Registration Nos. 2-92583 and 811-4084
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[ X ]
Pre-Effective Amendment No. _______ [ ]
Post-Effective Amendment No. 16 [ X ]
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 17 [ X ]
HAWAIIAN TAX-FREE TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[_X_] on July 31, 1997 pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[___] on (date) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new effective
date for a previous post-effective amendment.
Registrant hereby declares, pursuant to Section (a)(1) of Rule
24f-2 under the Investment Company Act of 1940, that Registrant
has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to that Section and that the Rule
24f-2 Notice for Registrant's fiscal year ended March 31, 1997
was filed in May 1997.
<PAGE>
HAWAIIAN TAX-FREE TRUST
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights; General Information
4..............Introduction; Highlights; Investment of the
Trust's Assets; Investment Restrictions;
General Information
5..............Management Arrangements
5A.............**
6..............General Information; Alternative Purchase
Plans; Dividend and Tax Information
7..............Net Asset Value per Share; Alternative
Purchase Plans; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Municipal
Bonds; Investment Restrictions
14.............Trustees and Officers
15.............General Information;
Trustees and Officers
16.............Additional Information as to Management
Arrangements; General Information
17.............Additional Information as to Management
Arrangements
18.............General Information
19.............Limitations of Redemptions in Kind; Computa-
tion of Net Asset Value; Automatic With-
drawal Plan; Distribution Plan
20.............Additional Tax Information
21.............How to Invest in the Trust (Prospectus cap-
tion); General Information
22.............Performance
* Not applicable or negative answer
** Contained in the annual report of the Registrant
<PAGE>
Hawaiian Tax-Free Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-228-4227
212-697-6666
Prospectus
Class A Shares
Class C Shares July 31, 1997
The Trust is a mutual fund whose objective is to seek to
provide as high a level of current income exempt from Hawaiian
State and regular Federal income taxes as is consistent with
preservation of capital by investing primarily in obligations
which pay interest exempt from Hawaiian State and Federal income
taxes. These obligations must, at the time of purchase, either be
rated within the four highest credit ratings (considered as
investment grade) assigned by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or, if unrated, be determined to be
of comparable quality by the Trust's investment adviser, Hawaiian
Trust Company, Limited.
This Prospectus concisely states information about the
Trust that you should know before investing. A Statement of
Additional Information about the Trust dated July 31, 1997, (the
"Additional Statement") has been filed with the Securities and
Exchange Commission and is available without charge upon written
request to Administrative Data Management Corp., the Trust's
Shareholder Servicing Agent, at the address given below, or by
calling the telephone number(s) given below. The Additional
Statement contains information about the Trust and its management
not included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus. Only
when you have read both the Prospectus and the Additional
Statement are all material facts about the Trust available to
you.
SHARES OF THE TRUST ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY HAWAIIAN TRUST COMPANY, LTD. (THE
"ADVISER"), BANK OF HAWAII, ITS BANK OR NON-BANK AFFILIATES OR BY
ANY OTHER BANK. SHARES OF THE TRUST ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED
AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN THE TRUST INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact
The Trust's Shareholder Servicing Agent:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1104
Call 800-228-4228 toll free or 732-855-5731
For General Inquiries & Yield Information,
Call 800-228-4227 toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
[LOGO]
HAWAIIAN TAX-FREE TRUST
[picture]
Maui Arts and Cultural Center
[picture]
Kapiolani Regional Park, Oahu
[picture]
Waimea Community Center, Big Island
[picture]
Keahole Airport, Big Island
[picture]
Saint Francis Medical Center, Oahu
[picture]
Civil Defense Radio Communication Equipment, Kauai
[picture]
Lahaina Aquatic Center, Maui
[picture]
Honolulu Harbor, Oahu
[picture]
Blaisdell Center Renovations, Honolulu, Oahu
[picture]
Honolulu International And InterIsland Airports, Oahu
[picture]
State of Hawaii Convention Center, Oahu
The Trust invests in tax-free municipal securities, primarily
the kinds of obligations issued by various communities and
political subdivisions within Hawaii. Most of these securities
are used to finance long-term municipal projects; examples are
pictured above. (See "Investment of the Trust's Assets.") The
municipal obligations which financed these particular projects,
as well as other projects not pictured, were included in the
Trust's portfolio as of July 1, 1997, and together represented
48.6% of the Trust's portfolio. Since the portfolio is subject to
change, the Trust may not necessarily own these specific
securities at the time of the delivery of this Prospectus.
<PAGE>
HIGHLIGHTS
Hawaiian Tax-Free Trust, founded by Aquila Management
Corporation in 1984 and one of the Aquilasm Group of Funds, is an
open-end mutual fund which invests primarily in tax-free
municipal bonds, the kind of obligations issued by the State of
Hawaii, its counties and various other local authorities to
finance such long-term projects as schools, roads, hospitals,
housing and harbor facilities throughout Hawaii. (See
"Introduction.")
Tax-Free Income - The municipal obligations in which the
Trust invests pay interest which is exempt from both regular
Federal and State of Hawaii income taxes. Dividends paid by the
Trust from this income are likewise free of both such taxes. It
is, however, possible that in certain circumstances, a small
portion of the dividends paid by the Trust will be subject to
income taxes. The Federal alternative minimum tax may apply to
some investors, but its impact will be limited, since not more
than 20% of the Trust's net assets can be invested in obligations
paying interest which is subject to this tax. The receipt of
exempt-interest dividends from the Trust may result in some
portion of social security payments or railroad retirement
benefits being included in taxable income. Capital gains
distributions, if any, are taxable. (See "Dividend and Tax
Information.")
Investment Grade - The Trust will acquire only those
municipal obligations which, at the time of purchase, are within
the four highest credit ratings assigned by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, or are determined
by the Adviser to be of comparable quality. In general , there
are nine separate credit ratings, ranging from the highest to the
lowest credit ratings for municipal obligations. Obligations
within the top four ratings are considered "investment grade,"
but those in the fourth rating may have speculative
characteristics as well. (See "Investment of the Trust's
Assets.")
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Trust," which includes applicable sales charge
information.)
Additional Investments - You may make additional investments
at any time and in any amount, directly, or if in an amount of
$50 or more, through the convenience of having your investment
electronically transferred from your financial institution
account into the Trust by Automatic Investment or Telephone
Investment. (See "How to Invest in the Trust.")
Alternative Purchase Plans - The Trust provides two
alternative ways for individuals to invest. (See "Alternative
Purchase Plans.") One way permits individual investors to pay
distribution and certain service charges principally at the time
they purchase shares; the other way permits investors to pay such
costs over a period of time, but without paying anything at time
of purchase, much as goods can be purchased on an installment
plan. For this purpose the Trust offers the following classes of
shares, which differ in their expense levels and sales charges:
* Front-Payment Class Shares ("Class A Shares") are
offered to anyone at net asset value plus a sales charge, paid at
the time of purchase, at the maximum rate of 4.0% of the public
offering price, with lower rates for larger purchases. (See "How
to Purchase Class A Shares.") Class A Shares are subject to an
asset retention service fee under the Trust's Distribution Plan
at the rate of 0.20 of 1% of the average annual net assets
represented by the Class A Shares. (See "Distribution Plan.")
* Level-Payment Class Shares ("Class C Shares") are
offered to anyone at net asset value with no sales charge payable
at the time of purchase but with a level charge for service and
distribution fees for six years after the date of purchase at the
aggregate annual rate of 1% of the average annual net assets of
the Class C Shares. (See "Distribution Plan" and "Shareholder
Services Plan for Class C Shares.") Six years after the date of
purchase, Class C Shares are automatically converted to Class A
Shares. If you redeem Class C Shares before you have held them
for 12 months from the date of purchase you will pay a contingent
deferred sales charge ("CDSC"); this charge is 1%, calculated on
the net asset value of the Class C Shares at the time of purchase
or at redemption, whichever is less. There is no CDSC after Class
C Shares have been held beyond the applicable period. (See
"Alternative Purchase Plans," "Computation of the Holding Periods
for Class C Shares" and "How to Purchase Class C Shares.")
The Trust also issues Institutional Class Shares ("Class Y
Shares") that are sold only to certain institutional investors.
Class Y Shares are not offered by this Prospectus.
Class A Shares and Class C Shares are only offered for
sale in certain states. (See "How to Invest in the Trust.") If
shares of the Trust are sold outside those states the Trust can
redeem them. If your state of residence is not Hawaii, the
dividends from the Trust may be subject to income taxes of the
state in which you reside. Accordingly, you should consult your
tax adviser before acquiring shares of the Trust.
Monthly Income - Dividends are declared daily and paid
monthly. At your choice, dividends are paid by check mailed to
you, directly deposited into your financial institution account
or automatically reinvested without sales charge in additional
shares of the Trust at the then-current net asset value. Specific
classes of shares will have different dividend amounts due to
their particular expense levels. (See "Dividend and Tax
Information.")
Many Different Issues - You have the advantages of a
portfolio which consists of over 260 separate issues with
different maturities. (See "Investment of the Trust's Assets.")
Local Portfolio Management - Hawaiian Trust Company,
Limited serves as the Trust's Investment Adviser, providing
experienced local professional management. It is a subsidiary of
Bank of Hawaii, was founded in 1898, and is the oldest and
largest trust company in Hawaii, administering approximately $12
billion in client assets, including investment authority over $1
billion in Hawaiian municipal bonds. The Trust pays monthly fees
to its Adviser and to its Administrator at an aggregate rate of
0.40% of average annual net assets. On September 30, 1997 the
Adviser will become Pacific Century Trust, a division of Bank of
Hawaii. (See "Table of Expenses" and "Management
Arrangements.")
Redemptions - Liquidity - You may redeem any amount of
your account on any business day at the next determined net asset
value by telephone, FAX or mail request, with proceeds being sent
to a predesignated financial institution, if you have elected
Expedited Redemption. Proceeds will be wired or transferred
through the facilities of the Automated Clearing House, wherever
possible, upon request, if in an amount of $1,000 or more, or
will be mailed. For these and other redemption procedures see
"How to Redeem Your Investment." There are no penalties or
redemption fees for redemption of Class A Shares. However, there
is a contingent deferred sales charge with respect to certain
Class A Shares which have been purchased in amounts of $1 million
or more (see "Purchase of $1 Million or More"). If you redeem
Class C Shares before you have held them for 12 months from the
date of purchase you will pay a contingent deferred sales charge
("CDSC") at the rate of 1%. (See "Alternative Purchase Plans" -
"Class C Shares.")
Certain Stabilizing Measures - The Trust will employ such
traditional measures as varying maturities, upgrading credit
standards for portfolio purchases, broadening diversification and
increasing its position in cash, in an attempt to protect against
declines in the value of its investments and other market risks.
(See "Certain Stabilizing Measures.")
Other Investments - The Trust may purchase certain taxable
short-term investments. Although it has no present intention of
doing so, the Trust may also, to a limited degree, buy and sell
futures contracts and options on futures contracts. (See
"Investment of the Trust's Assets.")
Exchanges - You may exchange Class A or Class C Shares of
the Trust into corresponding classes of shares of other
Aquila-sponsored tax-free municipal bond mutual funds or two
Aquila-sponsored equity funds. You may also exchange them into
shares of the Aquila-sponsored money market funds. The exchange
prices will be the respective net asset values of the shares.
(See "Exchange Privilege.")
Risks and Special Considerations - The share price,
determined on each business day, varies with the market prices of
the Trust's portfolio securities, which fluctuate with market
conditions, including prevailing interest rates. Accordingly, the
proceeds of redemptions may be more or less than your original
cost. (See "Factors Which May Affect the Value of the Trust's
Investments and Their Yields.") The Trust's assets, being
primarily or entirely Hawaiian issues, are subject to economic
and other conditions affecting Hawaii. (See "Risk Factors and
Special Considerations Regarding Investment in Hawaiian
Obligations.") Moreover, the Trust is classified as a
"non-diversified" investment company, because it may choose to
invest in the obligations of a relatively limited number of
issuers. (See "Investment of the Trust's Assets.") The Trust may
also, to a limited degree, buy and sell futures contracts and
options on futures contracts, although since inception the Trust
has not done so and has no present intention to do so. There may
be risks associated with these practices. (See "Certain
Stabilizing Measures.")
Statements and Reports - You will receive statements of your
account monthly as well as each time you add to your account or
take money out. Additionally, you will receive a Semi-Annual
Report and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
TABLE OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES Class A Class C
Shares Shares
<S> <C> <C>
Maximum Sales Load Imposed on Purchases 4.00% None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None None
Deferred Sales Charge None(1) 1.00%(2)
Redemption Fees None None
Exchange Fee None None
ANNUAL TRUST OPERATING EXPENSES(3)
(as a percentage of average net assets)
Investment Advisory Fee 0.14% 0.14%
12b-1 Fee 0.20% 0.75%
All Other Expenses(4) 0.41% 0.64%
Administration Fee 0.26% 0.26%
Service Fee None 0.25%
Other Expenses(4) 0.15% 0.13%
Total Trust Operating Expenses(4) 0.75% 1.53%
Example(5)
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each time period:
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A Shares $47 $63 $80 $129
Class C Shares
With complete
redemption at
end of period $26 $48 $83 $142(6)
With no redemption $16 $48 $83 $142(6)
<FN>
(1) Certain shares purchased in transactions of $1 million or more without a
sales charge may be subject to a contingent deferred sales charge of up to 1%
upon redemption during the first four years after purchase. See "Purchase of
$1 Million or More."
</FN>
<FN>
(2) A contingent deferred sales charge of 1% is imposed on the redemption
proceeds of the shares (or on the original price, whichever is lower) if
redeemed during the first 12 months after purchase.
</FN>
<FN>
(3) Estimated based upon amounts incurred by the Trust during its most
recent fiscal year.
</FN>
<FN>
(4) Does not reflect a 0.02% expense offset in custodian fees received for
uninvested cash balances. Reflecting this offset, other expenses, all other
expenses, and total Trust operating expenses for Class A Shares would have
been 0.13%, 0.39% and 0.73%, respectively; for Class C Shares, these
expenses would have been 0.11%, 0.62% and 1.51%, respectively.
</FN>
<FN>
(5) The expense example is based upon the above shareholder transaction
expenses (in the case of Class A Shares, this includes a sales charge of
$40 for a $1,000 investment) and annual Trust operating expenses. It is
also based upon amounts at the beginning of each year which includes the
prior year's assumed results. A year's results consist of an assumed 5%
annual return less total operating expenses; the expense ratio was applied
to an assumed average balance (the year's starting investment plus one-half
the year's results). Each figure represents the cumulative expenses so
determined for the period specified.
