise you as to the broker-dealers or banks
through which such purchases may be made.
The Agent will maintain records as to which of your shares
were purchased under each of the three investment methods set
forth above. If you make a redemption request and have purchased
shares under the first or second methods and other shares under
the third method, the Agent will, unless you otherwise request as
to such redemption, redeem those shares first purchased,
regardless of the method under which they were purchased.
Under each method, shares are issued at the net asset value
per share next determined after the purchase order is received in
proper form. Under each method, the Application must be properly
completed and have been received and accepted by the Agent; the
Funds or the Distributor may also reject any purchase order.
Under each method, Federal funds (see above) must either be
available to the Funds or the payment thereof must be guaranteed
to the Funds so that the Funds can be as fully invested as
practicable.
Transfer on Death Registration
The Funds generally permit "transfer on death" registration
of shares ("TOD"), so that on the death of the shareholder the
shares are transferred to a designated beneficiary or
beneficiaries. Ask the Agent or your broker-dealer for the
Transfer on Death Registration Request Form. With it you will
receive a copy of the TOD Rules of the Aquilasm Group of Funds,
which specify how the registration becomes effective and
operates. By opening a TOD Account, you agree to be bound by the
TOD Rules.
REDEEMING YOUR INVESTMENT
You may redeem some or all of your shares by a request to
the Agent. Shares will be redeemed at the next net asset value
determined after your request has been received in proper form.
There is no minimum period for investment in the Funds,
except for shares recently purchased by check or by Automatic or
Telephone Investment as discussed below.
How to Redeem Your Investment
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-255-2287 toll free
By FAX, send instructions to: 302-791-3055
For liquidity and convenience, the Funds offer expedited
redemption.
Expedited Redemption Methods
(Non-Certificate Shares Only)
You may request expedited redemption for any shares not
issued in certificate form in two ways:
1 By Telephone. The Agent will accept instructions from
anyone by telephone to redeem shares and make payments:
a) to a Financial Institution account you
have previously specified or
b) by check in the amount of $50,000 or less,
mailed to the same name and address (which
has been unchanged for the past 30 days) as
the account from which you are redeeming. You
may only redeem by check via telephone
request once in any 7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to
supply:
account name(s) and number
name of the caller
the social security number(s) registered to the account
personal identification
Note: Check the accuracy of your confirmation statements
immediately. The Funds, the Agent, and the Distributor are
not responsible for losses resulting from unauthorized
telephone transactions if the Agent follows reasonable
procedures designed to verify a caller's identity. The
Agent may record calls.
2. By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of
instruction sent to the Agent: PFPC Inc., by FAX at 302-791-3055
or by mail to 400 Bellevue Parkway, Wilmington, DE 19809. The
letter, signed by the registered shareholder(s) (no signature
guarantee is required), must indicate:
account name(s),
account number,
amount to be redeemed,
any payment directions.
To have redemption proceeds sent directly to a Financial
Institution Account, you must complete the Expedited Redemption
section of the Application or a Ready Access Features Form. You
will be required to provide (1) details about your Financial
Institution account, (2) signature guarantees and (3) possible
additional documentation.
The name(s) of the shareholder(s) on the Financial
Institution account must be identical to those on the Funds'
records of your account.
You may change your designated Financial Institution account
at any time by completing and returning a revised Ready Access
Features Form.
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. 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.
Because these checks are paid by redemption of shares in
your account, you should be certain that adequate shares are in
the account to cover the amount of the 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. Note:
certificate shares and shares which were recently purchased by
check are not available for redemption by check.
You may not present checks directly 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 redeem the
entire balance of your account, since the number of shares in
your account changes daily through dividend payments which are
automatically reinvested in full and fractional shares.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 Financial
Institution account and check writing are desired, you must so
elect on your Application, or by proper completion of a Ready
Access Features Form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
Certificate Shares. Mail to the Funds' Agent: (1) blank
(unsigned) certificates for Original Shares to be redeemed, (2)
redemption instructions, and (3) a stock assignment form.
To be in "proper form," items (2) and (3) must be signed by
the registered shareholder(s) exactly as the account is
registered. For a joint account, both shareholder signatures
are necessary.
For your protection, mail certificates separately from
signed redemption instructions. We recommend that
certificates be sent by registered mail, return receipt
requested.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or
executors, or if redemption is requested by someone other
than the shareholder of record. The Agent may require
signature guarantees if insufficient documentation is on
file.
We do not require a signature guarantee for redemptions up
to $50,000, payable to the record holder(s), and sent to the
address of record, except as noted above. In all other
cases, signatures must be guaranteed.
Your signature may be guaranteed by any:
member of a national securities exchange
U.S. bank or trust company
state-chartered savings bank
federally chartered savings and loan association
foreign bank having a U.S. correspondent bank; or
participant in the Securities Transfer Association
Medallion Program ("STAMP"), 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.
Non-Certificate Shares. You must use the Regular Redemption
Method if you have not chosen Expedited Redemption to a
predesignated Financial Institution account. To redeem by
this method, send a letter of instruction to the Funds'
Agent, which includes:
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 (we normally mail redemption
proceeds to your address as registered with a Fund)
Signature(s) of the registered shareholder(s) and
Signature guarantee(s), if required, as indicated
above.
"When Will I Receive the Proceeds of My Redemption?"
Redemption proceeds are normally sent, as shown below, to
your address of record on the next business day following
receipt of your redemption request. Except as described below,
the Funds will send payments within 7 days.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and as None
you requested on your
Application or Ready Access
Features Form, wired
or transferred through
the Automated Clearing
House to your Financial
Institution Account.
Through a broker
/dealer Check or wire, to your None.
broker/dealer. However,
your
broker/dealer
may charge a
fee.
Although the Funds do not currently intend to, 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.
The Funds may delay payment for redemption of shares
recently purchased by check (including certified, cashier's or
official bank check) or by Automatic Investment or Telephone
Investment up to 15 days after purchase; however, redemption will
not be delayed after (i) the check or transfer of funds has been
honored, or (ii) the Agent receives satisfactory assurance that
your Financial Institution will honor the check or transfer of
funds. You can eliminate possible delays by paying for purchased
shares with wired funds or Federal Reserve drafts.
The Funds have the right to postpone payment or suspend
redemption rights during certain periods. These periods may
occur (i) when the Exchange is closed for other than weekends and
holidays, (ii) when the Securities and Exchange Commission (the
"SEC") restricts trading on the Exchange, (iii) when the SEC
determines an emergency exists which causes disposal of, or
determination of the value of, the portfolio securities to be
unreasonable or impracticable, and (iv) during such other periods
as the SEC 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 Bank 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.
Any Fund can redeem your shares if their value totals less
than $500 as a result of redemptions or failure to meet and
maintain the minimum investment level under an Automatic
Investment Program. Before such a redemption is made, we will
send you a notice giving you 60 days to make additional
investments to bring your account up to the minimum.
Redemption proceeds may be paid in whole or in part
("redemption in kind") by distribution of a Fund's portfolio
securities in conformity with SEC rules. This method would only
be used if the Trustees determine that partial or whole cash
payments would be detrimental to the best interests of the
remaining shareholders.
"Is there an Automatic Withdrawal Plan?"
Yes. Under an Automatic Withdrawal Plan you can arrange to
receive a monthly or quarterly check in a stated amount, not less
than $50.
Distribution Arrangements
Confirmations and Share Certificates
A statement will be mailed to you confirming each purchase
of shares in a Fund. Accounts are rounded to the nearest 1/1000th
of a share. The Funds will not issue share certificates 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 you have certificates issued, Expedited Redemption
Methods described above will not be available and delay and
expense may be incurred if you lose the certificates. The Funds
will not issue certificates for fractional shares or to
shareholders who have elected the checking account or
predesignated bank account methods of withdrawing cash from their
accounts.
The Funds and the Distributor may reject any order for the
purchase of 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 Distribution Plan has other provisions that relate to
payments in connection with each Fund's Service Shares Class.
None of such payments are made from assets represented by
Original Shares of any Fund.
DIVIDENDS
The Funds will declare all of their net income for dividend
purposes daily as dividends.If you redeem all of your 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 issued under the "third" method.
You will receive monthly a summary of your account,
including information as to dividends paid during the month and
the shares credited to your account through reinvestment of
dividends.
Dividends paid by each Fund with respect to Service Shares
(the Fund's other class of 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 will be taxable to you as ordinary income (except
as described in "Tax Information Concerning the Tax-Free Fund"
below), even though reinvested. Statements as to the tax status
of your 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.
Dividends of each Fund will automatically be reinvested in
full and fractional shares of the same class at net asset value
unless you elect otherwise.
You may choose to have all or any part of the payments for
dividends paid in cash. You can elect to have the cash portion of
your dividends deposited, without charge, by electronic funds
transfers into your account at a financial institution, if it is
a member of the Automated Clearing House.
You can make any of these elections on the Application, by a
Ready Access Features Form or by a letter to the Agent. Your
election to receive some or all of your dividends in cash will be
effective as of the next payment of dividends after it has been
received in proper form by the Agent. It will continue in effect
until the Agent receives written notification of a change.
All shareholders, whether their dividends are received in
cash or reinvested, will receive a monthly statement indicating
the current status of their account.
If you do not comply with laws requiring you to furnish
taxpayer identification numbers and report dividends, the Funds
may be required to impose backup withholding at a rate of 31%
upon payment of redemptions and dividends.
TAX INFORMATION
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 Internal Revenue Code, interest on loans incurred
by shareholders to enable them to purchase or carry shares of the
Tax-Free Fund may not be deducted for regular Federal tax
purposes. 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.
If you or your spouse are receiving Social Security or
railroad retirement benefits, a portion of these benefits may
become taxable, if you receive exempt-interest dividends from the
Tax-Free Fund.
If you, or someone related to you, is a "substantial user"
of facilities financed by industrial development or private
activity bonds, you should consult your own tax adviser before
purchasing shares of the Tax-Free Fund.
Interest from all Municipal Obligations is tax-exempt for
purposes of computing the shareholder's regular tax. However,
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 ("AMT"). Whether or not that computation
will result in a tax will depend on the entire content of your
return. The Tax-Free Fund will not invest more than 20% of its
assets in the types of Municipal Obligations that pay interest
subject to AMT. The 20% limit is a fundamental policy of the
Tax-Free Fund; it cannot be changed without shareholder approval.
An adjustment required by the Internal Revenue Code will tend to
make it more likely that corporate shareholders will be subject
to AMT. They should consult their tax advisers.
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 Internal Revenue 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 1998, 1997 and 1996, the
percentage of the Tax-Free Fund's dividends exempt from State of
Hawaii income taxes was 37.7%, 44.9%, and 41.3% 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 1998, 1997 and 1996, the percentage
of the Government Securities Fund's dividends exempt from State
of Hawaii income taxes was 92.8%, 69.8% and 71.5%, 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.