</FN>
<FN>
(6) Six years after the date of purchase, Class C Shares are automatically
converted to Class A Shares.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL MUTUAL FUNDS USE THE 5%
ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING THE ABOVE EXAMPLE. THE EXAMPLE
ALSO REFLECTS THE MAXIMUM SALES CHARGE. (SEE "HOW TO INVEST IN THE TRUST").
The purpose of the above table is to assist the investor in understanding the
various costs that an investor in the Trust will bear directly or indirectly.
The assumed 5% annual return should not be interpreted as a prediction of an
actual return, which may be higher or lower.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights as it relates to the five
years ended March 31, 1997 has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon is included in the Trust's
financial statements contained in its Annual Report, which are incorporated by
reference into the Additional Statement. The information provided in the table
should be read in conjunction with the financial statements and related notes.
On October 24, 1989, Aquila Management Corporation, originally the Trusts
Sub-Adviser and Administrator, became Administrator only.
Class A(1) Class C(2)
Year ended March 31,
1997 1996 1995 1994 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Year.............. $11.31 $11.13 $11.19 $11.60 11.31
Income from
Investment Operations:
Net investment
income............... 0.59 0.61 0.62 0.63 0.46
Net gain (loss) on
securities (both
realized and
unrealized).......... (0.08) 0.18 (0.01) (0.38) (0.08)
Total from Investment
Operations........... 0.51 0.79 0.61 0.25 0.38
Less Distributions:
Dividends from net
investment income.... (0.58) (0.61) (0.62) (0.63) (0.45)
Distributions from
capital gains......... (0.01) - (0.05) (0.03) (0.01)
Total Distributions... (0.59) (0.61) (0.67) (0.66) (0.46)
Net Asset Value,
End of Year........... $11.23 $11.31 $11.13 $11.19 $11.23
Total Return (not
reflecting sales
charge) (%)........... 4.67 7.16 5.75 2.01 3.41
Ratios/Supplemental
Data
Net Assets,
End of Year (in
thousands) ($)....... 640,989 659,925 642,556 640,465 5,367
Ratio of Expenses
to Average Net
Assets (5)........... 0.73 0.72 0.75 0.74 1.51
Ratio of Net
Investment
Income to Average
Net Assets (5)....... 5.12 5.32 5.65 5.46 4.06
Portfolio Turnover
Rate (%).............. 9 28 33 16 9
Net investment income per share and the ratios of income and expenses to
average net assets without the expense offset in custodian fees for uninvested
cash balances would have been:
Net Investment
Income.............. 0.59 0.61 0.62 0.63 0.46
Ratio of Expenses
to Average Net
Assets (%).......... 0.75 0.73 0.77 0.76 1.53
Ratio of Net
Investment Income
to Average Net
Assets (%)........... 5.11 5.31 5.63 5.44 4.04
<CAPTION>
1993 1992 1991 1990 1989 1988
<C> <C> <C> <C> <C> <C>
$11.10 $10.85 $10.78 $10.60 $10.60 $11.14
0.68 0.71 0.72 0.74 0.75 0.75
0.50 0.25 0.07 0.18 - (0.54)
1.18 0.96 0.79 0.92 0.75 0.21
(0.68) (0.71) (0.72) (0.74) (0.75) (0.75)
- - - - -
0.68 (0.71) (0.72) (0.74) (0.75) (0.75)
$11.60 $11.10 $10.85 $10.78 $10.60 $10.60
10.98 9.15 7.62 8.88 7.23 2.18
$597,828 $475,469 $397,258 $336,503 $254,098 $224,321
0.71 0.70 0.71 0.73 0.78 0.77
5.92 6.44 6.68 6.80 7.02 7.06
11 16 27 7 19 34
0.68 0.71 0.72 0.74 0.75 0.75
0.73 0.72 0.73 0.80 0.80 0.78
5.90 6.42 6.67 6.75 7.00 7.04
<FN>
(1) Designated as Class A Shares on April 1, 1996.
</FN>
<FN>
(2) New Class of Shares established on April 1, 1996.
</FN>
</TABLE>
<PAGE>
INTRODUCTION
The Trust's shares are designed to be a suitable investment
for individuals, corporations, institutions and fiduciaries who
seek income exempt from regular Federal and Hawaiian State income
taxes.
You may invest in shares of the Trust as an alternative to
direct investments in Hawaiian Obligations, as defined below,
which may include obligations of certain non-Hawaiian issuers.
The Trust offers you the opportunity to keep assets fully
invested in a vehicle that provides a professionally managed
portfolio of Hawaiian Obligations which may, but not necessarily
will, be more diversified, higher yielding or more stable and
more liquid than you might be able to obtain on an individual
basis by direct purchase of Hawaiian Obligations. In some cases,
the portfolio may also contain taxable investments. Through the
convenience of a single security consisting of shares of the
Trust, you are also relieved of the inconvenience associated with
direct investments of fixed denominations, including the
selecting, purchasing, handling, monitoring call provisions and
safekeeping of Hawaiian Obligations.
Hawaiian Obligations are a type of municipal obligation.
Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities to obtain
funds for various public purposes. The two principal
classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less
while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government
guarantee; tax anticipation notes; revenue anticipation notes;
bond anticipation notes; construction loan notes; and floating
and variable rate demand notes. Municipal obligations include
municipal lease/purchase agreements which are similar to
installment purchase contracts for property or equipment. The
purposes for which municipal obligations are issued include the
construction of a wide range of public facilities such as
highways, bridges, schools, hospitals, housing, mass
transportation, streets and water and sewer works. Other public
purposes for which municipal obligations may be issued include
the refunding of outstanding obligations, the obtaining of funds
for general operating expenses and the obtaining of funds to lend
to other public institutions and facilities.
INVESTMENT OF THE TRUST'S ASSETS
In seeking its objective of providing as high a level of
current income which is exempt from both Hawaiian State and
regular Federal income taxes as is consistent with the
preservation of capital, the Trust will invest primarily in
Hawaiian Obligations (as defined below). There is no assurance
that the Trust will achieve its objective, which is a fundamental
policy of the Trust. (See "Investment Restrictions.") The Trust
may also invest in Taxable Short-Term Obligations (as defined
below). Although it has no present intention of doing so, it may
purchase and sell futures contracts on municipal bond indices and
on U.S. Government securities and may write and purchase put and
call options on these contracts (see below).
As used in the Prospectus and the Additional Statement, the
term "Hawaiian Obligations" means obligations, including those of
certain non-Hawaiian issuers, of any maturity which pay interest
which, in the opinion of bond counsel or other appropriate
counsel, is exempt from Hawaiian State and regular Federal income
taxes. Although exempt from regular Federal income tax, interest
paid on certain types of Hawaiian Obligations, and dividends
which the Trust might pay from this interest, are preference
items as to the Federal alternative minimum tax; for further
information, see "Dividend and Tax Information." As a fundamental
policy, at least 80% of the Trust's net assets will be invested
in Hawaiian Obligations the income paid upon which will not be
subject to the alternative minimum tax; accordingly, the Trust
can invest up to 20% of its net assets in obligations which are
subject to the Federal alternative minimum tax. The Trust may
refrain entirely from purchasing these types of Hawaiian
Obligations. (See "Dividend and Tax Information.")
The non-Hawaiian bonds or other obligations the interest on
which is exempt under present law from Hawaiian State and regular
Federal income taxes are those issued by or under the authority
of Guam, Northern Mariana Islands, Puerto Rico and the Virgin
Islands. As a Hawaii-oriented trust, at least 65% of the Trust's
total assets will be invested in Hawaiian Obligations of Hawaiian
issuers.
In general, there are nine separate credit ratings, ranging
from the highest to the lowest quality standards for municipal
obligations. So that the Trust will have a portfolio of
quality-oriented (investment grade) securities, the Hawaiian
Obligations which the Trust will purchase must, at the time of
purchase, either (i) be rated within the four highest credit
ratings assigned by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Corporation ("S&P"); or (ii) if unrated, be
determined to be of comparable quality to municipal obligations
so rated, by Hawaiian Trust Company, Limited (the "Adviser"), the
Trust's investment adviser, subject to the direction and control
of the Trust's Board of Trustees. Municipal obligations rated in
the fourth highest credit rating are considered by such rating
agencies to be of medium quality and thus may present investment
risks not present in more highly rated obligations. Such bonds
lack outstanding investment characteristics and may in fact have
speculative characteristics as well; changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is
the case for higher grade bonds. If after purchase the rating of
any rated Hawaiian Obligation is downgraded such that it could
not then be purchased by the Trust, or, in the case of an unrated
Hawaiian Obligation, if the Adviser determines that the unrated
obligation is no longer of comparable quality to those rated
obligations which the Trust may purchase, it is the current
policy of the Trust to cause any such obligation to be sold as
promptly thereafter as the Adviser in its discretion determines
to be consistent with the Trust's objectives; such obligation
remains in the Trust's portfolio until it is sold. In addition,
because a downgrade often results in a reduction in the market
price of a downgraded obligation, sale of such an obligation may
result in a loss. See Appendix A to the Additional Statement for
further information as to these ratings. The Trust can purchase
industrial development bonds without limit but only if they meet
the definition of Hawaiian Obligations, i.e., the interest on
them is exempt from Hawaiian State and regular Federal income
taxes. The Trust may invest without limit in Hawaiian Obligations
which are repayable from economically related projects or
facilities. Such investments could involve an increased risk to
the Trust should any of such issuers or related projects or
facilities experience financial difficulties.
The "Taxable Short-Term Obligations" which the Trust may
purchase are obligations maturing in one year or less from the
date of purchase by the Trust which are either (i) obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Obligations"); see the
Additional Statement for further information; (ii) commercial
paper rated Prime-1 by Moody's or A-1 by S&P (see Appendix A to
the Additional Statement); or (iii) bank obligations, such as
certificates of deposit, bankers acceptances and fixed time
deposits, issued by a domestic bank subject to regulation by the
U.S. Government having total assets of at least $1.5 billion.
Under normal market conditions the Trust cannot purchase Taxable
Short-Term Obligations or purchase or sell Municipal Bond Index
Futures, U.S. Government Securities Futures or options on Futures
if thereafter more than 20% of its total assets would consist of
such Obligations, cash, margin deposits on such Futures and
margin deposits and premiums on options on such Futures, except
for defensive purposes, i.e., in anticipation of a decline or
possible decline in the value of Hawaiian Obligations. The Trust
may also invest in Taxable Short-Term Obligations (within such
20% limit) pending investment in Hawaiian Obligations of the
proceeds of the sale of shares or the sale of Hawaiian
Obligations. The Trust may enter into repurchase agreements as to
Taxable Short-Term Obligations; see "Repurchase Agreements"
below. Income from "Taxable Short-Term Obligations" and
repurchase agreements is taxable and therefore is not included in
the "exempt-interest" dividends which the Trust will pay; see
"Dividend and Tax Information."
The Trust is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940
Act"). The Trust also intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code
(the "Code"). One of the tests for such qualification under the
Code is, in general, that at the end of each fiscal quarter of
the Trust, at least 50% of its assets must consist of (i) cash
and (ii) securities which, as to any one issuer, do not exceed 5%
of the value of the Trust's assets. If the Trust had elected to
register under the 1940 Act as a "diversified" investment
company, it would have to meet the same test as to 75% of its
assets. The Trust may therefore not have as much diversification
among securities, and thus diversification of risk, as if it had
made this election under the 1940 Act. In general, the more the
Trust invests in the securities of specific issuers, the more the
Trust is exposed to risks associated with investments in those
issuers. The Trust's assets, being primarily or entirely Hawaiian
issues, are accordingly subject to economic and other conditions
affecting Hawaii. (See "Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations.")
Certain Stabilizing Measures
The Trust will employ such traditional measures as varying
maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash
and cash equivalents in attempting to protect against declines in
the value of its investments and other market risks. There can,
however, be no assurance that these will be successful.
Although the Trust has no current intention of using futures
and options, to the limited degree described below, the Trust may
purchase and sell futures contracts on municipal bond indices
("Municipal Bond Index Futures") and on United States government
securities ("U.S. Government Securities Futures"); both kinds of
futures contracts are "Futures." The Trust may also write and
purchase put and call options on Futures.
Although it does not currently do so, and since inception
has not done so, the Trust may buy and sell futures and options
to attempt to hedge against changes in the market price of the
Trust's Hawaiian Obligations caused by interest rate
fluctuations. Futures and options also may provide a hedge
against increases in the cost of securities the Trust intends to
purchase. Under normal market conditions, the Trust cannot
purchase or sell Municipal Bond Index Futures, U.S. Government
Securities Futures, or options on Futures if thereafter more than
20% of its total assets would consist of cash, margin deposits on
such Futures and margin deposits and premiums on such options,
except for temporary defensive purposes, i.e., in anticipation of
a decline or possible decline in the value of Hawaiian
Obligations.(See the Additional Statement.)
The primary risks associated with the use of Futures and
options are: (i) imperfect correlation between the change in the
market value of the securities held in the Trust's portfolio and
the prices of Futures or options purchased or sold by the Trust;
(ii) incorrect forecasts by the Adviser concerning interest rates
which may result in the hedge being ineffective; and (iii)
possible lack of a liquid secondary market for a Future or
option; the resulting inability to close a Futures or options
position could adversely affect the Trust's hedging ability.
For a hedge to be completely effective, the price change of
the hedging instrument should equal the price change of the
security being hedged. The risk of imperfect correlation of these
price changes is increased as the composition of the Trust's
portfolio is divergent from the debt securities underlying the
hedging instrument. To date the Adviser has had no experience in
the use of Futures or options on them.
The liquidity of a secondary market in a Future may be
adversely affected by "daily price fluctuation limits"
established by commodity exchanges which restrict the amount of
change in the contract price allowed during a single trading day.
Thus, once a daily limit is reached, no further trades may be
entered into beyond the limit, thereby preventing the liquidation
of open positions. Prices have in the past reached the daily
limit on a number of consecutive trading days. For further
information about Futures and options, see the Additional
Statement.
When and if the Trust determines to use Futures and options,
the Prospectus will be supplemented.
Floating and Variable Rate Demand Notes
Floating and variable rate demand notes are tax-exempt
obligations which may have a stated maturity in excess of one
year, but permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding one year, in each
case upon not more than 30-days' notice. The issuer of such notes
normally has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal amount of the
note plus accrued interest upon a specified number of days'
notice to the noteholders. The interest rate on a floating rate
demand note is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand note is
adjusted automatically at specified intervals.
Participation Interests
The Trust may purchase from financial institutions
participation interests in Hawaiian Obligations (such as
industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Trust an
undivided interest in the underlying Hawaiian Obligations in the
proportion that the Trust's participation interest bears to the
total amount of the underlying Hawaiian Obligations. All such
participation interests must meet the Trust's credit
requirements. (See "Limitation to 10% as to Certain
Investments.")
When-Issued and Delayed Delivery Purchases
The Trust may buy Hawaiian Obligations on a when-issued or
delayed delivery basis when it has the intention of acquiring
them. The Hawaiian Obligations so purchased are subject to market
fluctuation and no interest accrues to the Trust until delivery
and payment take place; their value at the delivery date may be
less than the purchase price. The Trust cannot enter into
when-issued commitments exceeding in the aggregate 15% of the
market value of the Trust's total assets, less liabilities other
than the obligations created by when-issued commitments. If the
Trust chooses to dispose of the right to acquire a when-issued
obligation prior to its acquisition, it could, as with the
disposition of any other portfolio holding, incur a gain or loss
due to market fluctuation; any such gain would be a taxable
short-term gain. The Trust places an amount of assets equal in
value to the amount due on the settlement date for the
when-issued or delayed delivery securities being purchased in a
segregated account with the Custodian, which is marked to market
every business day. See the Additional Statement for further
information.
Repurchase Agreements
The Trust may purchase securities (limited to Taxable
Short-Term Obligations) subject to repurchase agreements.
Repurchase agreements may be entered into only with commercial
banks or broker-dealers. A repurchase agreement occurs when, at
the time the Trust purchases a security, the Trust also resells
it to the vendor and must deliver the security (or securities
substituted for it) to the vendor on an agreed-upon date in the
future. (The securities so resold or substituted are referred to
herein as the "Resold Securities.") The Resold Securities will be
held by the Trust's custodian bank. The resale price is in excess
of the purchase price in that it reflects an agreed-upon market
interest rate effective for the period of time during which the
Trust's money is invested in the Resold Securities. The majority
of these transactions run from day to day, and the delivery
pursuant to the resale typically will occur within one to five
days of the purchase. The Trust's risk is limited to the ability
of the vendor to pay the agreed-upon sum upon the delivery date;
in the event of bankruptcy or other default by the vendor, there
may be possible delays and expenses in liquidating the Resold
Securities, decline in their value and loss of interest. However,
in the opinion of the Trust this risk is not material since, upon
default, the Resold Securities constitute security for the
repurchase obligation. Repurchase agreements can be considered as
"loans" collateralized by the Resold Securities (such agreements
being defined as "loans" in the 1940 Act). The return on such
"collateral" may be more or less than that from the repurchase
agreement. The Resold Securities under any repurchase agreement
will be marked to market every business day so that the value of
the "collateral" is at least equal to the value of the loan,
including the accrued interest earned thereon, plus sufficient
additional market value as is considered necessary to provide a
margin of safety. Additionally, the Adviser will regularly review
the financial strength of all vendors of repurchase agreements to
the Trust.
Limitation to 10% as to Certain Investments
Due to their possible limited liquidity, the Trust cannot
make certain investments if thereafter more than 10% of its net
assets would consist of such investments. The investments
included in this 10% limit are (i) repurchase agreements maturing
in more than seven days; (ii) fixed time deposits subject to
withdrawal penalties other than overnight deposits; (iii)
restricted securities, i.e., securities which cannot freely be
sold for legal reasons (which the Trust does not expect to own);
and (iv) securities for which market quotations are not readily
available. However, this 10% limit does not include any
investments as to which the Trust can exercise the right to
demand payment in full within three days and as to which there is
a secondary market. Floating and variable rate demand notes and
participation interests (including municipal lease/ purchase
obligations) are considered illiquid unless determined by the
Board of Trustees to be readily marketable.
Factors Which May Affect the Value
of the Trust's Investments and Their Yields
The value of the Hawaiian Obligations and Taxable
Short-Term Obligations (collectively, "Obligations") in which the
Trust invests will fluctuate depending in large part on changes
in prevailing interest rates, and may be subject to other market
factors as well. If the prevailing interest rates go up after the
Trust buys Obligations, the value of the Obligations will
normally go down; if these rates go down, the value of the
Obligations will normally go up. Changes in value and yield based
on changes in prevailing interest rates may have different
effects on short-term Obligations than on long-term Obligations.
Long-term Obligations (which often have higher yields) may
fluctuate in value more than short-term ones.
Portfolio Insurance
The purpose of having insurance on some investments in
Hawaiian Obligations in the Trust's portfolio is to reduce
financial risk for investors in the Trust.
Insurance as to the timely payment of principal and interest
when due for Hawaiian Obligations is acquired as follows:
(i) obtained by the issuer of the Hawaiian Obligations at
the time of original issue of the obligations, known as "New
Issue Insurance," or
(ii) purchased by the Trust or a previous owner with respect
to specific Hawaiian Obligations, termed "Secondary Market
Insurance."
The insurance of principal under these types of insurance
policies refers to the payment of the face or par value of the
Hawaiian Obligation when due. Insurance is not affected by nor
does it insure the price paid by the Trust for the obligation.
The market value of obligations in the Trust will, from time to
time, be affected by various factors, including the general
movement of interest rates. The value of the Trust's shares is
not insured.
In order to attempt to reduce financial risk to the Trust's
investors, it is the Trust's current policy, which may be
changed, that the majority of the Trust's assets will be invested
in insured Hawaiian Obligations. However, if the Board of
Trustees determines that there is an inadequate supply in the
marketplace of Hawaiian Obligations covered by New Issue
Insurance and that appropriate Secondary Market Insurance cannot
be obtained for other Hawaiian Obligations on terms that are
financially advantageous to the Trust as a result of market
conditions or other factors, then the Trust will invest in
Hawaiian Obligations that are not insured. Use of insurance is
not a fundamental policy of the Trust.
New Issue Insurance is obtained by the issuer of the
Hawaiian Obligations and all premiums respecting such securities
are paid in advance by such issuer. Such policies are
noncancelable and continue in force so long as the Hawaiian
Obligations are outstanding and the insurer remains in business.
The Trust may also purchase Secondary Market Insurance on
any Hawaiian Obligation purchased by the Trust. By purchasing
Secondary Market Insurance, the Trust will obtain, upon payment
of a single premium, insurance against nonpayment of scheduled
principal and interest for the remaining term of the Hawaiian
Obligation, regardless of whether the Trust then owned such
security. Such insurance coverage is noncancelable and continues
in force so long as the security so insured is outstanding and
the insurer remains in business. The purposes of acquiring
Secondary Market Insurance are to insure timely payment of
principal and interest when due, and to enable the Trust to sell
a Hawaiian Obligation to a third party as a high rated insured
Hawaiian Obligation at a market price greater than what otherwise
might be obtainable if the security were sold without the
insurance coverage. There is no assurance that such insurance can
be obtained at rates that would make its purchase advantageous to
the Trust.
New Issue Insurance and Secondary Market Insurance will be
obtained from some or all of the following: Municipal Bond
Investors Assurance Corporation ("MBIA"), Financial Guaranty
Insurance Company ("FGIC") and AMBAC Indemnity Corporation
("AMBAC Indemnity"). See the Additional Statement for information
about these companies. The Trust may also purchase insurance
from, or Hawaiian Obligations insured by, other insurers.
Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations
The following is a discussion of the general factors that
might influence the ability of Hawaiian issuers to repay
principal and interest when due on the Hawaiian Obligations
contained in the portfolio of the Trust. Such information is
derived from sources that are generally available to investors
and is believed by the Trust to be accurate, but has not been
independently verified and may not be complete.
As of the date of this Prospectus, economic data
available indicate that the real Gross State Product growth for
1996 was 1.0%, slightly lower than the 1.3% that was projected in
1995. Although total employment continues to contract, it is
anticipated that most downsizing has been completed, and that
there will be minor job growth of 0.0-0.5% in 1997. Although some
local companies have left the State, other substantial
organizations have indicated interest in new Hawaiian operations.
The State of Hawaii Convention Center is nearing completion with
a projected opening date in mid-1998.
Local economic sources expect that the deflationary
trend, apparent in 1995, has continued through 1996. Retailers
have kept retail prices down and the Honolulu Consumer Price
Index is projected to remain at the current 2.2% annual rate.
Rents have dropped as more rental inventory builds up and
property valuations remain soft, both in the residential and
commercial sectors. State tax credits for hotel renovations will
provide incentives to modernize and improve competitiveness while
providing a stimulus to the construction industry.
In 1996, tourism, the State's principal industry,
increased by 3.6% over 1995 to 6.8 million visitors for the year.
Eastbound visitors accounted for the majority of the increase,
attributable in part to the introduction of direct flights to
Kona from Japan. Trends indicate that tourism as the State's
major export industry, will continue to improve in 1997.
Uncertainties regarding sovereignty and privatization of
government contracts will be outstanding issues that will have
significant impact over the long term for the State. Limited
revenue growth and the need to reduce expenditures will continue
to be of paramount concern for the State government. The Hawaii
legislature recently approved a $1 billion capital improvement
program to stimulate the economy through construction spending.
The attendant accelerated issuance of debt to fund the program at
a time when revenue growth has remained stagnant prompted
Standard & Poor's to downgrade the State's General Obligation
debt from AA to A+. Moody's rates the State's debt as AA3, which
is at the lowest end of the AA range.
INVESTMENT RESTRICTIONS
The Trust has a number of policies about what it can and
cannot do. Certain of these policies, identified in the
Prospectus and Additional Statement as "fundamental policies,"
cannot be changed unless the holders of a "majority," as defined
in the 1940 Act, of the Trust's outstanding shares vote to change
them. (See the Additional Statement for a definition of such a
majority.) All other policies can be changed from time to time by
the Board of Trustees without shareholder approval. Some of the
more important of the Trust's fundamental policies, not otherwise
identified in the Prospectus, are set forth below; others are
listed in the Additional Statement.
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than those listed
under "Investment of the Trust's Assets"; the Trust may also
purchase and sell Futures and options on them within the limits
there discussed.
2. The Trust has industry investment requirements.
The Trust cannot buy the Obligations 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; Hawaiian
Obligations (except for the industrial development bonds
discussed below), U.S. Government Securities and domestic bank
Obligations are not included in this limit. In applying this
restriction, the Trust will consider that a non-governmental user
of facilities financed by industrial development bonds is an
issuer in an industry.
3. The Trust can make loans only by lending securities or
entering into repurchase agreements.
The Trust can buy those Obligations which it is permitted to
buy (see "Investment of the Trust's Assets"); this is investing,
not making a loan. The Trust can, to increase its income, lend
its portfolio securities up to 10% of the value of its total
assets on a collateralized basis to broker-dealers, banks and
certain financial institutions, (see the Additional Statement)
and enter into repurchase agreements (see "Repurchase Agreements"
above). The Trust 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 Trust 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. Income from securities loans is taxable and therefore it is
not included in the "exempt-interest" dividends which the Trust
may pay.
4. The Trust can only borrow in limited amounts for special
purposes.
The Trust can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets and 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. However, this shall not prohibit margin
arrangements in connection with the purchase or sale of Municipal
Bond Index Futures, U.S. Government Securities Futures or options
on them, or the payment of premiums on those options. Interest on
borrowings would reduce the Trust's income. The Trust will not
purchase any Obligations while it has any outstanding borrowings
which exceed 5% of the value of its total assets. Except in
connection with borrowings, the Trust will not issue senior
securities.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Trust's
three classes and offering price per share of each class is
determined as of 4:00 p.m., New York time, on each day that the
New York Stock Exchange is open (a "business day"), by dividing
the value of the Trust's net assets (i.e., the value of the
assets less liabilities) allocable to each class by the total
number of shares of such class then outstanding. Determination of
the value of the Trust's assets is subject to the direction and
control of the Trust's Board of Trustees. In general, it is based
on market value, except that Hawaiian Obligations maturing in 60
days or less are generally valued at amortized cost; see the
Additional Statement for further information.
ALTERNATIVE PURCHASE PLANS
In this Prospectus the Trust provides you with two
alternative ways to invest in the Trust through two separate
classes of shares. All classes represent interests in the same
portfolio of Hawaiian Obligations. The primary distinction among
the classes of shares offered to individuals lies in their sales
charge structures and ongoing expenses, as described below. You
should choose the class that best suits your own circumstances
and needs.
If you choose to purchase Class A Shares you will pay the
applicable sales charge at the time of your purchase. By
purchasing Class C Shares, you will pay a sales charge over a
period of six years after purchase but without paying anything at
time of purchase, much as goods can be purchased on an
installment plan. You are subject to a contingent deferred sales
charge, described below, but only if you redeem your Class C
Shares before they have been held 12 months from your purchase.
(See "Computation of Holding Periods for Class C Shares.")
Class A Shares, "Front-Payment Class Shares," are offered
to anyone at net asset value plus a sales charge, paid at
the time of purchase, at the maximum rate of 4.0% of the
public offering price, with lower rates for larger
purchases. When you purchase Class A Shares, the amount of
your investment is reduced by the applicable sales
charge.Class A Shares are subject to an asset retention
service fee under the Trust's Distribution Plan at the rate
of 0.20 of 1% of the average annual net assets represented
by the Class A Shares. Certain Class A Shares purchased in
transactions of $1 million or more are subject to a
contingent deferred sales charge. (See "Purchase of $1
Million or More.")
Class C Shares, "Level-Payment Class Shares," are offered
to anyone at net asset value with no sales charge payable at
purchase but with a level charge for distribution fees and
service fees for six years after the date of purchase at the
aggregate annual rate of 1% of the average annual net assets
of the Class C Shares. (See "Distribution Plan" and
"Shareholder Services Plan for Class C Shares.") Six years
after the date of purchase, Class C Shares, including Class
C Shares acquired in exchange for other Class C Shares under
the Exchange Privilege (see "Exchange Privilege"), are
automatically converted to Class A Shares. If you redeem
Class C Shares before you have held them for 12 months from
the date of purchase you will pay a contingent deferred
sales charge ("CDSC") at the rate of 1%, calculated on the
net asset value of the redeemed Class C Shares at the time
of purchase or of redemption, whichever is less. The amount
of any CDSC will be paid to the Distributor. The CDSC does
not apply to shares acquired through the reinvestment of
dividends on Class C Shares or to any Class C Shares held
for more than 12 months after purchase. For purposes of
applying the CDSC and determining the time of conversion,
the 12-month and six-year holding periods are considered
modified by up to one month depending upon when during a
month your purchase of such shares is made. (See
"Computation of Holding Periods for Class C Shares" and "How
to Purchase Class C Shares.")