<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 financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Original Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request.
Year Ended March 31, (1)
1999 1998 1997 1996 1995
<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 0.05 0.04
Less distributions:
Dividends from net
investment income........(0.05) (0.05) (0.05) (0.05) (0.04)
Net Asset Value, End
of Period.................$1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)........... 4.90 5.15 4.88 5.32 4.40
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands)..........417.7 418.8 421.4 308.7 486.7
Ratio of Expenses to Average
Net Assets (%)........... 0.57 0.58 0.60 0.61 0.59
Average Net Assets (%).... 4.79 5.03 4.78 5.23 4.40
For periods after April 1, 1995 the expense ratios after giving effect to
the expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%)............. 0.56 0.57 0.60 0.60
<FN>
(1) Designated as the "Original Shares" class of shares on January 20,
1995.<
</FN>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 4.34% and its "compounded effective yield" for that period
was 4.43%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
</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 financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Original Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request.
Year Ended March 31, (1)
1999 1998 1997 1996 1995
<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 0.03
Less distributions:
Dividends from net
investment income........(0.03) (0.03) (0.03) (0.03) (0.03)
Net Asset Value, End
of Period.................$1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)........... 2.91 3.08 3.00 3.37 2.74
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands).......... 83.4 76.6 91.0 125.2 138.3
Ratio of Expenses to Average
Net Assets (%)........... 0.54 0.63 0.55 0.54 0.55
Average Net Assets (%).... 2.85 3.04 2.97 3.32 2.74
For periods after April 1, 1995 the expense ratios after giving effect to
the expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%)............. 0.53 0.63 0.55 0.54 -
<FN>
(1) Designated as the "Original Shares" class of shares on January 20,
1995.
</FN>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 2.60% and its "compounded effective yield" for that period
was 2.63%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
</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 financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Original Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request. 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, (1)
1999 1998 1997 1996 1995
<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..... 0.04 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net
investment income........(0.04) (0.05) (0.05) (0.05) (0.04)
Net Asset Value, End
of Period.................$1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)........... 4.80 4.95 4.76 5.20 4.20
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands)..........139.9 100.8 65.7 74.0 64.0
Ratio of Expenses to Average
Net Assets (%)........... 0.49 0.52 0.56 0.55 0.54
Average Net Assets (%).... 4.70 4.85 4.65 5.06 4.04
The expense and net investment income ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees for periods prior to
April 1, 1996 were:
Ratio of Expenses
to Average Net Assets(%)
- - - 0.63 0.59
Ratio of Net Investment
Income to
Average Net Assets(%) - - - 4.98 3.99
The expense ratios after giving effect to the waivers and expense offset
for invested cash balances for periods after April 1, 1995 were:
Ratio of Expenses to
Average Net Assets(%) 0.49 0.52 0.55 0.54 -
<FN>
(1) Designated as the "Original Shares" class of shares on January 20,
1995.
</FN>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 4.31% and its "compounded effective yield" for that period
was 4.40%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
</TABLE>
<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(s) 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.
You can have any portion reinvested, with the balance paid in cash, by
indicating a percent below:
Dividends are to be:___% Reinvested ___% 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 Trusts, 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>
[Inside Back Cover]
<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
Diana P. Herrmann, President
Charles E. Childs, III, Senior Vice President
Sherri Foster, Vice President
John M. Herndon, Vice President and Assistant Secretary
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 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
<PAGE>
Back Cover
This Prospectus concisely states information about the Funds
that you should know before investing. A Statement of Additional
Information about the Funds dated July 30, 1999, (the "SAI") has
been filed with the Securities and Exchange Commission. The SAI
contains information about the Funds and their management not
included in this Prospectus. The SAI is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
this Prospectus and the SAI are all material facts about the
Funds available to you.
You can get additional information about the Funds'
investments in the Funds' annual and semi-annual reports to
shareholders. In the Funds' annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Funds' performance during their
last fiscal year. You can get the SAI and the Funds' annual and
semi-annual reports without charge, upon request.
In addition, you can review and copy information about the
Funds (including the SAI) at the Public Reference Room of the SEC
in Washington, D.C. You can get information on the operation of
the SEC's public reference room by calling the SEC at
1-800-SEC-0330. You can get other information about the Funds at
the SEC's Internet site at http://www.sec.gov. You can get copies
of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
This Prospectus should be read and retained for future reference
TABLE OF CONTENTS
The Cash Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Cash Fund...................
The Tax-Free Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Tax-Free Fund...................
The Government Securities Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Government Securities Fund
Management of the Funds.................................
Net Asset Value Per Share........................
Purchases .......................................
Redeeming Your Investment........................
Dividends........................................
Tax Information..................................
Financial Highlights.............................
Application
The file number under which the Trust is registered
with the SEC under the
Investment Company Act of 1940 is 811-4066
<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
A cash management
investment
[LOGO]
PROSPECTUS
Original Shares
To receive a free copy of the Trust's SAI, annual or semi-annual
report, or other information about the Trust, or to make
shareholder inquiries call:
the Trust's Shareholder Servicing Agent at
800-255-2287 toll free
or you can write to:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
For General Inquiries and Yield Information, call 800-228-7496 or
212-697-6666
This Prospectus should be read and retained for future reference
<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 30, 1999
Cash Assets Trust consists of three separate portfolios:
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 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 and
in certain repurchase agreements secured by U.S. government
securities.
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
The Securities and Exchange Commission has not approved or
disapproved the Trust's securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
The Cash Fund: Objective, Investment Strategies, Main Risks
"What is the Cash Fund's objective?"
The 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.
"What does the Cash Fund invest in?"
The Cash Fund seeks to attain this objective by investing in
short-term money-market securities denominated in U.S. dollars
that are of high quality and present minimal credit risks.
Under the current management policies, the Cash Fund invests
only in the following types of obligations:
(1) U.S. government securities or obligations guaranteed by
the U.S. government or its agencies or instrumentalities.
(2) Bank obligations and instruments secured by them.
("Banks" includes commercial banks, savings banks and savings and
loan associations.)
(3) Short-term corporate debt known as "commercial paper."
(4) Corporate debt obligations (for example, bonds and
debentures). Debentures are a form of unsecured corporate debt.
(5) Variable amount master demand notes which are repayable
on not more than 30 days' notice.
(6) Repurchase agreements.
The Cash Fund seeks to maintain a net asset value of $1.00
per share.
There are limits on the percentage of the Cash Fund's assets
that can be invested in the securities of any issuer.
The dollar weighted average maturity of the Cash Fund will
be 90 days or less and the Cash Fund may buy only those
instruments that have a remaining maturity of 397 days or less.
Securities the Cash Fund buys must present minimal credit
risks and at the time of purchase be rated in the two highest
rating categories for short-term securities by any two of the
nationally recognized statistical rating organizations
("NRSROs"); if they are unrated, they must be determined by the
Board of Trustees to be of comparable quality. Some securities
may have third-party guarantees to meet these rating
requirements.
Pacific Century Trust (the "Adviser") seeks to develop an
appropriate portfolio by considering the differences among
securities of different issuers, yields, maturities and market
sectors.
The Cash Fund may change any of its management policies
without shareholder approval.
"What are the main risks of investing in the Cash Fund?"
Although the Cash Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Cash Fund.
Investment in the Cash Fund is not a deposit in Pacific
Century Trust, Bank of Hawaii, Pacific Century Financial Corp. or
their bank or non-bank affiliates or any other bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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. 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. These notes are also
subject to credit risk.
Repurchase agreements involve some risk to the Cash Fund if
the other party does not fulfill its obligations under the
agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
Corporate bonds and debentures are subject to interest rate
and credit risks.
Investments in foreign banks and foreign branches of United
States banks involve certain risks. Foreign banks and foreign
branches of domestic banks may not be subject to regulations that
meet U.S. standards. 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.
<PAGE>
PACIFIC CAPITAL CASH ASSETS TRUST- SERVICE SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in the Cash Fund Service Shares by showing
changes in the Fund's performance from year to year over a 3 year
period and by showing the Fund's average annual returns for one
year and since inception. How the Fund has performed in the past
is not necessarily an indication of how the Fund will perform in
the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1996-1998
<S> <C> <C> <C>
6%
5% 4.62 4.83 4.80
4% XXXX XXXX XXXX
3% XXXX XXXX XXXX
2% XXXX XXXX XXXX
1% XXXX XXXX XXXX
XXXX XXXX XXXX
0% XXXX XXXX XXXX
1996 1997 1998
Calendar Years
During the 3-year period shown in the bar chart, the highest
return for a quarter was 1.22% (quarter ended December 31, 1997)
and the lowest return for a quarter was 1.12% (quarters ended
June 30, 1996 and March 31, 1997).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 2.04%.
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
For the period ended
December 31, 1998
Since
1-Year inception
<S> <C> <C>
Pacific Capital Cash Assets Trust- Service Shares
4.80% 4.86
<FN>
* From commencement of operations on February 1, 1995.
</FN>
</TABLE>
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL CASH ASSETS TRUST
SERVICE SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if
you buy and hold Service Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.37%
Distribution (12b-1) Fee.....................0.25%
All Other Expenses:
Administration Fee....................0.13%
Other Expenses........................0.06%
Total All Other Expenses....................0.19%
Total Annual Fund Operating Expenses.........0.81%
Example
This Example is intended to help you compare the cost of
investing in the Service Shares of the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Service Shares of
the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year, that you
reinvest all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<C> <C> <C> <C>
$83 $259 $450 $1,002
</TABLE>
<PAGE>
The Tax-Free Fund: Objective, Investment Strategies, Main Risks
"What is the Tax-Free Fund's objective?"
The 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 State of
Hawaii income taxes.
"What does the Tax-Free Fund invest in?"
The Tax-Free Fund seeks to attain this objective by
investing in municipal obligations of Hawaiian issuers to the
extent that obligations of the desired quality, maturity and
interest rate are available; otherwise by investing in similar
obligations of non-Hawaii issuers. These obligations must have
remaining maturities not exceeding one year, must be of high
quality and must present minimal credit risks. At least 80% of
the Tax-Free Fund's assets must be invested in tax-exempt
obligations.
Under the current management policies, the Tax-Free Fund
invests only in the following types of obligations:
Municipal Obligations
As used in this Prospectus, 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 Guam, the Northern Mariana Islands, Puerto Rico and the Virgin
Islands, paying interest which, in the opinion of bond counsel or
other appropriate counsel, is also exempt from Hawaii state
income taxes.
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.
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.
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 purchase only
those with a remaining maturity of 13 months or less.
Municipal Notes
Municipal notes generally have maturities at the time of
issuance of three years or less. 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.