In determining whether a CDSC is payable on a redemption of
Class C Shares, it will be assumed that the redemption is made
first of any shares acquired as dividends or distributions,
second of any Class C Shares you have held for more than 12
months from the date of purchase and finally of those Class C
Shares as to which the CDSC is payable which you have held the
longest. This will result in your paying the lowest possible
CDSC.
Computation of Holding Periods for
Class C Shares
For purposes of determining the holding period for Class C
Shares, all of your purchases made during a calendar month will
be deemed to have been made on the first business day of that
month at the average cost of all purchases made during that
month. The 12-month CDSC holding period will end on the first
business day of the 12th calendar month after the date your
purchase is deemed to have been made. Accordingly, the CDSC
holding period applicable to your Class C Shares may be up to one
month less than the full 12 months depending upon when your
actual purchase was made during a month. Running of the 12-month
CDSC holding period will be suspended for one month for each
period of thirty days during which you have held shares of a
money market fund you have received in exchange for Class C
Shares under the Exchange Privilege. (See "Exchange Privilege.")
Your Class C Shares will automatically convert to Class A
Shares six years after the date of purchase, together with a
pro-rata portion of all Class C Shares representing dividends and
other distributions paid in additional Class C Shares. The Class
C Shares so converted will no longer be subject to the higher
expenses borne by the Class C Shares. The conversion will be
effected at relative net asset values on the first business day
of the month following that in which the sixth anniversary of
your purchase of the Class C Shares occurred, except as noted
below. Accordingly, the holding period applicable to your Class C
Shares may be up to one month more than the six years depending
upon when your actual purchase was made during a month. Because
the per share value of Class A Shares may be higher than that of
Class C Shares at the time of conversion, you may receive fewer
Class A Shares than the number of Class C Shares converted. If
you have made one or more exchanges of Class C Shares among the
Aquila-sponsored tax-free municipal bond funds or equity funds
under the Exchange Privilege, the six-year holding period is
deemed to have begun on the date you purchased your original
Class C Shares of the Trust or of another of the Aquila bond or
equity funds. The six-year holding period will be suspended by
one month for each period of thirty days during which you hold
shares of a money market fund you have received in exchange for
Class C Shares under the Exchange Privilege. (See "Exchange
Privilege.")
The following chart summarizes the principal differences
between Class A Shares and Class C Shares.
<TABLE>
<CAPTION>
Class A Class C
<S> <C> <C>
Initial Sales Maximum of 4% None
Charge of the public
offering price
Contingent None (except Maximum CDSC
Deferred for certain of 1% if shares
Sales Charge purchases over redeemed before
$1 Million) 12 months; 0%
after 12 months
Distribution and 0.05 of 1% Distribution fee
Service Fees of 0.75 of 1% and
a service fee of
0.25 of 1% for a
total of 1%,
payable for six
years
Other Information Initial sales Shares convert
charge waived to Class A Shares
or reduced in after six years
some cases
</TABLE>
Factors to Consider in Choosing Classes of Shares
This discussion relates to the major differences between
Class A Shares and Class C Shares. It is recommended that any
investment in the Trust be considered long-term in nature.
Over time, the cumulative total cost of the 1% annual
service and distribution fees on the Class C Shares will equal or
exceed the total cost of the initial 4% maximum initial sales
charge and 0.20 of 1% annual fee payable for Class A Shares. For
example, if equal amounts were paid at the same time for Class A
Shares (where the amount invested is reduced by the amount of the
sales charge) and for Class C Shares (which carry no sales charge
at the time of purchase) and the net asset value per share
remained constant over time, the total of such costs for Class C
Shares would equal the total of such costs for Class A Shares
after approximately four and two-thirds years. This example
assumes no redemptions and disregards the time value of money.
Purchasers of Class C Shares have all of their investment dollars
invested from the time of purchase, without having their
investment reduced at the outset by the initial sales charge
payable for Class A Shares. If you invest in Class A Shares you
will pay the entire sales charge at the time of purchase.
Accordingly, if you expect to redeem your shares within a
reasonably short time after purchase, you should consider the
total cost of such an investment in Class A Shares compared with
a similar investment in Class C Shares. The example under "Table
of Expenses" shows the effect of Trust expenses for both classes
if a hypothetical investment in each of the classes is held for
1, 3, 5 and 10 years. (See the Table of Expenses.)
Dividends and other distributions paid by the Trust with
respect to shares of each class are calculated in the same manner
and at the same time. The dividends actually paid with respect to
Class C Shares will be lower than those paid on Class A Shares
because Class C Shares bear higher distribution and service fees
and will have a higher expense ratio. In addition, the dividends
of each class can vary because each class will bear certain
class-specific charges. For example, each class will bear the
costs of printing and mailing annual reports to its own
shareholders.
HOW TO INVEST IN THE TRUST
The Trust's shares may be purchased through any investment
broker or dealer (a "selected dealer") which has a sales
agreement with Aquila Distributors, Inc. (the "Distributor") or
through the Distributor. There are two ways to make an initial
investment: (i) order the shares through your investment broker
or dealer, if it is a selected dealer; or (ii) mail the
Application with payment to Administrative Data Management Corp.
(the "Agent") at the address on the Application. If you purchase
Class A Shares the applicable sales charge will apply in either
instance. Subsequent investments are also subject to the
applicable sales charges. You are urged to complete an
Application and send it to the Agent so that expedited
shareholder services can be established at the time of your
investment. Unless your initial investment is specified to be
made in Class C Shares, it will be made in Class A Shares.
The minimum initial investment for Class A Shares and
Class C Shares is $1,000, except as otherwise stated in the
Prospectus or Additional Statement. You may also make an initial
investment of at least $50 by establishing an Automatic
Investment Program. To do this you must open an account for
automatic investments of at least $50 each month and make an
initial investment of at least $50. (See below and "Automatic
Investment Program" in the Application.) Such investment must be
drawn in United States dollars on a United States commercial or
savings bank, a credit union or a United States branch of a
foreign commercial bank (each of which is a "Financial
Institution"). You may make subsequent investments in the same
class of shares in any amount (unless you have an Automatic
Withdrawal Plan). Your subsequent investment may be made through
a selected dealer or by forwarding payment to the Agent, with the
name(s) of account owner(s), the account number, the name of the
Trust and the class of shares to be purchased. With subsequent
investments, please send the pre-printed stub attached to the
Trust's confirmations.
Subsequent investments of $50 or more in shares of the same
class as your initial investment can be made by electronic funds
transfer from your demand account at a Financial Institution. To
use electronic funds transfer for your purchases, your Financial
Institution must be a member of the Automated Clearing House and
the Agent must have received your completed Application
designating this feature, or, after your account has been opened,
a Ready Access Features form available from the Distributor or
the Agent. A pre-determined amount can be regularly transferred
for investment ("Automatic Investment"), or single investments
can be made upon receipt by the Agent of telephone instructions
from anyone ("Telephone Investment"). The maximum amount of each
Telephone Investment is $50,000. Upon 30 days' written notice to
shareholders, the Trust may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
The offering price is the net asset value per share for
Class C Shares and the net asset value per share plus the
applicable sales charge for Class A Shares. The offering price
determined on any day applies to all purchase orders received by
the Agent from selected dealers that day, except that orders
received by it after 4:00 p.m. New York time will receive that
day's offering price only if such orders were received by
selected dealers from customers prior to such time and
transmitted to the Distributor prior to its close of business
that day (normally 5:00 p.m. New York time); if not so
transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next
business day. In the case of Telephone Investment your order will
be filled at the next determined offering price. If your order is
placed after the time for determining the net asset value of the
Trust shares for any day it will be executed at the price
determined on the following business day. The sale of shares will
be suspended during any period when the determination of net
asset value is suspended and may be suspended by the Distributor
when the Distributor judges it in the Trust's best interest to do
so.
At the date of the Prospectus, Class A Shares and Class C
Shares of the Trust are available only in the following states:
Hawaii, Alaska, Arizona, California, Colorado, District of
Columbia, Florida, Illinois, Maryland, Massachusetts, Montana,
Nevada, New Jersey, New York, Oregon, Texas, Virginia and
Washington.
If you do not reside in one of these states you should
not purchase shares of the Trust. If Class A Shares or Class C
Shares are sold outside of these states the Trust can redeem
them. Such a redemption may result in a loss to you and may have
tax consequences. In addition, if your state of residence is not
Hawaiian, the dividends from the Trust may not be exempt from
income tax of the state in which you reside. Accordingly, you
should consult your tax adviser before acquiring shares of the
Trust.
How to Purchase Class A Shares
(Front-Payment Class Shares)
The following table shows the amount of the sales charge to
a "single purchaser" (defined below) together with the dealer
discounts paid to dealers and the agency commissions paid to
brokers (collectively called the "commissions") for purchases of
Class A Shares:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge Commissions as
Percentage as Approximate Percentage of
of Public Percentage of Public
Amount of Purchase Offering Price Amount Invested Offering Price
<S> <C> <C> <C>
Less than $25,000 4.00% 4.17% 3.50%
$25,000 but less 3.75% 3.90% 3.50%
than $50,000
$50,000 but less 3.50% 3.63% 3.25%
than $100,000
$100,000 but less 3.25% 3.36% 3.00%
than $250,000
$250,000 but less 3.00% 3.09% 2.75%
than $500,000
$500,000 but less 2.50% 2.56% 2.25%
than $1,000,000
For purchases of $1 million or more see "Purchase of $1 Million or More,"
below.
</TABLE>
The table of sales charges is applicable to purchases of
Class A Shares by a "single purchaser," i.e.: (a) an individual;
(b) an individual together with his or her spouse and their
children under the age of 21 purchasing Class A Shares for his,
her or their own accounts; (c) a trustee or other fiduciary
purchasing Class A Shares for a single trust estate or a single
fiduciary account; and (d) a tax-exempt organization enumerated
in Section 501(c)(3) or (13) of the Code.
Upon notice to all selected dealers, the Distributor may
reallow up to the full amount of the applicable sales charge as
shown in the above schedule during periods specified in such
notice. During periods when all or substantially all of the
entire sales charge is reallowed, such selected dealers may be
deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Purchase of $1 Million or More
Class A Shares issued under the following circumstances
are called "CDSC Class A Shares": (i) Class A Shares issued in a
single purchase of $1 million or more by a single purchaser; and
(ii) all Class A Shares issued in a single purchase to a single
purchaser the value of which, when added to the value of the CDSC
Class A Shares and Class A Shares on which a sales charge has
been paid, already owned at the time of such purchase, equals or
exceeds $1 million. CDSC Class A Shares also include certain
Class A Shares issued under the program captioned "Special Dealer
Arrangements," below. CDSC Class A Shares do not include (i)
Class A Shares purchased without sales charge pursuant to the
terms described under "General," below and (ii) Class A Shares
purchased in transactions of less than $1 million and when
certain special dealer arrangements are not in effect under
"Certain Investment Companies" set forth under "Reduced Sales
Charges," below.
When you purchase CDSC Class A Shares you will not pay a
sales charge at the time of purchase, and the Distributor will
pay to any dealer effecting such a purchase an amount equal to 1%
of the sales price of the shares purchased for purchases of $1
million but less than $2.5 million, 0.50 of 1% for purchases of
$2.5 million but less than $5 million, and 0.25 of 1% for
purchases of $5 million or more.
If you redeem all or part of your CDSC Class A Shares
during the four years after your purchase of such shares, at the
time of redemption you will be required to pay to the Distributor
a special contingent deferred sales charge based on the lesser of
(i) the net asset value of your redeemed CDSC Class A Shares at
the time of purchase or (ii) the net asset value of your redeemed
CDSC Class A Shares at the time of redemption (the "Redemption
Value"). The special charge will be an amount equal to 1% of the
Redemption Value if the redemption occurs within the first two
years after purchase, and 0.50 of 1% of the Redemption Value if
the redemption occurs within the third or fourth year after
purchase. The special charge will apply to redemptions of CDSC
Class A Shares purchased without a sales charge pursuant to a
Letter of Intent, as described below under "Reduced Sales Charges
for Certain Purchasers of Class A Shares." The special charge
does not apply to Class A Shares acquired through the
reinvestment of dividends on CDSC Class A Shares or to any CDSC
Class A Shares held for more than four years after purchase. In
determining whether the special charge is applicable, it will be
assumed that the CDSC Class A Shares you have held the longest
are the first CDSC Class A Shares to be redeemed, unless you
instruct the Agent otherwise. It will also be assumed that if you
have both CDSC Class A Shares and non-CDSC Class A Shares the
non-CDSC Class A Shares will be redeemed first.
For purposes of determining the holding period for CDSC
Class A Shares, all of your purchases made during a calendar
month will be deemed to have been made on the first business day
of that month at the average cost of all purchases made during
that month. The four-year holding period will end on the first
business day of the 48th calendar month after the date your
purchase is deemed to have been made. Accordingly, the CDSC
holding period applicable to your CDSC Class A Shares may be up
to one month less than the full 48 months depending upon when
your actual purchase was made during a month. Running of the
48-month CDSC holding period will be suspended for one month for
each period of thirty days during which you have held shares of a
money market fund you have received in exchange for CDSC Class A
Shares under the Exchange Privilege. (See "Exchange Privilege.")
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation: If you are a "single purchaser"
you may benefit from a reduction of the sales charge in
accordance with the above schedule for subsequent purchases of
Class A Shares if the cumulative value (at cost or current net
asset value, whichever is higher) of Class A Shares you have
previously purchased with a sales charge and still own, together
with Class A Shares of your subsequent purchase with such a
charge, amounts to $25,000 or more.
Letters of Intent: The foregoing schedule of reduced sales
charges will also be available to "single purchasers" who enter
into a written Letter of Intent (included in the Application)
providing for the purchase, within a thirteen-month period, of
Class A Shares of the Trust through a single selected dealer or
through the Distributor. Class A Shares of the Trust which you
previously purchased during a 90-day period prior to the date of
receipt by the Distributor of your Letter of Intent and which you
still own may also be included in determining the applicable
reduction. For further details, including escrow provisions, see
the Letter of Intent provisions of the Application.