Concentration
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.
Shares of Investment Companies
The Tax-Free Fund may purchase shares of investment
companies with money market portfolios consisting only of
Municipal Obligations.
The Tax-Free Fund seeks to maintain a net asset value of
$1.00 per share.
The dollar weighted average maturity of the Tax-Free Fund
will be 90 days or less and the Tax-Free Fund may buy only those
instruments that have a remaining maturity of 397 days or less.
Securities the Tax-Free Fund buys must present minimal
credit risks and at the time of purchase be rated in the two
highest rating categories for short-term securities by any two of
the NRSROs or, if they are unrated, must be determined by the
Board of Trustees to be of comparable quality. Some securities
may have third-party guarantees to meet these rating
requirements.
The Adviser seeks to develop an appropriate portfolio by
considering the differences among securities of different
issuers, yields, maturities and market sectors.
The Tax-Free Fund may change any of its management policies
without shareholder approval.
"What are the main risks of investing in the Tax-Free Fund?"
Although the Tax-Free Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money
by investing in the Tax-Free Fund.
Hawaiian Obligations
The Tax-Free Fund's assets, being primarily Hawaiian issues,
are subject to economic and other conditions affecting Hawaii.
Adverse local events, such as a downturn in the Hawaiian economy,
could affect the value of the Tax-Free Fund's portfolio.
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 Hawaiian Obligations that the
Tax-Free Fund owns. The Tax-Free Fund has derived this
information from sources that are generally available to
investors and believes it to be accurate, but it has not been
independently verified and it may not be complete.
As of the date of this prospectus, the economic data
available indicate that much of Hawaii's economic slowdown in
1998 was attributable to the financial crisis in Asia. Gross
State Product grew by 1.0 percent compared to the 1.5 percent
growth experienced in 1997. Real personal income growth, which
began to accelerate in 1997, continued into most of 1998,
registering an average annual growth rate of approximately 2.0
percent. Much of the growth is attributable to external sources
such as dividends and interest, as growth in wages and salaries
has slowed over the past year. Hawaii experienced slight
deflation in 1998, with the consumer price index decreasing 0.2
percent. The index is expected to be flat to negative 0.5 percent
in 1999. Hawaii's cost of living differential continued to
decline in 1998 and was recently 1.30 times the national average
compared to its peak of 1.40 times in the early 1990s.
Statewide the total number of jobs dropped 1.0 percent in
1998. However, the number of persons employed has been increasing
for the past several years and currently totals 560,950. In
addition, Hawaii's unemployment rate has declined from 6.2
percent in 1997 to 5.8 percent in 1998. The future for Hawaii's
job market is considered promising with several new business
ventures and a revival of the film industry.
Hawaii home prices have stabilized over the past year
causing increases in sales volume. In addition, the decline in
prices over the past several years has created an attractive
market for investors seeking resort homes and lots, especially on
the neighboring islands. The decline in property values has had a
negative impact on the financial conditions of the City and
County of Honolulu. In early 1999, both Moody's Investors Service
and Standard & Poor's lowered the rating of the City's
outstanding general obligation debt one notch to AA3 and AA-,
respectively. The ratings for the City's bonds are currently
stable. This downgrade was anticipated as the declining tax base
and prolonged period of economic recovery has limited the City's
financial flexibility for several years.
In 1998, tourism, the state's principal industry,
experienced an overall decline of 1.7 percent. Total visitor
arrivals declined from 6.88 million in 1997 to 6.76 million in
1998. The strong U.S. economy helped to boost westbound arrivals
by 4.1 percent which helped to offset the 10 percent decline in
eastbound arrivals. Occupancy figures also reflected the strong
westbound visitor numbers as several neighboring islands, a
favorite destination for the repeat westbound visitor, registered
increases over the prior year. The increased westbound arrivals
have prompted several airlines to increase service between the
continental U.S. and Hawaii. In addition, several of the
neighboring islands have lengthened their runways to accommodate
larger aircraft.
Other Main Risks
Investment in the Tax-Free Fund is not a deposit in Pacific
Century Trust, Bank of Hawaii, Pacific Century Financial Corp. or
their bank or non-bank affiliates or any other bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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. Such obligations are
also subject to credit risk.
Repurchase agreements involve some risk to the Tax-Free Fund
if the other party does not fulfill its obligations under the
agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
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.
<PAGE>
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST- SERVICE SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in the Tax-Free Fund-Service Shares by showing
changes in the Tax-Free Fund's performance from year to year over
a 3-year period and by showing the Tax-Free Fund's average annual
returns for one year and since inception. How the Tax-Free Fund
has performed in the past is not necessarily an indication of how
the Tax-Free Fund will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1996-1998
<S> <C> <C> <C>
3% 2.75 2.82 2.74
2% XXXX XXXX XXXX
1% XXXX XXXX XXXX
XXXX XXXX XXXX
0% XXXX XXXX XXXX
1996 1997 1998
Calendar Years
During the 3-year period shown in the bar chart, the highest
return for a quarter was 0.73% (quarters ended June 30, 1997 and
June 30,1998) and the lowest return for a quarter was 0.69%
(quarter ended March 31, 1997).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 1.19%.
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
For the period
ended December 31, 1998
Since
1-Year inception
<S> <C> <C>
Pacific Capital Tax-Free Cash Assets Trust- Service Shares
2.74% 2.89
<FN>
* From commencement of operations on February 1, 1995.
</FN>
</TABLE>
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST
SERVICE SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if
you buy and hold Service Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.29%
Distribution (12b-1) Fee.....................0.25%
All Other Expenses:
Administration Fee....................0.11%
Other Expenses........................0.14%
Total All Other Expenses....................0.25%
Total Annual Fund Operating Expenses.........0.79%
Example
This Example is intended to help you compare the cost of
investing in Service Shares of the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Service Shares of
the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year, that you reinvest
all dividends and distributions, and that the Fund's operating
expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<C> <C> <C> <C>
$81 $252 $439 $ 978
</TABLE>
<PAGE>
The Government Securities Fund: Objective, Investment Strategies,
Main Risks
"What is the Government Securities Fund's objective?"
The 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.
"What does the Government Securities Fund invest in?"
The Government Securities Fund 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 in
certain repurchase agreements secured by U.S. government
securities.
Under the current management policies, the Government
Securities Fund invests only in the following types of
obligations:
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. 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.
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.
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.
The Government Securities Fund seeks to maintain a net asset
value of $1.00 per share.
The dollar weighted average maturity of the Government
Securities Fund will be 90 days or less and the Government
Securities Fund may buy only those instruments that have a
remaining maturity of 397 days or less.
Securities the Government Securities Fund buys must present
minimal credit risks and at the time of purchase be rated in the
two highest rating categories for short-term securities by any two
of the NRSROs or, if they are unrated, must be determined by the
Board of Trustees to be of comparable quality. Some securities may
have third-party guarantees to meet these rating requirements.
The Adviser seeks to develop an appropriate portfolio by
considering the differences in yields among securities of different
issuers, yields, maturities and market sectors.
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.
The Government Securities Fund may change any of its
management policies without shareholder approval.
"What are the main risks of investing in the Government Securities
Fund?"
Although the Government Securities Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the Government Securities Fund.
Investment in the Government Securities Fund is not a deposit
in Pacific Century Trust, Bank of Hawaii, Pacific Century Financial
Corp. or their bank or non-bank affiliates or any other bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Repurchase agreements involve some risk to the Government
Securities Fund if the other party does not fulfill its obligations
under the agreement.
The value of money-market instruments tends to fall if
prevailing interest rates rise.
<PAGE>
PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST-
SERVICE SHARES
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in the Government Securities Fund - Service
Shares by showing changes in the Fund's performance from year to
year over a 3 year period and by showing the Fund's average annual
returns for one year and since inception. How the Fund has
performed in the past is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1996-1998
<S> <C> <C> <C>
5% 4.53 4.63 4.70
4% XXXX XXXX XXXX
3% XXXX XXXX XXXX
2% XXXX XXXX XXXX
1% XXXX XXXX XXXX
XXXX XXXX XXXX
0% XXXX XXXX XXXX
1996 1997 1998
Calendar Years
During the 3-year period shown in the bar chart, the highest return
for a quarter was 1.20% (quarter ended September 30, 1998) and the
lowest return for a quarter was 1.09% (quarters ended June 30, 1996
and March 31, 1997).
The year-to-date (from January 1, 1999 to June 30, 1999) total
return was 2.01%.
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
For the period ended
December 31, 1998
Since
1-Year inception
<S> <C> <C>
Pacific Capital U.S. Government Securities Cash Assets
Trust-Service Shares
4.70% 4.75*
<FN>
* From commencement of operations on February 1, 1995.
</FN>
</TABLE>
Please call (800) 228-7496 toll free to obtain the Fund's most
current seven-day yield.
<PAGE>
PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST
SERVICE SHARES
FEES AND EXPENSES
<TABLE>
<CAPTION>
This table describes the fees and expenses that you may pay if
you buy and hold Original Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................0.00%
(as percentage of offering price)
Maximum Deferred Sales Charge (Load).........0.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends
(as a percentage of offering price)........0.00%
Redemption Fees..............................0.00%
Exchange Fees................................0.00%
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Investment Advisory Fee......................0.32%
Distribution (12b-1) Fee.....................0.25%
All Other Expenses:
Administration Fee....................0.08%
Other Expenses........................0.09%
Total All Other Expenses....................0.17%
Total Annual Fund Operating Expenses.........0.74%
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Original Shares of
the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year, you reinvest all
dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
$76 $237 $411 $ 918
</TABLE>
<PAGE>
General Risks
Year 2000. Like other financial and business organizations,
the Funds could be adversely affected if computer systems the Funds
rely 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 steps are
being taken by the other major service providers to the Funds to
achieve comparable results. Certain vendors have advised the
Administrator that they are currently compliant. The Funds' mission
critical vendors -- the shareholder servicing agent, the custodian
and the fund accounting agent -- as well as other support
organizations, have advised the Administrator that they are
actively working on necessary changes. These three vendors have
advised the Administrator that they expect to be ready and will
additionally be prepared to implement contingency plans if
necessary. All such expenses are being borne, and are expected to
continue to be borne, by the respective service providers. The
Funds have not incurred, nor are they anticipated to incur any
costs related to these matters. The Administrator has also
requested the Funds' portfolio managers to attempt to evaluate the
potential impact of this problem on the issuers of securities in
which the Funds invest. At this time there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the
Funds.
MANAGEMENT OF THE FUNDS
"How are the Funds managed?"