General: Class A Shares may be purchased at the next
determined net asset value by the Trust's Trustees and officers,
by the directors, officers and certain employees, retired
employees and representatives of the Adviser and its parent and
affiliates, the Administrator and the Distributor, by selected
dealers and brokers and their officers and employees, by certain
persons connected with firms providing legal, advertising or
public relations assistance, by certain family members of, and
plans for the benefit of, the foregoing, and for the benefit of
trust or similar clients of banking institutions over which these
institutions have full investment authority if the Trust or the
Distributor has entered into an agreement relating to such
purchases. Except for the last category, purchasers must give
written assurance that the purchase is for investment and that
the Class A Shares will not be resold except through redemption.
There may be tax consequences of these purchases. Such purchasers
should consult their own tax counsel. Class A Shares may also be
issued at net asset value in a merger, acquisition or exchange
offer made pursuant to a plan of reorganization to which the
Trust is a party.
The Trust permits the sale of its Class A Shares at
prices that reflect the reduction or elimination of the sales
charge to investors who are members of certain qualified groups
meeting the following requirements. A qualified group (i) is a
group or association, or a category of purchasers who are
represented by a fiduciary, professional or other representative
(other than a registered broker-dealer), which (ii) satisfies
uniform criteria which enable the Distributor to realize
economies of scale in its costs of distributing Class A Shares;
(iii) gives its endorsement or authorization (if it is a group or
association) to an investment program to facilitate solicitation
of its membership by a broker or dealer; and (iv) complies with
the conditions of purchase that are set forth in any agreement
entered into between the Trust and the group, representative or
broker or dealer. At the time of purchase you must furnish the
Distributor with information sufficient to permit verification
that the purchase qualifies for a reduced sales charge, either
directly or through a broker or dealer.
Certain Investment Companies: Class A Shares of the Trust
may be purchased at net asset value without sales charge (except
as set forth below under "Special Dealer Arrangements") to the
extent that the aggregate net asset value of such Class A Shares
does not exceed the proceeds from a redemption (a "Qualified
Redemption"), made within 120 days prior to such purchase, of
shares of another investment company on which a sales charge,
including a contingent deferred sales charge, has been paid.
Additional information is available from the Distributor.
To qualify, the following special procedures must be
followed:
1. A completed Application (included in the Prospectus)
and payment for the Class A Shares to be purchased must be sent
to the Distributor, Aquila Distributors, Inc., 380 Madison
Avenue, Suite 2300, New York, NY 10017 and should not be sent to
the Shareholder Servicing Agent of the Trust, Administrative Data
Management Corp. (This instruction replaces the mailing address
contained on the Application.)
2. The Application must be accompanied by evidence
satisfactory to the Distributor that the prospective shareholder
has made a Qualified Redemption in an amount at least equal to
the net asset value of the Class A Shares to be purchased.
Satisfactory evidence includes a confirmation of the date and the
amount of the redemption from the investment company, its
transfer agent or the investor's broker or dealer, or a copy of
the investor's account statement with the investment company
reflecting the redemption transaction.
3. You must complete and return to the Distributor a
Transfer Request Form, which is available from the Distributor.
The Trust reserves the right to alter or terminate this
privilege at any time without notice. The Prospectus will be
supplemented to reflect such alteration or termination.
Special Dealer Arrangements: During certain periods
determined by the Distributor, the Distributor (not the Trust)
will pay to any dealer effecting a purchase of Class A Shares of
the Trust using the proceeds of a Qualified Redemption the lesser
of (i) 1% of such proceeds or (ii) the same amounts described
under "Purchase of $1 Million or More," above, on the same terms
and conditions. Class A Shares of the Trust issued in such a
transaction will be CDSC Class A Shares and if you thereafter
redeem all or part of such shares during the four-year period
from the date of purchase you will be subject to the special
contingent deferred sales charge described under "Purchase of $1
Million or More," above, on the same terms and conditions.
Whenever the Special Dealer Arrangements are in effect the
Prospectus will be supplemented.
How to Purchase Class C Shares
(Level-Payment Class Shares)
Level-Payment Class Shares (Class C Shares) are offered
at net asset value with no sales charge payable at purchase. A
level charge is imposed for service and distribution fees for the
first six years after the date of purchase at the aggregate
annual rate of 1% of the average annual net assets of the Trust
represented by the Class C Shares. If you redeem Class C Shares
before you have held them for 12 months from the date of purchase
you will pay a contingent deferred sales charge ("CDSC"). The
CDSC is charged at the rate of 1%, calculated on the net asset
value of the redeemed Class C Shares at the time of purchase or
at redemption, whichever is less. There is no CDSC after Class C
Shares have been held beyond the applicable period. The CDSC does
not apply to Class C Shares acquired through the reinvestment of
dividends on Class C Shares.
The Distributor will pay to any dealer effecting a purchase
of Class C Shares an amount equal to 1% of the sales price of the
Class C Shares purchased.
Additional Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of
any class of shares of the Trust. Additional compensation may
include payment or partial payment for advertising of the Trust's
shares, payment of travel expenses, including lodging, incurred
in connection with attendance at sales seminars taken by
qualifying registered representatives to locations within or
outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences. In some instances, such compensation may be made
available only to certain dealers whose representatives have sold
or are expected to sell significant amounts of such shares.
Dealers may not use sales of the Trust's shares to qualify for
the incentives to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. The cost to the
Distributor of such promotional activities and such payments to
participating dealers will not exceed the amount of the sales
charges in respect of sales of all classes of shares of the Trust
effected through such participating dealers, whether retained by
the Distributor or reallowed to participating dealers. No such
additional compensation to dealers in connection with sales of
shares of the Trust will affect the price you pay for shares or
the amount that the Trust will receive from such sales. Any of
the foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and dealers may receive different levels of
compensation for selling different classes of shares.
Systematic Payroll Investments
If your employer has established with the Trust a Systematic
Payroll Investment Plan ("Payroll Plan") you may arrange for
systematic investments into the Trust through a Payroll Plan.
Investments can be made in either Class A Shares or Class C
Shares. In order to participate in a Payroll Plan, you should
make arrangements with your own employer's payroll department,
and you must complete and sign any special application forms
which may be required by your employer. You must also complete
the Application included in the Prospectus. Once your application
is received and put into effect, under a Payroll Plan the
employer will make a deduction from payroll checks in an amount
you determine, and will remit the proceeds to the Trust. An
investment in the Trust will be made for you at the offering
price, which includes applicable sales charges determined as
described above, when the Trust receives the funds from your
employer. The Trust will send a confirmation of each transaction
to you. To change the amount of or to terminate your
participation in the Payroll Plan (which could take up to ten
days), you must notify your employer.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to
you in an account maintained for you at the Agent in full and
fractional shares of the Trust (rounded to the nearest 1/1000th
of a share).
No share certificates will be issued for Class C Shares.
Share certificates for Class A Shares will be issued only if you
so request in writing to the Agent. All share certificates
previously issued by the Trust represent Class A Shares. No
certificates will be issued for fractional Class A shares or if
you have elected Automatic Investment or Telephone Investment for
Class A Shares (see "How to Invest in the Trust" above) or
Expedited Redemption (see "How to Redeem Your Investment" below).
If certificates for Class A Shares are issued at your request,
Expedited Redemption Methods described below will not be
available. In addition, you may incur delay and expense if you
lose the certificates.
The Trust and the Distributor reserve the right to 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
The Trust has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule 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 written
plan adopted under the Rule. The Plan has three parts.
Under one part of the Plan, the Trust is authorized to
make payments with respect to Class A Shares ("Class A Permitted
Payments") to Qualified Recipients, which payments shall be made
through the Distributor or shareholder servicing agent as
disbursing agent, and may not exceed, for any fiscal year of the
Trust (as adjusted for any part or parts of a fiscal year during
which payments under the Plan are not accruable or for any fiscal
year which is not a full fiscal year) 0.20 of 1% of the average
annual net assets represented by the Class A Shares of the Trust.
Such payments shall be made only out of the Trust's assets
allocable to the Class A Shares. "Qualified Recipients" means
broker-dealers or others selected by the Distributor, including
but not limited to any principal underwriter of the Trust, with
which the Trust or the Distributor has entered into written
agreements and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Trust's Class A Shares or servicing of accounts of
shareholders owning Class A Shares. (See Additional Statement for
a description of the Distribution Plan.)
Whenever the Trust makes Class A Permitted Payments,
the aggregate annual rate of the advisory fee and administration
fee otherwise payable by the Trust will be reduced from 0.55 of
1% to 0.40 of 1% of the Trust's average annual net assets. (See
"Management Arrangements.")
Under another part of the Plan, the Trust is authorized
to make payments with respect to Class C Shares ("Class C
Permitted Payments") to Qualified Recipients. Class C Permitted
Payments shall be made through the Distributor or shareholder
servicing agent as disbursing agent, and may not exceed, for any
fiscal year of the Trust (as adjusted for any part or parts of a
fiscal year during which payments under the Plan are not
accruable or for any fiscal year which is not a full fiscal
year), 0.75 of 1% of the average annual net assets represented by
the Class C Shares of the Trust. Such payments shall be made only
out of the Trust's assets allocable to the Class C Shares.
"Qualified Recipients" means broker-dealers or others selected by
the Distributor, including but not limited to any principal
underwriter of the Trust, with which the Trust or the Distributor
has entered into written agreements and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's Class C Shares or
servicing of accounts of shareholders owning Class C Shares.
Payments with respect to Class C Shares during the first year
after purchase are paid to the Distributor and thereafter to
other Qualified Recipients.
Another part of the Plan is designed to protect against any
claim against or involving the Trust that some of the expenses
which might be considered to be sales-related which the Trust
pays or may pay come within the purview of the Rule. The Trust
believes that except for Permitted Payments it is not financing
any such activity and does not consider any payment enumerated in
this part of the Plan as so financing any such activity. However,
it might be claimed that some of the expenses the Trust pays come
within the purview of the Rule. If and to the extent that any
payment as specifically listed in the Plan (see the Additional
Statement) is considered to be primarily intended to result in or
as indirect financing of any activity which is primarily intended
to result in the sale of Trust shares, these payments are
authorized under the Plan. In addition, if the Administrator, out
of its own funds, makes payment for distribution expenses such
payments are authorized. See the Additional Statement.
During the fiscal year ended March 31, 1997, $1,304,201
was paid to Qualified Recipients under the Plan with respect to
Class A Shares, of which $76,168 was retained by the Distributor.
During the same period, $14,765 was paid with respect to Class C
Shares all of which was retained by the Distributor. Payments
with respect to Class C Shares during the first year after
purchase are paid to the Distributor and thereafter to other
Qualified Recipients.
Shareholder Services Plan for Class C Shares
Under a Shareholder Services Plan, the Trust is
authorized to make payments with respect to Class C Shares
("Service Fees") to Qualified Recipients. Service Fees shall be
paid through the Distributor or shareholder servicing agent as
disbursing agent, and may not exceed, for any fiscal year of the
Trust (as adjusted for any part or parts of a fiscal year during
which payments under the Plan are not accruable or for any fiscal
year which is not a full fiscal year), 0.25 of 1% of the average
annual net assets represented by the Class C Shares of the Trust.
Such payments shall be made only out of the Trust's assets
represented by the Class C Shares. "Qualified Recipients" means
broker-dealers or others selected by the Distributor, including
but not limited to any principal underwriter of the Trust, with
which the Distributor has entered into written agreements and
which have agreed to provide personal services to holders of
Class C Shares and/or maintenance of Class C shareholder
accounts. See the Additional Statement. Service Fees with respect
to Class C Shares will be paid to the Distributor. During the
fiscal year ended March 31, 1997, $4,922 was paid to the
Distributor.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your shares at the net
asset value next determined after acceptance of your redemption
request at the Agent (subject to any applicable contingent
deferred sales charge for redemptions of Class C Shares and CDSC
Class A Shares). For redemptions of Class C Shares and CDSC Class
A Shares, at the time of redemption a sufficient number of
additional shares will be redeemed to pay for any applicable
contingent deferred sales charge. Redemptions can be made by the
various methods described below. There is no minimum period for
any investment in the Trust, except for shares recently purchased
by check, Automatic Investment or Telephone Investment as
discussed below. Except for CDSC Class A Shares (see "Purchase of
$1 Million or More") there are no redemption fees or withdrawal
penalties for Class A Shares. Class C Shares are subject to a
contingent deferred sales charge if redeemed before they have
been held 12 months from the date of purchase. (See "Alternative
Purchase Plans.") A redemption may result in a transaction
taxable to you. If you own both Class A Shares and Class C Shares
and do not specify which you wish to redeem, it will be assumed
that you wish to redeem Class A Shares.
For your convenience the Trust offers expedited redemption
for all classes of shares to provide you with a high level of
liquidity for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares of any
class not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have predesignated
or
b) by check in the amount of $50,000 or less, mailed to you,
if your shares are registered in your name at the Trust and
the check is sent to your address of record, provided that
there has not been a change of your address of record during
the 30 days preceding your redemption request. You can make
only one request for telephone redemption by check in any
7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-228-4228 toll free or 732-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
2. By FAX or Mail. You may also request redemption
payments to a predesignated Financial Institution account by a
letter of instruction sent to: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, by FAX at 732-855-5730 or
by mail at 581 Main Street, Woodbridge, NJ 07095-1198, indicating
account name(s), account number, amount to be redeemed, and any
payment directions, signed by the registered holder(s). Signature
guarantees are not required. See "Redemption Payments" below for
payment methods.
If you wish to have redemption proceeds sent to a
Financial Institution Account, you should so elect on the
Expedited Redemption section of the Application or the Ready
Access Features form and provide the required information
concerning your Financial Institution account number. The
Financial Institution account must be in the exclusive name(s) of
the shareholder(s) as registered with the Trust. You may change
the designated Financial Institution account at any time by
completing and returning a Ready Access Features form. For
protection of your assets, this form requires signature
guarantees and possible additional documentation.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Class A
Shares to be redeemed should be sent in blank (unsigned) to the
Trust's Shareholder Servicing Agent: Administrative Data
Management Corp., Attn: Aquilasm Group of Funds, 581 Main Street,
Woodbridge, NJ 07095-1198, with payment instructions. A stock
assignment form signed by the registered shareholder(s) exactly
as the account is registered must also be sent to the Shareholder
Servicing Agent.
For your own protection, it is essential that
certificates be mailed seperately from signed redemption
documentation. Because of possible mail problems, it is also
recommended that certificates be sent by registered mail, return
receipt requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required
if sufficient documentation is not on file with the Agent.