Pacific Century Trust, a division of Bank of Hawaii, Financial
Plaza of the Pacific, P.O. Box 3170, Honolulu, HI 96813 (the
"Adviser") is the investment adviser for each of the Funds. Aquila
Management Corporation, 380 Madison Avenue, Suite 2300, New York,
NY 10017, the Administrator, is responsible for administrative
services, including providing for the maintenance of the
headquarters of the Funds, overseeing relationships between the
Funds and the service providers to the Funds, maintaining the
Funds' books and records and providing other administrative
services.
Under the Advisory Agreements, the Adviser provides for
investment supervision including supervising continuously the
investment program of each Fund and the composition of its
portfolio; determining what securities will be purchased or sold by
each Fund; arranging for the purchase and the sale of securities
held in the portfolio of each Fund; and, at the Adviser's expense,
pricing of each Fund's portfolio daily.
Under the Advisory Agreements, during the fiscal year ended
March 31, 1999, each Fund paid 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 was 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 was 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 stated 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 paid were 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.
Information about the Adviser and the Administrator
The Adviser is a division of Bank of Hawaii, all of whose
shares are owned by Pacific Century Financial Corp. ("PCF") and
Bank of Hawaii's directors (each of whom owns qualifying shares as
required by Hawaii law). PCF 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. PCF
files annual and periodic reports with the Securities and Exchange
Commission which are available for public inspection.
The Funds' Administrator is founder and Administrator and/or
Manager to the Aquilasm Group of Funds, which consists of tax-free
municipal bond funds, money-market funds and equity funds. As of
December 31, 1998, these funds had aggregate assets of
approximately $3.2 billion, of which approximately $2.0 billion
consisted of assets of the tax-free municipal bond 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.
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) by the total number of shares of that class of the
Fund then outstanding. The price at which a purchase or
redemption of shares is effected is the next calculated net asset
value after your purchase or redemption order is received in
proper form.
The net asset value per share will normally remain constant
at $1.00 per share except under extraordinary circumstances. The
net asset value per share is based on a valuation of each Fund's
investments at amortized cost.
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 as well. In addition, the
Custodian is not open on Columbus Day and Veterans Day.
PURCHASES
Opening an Account
To open a new Service Shares account directly with any Fund,
you must send a properly completed Application to PFPC Inc. (the
"Agent"). The Funds will not honor redemption of shares purchased
by wire payment until a properly completed Application has been
received by the Agent. The minimum initial investment is $1,000.
Subsequent investments may be in any amount.
You can make investments in Service Shares in any of these
three ways:
1. By Mail. You can make payment 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. You can wire Federal funds (monies credited to a
bank's account with a Federal Reserve Bank) to PNC Bank, NA.
To insure prompt and proper crediting to your account, if
you choose this method of payment, you should first telephone the
Agent (800-255-2287 toll free) and then instruct your bank to
wire funds as indicated below for the appropriate Fund:
the Cash Fund:
PNC BANK, NA
Philadelphia, PA
ABA#0310-0005-3
Account #85-0216-4589
FFC: Pacific Capital Cash Assets Trust-Service Shares
the Tax-Free Fund:
PNC BANK, NA
Philadelphia, PA
ABA#0310-0005-3
Account #85-0216-4626
FFC: Pacific Capital Tax-Free Cash Assets Trust-
Service Shares
the 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-Service Shares
In addition you should supply:
Account name and number (if an existing account)
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 the Funds
by purchasing shares through registered broker-dealers.
The Funds impose no sales or service charge 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.
If you are not investing through a financial intermediary,
you should follow these instructions:
Opening an Account Adding to An Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to payable to
the appropriate Fund. the appropriate Fund.
* Complete the Application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to each Fund's confirmations
you wish to authorize. or supply the name(s)
of account owner(s),
the account number and
the name of the Fund.
* Send your check and * Send your check
completed application to your dealer or
to your dealer or to the Funds' Agent, PFPC
to the Funds' Agent, PFPC Inc., or
Inc., or
* Wire funds as described above. * Wire funds as described
above.
Be sure to supply the name(s) of account owner(s), the
account number, the name of the Fund.
If you make additional investments in Service Shares through
an account with a financial intermediary, you will follow the
procedures of the financial intermediary, rather than the
foregoing.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of
$50 or more from your Financial Institution if it is a member of
the Automated Clearing House. You may make investments through
two electronic transfer features, "Automatic Investment" and
"Telephone Investment."
* Automatic Investment You can authorize a pre-determined
amount to be regularly transferred from your account.
* Telephone Investment You can make single investments of up
to $50,000 to be made by telephone instructions to the
Agent.
Before you can transfer funds electronically, the Agent must
have your completed Application authorizing these features. If
you initially decide not to choose these conveniences and then
later wish to do so, you must complete a Ready Access Features
Form which is available from the Distributor or Agent. The Funds
may modify or terminate these investment methods or charge a
service fee, upon 30 days' written notice to shareholders.
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
The Funds issue shares three ways.
First Method - ordinary investments. You will be paid
dividends starting on the day (whether or not a Business Day)
after the first Business Day on which your purchase order has
been received in proper form and funds have become available for
investment. You will be paid a dividend on the day on which your
shares are redeemed.
"When will funds be available so that my order will become
effective?"
The Funds must have payment for your purchase available for
investment before 4:00 p.m. New York time on a Business Day for
your order to be effective on that Business Day. Your order is
effective and you will receive the next determined net asset
value per share depending on the method of payment you choose, as
follows.
Payment Method When will an order When will an order
received before received after
4:00 p.m on a 4:00 p.m. on a
Business Day Business Day
be deemed be deemed
effective? effective?
By wire in
Federal Funds or
Federal Reserve
Draft That day Next Business Day
By wire not
in Federal Funds 4:00 p.m. on the 4:00 p.m. on the
Business Day Business Day
converted to converted to
Federal Funds Federal Funds
(normally the (normally the
next Business next Business
Day) Day)
By Check 4:00 p.m. on the 4:00 p.m. on the
Business Day Business Day
converted to converted to
Federal Funds Federal Funds
(normally (normally
two Business two Business
Days for checks Days for checks
on banks in the on banks in the
Federal Reserve Federal Reserve
System, longer System, longer
for other banks) for other banks)
Automatic
Investment The day you specify;
if it is not a
Business Day, on the
next Business Day
Telephone
Investment That day Next Business Day
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. (The Agent will convert wires and checks to Federal Funds
as your agent.)
Second Method - For banks or broker-dealers which have made
special arrangements with the Funds. You will be paid dividends
starting on the day (whether or not a Business Day) after the
Business Day on which your purchase order is received in proper
form. You will be paid a dividend on the day on which your shares
are redeemed.
"When will my order be effective under the Second Method?"
Your purchase order is effective on the Business Day it is
received if
1) your 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
2) (i) you advise the Agent prior to 5:00 p.m. New York time
of a dollar amount to be invested and the form of
registration of the shares to be issued; (ii) your bank or
broker-dealer wires payment for your order in Federal funds,
before noon New York time on the next Business Day; and
(iii) arrangements satisfactory to the Funds are made with
your bank or broker-dealer under which if Federal funds are
not so received, the Funds are reimbursed for any costs or
loss of income arising out of such non-receipt.
If you pay by check under No. 1 above, and the check is not
converted into Federal funds in the normal course on the next
Business Day, you must arrange to have payment wired in Federal
Funds before noon on the next Business Day.
Third Method- For broker-dealers or banks which have
requested that this method be used, to which request any Fund has
consented. You will be paid dividends starting on the day on
which your purchase order has been received in proper form and
funds have become available for investment. You will not be paid
a dividend on the day on which your shares are redeemed.
"When will my order be effective under the Third Method?"
Your purchase order is effective and your funds are invested
as follows:
On that day, if
(i) you advise the Agent before 2:00 p.m. New York time on a
Business Day of a dollar amount to be invested in the Cash Fund
or Government Securities Fund and prior to noon of a dollar
amount to be invested in the Tax-Free Fund; and
(ii) Your payment in Federal funds is received by wire on
that day.
The third investment method is available to prospective
investors in shares of a Fund 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
the Funds will advise you as to the broker-dealers or banks
through which such purchases may be made.
The Agent will maintain records as to which of your shares
were purchased under each of the three investment methods set
forth above. If you make a redemption request and have purchased
shares under the first or second methods and other shares under
the third method, the Agent will, unless you otherwise request as
to such redemption, redeem those shares first purchased,
regardless of the method under which they were purchased.
Under each method, shares are issued at the net asset value
per share next determined after the purchase order is received in
proper form. Under each method, the Application must be properly
completed and have been received and accepted by the Agent; the
Funds or the Distributor may also reject any purchase order.
Under each method, Federal funds (see above) must either be
available to the Funds or the payment thereof must be guaranteed
to the Funds so that the Funds can be as fully invested as
practicable.
Transfer on Death Registration
The Funds generally permit "transfer on death" registration
of shares ("TOD") purchased directly, so that on the death of the
shareholder the shares are transferred to a designated
beneficiary or beneficiaries. Ask the Agent or your broker-dealer
for the Transfer on Death Registration Request Form. With it you
will receive a copy of the TOD Rules of the Aquilasm Group of
Funds, which specify how the registration becomes effective and
operates. By opening a TOD Account, you agree to be bound by the
TOD Rules. TOD registration may not be available if you invest
through a financial intermediary.
REDEEMING YOUR INVESTMENT
You may redeem some or all of your shares by a request to
the Agent. Shares will be redeemed at the next net asset value
determined after your request has been received in proper form.
There is no minimum period for investment in the Funds,
except for shares recently purchased by check or by Automatic or
Telephone Investment as discussed below.
If you purchased 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.
How to Redeem Your Investment
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-255-2287 toll free
By FAX, send instructions to: 302-791-3055
For liquidity and convenience, the Funds offer expedited
redemption.
Expedited Redemption Methods
(Non-Certificate Shares Only)
You may request expedited redemption for any shares not
issued in certificate form in two ways:
1. By Telephone. The Agent will accept instructions from
anyone by telephone to redeem shares and make payments:
a) to a Financial Institution account you
have previously specified or
b) by check in the amount of $50,000 or less,
mailed to the same name and address (which
has been unchanged for the past 30 days) as
the account from which you are redeeming. You
may only redeem by check via telephone
request once in any 7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to
supply:
account name(s) and number
name of the caller
the social security number(s) registered to the account
personal identification
Note: Check the accuracy of your confirmation statements
immediately. The Funds, the Agent, and the Distributor are
not responsible for losses resulting from unauthorized
telephone transactions if the Agent follows reasonable
procedures designed to verify a caller's identity. The
Agent may record calls.
2. By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of
instruction sent to the Agent: PFPC Inc., by FAX at 302-791-3055
or by mail to 400 Bellevue Parkway, Wilmington, DE 19809. The
letter, signed by the registered shareholder(s) (no signature
guarantee is required), must indicate:
account name(s),
account number,
amount to be redeemed,
any payment directions.
To have redemption proceeds sent directly to a Financial
Institution Account, you must complete the Expedited Redemption
section of the Application or a Ready Access Features Form. You
will be required to provide (1) details about your Financial
Institution account, (2) signature guarantees and (3) possible
additional documentation.
The name(s) of the shareholder(s) on the Financial
Institution account must be identical to those on the Funds'
records of your account.
You may change your designated Financial Institution account
at any time by completing and returning a revised Ready Access
Features Form.
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. 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.
Because these checks are paid by redemption of shares in
your account, you should be certain that adequate shares are in
the account to cover the amount of the 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. Note :
certificate shares and shares which were recently purchased by
check are not available for redemption by check.
You may not present checks directly 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 redeem the
entire balance of your account, since the number of shares in
your account changes daily through dividend payments which are
automatically reinvested in full and fractional shares.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 Financial
Institution account and check writing are desired, you must so
elect on your Application, or by proper completion of a Ready
Access Features Form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
Certificate Shares. Mail to the Funds' Agent: (1) blank
(unsigned) certificates for Service Shares to be redeemed, (2)
redemption instructions, and (3) a stock assignment form.
To be in "proper form," items (2) and (3) must be signed by
the registered shareholder(s) exactly as the account is
registered. For a joint account, both shareholder signatures
are necessary.
For your protection, mail certificates separately from
signed redemption instructions. We recommend that
certificates be sent by registered mail, return receipt
requested.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or
executors, or if redemption is requested by someone other
than the shareholder of record. The Agent may require
signature guarantees if insufficient documentation is on
file.
We do not require a signature guarantee for redemptions up
to $50,000, payable to the record holder(s), and sent to the
address of record, except as noted above. In all other
cases, signatures must be guaranteed.
Your signature may be guaranteed by any:
member of a national securities exchange
U.S. bank or trust company
state-chartered savings bank
federally chartered savings and loan association
foreign bank having a U.S. correspondent bank; or
participant in the Securities Transfer Association
Medallion Program ("STAMP"), 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.
Non-Certificate Shares. You must use the Regular Redemption
Method if you have not chosen Expedited Redemption to a
predesignated Financial Institution account. To redeem by
this method, send a letter of instruction to the Funds'
Agent, which includes:
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 (we normally mail redemption
proceeds to your address as registered with a Fund)
Signature(s) of the registered shareholder(s) and
Signature guarantee(s), if required, as indicated
above.
"When Will I Receive the Proceeds of My Redemption?"
Redemption proceeds are normally sent, as shown below, to
your address of record on the next business day following
receipt of your redemption request. Except as described below,
the Funds will send payments within 7 days.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and as None
you requested on your
Application or Ready Access
Features Form, wired
or transferred through
the Automated Clearing
House to your Financial
Institution Account.
Through a broker
/dealer Check or wire, to your None.
broker/dealer. However,
your
broker/dealer
may charge a
fee.
Although the Funds do not currently intend to, 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.
The Funds may delay payment for redemption of shares
recently purchased by check (including certified, cashier's or
official bank check) or by Automatic Investment or Telephone
Investment up to 15 days after purchase; however, redemption will
not be delayed after (i) the check or transfer of funds has been
honored, or (ii) the Agent receives satisfactory assurance that
your Financial Institution will honor the check or transfer of
funds. You can eliminate possible delays by paying for purchased
shares with wired funds or Federal Reserve drafts.
The Funds have the right to postpone payment or suspend
redemption rights during certain periods. These periods may
occur (i) when the Exchange is closed for other than weekends and
holidays, (ii) when the Securities and Exchange Commission (the
"SEC") restricts trading on the Exchange, (iii) when the SEC
determines an emergency exists which causes disposal of, or
determination of the value of, the portfolio securities to be
unreasonable or impracticable, and (iv) during such other periods
as the SEC may permit.
Payment for redemption by any method (including redemption
by check) of Service Shares recently purchased by check
(irrespective of whether the check is a regular check or a
certified, cashier's or official bank check) or by Automatic
Investment or Telephone Investment may be delayed up to 15 days
or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the bank on
which the purchase check was drawn or from which the funds for
Automatic Investment or Telephone Investment were transferred,
satisfactory to the Agent and the Fund, that the purchase check
or Automatic Investment or Telephone Investment will be honored.
Service Shares so purchased within the prior 15 days will not be
redeemed under the check writing redemption procedure and a
shareholder must not write a check if (i) it will be presented to
the Bank for payment within 15 days of a purchase of Service
Shares by check and (ii) the redemption check would cause the
redemption of some or all of those shares.
Any Fund can redeem your shares if their value totals less
than $500 as a result of redemptions or failure to meet and
maintain the minimum investment level under an Automatic
Investment Program. Before such a redemption is made, we will
send you a notice giving you 60 days to make additional
investments to bring your account up to the minimum.
Redemption proceeds may be paid in whole or in part
("redemption in kind") by distribution of a Fund's portfolio
securities in conformity with SEC rules. This method would only
be used if the Trustees determine that partial or whole cash
payments would be detrimental to the best interests of the
remaining shareholders.
"Is there an Automatic Withdrawal Plan?"
Yes, but it is available only for shares purchased directly
and not for shares purchased through a financial intermediary.
Under an Automatic Withdrawal Plan you can arrange to receive a
monthly or quarterly check in a stated amount, not less than $50.
Distribution Arrangements
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 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. Share certificates may not be available to
investors who purchase Service Shares through an account with a
financial intermediary.
The Funds and the Distributor may reject any order for the
purchase of 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.
A part of the Distribution Plan that relates exclusively to
Service Shares provides for payments under agreements by each
Fund out of its assets represented by Service Shares to certain
designated payees 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 any Fund represented by Service
Shares.
A designated payee may pass on a portion of the payments it
receives under the Distribution Plan to other financial
institutions or service organizations that also render assistance
in the distribution, retention and/or servicing of Service
Shares. The Bank of Hawaii and Pacific Century Investment
Services, "affiliated persons," as defined in the 1940 Act, of
the Adviser, are among those who, indirectly through one or more
designated payees, will receive payments authorized by the Plan
in consideration of their services in connection with investments
in Service Shares by their customers.
DIVIDENDS
The Funds will declare all of their net income for dividend
purposes daily as dividends.If you redeem all of your 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 issued under the "third" method.
You will receive monthly a summary of your account,
including information as to dividends paid during the month and
the shares credited to your account through reinvestment of
dividends.
Dividends paid by each Fund with respect to Service Shares
and Original Shares (the Fund's other class of 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 will be taxable to you as ordinary income (except
as described in "Tax Information Concerning the Tax-Free Fund"
below), even though reinvested. Statements as to the tax status
of your 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.
Dividends of each Fund will automatically be reinvested in
full and fractional shares of the same class at net asset value
unless you elect otherwise.
You may choose to have all or any part of the payments for
dividends paid in cash. You can elect to have the cash portion of
your dividends deposited, without charge, by electronic funds
transfers into your account at a financial institution, if it is
a member of the Automated Clearing House.
You can make any of these elections on the Application, by a
Ready Access Features Form or by a letter to the Agent. Your
election to receive some or all of your dividends in cash will be
effective as of the next payment of dividends after it has been
received in proper form by the Agent. It will continue in effect
until the Agent receives written notification of a change.
All shareholders, whether their dividends are received in
cash or reinvested, will receive a monthly statement indicating
the current status of their account.
If you do not comply with laws requiring you to furnish
taxpayer identification numbers and report dividends, the Funds
may be required to impose backup withholding at a rate of 31%
upon payment of redemptions and dividends.
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 Internal Revenue Code, interest on loans incurred
by shareholders to enable them to purchase or carry shares of the
Tax-Free Fund may not be deducted for regular Federal tax
purposes. 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.
If you or your spouse are receiving Social Security or
railroad retirement benefits, a portion of these benefits may
become taxable, if you receive exempt-interest dividends from the
Tax-Free Fund.
If you, or someone related to you, is a "substantial user"
of facilities financed by industrial development or private
activity bonds, you should consult your own tax adviser before
purchasing shares of the Tax-Free Fund.
Interest from all Municipal Obligations is tax-exempt for
purposes of computing the shareholder's regular tax. However,
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 ("AMT"). Whether or not that computation
will result in a tax will depend on the entire content of your
return. The Tax-Free Fund will not invest more than 20% of its
assets in the types of Municipal Obligations that pay interest
subject to AMT. The 20% limit is a fundamental policy of the
Tax-Free Fund; it cannot be changed without shareholder approval.
An adjustment required by the Internal Revenue Code will tend to
make it more likely that corporate shareholders will be subject
to AMT. They should consult their tax advisers.
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 Internal Revenue 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 1998, 1997 and 1996, the
percentage of the Tax-Free Fund's dividends exempt from State of
Hawaii income taxes was 37.7%, 44.9%, and 41.3% 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 1998, 1997 and 1996, the percentage
of the Government Securities Fund's dividends exempt from State
of Hawaii income taxes was 92.8%, 69.8% and 71.5%, 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.
<PAGE>
[CAPTION]
<TABLE>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
SERVICE SHARES
CASH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Service Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request.
Period
Year Ended March 31, Ended
1999 1998 1997 1996 3/31/95**
<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 0.05 0.01
Less distributions:
Dividends from net
investment income...... 0.05 (0.05) (0.05) (0.05) (0.01)
Net Asset Value, End
of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)......... 4.64 4.88 4.62 5.06 0.85+
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands)....... 162.6 113.4 65.8 32.9 3.5
Ratio of Expenses to Average
Net Assets (%)........... 0.81 0.83 0.85 0.86 0.83*
Average Net Assets (%).... 4.51 4.77 4.53 4.84 5.26*
For periods after April 1, 1995 the expense ratios after giving effect to
the expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%)............. 0.81 0.82 0.85 0.86 -
<FN>
** For the period from February 1, 1995(commencement of operations) to
March 31, 1995.</FN>
<FN>
+ Not annualized
</FN>
<FN>
* Annualized
</FN>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 4.09% and its "compounded effective yield" for that period
was 4.17%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
SERVICE SHARES
TAX-FREE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Service Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request.