Additional documentation may be required where shares are held by
certain types of shareholders such as corporations, partnerships,
trustees or executors, or if redemption is requested by other
than the shareholder of record. If redemption proceeds of $50,000
or less are payable to the record holder and are to be sent to
the record address, no signature guarantee is required, except as
noted above. In all other cases, signatures must be guaranteed by
a member of a national securities exchange, a U.S. bank or trust
company, a state-chartered savings bank, a federally chartered
savings and loan association, a foreign bank having a U.S.
correspondent bank, a participant in the Securities Transfer
Association Medallion Program (STAMP), the Stock Exchanges
Medallion Program (SEMP) or the New York Stock Exchange, Inc.
Medallion Signature Program (MSP). A notary public is not an
acceptable signature guarantor.
2. Non-Certificate Shares. If you own non-certificate shares
registered on the books of the Trust, and you have not elected
Expedited Redemption to a predesignated Financial Institution
account, you must use the Regular Redemption Method. Under this
redemption method you should send a letter of instruction to:
Administrative Data Management Corp., Attn: Aquilasm Group of
Funds, 581 Main Street, Woodbridge, NJ 07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will be
mailed to your address as registered with the Trust);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above.
Redemption Payments
Redemption payments will ordinarily be mailed to you at your
address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will,
wherever possible, be wired or transferred through the facilities
of the Automated Clearing House to the Financial Institution
account specified in the Expedited Redemption section of your
Application or Ready Access Features form. The Trust may impose a
charge, not exceeding $5.00 per wire redemption, after written
notice to shareholders who have elected this redemption
procedure. The Trust has no present intention of making this
charge. Upon 30 days' written notice to shareholders, the Trust
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 presently 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,
it may charge you a fee for this service.
The Trust will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven
days after acceptance of such a redemption request. However, the
right of redemption may be suspended or the date of payment
postponed (i) during periods when the New York Stock Exchange is
closed for other than weekends and holidays or when trading on
such Exchange is restricted as determined by the Securities and
Exchange Commission by rule or regulation; (ii) during periods in
which an emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption of 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 Financial Institution 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 Trust, that the purchase check or Automatic
Investment or Telephone Investment will be honored. Possible
delays in payment of redemption proceeds can be eliminated by
using wire payments or Federal Reserve drafts to pay for
purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Trust to
make payment wholly or partly in cash, the Trust may pay the
redemption price in whole or in part by the distribution in kind
of securities from the portfolio of the Trust, in lieu of cash,
in conformity with applicable rules of the Securities and
Exchange Commission. See the Additional Statement for details.
The Trust has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 as a result of shareholder redemptions
or failure to meet the minimum investment level under an
Automatic Purchase Program. If the Board elects to do this,
shareholders who are affected will receive prior written notice
and will be permitted 60 days to bring their accounts up to the
minimum before this redemption is processed.
Reinvestment Privilege
You may reinvest without payment of any additional sales
charge all or part of any redemption proceeds within 120 days of
a redemption of shares in shares of the Trust of the same class
as the shares redeemed at the net asset value next determined
after the Agent receives your reinvestment order. In the case of
Class C Shares or CDSC Class A Shares on which a contingent
deferred sales charge was deducted at the time of redemption, the
Distributor will refund to you the amount of such sales charge,
which will be added to the amount of the reinvestment. The Class
C Shares or CDSC Class A Shares issued on reinvestment will be
deemed to have been outstanding from the date of your original
purchase of the redeemed shares, less the period from redemption
to reinvestment. The reinvestment privilege for any class may be
exercised only once a year, unless otherwise approved by the
Distributor. If you have realized a gain on the redemption of
your shares, the redemption transaction is taxable, and
reinvestment will not alter any capital gains tax payable. If
there has been a loss on the redemption, some or all of the loss
may be tax deductible, depending on the amount reinvested and the
length of time between the redemption and the reinvestment. You
should consult your own tax advisor on this matter.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase Class A Shares of the Trust having a net asset value of
at least $5,000. The Automatic Withdrawal Plan is not available
for Class C Shares.
Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions
must be reinvested in your shareholder account. Redemption of
Class A Shares to make payments under the Automatic Withdrawal
Plan will give rise to a gain or loss for tax purposes. See the
Automatic Withdrawal Plan provisions of the Application included
in the Prospectus, the Additional Statement under "Automatic
Withdrawal Plan," and "Dividend and Tax Information" below.
Purchases of additional Class A Shares concurrently with
withdrawals are undesirable because of sales charges when
purchases are made. Accordingly, you may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases. While an occasional lump sum investment may be made,
such investment should normally be an amount at least equal to
three times the annual withdrawal or $5,000, whichever is less.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Trust are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Trust's Trustees and officers and provides
further information about them.
The Advisory Agreement
Hawaiian Trust Company, Limited (the "Adviser") supervises
the investment program of the Trust and the composition of its
portfolio.
The services of the Adviser are rendered under an Investment
Advisory Agreement (the "Advisory Agreement") which provides,
subject to the control of the Board of Trustees, for investment
supervision and for either keeping the accounting records of the
Trust, including the computation of the net asset value per share
and the dividends, or, at the Adviser's expense and
responsibility, delegating these accounting duties in whole or in
part to a company satisfactory to the Trust. The Advisory
Agreement states that the Adviser shall, at its expense, provide
to the Trust all office space and facilities, equipment and
clerical personnel necessary for the carrying out of the
Adviser's duties under the Advisory Agreement.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Trust and of
those Trustees, if any, who are affiliated with the Adviser,
provided that if a Trustee is an affiliate of the Adviser solely
by reason of being a member of its Board of Directors, the Trust
may pay compensation to such Trustee, but at a rate no greater
than the rate it pays to its other Trustees. Under the Advisory
Agreement, the Trust 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 the Advisory Agreement, all
costs and expenses not expressly assumed by the Adviser or by the
Administrator under the Administration Agreement or by the
Trust's Distributor (principal underwriter) are paid by the
Trust. The Advisory Agreement lists examples of such expenses
borne by the Trust, 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 Trust and its shares under Federal and State securities laws,
interest, taxes and brokerage commissions, and non-recurring
expenses, including litigation.
Under the Advisory Agreement, the Trust pays a fee payable
monthly and computed on the net asset value of the Trust as of
the close of business each business day at the annual rate of
0.19 of 1% of such net asset value, provided, however, that for
any day that the Trust pays or accrues a fee under the
Distribution Plan of the Trust based upon the assets of the
Trust, the annual investment advisory fee shall be payable at the
annual rate of 0.14 of 1% of such net asset value. Such fees
under the Plan commenced July 1, 1992 and since that date the
Trust's investment advisory fee has been payable at the annual
rate of 0.14 of 1% of such net asset value.
The Adviser agrees that the above fee shall be reduced, but
not below zero, by an amount equal to its pro-rata portion (based
upon the aggregate fees of the Adviser and the Administrator) of
the amount, if any, by which the total expenses of the Trust in
any fiscal year, exclusive of taxes, interest and brokerage fees,
shall exceed the lesser of (i) 2.5% of the first $30 million of
average annual net assets of the Trust plus 2% of the next $70
million of such assets and 1.5% of its average annual net assets
in excess of $100 million, or (ii) 25% of the Trust's total
annual investment income.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Trust; see the
Additional Statement. Under these provisions the Adviser, in
making such allocation, is authorized to consider sales of the
Trust's shares and sales of shares of certain other investment
companies (see "Exchange Privilege" below).
The Administration Agreement
Under an Administration Agreement (the "Administration
Agreement"), 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 Trust and pays all compensation of the
Trust's Trustees, officers and employees who are affiliated
persons of the Administrator.
Under the Administration Agreement, subject to the
control of the Trust's Board of Trustees, the Administrator
provides all administrative services to the Trust 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 Trust, and
overseeing all relationships between the Trust and its transfer
agent, custodian, legal counsel, auditors and principal
underwriter, including the negotiation of agreements in relation
thereto, the supervision and coordination of the performance of
such agreements, and the overseeing of all administrative matters
which are necessary or desirable for effective operation of the
Trust and for the sale, servicing, or redemption of the Trust's
shares. See the Additional Statement for a further description of
functions listed in the Administration Agreement as part of such
duties.
Under the Administration Agreement, the Trust pays the
Administrator, and the Administrator accepts as full compensation
for all services rendered thereunder, a fee payable monthly and
computed on the net asset value of the Trust at the end of each
business day at the annual rate of 0.36 of 1% of such net asset
value, provided, however, that for any day that the Trust pays or
accrues a fee under the Distribution Plan of the Trust based upon
the assets of the Trust, the annual administration fee will be
payable at the annual rate of 0.26 of 1% of such net asset value.
Such fees under the Distribution Plan commenced July 1, 1992 and
since that date the Trust's administration fee is payable at the
rate of 0.26 of 1% of such net asset value. The Administrator
agrees that the above fee shall be reduced, but not below zero,
by an amount equal to its pro-rata portion (based upon the
aggregate fees of the Adviser and the Administrator) of the
amount, if any, by which the total expenses of the Trust in any
fiscal year, exclusive of taxes, interest and brokerage fees,
exceed the lesser of (i) 2.5% of the first $30 million of average
annual net assets of the Trust plus 2% of the next $70 million of
such assets and 1.5% of its average annual net assets in excess
of $100 million, or (ii) 25% of the Trust's total annual
investment income.
Information about the Adviser,
the Administrator and the Distributor
The Adviser, a Hawaii corporation organized in 1898, is
the largest trust company in the State of Hawaii in terms of
assets under administration. As of March 31, 1997 the Adviser had
over $12 billion of clients' assets under administration. The
Adviser is not authorized to, and does not carry on, a banking
business. The Adviser is a wholly-owned subsidiary of Bank of
Hawaii, all of whose shares are owned by 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. See the Additional Statement as
to the legality, under the Federal banking laws, of the Adviser's
acting as the Trust's investment adviser. On September 30, 1997
the Adviser will become Pacific Century Trust, a division of Bank
of Hawaii.
Ms. Lorene Okimoto has been the Trust's portfolio manager
since December, 1991. She has been employed by the Adviser as a
portfolio manager since 1989, and has been a Vice President of
the Adviser since 1993. She was employed by the Bank of Hawaii
from 1979 to 1984 and by Bank of Hawaii International Corporation
from 1984 to 1988. Ms. Okimoto holds a B.A. degree from the
University of Hawaii.
The Trust's Administrator is founder and administrator to
the Aquilasm Group of Funds, which consists of tax-free municipal
bond funds, money market funds and two equity funds. As of June
30, 1997, these funds had aggregate assets of approximately $2.6
billion, of which approximately $1.9 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). See the Additional Statement for information on Mr.
Herrmann.
For the Trust's fiscal year ended March 31, 1997 fees of
$915,693 and $1,700,577, respectively, were paid and/or accrued
to the Adviser and to the Administrator under the Advisory
Agreement and the Administration Agreement.
The Distributor currently handles the distribution of shares
of fourteen funds (seven tax-free municipal bond funds, five
money market 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.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which
are currently owned 75% by Mr. Herrmann, and 25% by Diana P.
Herrmann will be owned by certain directors and/or officers of
the Administrator and/or the Distributor, including Mr.
Herrmann.
The Adviser, the Administrator and the Distributor have
entered into non-binding principles of cooperation, with the
approval of the Board of Trustees, relating to various matters
including suggestion of nominees to the Board of Trustees. In
addition, the Trust has entered into separate agreements with the
Adviser, the Administrator and the Distributor under which the
service providers have respectively agreed not to serve in the
same capacities for any mutual fund with the same objectives as
the Trust under the circumstances described in these agreements.
See the Additional Statement.
DIVIDEND AND TAX INFORMATION
Dividends and Distributions
The Trust will declare all of its net income, as defined
below, as dividends on every day, including weekends and
holidays, on those shares outstanding for which payment was
received by the close of business on the preceding business day.
Net income for dividend purposes includes all interest income
accrued by the Trust since the previous dividend declaration,
including accretion of any original issue discount, less expenses
paid or accrued. As such net income will vary, the Trust's
dividends will also vary. The per share dividends of Class C
Shares will be lower than the per share dividends on the Class A
Shares as a result of the higher service and distribution fees
applicable to those shares. In addition, the dividends of each
class can vary because each class will bear certain
class-specific charges. Dividends and other distributions paid by
the Trust with respect to each class of its shares are calculated
at the same time and in the same manner.
It is the Trust's present policy to pay dividends so that
they will be received or credited by approximately the first day
of each month. On the Application or by completing a Ready Access
Features form, you may elect to have 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.
Redeemed shares continue to earn dividends through and
including the earlier of (i) the day before the day on which the
redemption proceeds are mailed, wired or transferred by the
facilities of the Automated Clearing House by the Agent or paid
by the Agent to a selected dealer; or (ii) the third day on which
the New York Stock Exchange is open after the day on which the
net asset value of the redeemed shares has been determined (See
"How To Redeem Your Investment.")
Net investment income includes amounts of income from the
Hawaiian Obligations in the Trust's portfolio which are allocated
as "exempt-interest dividends." "Exempt-interest dividends" are
exempt from regular Federal income tax. The allocation of
"exempt-interest dividends" will be made by the use of one
designated percentage applied uniformly to all income dividends
declared during the Trust's tax year. Such designation will
normally be made in the first month after the end of each of the
Trust's fiscal years as to income dividends paid in the prior
year. It is possible that in certain circumstances, a small
portion of the dividends paid by the Trust will be subject to
income taxes. During the Trust's fiscal year ended March 31,
1997, 97.89% of the Trust's dividends were "exempt-interest
dividends." For the calendar year 1996, 99.04 of the total
dividends paid were taxable. The percentage of income designated
as tax-exempt for any particular dividend may be different from
the percentage of the Trust's income that was tax-exempt during
the period covered by the dividend.
Distributions ("short-term gains distributions") from net
realized short-term gains, if any, and distributions ("long-term
gains distributions"), if any, from the excess of net long-term
capital gains over net short-term capital losses realized through
October 31st of each year and not previously paid out will be
paid out after that date; the Trust may also pay supplemental
distributions after the end of its fiscal year. If net capital
losses are realized in any year, they are charged against capital
and not against net investment income which is distributed
regardless of gains or losses. The Trust may be required to
impose backup withholding at a rate of 31% upon payment of
redemptions to shareholders, and from short- and long-term gains
distributions (if any) and any other distributions that do not
qualify as "exempt-interest dividends," if shareholders do not
comply with provisions of the law relating to the furnishing of
taxpayer identification numbers and reporting of dividends.
Unless you request otherwise by letter addressed to the
Agent or by filing an appropriate Application prior to a given
ex-dividend date, dividends and distributions will be
automatically reinvested in full and fractional shares of the
Trust at net asset value on the record date for the dividend or
distribution or other date fixed by the Board of Trustees. An
election to receive cash will continue in effect until written
notification of a change is received by the Agent. All
shareholders, whether their dividends are received in cash or are
being reinvested, will receive a monthly account summary
indicating the current status of their investment. There is no
fixed dividend rate. Corporate shareholders of the Trust are not
entitled to any deduction for dividends received from the Trust.
Tax Information
The following is a brief description of certain federal and
State of Hawaii income tax considerations with respect to the
Trust and investment therein. There can be no assurance that such
considerations will not be altered by future changes in the law
or administrative interpretations. In addition you may be subject
to local taxes or to tax in a state other than Hawaii. These
taxes are not described herein and may differ from the taxes
imposed under federal and Hawaii law.
The Trust qualified during its last fiscal year as a
"regulated investment company" under the Code, and intends to
continue to so qualify. If it does so qualify, it will not be
liable for Federal income taxes on amounts paid by it as
dividends and distributions. However, the Code contains a number
of complex tests relating to such qualification and it is
possible although not likely that the Trust might not meet one or
more of these tests in any particular year. If it does not so
qualify, it would be treated for tax purposes as an ordinary
corporation, would receive no tax deduction for payments made to
shareholders and would be unable to pay dividends or
distributions which would qualify as "exempt-interest dividends"
or "capital gains dividends," as discussed below.
The Trust intends to qualify during each fiscal year
under the Code to pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends which are derived from
net income earned by the Trust on Hawaiian Obligations will be
excludable from gross income of the shareholders for regular
Federal income tax purposes. Capital gains dividends are not
included in exempt-interest dividends. Although "exempt-interest
dividends" are not taxed, each taxpayer must report the total
amount of tax-exempt interest (including exempt-interest
dividends from the Trust) received or acquired during the
year.
The Omnibus Budget Reconciliation Act of 1993 requires that
either gains realized by the Trust on the sale of municipal
obligations acquired after April 30, 1993 at a price which is
less than face or redemption value be included as ordinary income
to the extent such gains do not exceed such discount or that the
discount be amortized and included ratably in taxable income.
There is an exception to the foregoing treatment if the amount of
the discount is less than 0.25% of face or redemption value
multiplied by the number of years from acquisition to maturity.
The Trust will report such ordinary income in the years of sale
or redemption rather than amortize the discount and report it
ratably. To the extent the resultant ordinary taxable income is
distributed to shareholders, it will be taxable to them as
ordinary income.
Capital gains dividends (net long-term gains over net
short-term losses which the Trust distributes and so designates)
are reportable by shareholders as long-term capital gains. This
is the case whether the shareholder takes the distribution in
cash or elects to have the distribution reinvested in Trust
shares and regardless of the length of time the shareholder has
held his or her shares. Capital gains are taxed at the same rates
as ordinary income, except that for individuals, trusts and
estates the maximum tax rate on capital gains distributions is
28% even if the applicable rate on ordinary income for such
taxpayers is higher than 28%.
Short-term gains, when distributed, are taxed to
shareholders as ordinary income. Capital losses of the Trust are
not distributed but carried forward by the Trust to offset gains
in later years and thereby lessen the later-year capital gains
dividends and amounts taxed to shareholders.
The Trust's gains or losses on sales of Obligations will be
long-term or short-term depending upon the length of time the
Trust has held such Obligations. Capital gains and losses of the
Trust will also include gains and losses on Futures and Options,
if any, including gains and losses actually realized on sales and
exchanges and gains and losses deemed to be realized. Those
deemed to be realized are on Futures and Options held by the
Trust at year-end, which are "marked to the market," that is,
deemed sold for fair market value. Net gains or losses realized
and deemed realized on Futures and Options will be reportable by
the Trust as long-term to the extent of 60% of the gains or
losses and short-term to the extent of 40% regardless of the
actual holding period of such investments.
Information as to the tax status of the Trust's dividends
and distributions will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders
to enable them to purchase or carry shares of the Trust 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 Trust
may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the
purchase of shares. The receipt of exempt-interest dividends from
the Trust by an individual shareholder may result in some portion
of any social security payments or railroad retirement benefits
received by the shareholder or the shareholder's spouse being
included in taxable income.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds
or private activity bonds should consult their own tax advisers
before purchasing shares.
While interest from all Hawaiian Obligations is tax-exempt
for purposes of computing the shareholder's regular tax, interest
from so-called private activity bonds issued after August 7,
1986, constitutes a tax preference for both individuals and
corporations and thus will enter into a computation of the
alternative minimum tax. Whether or not that computation will
result in a tax will depend on the entire content of the
taxpayer's return. The Trust will not invest in the types of
Hawaiian Obligations which would give rise to interest that would
be subject to alternative minimum taxation if more than 20% of
its net assets would be so invested, and may refrain from
investing in that type of bond completely. The 20% limit is a
fundamental policy of the Trust.
Corporate shareholders must add to or subtract from
alternative minimum taxable income, as calculated before taking
into consideration this adjustment, 75% of the difference between
what is called adjusted current earnings (essentially current
earnings and profits) and alternative minimum taxable income, as
previously calculated. Since tax-exempt bond interest is included
in earnings and profits and therefore in adjusted current
earnings, this adjustment will tend to make it more likely that
corporate shareholders will be subject to the alternative minimum
tax.
As of the date of the Prospectus, Congress is considering a
number of changes affecting taxation. It is not possible to
predict which, if any, of such changes will become law.
Tax Effects of Redemptions
Normally, when you redeem shares of the Trust you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid
for the shares. If you are required to pay a contingent deferred
sales charge at the time of redemption, the amount of that charge
will reduce the amount of your gain or increase the amount of
your loss as the case may be. Your gain or loss will be long-term
if you held the redeemed shares for over a year, and short-term,
if for a year or less. However, if shares held for six months or
less are redeemed and you have a loss, two special rules apply:
the loss is reduced by the amount of exempt-interest dividends,
if any, which you received on the redeemed shares, and any loss
over and above the amount of such exempt-interest dividends is
treated as a long-term loss to the extent you have received
capital gains dividends on the redeemed shares.
Tax Effect of Conversion
Class C Shares will automatically convert to Class A Shares
approximately six years after purchase. No gain or loss will be
recognized by the Trust or its shareholders upon such
conversions; each shareholder's adjusted tax basis in the Class A
Shares received upon conversion will equal the shareholder's
adjusted tax basis in the Class C Shares held immediately before
the conversion; and each shareholder's holding period for the
Class A Shares received upon conversion will include the period
for which the shareholder held as capital assets the converted
Class C Shares immediately before conversion.
Hawaiian Tax Information
The Trust, and dividends and distributions made by the Trust
to Hawaii residents, will generally be treated for Hawaii income
tax purposes in the same manner as they are treated under the
Code for Federal income tax purposes. Under Hawaiian law,
however, interest derived from obligations of states (and their
political subdivisions) other than Hawaii will not be exempt from
Hawaiian income taxation. (Interest derived from bonds or
obligations issued by or under the authority of the following is
exempt from Hawaiian income taxation: Guam, Northern Mariana
Islands, Puerto Rico, and the Virgin Islands.)
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 services loan
companies, financial corporations, and small business investment
companies.
Persons or entities who are not Hawaii residents should not
be subject to Hawaiian income taxation on dividends and
distributions made by the Trust but may be subject to other state
and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Trust and certain tax-free municipal bond funds and two
equity funds (the "Bond or Equity Funds") and certain money
market funds (the "Money-Market Funds"), all of which are
sponsored by Aquila Management Corporation and Aquila
Distributors, Inc., and have the same Administrator and
Distributor as the Trust. All exchanges are subject to certain
conditions described below. As of the date of the Prospectus, the
Aquila-sponsored Bond or Equity Funds are this Trust, Aquila
Rocky Mountain Equity Fund, Aquila Cascadia Equity Fund, Tax-Free
Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For
Utah and Narragansett Insured Tax-Free Income Fund. The Aquila
Money-Market Funds are Capital Cash Management Trust, Pacific
Capital Cash Assets Trust (Original Shares), Pacific Capital
Tax-Free Cash Assets Trust (Original Shares), Pacific Capital
U.S. Treasuries Cash Assets Trust (Original Shares) and Churchill
Cash Reserves Trust.
Class A Shares of the Trust can be exchanged only into Class
A Shares of any Bond or Equity Fund or into shares of the
Money-Market Funds. Class C Shares can be exchanged only into
Class C Shares of any Bond or Equity Fund or into shares of the
Money-Market Funds.
Class A Shares Exchange Privilege
Under the Class A Shares exchange privilege, once any
applicable sales charge has been paid on Class A Shares of any
Bond or Equity Fund, those shares (and any Class A Shares
acquired as a result of reinvestment of dividends and/or
distributions) may be exchanged any number of times between
Money-Market Funds and Bond or Equity Funds without the payment
of any additional sales charge.
CDSC Class A Shares of the Trust (see "Purchase of $1
Million or More" and "Special Dealer Arrangements") can be
exchanged for CDSC Class A Shares of a Bond or Equity Fund or
into a Money-Market Fund. The CDSC Class A Shares will not be
subject to a contingent deferred sales charge at the time of
exchange, but the contingent deferred sales charge will be
payable upon a redemption which occurs before the expiration of
the applicable holding period of any CDSC Class A Shares or any
shares of a Money-Market Fund received on exchange for CDSC Class
A Shares. (The contingent deferred sales charge does not apply to
any shares acquired as a result of reinvestment of dividends
and/or distributions.) For purposes of computing the time period
for the applicable contingent deferred sales charge, the length
of time of ownership of CDSC Class A Shares will be determined by
the time of original purchase and not by the time of the
exchange. Any period of 30 days or more during which any
Money-Market shares received on an exchange of CDSC Class A
Shares are held is not counted in computing the period of
ownership of CDSC Class A Shares. (See "Alternative Purchase
Plans.")
Class C Shares Exchange Privilege
Under the Class C Shares exchange privilege, Class C
Shares (and any Class C Shares acquired as a result of
reinvestment of dividends and/or distributions) may be exchanged
any number of times between Money-Market Funds and for Class C
Shares of Bond or Equity Funds. Class C Shares will not be
subject to a contingent deferred sales charge at the time of
exchange, but the contingent deferred sales charge will be
payable upon redemption which occurs before the expiration of the
applicable holding period of any Class C Shares or any shares of
a Money-Market Fund received on exchange for Class C Shares. (The
contingent deferred sales charge does not apply to any shares
acquired as a result of reinvestment of dividends and/or
distributions.) For purposes of computing the time period for the
applicable contingent deferred sales charge or for the conversion
of Class C Shares into Class A Shares, the length of time of
ownership of Class C Shares will be determined by time of
original purchase and not by the time of the exchange. Any period
of 30 days or more during which any Money-Market shares received
on an exchange of Class C Shares are held is not counted in
computing the period of ownership of Class C Shares. (See
"Alternative Purchase Plans.")
Eligible Shares
The "Class A Eligible Shares" of any Bond or Equity Fund
are those Class A Shares which were (a) acquired by direct
purchase with payment of any applicable sales charge, or which
were received in exchange for shares of another Bond or Equity
Fund on which any applicable sales charge was paid; (b) acquired
by exchange for shares of a Money-Market Fund with payment of the
applicable sales charge; (c) acquired in one or more exchanges
between shares of a Money-Market Fund and a Bond or Equity Fund
so long as the shares of the Bond or Equity Fund were originally
purchased as set forth in (a) or (b); (d) acquired on conversion
of Class C Shares or (e) acquired as a result of reinvestment of
dividends and/or distributions on otherwise Class A Eligible
Shares.
The "CDSC Class A Eligible Shares" of any Bond or Equity
Fund are those CDSC Class A Shares which were (a) acquired by
direct purchase in the amount of $1 million or more without a
sales charge or in certain purchases when Special Dealer
Arrangements are in effect or which were received in exchange for
CDSC Class A Shares of another Bond or Equity Fund acquired under
the same conditions; (b) acquired by exchange for shares of a
Money-Market Fund under the same conditions; (c) acquired in one
or more exchanges between shares of a Money-Market Fund and a
Bond or Equity Fund so long as the shares of the Bond or Equity
Fund were originally purchased as set forth in (a) or (b); or (d)
acquired as a result of reinvestment of dividends and/or
distributions on otherwise CDSC Class A Eligible Shares.
The "Class C Eligible Shares" of any Bond or Equity Fund
are those Class C Shares which were (a) acquired by direct
purchase including by exchange from a Money-Market Fund, or which
were received in exchange for shares of Class C Shares of another
Bond or Equity Fund; or (b) acquired as a result of reinvestment
of dividends and/or distributions on otherwise Class C Eligible
Shares.
If you own Class A or Class C Eligible Shares of any Bond or
Equity Fund, you may exchange them for shares of any Money Market
Fund or the Class A or Class C Shares, respectively, of any other
Bond or Equity Fund without payment of any sales charge or CDSC.
The shares received will continue to be Class A or Class C
Eligible shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class A Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class A Shares of any Bond or
Equity Fund without payment of any sales charge.
If you own shares of a Money-Market Fund which you have
acquired by exchange for CDSC Class A Eligible Shares of any Bond
or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for CDSC Class A Shares of any
Bond or Equity Fund but you will be required to pay the
applicable contingent deferred sales charge, if any, if you
redeem such shares before you have held CDSC Class A Shares for
four years. You will also be required to pay the applicable
contingent deferred sales charge, if any, if you redeem such
shares of a Money-Market Fund before you have held CDSC Class A
Shares for four years. The running of the four-year period is
suspended during the period you hold shares of a Money-Market
Fund received in exchange for CDSC Class A Shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class C Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class C Shares of any Bond or
Equity Fund, but you will be required to pay the applicable
contingent deferred sales charge, if any, if you redeem such
Class C Shares before you have held Class C Shares for 12 months.
You will also be required to pay the applicable contingent
deferred sales charge, if any, if you redeem such shares of a
Money-Market Fund before you have held Class C Shares for 12
months. The running of the 12-month CDSC period and the six-year
conversion period for Class C Shares is suspended during the
period you hold shares of a Money-Market Fund received in
exchange for Class C Shares. (See "Alternative Purchase Plans.")