Period
Year Ended March 31, Ended
1999 1998 1997 1996 3/31/95**
<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 0.01
Less distributions:
Dividends from net
investment income......(0.03) (0.03) (0.03) (0.03) (0.01)
Net Asset Value, End
of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)......... 2.65 2.83 2.75 3.11 0.52+
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands)....... 47.6 37.1 25.5 17.6 1.4
Ratio of Expenses to Average
Net Assets (%)........... 0.79 0.88 0.80 0.80 0.77*
Average Net Assets (%)... 2.64 2.79 2.70 2.97 3.22*
For periods after April 1, 1995 the expense ratios after giving effect to
the expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%).............0.78 0.88 0.88 0.80 -
<FN>
** For the period from February 1, 1995 (commencement of operations) to
March 31, 1995.</FN>
<FN>
+ Not annualized
</FN>
<FN>
* Annualized
</FN>
</TABLE>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 2.35% and its "compounded effective yield" for that period
was 2.37%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
<PAGE>
<TABLE>
<CAPTION>
THE PACIFIC CAPITAL FUNDS
OF CASH ASSETS TRUST
SERVICE SHARES
GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial highlights table is intended to help you understand the
Fund's financial performance for the indicated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in Service Shares of
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the
Fund's financial statements, is included in the annual report, is
incorporated by reference into the SAI and is available upon request. 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.
Period
Year Ended March 31, Ended
1999 1998 1997 1996 3/31/95**
<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....0.04 0.05 0.04 0.05 0.01
Less distributions:
Dividends from net
investment income......(0.04) (0.05) (0.04) (0.05) (0.01)
Net Asset Value, End
of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00
Total Return (%)......... 4.54 4.69 4.50 4.94 0.94+
Ratios/Supplemental Data
Net Assets,
End of Period
($ in thousands)....... 214.2 149.9 83.4 11.8 0.50
Ratio of Expenses to Average
Net Assets (%)........... 0.74 0.77 0.80 0.80 0.85*
Average Net Assets (%)... 4.42 4.60 4.42 4.67 5.09*
The expense and net investment income ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees for periods prior to
April 1, 1996 were:
Ratio of Expenses
to Average Net Assets(%)
- - - 0.88 0.98*
Ratio of Net Investment
Income to
Average Net Assets(%) - - - 4.59 4.96*
The expense ratios after giving effect to the waivers and expense offset
for invested cash balances for periods after April 1, 1995 were:
Ratio of Expenses to
Average Net Assets(%) 0.74 0.77 0.79 0.79 -
<FN>
** For the period from February 1, 1995 (commencement of operations) to
March 31, 1995.</FN>
<FN>
+ Not annualized
</FN>
<FN>
* Annualized
</FN>
</TABLE>
Unaudited: The Fund's "current yield" for the seven days ended March 31,
1999 was 4.06% and its "compounded effective yield" for that period
was 4.14%. Current yield is net income over a stated seven-day period
annualized, and is shown as a percentage. Effective yield is calculated
similarly, but, when annualized, the income earned is assumed to be
reinvested, which gives effect to compounding.
<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(s) 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 (Service Shares) A/C 85-0216-4589
Pacific Capital Tax-Free Cash Assets Trust (Service Shares)
A/C 85-0216-4626
Pacific Capital U.S. Government Securities Cash Assets Trust
(Service 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.
You can have any portion reinvested, with the balance paid in cash, by
indicating a percent below:
Dividends are to be:___% Reinvested ___% 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 Trusts, 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.
[Inside Back Cover]
<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
Diana P. Herrmann, President
Charles E. Childs, III, Senior Vice President
Sherri Foster, Vice President
John M. Herndon, Vice President and Assistant Secretary
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 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
<PAGE>
<PAGE>
This Prospectus concisely states information about the Funds that
you should know before investing. A Statement of Additional
Information about the Funds dated July 30, 1999, (the "SAI") has
been filed with the Securities and Exchange Commission. The SAI
contains information about the Funds and their management not
included in this Prospectus. The SAI is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
this Prospectus and the SAI are all material facts about the
Funds available to you.
You can get additional information about the Funds'
investments in the Funds' annual and semi-annual reports to
shareholders. In the Funds' annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Funds' performance during their
last fiscal year. You can get the SAI and the Funds' annual and
semi-annual reports without charge, upon request.
In addition, you can review and copy information about the
Funds (including the SAI) at the Public Reference Room of the SEC
in Washington, D.C. You can get information on the operation of
the SEC's public reference room by calling the SEC at
1-800-SEC-0330. You can get other information about the Funds at
the SEC's Internet site at http://www.sec.gov. You can get copies
of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
This Prospectus should be read and retained for future reference
TABLE OF CONTENTS
The Cash Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Cash Fund...................
The Tax-Free Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Tax-Free Fund...................
The Government Securities Fund: Objective, Investment Strategies,
Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Government Securities Fund
Management of the Funds.................................
Net Asset Value Per Share........................
Purchases .......................................
Redeeming Your Investment........................
Dividends........................................
Tax Information..................................
Financial Highlights.............................
Application
The file number under which the Trust is registered
with the SEC under the
Investment Company Act of 1940 is 811-4066
<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
A cash management
investment
[LOGO]
PROSPECTUS
Service Shares
To receive a free copy of the Trust's SAI, annual or semi-annual
report, or other information about the Trust, or to make
shareholder inquiries call:
the Trust's Shareholder Servicing Agent at
800-255-2287 toll free
or you can write to:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
For General Inquiries and Yield Information, call 800-228-7496 or
212-697-6666
This Prospectus should be read and retained for future reference
<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 30, 1999
This Statement of Additional Information (the "SAI") 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 30, 1999: one for Original Class Shares
("Original Shares"), the other for Service Class Shares ("Service
Shares") of the Funds. References in the SAI to "the Prospectus"
refer to either of these Prospectuses. The SAI 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
Financial Statements
The financial statements for each Fund for the year ended
March 31, 1999, which are contained in the Annual Report for that
fiscal year, are hereby incorporated by reference into the SAI.
Those financial statements have been audited by KPMG LLP,
independent auditors, whose report thereon is incorporated
herein by reference. The Annual Report of each Fund for the
fiscal year ended March 31, 1999 can be obtained without charge
by calling any of the toll-free numbers listed above. The Annual
Report will be delivered with the SAI.
TABLE OF CONTENTS
Trust History
Investment Strategies and Risks
Policies of the Funds
Management of the Funds
Ownership of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Capital Stock
Purchase, Redemption, and Pricing of Shares
Taxation of the Funds
Underwriter
Performance
Appendix A
<PAGE>
CASH ASSETS TRUST
STATEMENT OF ADDITIONAL INFORMATION
Trust History
Cash Assets Trust (the "Trust") is an 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"). They are collectively referred to as the
"Funds." Until April 1, 1998, the Government Securities Fund was
called the Treasuries Fund.
Investment Strategies and Risks
The investment objective and policies of each Fund are
described in the Prospectus, which refers to the investments and
investment methods described below.
Additional Information About the Cash Fund's Investments
Under the 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.
(2) Bank Obligations and Instruments Secured by Them: Bank
obligations (i) of U.S. regulated banks having total assets of at
least $1.5 billion, which may be domestic banks, foreign
branches of such banks or U.S. subsidiaries of foreign banks;
(ii) of any foreign bank having total assets equivalent to at
least $1.5 billion; or (iii) that are fully insured as to
principal by the Federal Deposit Insurance Corporation. ("Banks"
includes commercial banks, savings banks and savings and loan
associations.)
(3) Commercial Paper: Short-term corporate debt.
(4) Corporate Debt Obligations: Corporate debt obligations
(for example, bonds and debentures). Debentures are a form of
unsecured corporate debt.
(5) Variable Amount Master Demand Notes: Variable amount
master demand notes repayable on not more than 30 days' notice.
These notes permit the investment of fluctuating amounts by the
Cash Fund at varying rates of interest pursuant to direct
arrangements between the Cash 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. Variable amount master demand
notes may or may not be backed by bank letters of credit.
(6) Certain Other Obligations: Obligations other than those
listed in 1 through 5 above only 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). If the Cash Fund invests more than 5% of its net
assets in such other obligations, the Prospectus will be
supplemented to describe them.
(7) Repurchase Agreements: The Cash Fund may purchase
securities subject to repurchase agreements with commercial banks
and broker-dealers 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 two or more nationally recognized statistical
rating organizations ("NRSROs").
(8) When-Issued or Delayed Delivery Securities: The Cash
Fund may buy securities on a when-issued or delayed delivery
basis. The Cash Fund may not enter into when-issued commitments
exceeding in the aggregate 15% of the market value of the Cash
Fund's total assets, less liabilities other than the obligations
created by when-issued commitments. When-issued securities 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.
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, Pacific Century Trust (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 savings institutions
(collectively herein, "banks") up to $100,000. 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 a 10% limit of each Fund 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 above, 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. As of the
date of the SAI 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
Prospectus and described in the SAI.
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.
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 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.
The Tax-Free Fund may, with respect to obligations held in
its portfolio, 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 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).
Additional Information About Other Investments the Tax-Free Fund
Can Make
Temporary Taxable Investments
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.
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.
Under current management policies the Taxable Obligations
which the Tax-Free Fund may purchase are:
Obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities; commercial paper obligations
and bank obligations (i) of U.S. regulated banks having total
assets of at least $1.5 billion, which may be domestic banks,
foreign branches of such banks or U.S. subsidiaries of foreign
banks; or (ii) that are fully insured as to principal by the
Federal Deposit Insurance Corporation. "Bank" includes commercial
banks, savings banks and savings and loan associations.
Floating and Variable Rate Instruments
The Tax-Free Fund may purchase obligations with 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 Tax-Free Fund to tender them back
to the issuer at par value prior to maturity. The Adviser will
monitor the ability of an issuer of a demand instrument to pay
principal and interest on demand.
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.
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. 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. 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.
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. Repurchase agreements may be
entered into only with commercial banks or broker-dealers.
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. 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. 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.
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
SAI 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.
Portfolio 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 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, it 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 its 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 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.
Policies of the Funds
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 outstanding shares of that Fund 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.
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; U.S.
Government Securities and those domestic bank obligations and
instruments of domestic banks which the Cash Fund may purchase
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; 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 and enter into repurchase agreements. 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.
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 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; this is investing, not making a loan. The
Tax-Free Fund can lend its portfolio securities and enter into
repurchase agreements.
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.
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; 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
and enter into repurchase agreements. 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.
Restrictions Applicable to all of the Funds
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, any Trustee,
Director or officer of the Fund or its Adviser individually owns
beneficially more than 0.5% of the securities of that issuer and
all such Trustees, Directors and officers 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.
Management of the Funds
The Board of Trustees
The business and affairs of each Fund are managed under the
direction and control of its Board of Trustees. The Board of
Trustees has authority over every aspect of the Fund's
operations, including approval of the advisory agreements and
their annual renewal, the contracts with all other service
providers and payments under the Fund's Distribution Plan and
Shareholder Services Plan.
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
SAI, the Trustees and officers of the Funds owned less than 1% of
the outstanding shares of any of them.
In the following material the Funds are together with
Capital Cash Management Trust ("CCMT") called the "Aquila
Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of
Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado,
Churchill Tax-Free Fund of Kentucky, Narragansett Insured
Tax-Free Income Fund and Tax-Free Fund For Utah, each of which is
a tax-free municipal bond fund, are called the "Aquila Bond
Funds"; and Aquila Cascadia Equity Fund and Aquila Rocky Mountain
Equity Fund are called the "Aquila Equity Funds."
Lacy B. Herrmann* Chairman Founder and Chairman of
380 Madison Avenue of the the Board of Aquila
New York, New York Board of Management Corporation,
10017, Trustees the sponsoring
Age: 70 organization and Manager
or Administrator and/or
Adviser or Sub-Adviser to
the Aquila Money-Market
Funds, the Aquila Bond
Funds and the Aquila
Equity Funds, and
Founder, Chairman of the
Board of Trustees and
(currently or until 1998)
President of each since
its establishment,
beginning in 1984; Vice
President and Director,
and formerly Secretary,
of Aquila Distributors,
Inc., distributor of the
above funds, since 1981;
President and a Director
of STCM Management
Company, Inc., sponsor
and sub-adviser to CCMT;
Founder and Chairman of
several other money
market funds; Director or
Trustee of OCC Cash
Reserves, Inc. and Quest
For Value Accumulation
Trust, and Director or
Trustee of Oppenheimer
Quest Value Fund, Inc.,
Oppenheimer Quest Global
Value Fund, Inc. and
Oppenheimer 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 Director of Sonesta
20 Park Plaza, Suite 1010 International Hotels
Boston, Massachusetts Corporation, Boston,
02116 Massachusetts and
Age: 76 Independent General
Partner of the Merrill
Lynch-Lee Funds; Former
Director of
Colgate-Palmolive
Company, Digital
Equipment Corporation,
Intermet Corporation, The
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,
Pacific Capital Cash
Assets Trust, Pacific
Capital Tax-Free Cash
Assets Trust and Pacific
Capital U.S. Government
Securities Cash Assets
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
Emeritus, Boston Symphony
Orchestra; 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 Retired; Advisory
8702 North Via La Serena Director of the
Paradise Valley, Arizona Renaissance Companies
85253 (design and construction
Age: 77 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 and
Pacific Capital Cash
Assets Trust since 1987,
of Pacific Capital
Tax-Free Cash Assets
Trust and Pacific Capital
U.S. Government
Securities Cash Assets
Trust since 1988 and of
Aquila Rocky Mountain
Equity Fund since 1993;
previously Vice President
of Investment Research at
Citibank, New York City,
and prior to that Vice
President and Director of
Investment Research of
Irving Trust Company, New
York City; past President
of The New York Society
of Security Analysts and
currently a member of the
Phoenix Society of
Financial Analysts;
formerly Director of the
Financial Analysts
Federation; past Chairman
of the Board and past
Director of Mercy
Healthcare of Arizona,
Phoenix, Arizona;
Director of St. Joseph's
Hospital Foundation since
1996 and Director of
Northern Arizona
University Foundation
since 1990, presently or
formerly an officer
and/or director of
various other community
and professional
organizations.
William M. Cole Trustee President of Cole
852 Ramapo Way International,
Westfield, New Jersey Inc., financial and
07090 shipping consultants,
Age: 68 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
Pacific Capital Cash
Assets Trust since 1984,
of Hawaiian Tax-Free
Trust since 1985, of
Tax-Free Fund of Colorado
since 1987 and of Pacific
Capital Tax-Free Cash
Assets Trust and Pacific
Capital U.S. Government
Securities Cash Assets
Trust since 1988;
Chairman of Cole Group, a
financial consulting and
real estate firm, since
1985.
Thomas W. Courtney Trustee President of Courtney
P.O. Box 8186 Associates, Inc., a
Naples, Florida 33941 venture capital firm,
Age: 65 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
Pacific Capital Cash
Assets Trust since 1984,
of Tax-Free Trust of
Arizona since 1986 and of
Pacific Capital Tax-Free
Cash Assets Trust and
Pacific Capital U.S.
Government Securities
Cash Assets Trust since
1988; Trustee of numerous
Oppenheimer Capital and
Oppenheimer Management
Funds.
Richard W. Gushman, II Trustee President and Chief
700 Bishop Street Executive Officer of
Suite 222 OKOA, Inc., a private
Honolulu, Hawaii 96813 Hawaii corporation
Age: 53 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
and of Pacific Capital
Cash Assets Trust,
Pacific Capital Tax-Free
Cash Assets Trust and
Pacific Capital U.S.
Government Securities
Cash Assets Trust since
1993; Trustee of Pacific
Capital Funds, which
includes bond and stock
funds, since 1993;
Trustee of the University
of Hawaii Foundation and
of Hawaii Pacific
University; Member of the
Boards of Aloha United
Way, Boys and Girls Club
of Honolulu and Oceanic
Cablevision, Inc.
Stanley W. Hong Trustee President and Chief
4976 Poola Street Executive Officer
Honolulu, Hawaii 96821 of The Chamber of
Age: 63 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 and of Pacific
Capital Cash Assets
Trust, Pacific Capital
Tax-Free Cash Assets
Trust and Pacific Capital
U.S. Government
Securities Cash Assets
Trust since 1993; 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 Managing Director of
26 Circle Drive EastWind Power
Hastings-on Hudson Partners, Ltd. since
New York 10706 1994: Second Vice
Age: 63 President,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 and
Pacific Capital Cash
Assets Trust since 1984,
of Churchill Cash
Reserves Trust since
1985, of Pacific Capital
Tax-Free Cash Assets
Trust and Pacific Capital
U.S. Government
Securities Cash Assets
Trust since 1988 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 Executive Director,
888 Miliani Street Hawaii Government
Suite 601 Employees Association
Honolulu, Hawaii AFSCME Local
96813-298 152, AFL-CIO; Trustee
Age: 55 of Hawaiian Tax-Free
Trust since 1992 and of
Pacific Capital Cash
Assets Trust, Pacific
Capital Tax-Free Cash
Assets Trust and Pacific
Capital U.S. Government
Securities Cash Assets
Trust since 1993; Trustee
of Pacific Capital Funds,
which includes bond and
stock funds, since 1993;
Chairman of the Royal
State Insurance Group
since 1988; Trustee of
the Blood Bank of Hawaii
since 1975 (Chair
1982-1984); International
Vice President of the
American Federation of
State, Country and
Municipal Employees,
AFL-CIO since 1981;
Director of the
Rehabilitation Hospital
of the Pacific since
1981; Trustee of the
Public Schools of Hawaii
Foundation since 1986;
Member of the Judicial
Council of Hawaii since
1987; and 1997 chair of
the Hawaii Community
Foundation.
Douglas Philpotts* Trustee Retired; Director of P.O.
Box 3170 Financial Plaza of the
Honolulu, Hawaii 96802 Pacific Hawaiian Trust
Age: 67 Company, Limited
1986-1997; Chairman of
the Board, 1992-1994 and
President,1986-1992;
Director of Victoria
Ward, Limited; Trustee of
Pacific Capital Cash
Assets Trust, Pacific
Capital Tax-Free Cash
Assets Trust, Pacific
Capital U.S. Government
Securities Cash Assets
Trust and 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 Director of Hawaiian
P. O. Box 3466 Electric Industries,
Honolulu, Hawaii 96801 Inc., a public utility
Age:67 holding company, since
1993; Trustee of the
Bernice Pauahi Bishop
Estate 1990- 1999; 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
and of Pacific Capital
Cash Assets Trust,
Pacific Capital Tax-Free
Cash Assets Trust and
Pacific Capital U.S.
Government Securities
Cash Assets Trust since
1993; Trustee of Pacific
Capital Funds, which
includes bond and stock
funds, since 1993.
Diana P. Herrmann, President President and Chief
380 Madison Avenue Operating Officer of the
New York, New York Administrator since 1997,
10017 a Director since 1984,
Age: 41 Secretary since 1986 and
previously its Executive
Vice President, Senior
Vice President or Vice
President, 1986-1997;
President of various
Aquila Bond and
Money-Market Funds since
1998; Assistant Vice
President, Vice
President, Senior Vice
President or Executive
Vice President of Aquila
Money-Market, Bond and
Equity Funds since 1986;
Trustee of a number of
Aquila Money-Market, Bond
and Equity Funds since
1995; Trustee of Reserve
Money-Market Funds since
1999 and Reserve Private
Equity Series since 1998;
Assistant Vice President
and formerly Loan Officer
of European American
Bank, 1981-1986; daughter
of the Trust's Chairman;
Trustee of the Leopold
Schepp Foundation
(academic scholarships)
since 1995; actively
involved in mutual fund
and trade associations
and in college and other
volunteer organizations.
Charles E. Childs, III Senior Vice Senior Vice President -
380 Madison Avenue President Corporate development
New York, New York 10017 since 1998, formerly Vice
Age: 42 President - 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.
Sherri Foster Vice Senior Vice President of
100 Ridge Road President Hawaiian Tax-Free
Suite 1813-15 Trust since 1993,
Age: 49 President, Vice
President, 1988-1992 and
Assistant Vice President,
1985-1988; Assistant Vice
President of Pacific
Capital Cash Assets Trust
since 1985 and of Pacific
Capital Tax-Free Cash
Assets Trust and Pacific
Capital U.S. Government
Securities Cash Assets
Trust since 1988; Vice
President of Aquila
Cascadia Equity Fund
(this Fund) since 1998;
Registered Representative
of the Distributor since
1985; Realtor-Associate
of Tom Soeten Realty;
Sherian Bender Realty,
successor to John Wilson
Enterprises, 1983-1998;
Executive Secretary of
the Hyatt Regency, Maui,
1981-1983.
John M. Herndon Vice Assistant Secretary of
380 Madison Avenue President, the Aquila Money-Market,
New York, New York Assistant Bond and Equity Funds
10017 Secretary since 1995 and Vice
Age: 59 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.
Rose F. Marotta Chief Chief Financial Officer
380 Madison Avenue, Financial of the Aquila Money-
New York, New York Officer Market, Bond and Equity
10017 Funds since 1991 and
Age: 75 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 Treasurer of the Aquila
380 Madison Avenue, Money-Market, Bond
New York, New York 10017 and Equity Funds and
Age: 63 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 Partner of Hollyer Brady
551 Fifth Avenue, Smith Troxell Barrett
New York, New York 10176 Rockett Hines & Mone
Age: 59 LLP, attorneys, since
1989 and counsel,
1987-1989; Secretary of
the Aquila Money-Market,
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.
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, 1999, the Cash Fund, the Tax-Free
Fund and the Government Securities Fund paid, respectively,
$126,327, $60,336 and $68,428 in compensation and reimbursement
of expenses to its 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 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.
Compensation Compensation Compensation
Name from CAT from TFCAT from USGSCAT
Vernon R. $10,265 $5,285 $6,370
Alden
Arthur K. $10,391 $5,384 $5,058
Carlson
William M. $10,513 $5,263 $5,901
Cole
Thomas W. $10,412 $6,616 $5,865
Courtney
Richard W. $10,267 $5,470 $4,728
Gushman
Stanley W. $12,609 $5,196 $4,736
Hong
Theodore T. $10,716 $5,263 $5,898
Mason
Russell K. $10,472 $6,231 $4,639
Okata
Douglas $8,734 $5,451 $3,643
Philpotts
Oswald K. $10,117 $5,231 $4,829
Stender
Compensation from Number of Aquila Group
from all funds in boards on which the
Name the Aquila Group Trustee serves
Vernon R. $50,188 7
Alden
Arthur K. $54,975 7
Carlson
William M. $42,515 5
Cole
Thomas W. $47,855 5
Courtney
Richard W. $35,058 4
Gushman
Stanley W. $36,605 4
Hong
Theodore T. $47,453 8
Mason
Russell K. $34,961 4
Okata
Douglas $30,597 4
Philpotts
Oswald K. $34,500 4
Stender
Certain Trustees are also trustees of the funds in the
Pacific Capital Group of Funds for which the Adviser is also
investment adviser. During the calendar year 1998, these funds
paid the following Trustees the amounts listed: Mr. Gushman,
$18,500; Mr. Hong, $18,500; Mr. Okata, $18,500; Mr. Philpotts,
$16,000; and Mr. Stender, $16,000.
Ownership of Securities
The ownership of more than 5% of the outstanding shares of
each Fund on May 12, 1999, was as follows:
The Cash Fund: Of the Cash Fund's Original Shares, Pacific
Century Trust, Financial Plaza of the Pacific, Honolulu, Hawaii
held of record 857,650,669 shares in two accounts (66.5%) and
Mercantile Bank, N.A., P.O. Box 387, St. Louis, Missouri held of
record 126,216,519 shares (31.9%). Of the Cash Fund's Service
Shares, BHC Securities, Inc., 2005 Market Street, Philadelphia,
PA held of record 173,159,906 shares (99.1%)
The Tax-Free Fund: Of the Tax-Free Fund's Original Shares,
Pacific Century Trust, Financial Plaza of the Pacific, Honolulu,
Hawaii held of record 66,303,572 shares in two accounts (89.1%)
and Mercantile Bank, N.A., P.O. Box 387, St. Louis, Missouri held
of record 4,357,971 shares (5.8%); of the Tax-Free Fund's Service
Shares, BHC Securities, Inc., 2005 Market Street, Philadelphia,
PA held of record 46,320,326 shares (99.9%).
The Government Securities Fund: Of the Government Securities
Fund's Original Shares, Pacific Century Trust, Financial Plaza of
the Pacific, Honolulu, Hawaii held of record 128,189,124 shares
in two accounts (93.8%); Mercantile Bank, N.A., P.O. Box 387, St.
Louis, Missouri held of record 7,392,033 shares (5.5%). Of the
Government Securities Fund's Service Shares, BHC Securities,
Inc., 2005 Market Street, Philadelphia, PA held of record
211,851,630 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.
Investment Advisory and Other Services
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 Funds' 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.
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).
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.
Each 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 division of
the Bank of Hawaii, which is a state-chartered bank. The Adviser
has advised the Funds that it is not 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.
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.
Advisory and Administration Fees
During the three fiscal years ended March 31, 1999, 1998 and
1997, the Funds paid the following fees:
To the Adviser:
Cash Fund Tax-Free Government
Fund Securities Fund
1999 $2,072,443 $377,975 $1,049,559
1998 $1,791,797 $271,071 $588,596
1997 $1,424,936 $410,547 $379,291
To the Administrator:
1999 $715,281 $149,267 $266,270
1998 $669,595 $125,970 $168,490
1997 $609,175 $156,130 $124,062
Transfer Agent, Custodian and Auditors
The Funds' Shareholder Servicing Agent (transfer agent) is
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
Each Fund's Custodian is Bank One Trust Company N.A., 100
East Broad Street, Columbus, Ohio 43271; it receives, holds and
delivers the Funds' portfolio securities (including physical
securities, book-entry securities, and securities in
depositories) and money, performs related accounting functions
and issues reports to the Funds.
The Funds' auditors, KPMG LLP, 345 Park Avenue, New York,
New York 10154 perform an annual audit of the Funds' financial
statements.
Brokerage Allocation and Other Practices
During the fiscal years ended March 31, 1999, 1998 and 1997,
all of the Funds' transactions were principal transactions and no
brokerage commissions were paid. Brokerage allocation and other
practices relating to brokerage are set forth in the description
of the Advisory Agreements, above.
Limitation of Redemptions in Kind
Each 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.
Capital Stock
Description of Shares
The Business 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. 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").
Shares are fully paid and non-assessable, except as set forth
below; the holders of shares have no pre-emptive or conversion
rights.
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.
Each Fund has two classes of shares:
Original Shares: Original Shares are offered 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. Original
Shares are sold with no sales charge and there is no redemption
fee.
Service Shares: Service Shares are offered to anyone. There
are no sales charges or redemption fees. Service Shares of each
Fund are subject to a Distribution (12b-1) fee of 0.25 of 1% of
the average annual assets of the Fund represented by Service
Shares.
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.
Purchase, Redemption, and Pricing of Shares
Amortized Cost Valuation
The Funds operate under Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission which permits them to value
their portfolios 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 a Fund would
receive if it sold the instrument. During periods of declining
interest rates, the daily yield on a 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 Fund's price per share 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 net asset 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 each 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
each 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 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 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 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. 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 the account. Monthly or quarterly payments paid to
shareholders may not be considered as a yield or income on
investment.
EXCHANGE PRIVILEGES
Original Shares
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 SAI, 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 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 SAI,
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 for Original
Shares
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.
Exchange Privilege for Service Shares:
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 SAI, 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 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 Service Shares 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, the Prospectus will be appropriately
supplemented. No such modification or termination shall take
effect on less than 60 days' written notice to shareholders.
Provisions Applicable to All Exchanges of Original Shares and
Service Shares
All exercises of an exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; 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;
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.
Transfer on Death Registration
Each of the funds in the Aquilasm Group of Funds now permits
registration of its shares in beneficiary form, subject to the
funds' rules governing Transfer on Death ("TOD") registration, if
the investor resides in a state that has adopted the Uniform
Transfer on Death Security Registration Act (a "TOD State"; for
these purposes, Missouri is deemed to be a TOD State). This form
of registration allows you to provide that, on your death, your
shares are to be transferred to the one or more persons (to a
maximum of three) that you specify as beneficiaries. To register
shares of the Trust in TOD form, complete the special TOD
Registration Request Form and review the Rules Governing TOD
Registration; both are available from the Agent. The Rules, which
are subject to amendment upon 60 days' notice to TOD account
owners, contain important information regarding TOD accounts with
the Trust; by opening such an account you agree to be bound by
them, and failure to comply with them may result in your shares'
not being transferred to your designated beneficiaries. If you
open a TOD account with the Trust that is otherwise acceptable
but, for whatever reason, neither the Trust nor the Transfer
Agent receives a properly completed TOD Registration Request Form
from you prior to your death, the Trust reserves the right not to
honor your TOD designation, in which case your account will
become part of your estate.
You are eligible for TOD registration only if, and as long
as, you reside in a TOD State. If you open a TOD account and your
account address indicates that you do not reside in a TOD State,
your TOD registration will be ineffective and the Trust may, in
its discretion, either open the account as a regular (non-TOD)
account or redeem your shares. Such a redemption may result in a
loss to you and may have tax consequences. Similarly, if you open
a TOD account while residing in a TOD State and later move to a
non-TOD State, your TOD registration will no longer be effective.
In both cases, should you die while residing in a non-TOD State
the Trust reserves the right not to honor your TOD designation.
At the date of this SAI, most states are TOD States.
Distribution Plan
Each Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act; all 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 the 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 by the fund 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, 1999 no or
nominal 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 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 three fiscal years ended March 31, 1999, 1998 and
1997, the following payments were made by the Funds under Part II
of their respective Plans to Designated Payees. All such payments
were for compensation.
Cash Fund Tax-Free Fund Government
Securities Fund
1999 $338,640 $116,914 $468,352
1998 $225,212 $ 63,840 $282,730
1997 $125,694 $ 50,847 $141,496
Taxation of the Trust
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.
Underwriter
Aquila Distributors, Inc. acts as each Fund's principal
underwriter in the continuous public offering of each Fund's
shares. The Distributor is not obligated to sell a specific
number of shares. Under the Distribution Agreement, 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.
(1) (2) (3) (4) (5)
Name of Net Under- Compensation Brokerage Other
Principal writing on Redemptions Commissions Compen-
Underwriter Discounts and sation
and Repurchases
Commissions
Aquila None None None None
Distributors
Inc.
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 Trust.
Under the Distribution Agreement, 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.
The shares of the Distributor are owned 72% by Mr. Herrmann
and other members of his immediate family, 24% by Diana P.
Herrmann and the balance by an officer of the Distributor.
Performance
From time to time, each Fund may advertise its "current
yield" and its "effective yield" (also referred to as "effective
compound yield"). Both yield figures are based on historical
earnings and are not intended to indicate future performance. The
current yield of a Fund refers to the net income generated by an
investment in that Fund over a stated seven-day period. This
income is then "annualized". That is, the amount of income
generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a
percentage of the investment. Each Fund may also advertise or
quote its effective yield, which is calculated similarly, but,
when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective yield will be slightly
higher than the current yield because of the compounding effect
of this assumed reinvestment.
In addition, each Fund may also compare its performance to
other income-producing securities such as (i) money-market funds;
(ii) various bank products, including both those that are insured
(e.g., deposit obligations) and those that are not (e.g.,
investment instruments offered by affiliates of banks); and (iii)
U.S. Treasury Bills or Notes. There are differences between these
income-producing alternatives and each Fund other than their
yields, some of which are summarized below.
The yield of each Fund is not fixed and will fluctuate. In
addition, your investment is not insured and its yield is not
guaranteed. There can be no assurance that a Fund will be able to
maintain a stable net asset value of $1.00 per share. Although
the yields of bank money-market deposit accounts and NOW accounts
will fluctuate, principal will not fluctuate and is insured by
the Federal Deposit Insurance Corporation up to $100,000. Bank
passbook savings accounts normally offer a fixed rate of
interest, and their principal and interest are also guaranteed
and insured. Bank certificates of deposit offer fixed or variable
rates for a set term. Principal and fixed rates are guaranteed
and insured. There is no fluctuation in principal value.
Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. Investment instruments, such as repurchase
agreements and commercial paper, offered by affiliates of banks
are not insured by the Federal Deposit Insurance Corporation. 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.
<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.