Shares of a Money-Market Fund may be exchanged for shares of
another Money-Market Fund or for Class A Shares or Class C Shares
of a Bond or Equity Fund; however, if the shares of a
Money-Market Fund were not acquired by exchange of Eligible
Shares of a Bond or Equity Fund or of shares of a Money-Market
Fund acquired in such an exchange, they may be exchanged for
Class A Shares of a Bond or Equity Fund only upon payment of the
applicable sales charge.
This Trust, as well as the Money-Market Funds and other 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 Trust
may also modify or terminate this exchange privilege at any time.
In the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take
effect on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset
value of the shares surrendered for exchange are at least equal
to the minimum investment requirements of the investment company
whose shares are being acquired and (iii) the ownership of the
accounts from which and to which the exchange is made are
identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-228-4228 toll free or 732-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
Exchanges will be effected at the relative exchange prices
of the shares being exchanged next determined after receipt by
the Agent of your 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, in which case the exchange price of shares of a Bond or
Equity Fund will be their public offering price. Prices for
exchanges are determined in the same manner as for purchases of
the Trust's shares. See "How to Invest in the Trust."
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the
realization of a capital gain or loss, depending on the cost or
other tax basis of the shares exchanged and the holding period
(see "Tax Effects of Redemptions" and the Additional Statement);
no representation is made as to the deductibility of any such
loss should such occur.
Dividends paid by the Money-Market Funds are taxable,
except to the extent that a portion or all of the dividends paid
by Pacific Capital Tax-Free Cash Assets Trust (a tax-free
money-market fund) are exempt from regular Federal income tax,
and to the extent that a portion or all of the dividends paid by
Pacific Capital U.S. Treasuries Cash Assets Trust (which invests
in U.S. Treasury obligations) are exempt from state income taxes.
Dividends paid by Aquila Rocky Mountain Equity Fund 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 bond
fund or a tax-free money-market fund under the exchange privilege
arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Trust's
performance including current yield, taxable equivalent yield,
various expressions of total return, current distribution rate
and taxable equivalent distribution rate.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes any applicable sales charge) for 1-, 5- and 10-year
periods and for a period since the inception of the Trust, to the
extent applicable, through the end of such periods, assuming
reinvestment (without sales charge) of all distributions. The
Trust may also furnish total return quotations for other periods
or based on investments at various applicable sales charge levels
or at net asset value. For such purposes total return equals the
total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a
percentage of the purchase price. See the Additional
Statement.
Current yield reflects the income per share earned by each
of the Trust's portfolio investments; it is calculated by (i)
dividing the Trust's net investment income per share during a
recent 30-day period by (ii) the maximum public offering price on
the last day of that period and by (iii) annualizing the result.
Taxable equivalent yield shows the yield from a taxable
investment that would be required to produce an after-tax yield
equivalent to that of the Trust, which invests in tax-exempt
obligations. It is computed by dividing the tax-exempt portion of
the Trust's yield (calculated as indicated) by one minus a stated
income tax rate and by adding the product to the taxable portion
(if any) of the Trust's yield. See the Additional Statement.
Current yield and taxable equivalent yield, which are
calculated according to a formula prescribed by the Securities
and Exchange Commission (see the Additional Statement), are not
indicative of the dividends or distributions which were or will
be paid to the Trust's shareholders. Dividends or distributions
paid to shareholders are reflected in the current distribution
rate or taxable equivalent distribution rate which may be quoted
to shareholders. The current distribution rate is computed by (i)
dividing the total amount of dividends per share paid by the
Trust during a recent 30-day period by (ii) the current maximum
offering price and by (iii) annualizing the result. A taxable
equivalent distribution rate shows the taxable distribution rate
that would be required to produce an after-tax distribution rate
equivalent to the Trust's distribution rate (calculated as
indicated above). The current distribution rate differs from the
current yield computation because it could include distributions
to shareholders from sources, if any, other than dividends and
interest, such as short-term capital gains or return of capital.
If distribution rates are quoted in advertising, they will be
accompanied by calculations of current yield in accordance with
the formula of the Securities and Exchange Commission.
In each case performance figures are based upon past
performance, reflect as appropriate all recurring charges against
the Trust's income net of fee waivers and reimbursement of
expenses, if any, and will assume the payment of the maximum
sales charge, if any, on the purchase of shares, but not on
reinvestment of income dividends. The investment results of the
Trust, like all other investment companies, will fluctuate over
time; thus, performance figures should not be considered to
represent what an investment may earn in the future or what the
Trust's yield, tax equivalent yield, distribution rate, taxable
equivalent distribution rate or total return may be in any future
period. The annual report of the Trust contains additional
performance information that will be made available upon request
and without charge.
Description of the Trust and its Shares
The Trust is an open-end, non-diversified management
investment company organized in 1984 as a Massachusetts business
trust. (See "Investment of the Trust's Assets" for further
information about the Trust's status as "non-diversified.") 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 the
Trust with each other share of its class; shares of the
respective classes represent proportionate interests in the Trust
in accordance with their respective net asset values. Upon
liquidation of the Trust, shareholders are entitled to share
pro-rata in the net assets of the Trust available for
distribution to shareholders, in accordance with the respective
net asset values of the shares of each of the Trust's classes at
that time. All shares are presently divided into three classes;
however, 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, which may differ from each other as
provided in rules and regulations of the Securities and Exchange
Commission or by exemptive order. The Board of Trustees may, at
its own discretion, create additional series of shares, each of
which may have separate assets and liabilities (in which case any
such series will have a designation including the word "Series").
See the Additional Statement for further information about
possible additional series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
In addition to Class A Shares and Class C Shares, which
are offered by this Prospectus, the Trust also has Institutional
Class Shares ("Class Y 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. Class Y Shares are offered by means
of a separate prospectus, which can be obtained by calling the
Trust at 800-228-4227.
The primary distinction among the Trust's three classes
of shares lies in their different sales charge structures and
ongoing expenses, which are likely to be reflected in differing
yields and other measures of investment performance. All three
classes represent interests in the same portfolio of Hawaiian
Obligations and have the same rights, except that each class
bears the separate expenses, if any, of its participation in the
Distribution Plan and Shareholder Services Plan and has exclusive
voting rights with respect to such participation.
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) per share 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. Shares vote by classes on
any matter specifically affecting one or more classes, such as an
amendment of an applicable part of the Distribution Plan. 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, except that the Trust's Board of Trustees
may change the name 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 the Trust. If not so
terminated, the Trust will continue indefinitely.
<PAGE>
APPLICATION FOR HAWAIIAN TAX-FREE TRUST
FOR CLASS A OR CLASS C SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: AQUILAsm GROUP OF FUNDS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
Tel.# 1-800-228-4228
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for ____________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** _____________________________________
Name of State Minor's Social Security Number
4. ____________________________________________________
____________________________________________________
(Name of Corporation or Partnership. 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
Indicate method of payment (For either method, make check
payment to: HAWAIIAN TAX-FREE TRUST)
Indicate class of shares:
__ Class A Shares (Front-Payment Class)
__ Class C Shares (Level-Payment Class)
IF NO SHARE CLASS IS MARKED, INVESTMENT WILL AUTOMATICALLY BE MADE
IN CLASS A SHARES.
__ Initial Investment $_________ (Minimum $1,000)
__ Automatic Investment $________ (Minimum $50)
For Automatic Investments of at least $50 per month, you must
complete Step 3, Section A, Step 4, Sections A & B and ATTACH A
PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions 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. (A Financial Institution is a commercial
bank, savings bank or credit union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your Hawaiian Tax-Free Trust 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 Trust toll-free at 1-800-228-4228. 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. LETTER OF INTENT
APPLICABLE TO CLASS A SHARES ONLY.
See Terms of Letter of Intent and Escrow at the end of this application
___ Yes ___ No
I/We intend to invest in Class A Shares of the Trust during the
13-month period from the date of my/our first purchase pursuant
to this Letter (which purchase cannot be more than 90 days prior
to the date of this Letter), an aggregate amount (excluding any
reinvestment of dividends or distributions) of at least $25,000
which, together with my/our present holdings of Trust shares (at
public offering price on date of this Letter), will equal or exceed
the minimum amount checked below:
___ $25,000 ___ $50,000 ___ $100,000 ___ $250,000
___ $500,000 ___ $1,000,000 ___ $2,500,000 ___ $5,000,000
D. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
APPLICABLE TO CLASS A SHARES ONLY.
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, Administrative
Data Management Corp. (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
E. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
persons telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund 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 their respective officers, directors,
trustees, employees, agents and affiliates against any liability,
damage, expense, claim or loss, including reasonable costs and
attorneys fees, resulting from acceptance of, or acting or failure to
act upon, this Authorization.
F. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
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
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT YOU MUST
ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits. I/We understand that this authority
will remain in effect until you receive my/our written instructions to
cancel this service. I/We also agree that if any such drafts or debits
are dishonored, for any reason, you shall have no liabilities.
Financial Institution Account Number
_______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account is
registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(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. I/We acknowledge that shares purchased either
through Automatic Investment or Telephone Investment are subject to
applicable sales 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 183 days
during each calendar year and does not conduct a business in the U.S.
which would receive any gain from the Trust, or is exempt under an
income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
- - You may cancel any feature at any time, effective 3 days after the
Agent receives written notice from you.
- - Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access features form which may be obtained from Aquila
Distributors at 1-800-228-4227 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.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 2c and signing the Application, the investor is
entitled to make each purchase at the public offering price applicable
to a single transaction of the dollar amount checked above, and agrees
to be bound by the terms and conditions applicable to Letters of Intent
appearing below.
The investor is making no commitment to purchase shares, but if
the investor's purchases within thirteen months from the date of the
investor's first purchase do not aggregate $25,000, or, if such
purchases added to the investor's present holdings do not aggregate
the minimum amount specified above, the investor will pay the increased
amount of sales charge prescribed in the terms of escrow below.
The commission to the dealer or broker, if any, named herein shall
be at the rate applicable to the minimum amount of the investor's
specified intended purchases checked above. If the investor's actual
purchases do not reach this minimum amount, the commissions previously
paid to the dealer will be adjusted to the rate applicable to the
investor's total purchases. If the investor's purchases exceed the
dollar amount of the investor's intended purchases and pass the next
commission break-point, the investor shall receive the lower sales
charge, provided that the dealer returns to the Distributor the excess
of commissions previously allowed or paid to him over that which would
be applicable to the amount of the investor's total purchases.
The investor's dealer or broker shall refer to this Letter of
Intent in placing any future purchase orders for the investor while
this Letter is in effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary),
3% of the dollar amount specified in the Letter of Intent (computed
to the nearest full share) shall be held in escrow in shares of the
Trust by the Agent. All dividends and any capital distributions on the
escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within a thirteen-month period, the escrowed shares will be
promptly released to the investor. However, shares disposed of prior
to completion of the purchase requirement under the Letter will be
deducted from the amount required to complete the investment commitment.
3. If the total purchases pursuant to the Letter are less than the
amount specified in the Letter as the intended aggregate purchases,
the investor must remit to the Distributor an amount equal to the
difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total
amount purchased had been made at a single time. If such difference in
sales charges is not paid within twenty days after receipt of a
request from the Distributor or the dealer, the Distributor will,
within sixty days after the expiration of the Letter, redeem the number
of escrowed shares necessary to realize such difference in sales
charges. Full shares and any cash proceeds for a fractional share
remaining after such redemption will be released to the investor. The
escrow of shares will not be released until any additional sales charge
due has been paid as stated in this section.
4. By checking Box 2c and signing the Application, the investor
irrevocably constitutes and appoints the Agent or the Distributor as
his attorney to surrender for redemption any or all escrowed shares
on the books of the Trust.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Trust purchased
for and held under the Plan, but the Agent will credit all such shares
to the Planholder on the records of the Trust. Any share certificates
now held by the Planholder may be surrendered unendorsed to the Agent
with the application so that the shares represented by the certificate
may be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the
Trust at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will
be made at the Net Asset Value per share in effect at the close of
business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address
to which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written
notice (in proper form in accordance with the requirements of the then
current Prospectus of the Trust) to redeem all, or any part of, the
shares held under the Plan. In such case the Agent will redeem the
number of shares requested at the Net Asset Value per share in effect
in accordance with the Trust's usual redemption procedures and will
mail a check for the proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Trust. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the
Trust, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue as
a dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his executor or guardian,
or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Trust, the Planholder will be deemed to have appointed any successor
transfer agent to act as his agent in administering the Plan.
10. Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously making regular purchases. While an occasional lump sum
investment may be made, such investment should normally be an amount
equivalent to three times the annual withdrawal or $5,000, whichever
is less.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
(after September 30, 1997)
Pacific Century Trust
a division of
Bank of Hawaii
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Sherri Foster, Senior Vice President
William C. Wallace, Senior Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1104
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights
Table of Expenses
Financial Highlights
Introduction
Investment Of The Trust's Assets
Investment Restrictions
Net Asset Value Per Share
Alternative Purchase Plans
How To Invest In The Trust
How To Redeem Your Investment
Automatic Withdrawal Plan
Management Arrangements
Dividend And Tax Information
Exchange Privilege
General Information
Application and Letter of Intent
HAWAIIAN
TAX-FREE TRUST
A TAX-FREE
INCOME INVESTMENT
[LOGO]
PROSPECTUS
[LOGO]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
Hawaiian Tax-Free Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-228-4227
212-697-6666
Prospectus
Institutional Class Shares
Class Y Shares
July 31, 1997
The Trust is a mutual fund whose objective is to seek to
provide as high a level of current income exempt from Hawaiian
State and regular Federal income taxes as is consistent with
preservation of capital by investing primarily in obligations
which pay interest exempt from Hawaiian State and Federal income
taxes. These obligations must, at the time of purchase, either be
rated within the four highest credit ratings (considered as
investment grade) assigned by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or, if unrated, be determined to be
of comparable quality by the Trust's investment adviser, Hawaiian
Trust Company, Limited.
There are three classes of shares of the Trust:
Institutional Class Shares ("Class Y Shares") 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. Class Y Shares are offered at net
asset value with no sales charge, no redemption fee, no
contingent deferred sales charge and no distribution fee. (See
"How to Purchase Class Y Shares.") The other classes,
Front-Payment Class Shares ("Class A Shares") and Level-Payment
Class Shares ("Class C Shares") are not offered by this
Prospectus. See "General Information - Description of the Trust
and its Shares."
This Prospectus concisely states information about the
Trust that you should know before investing. A Statement of
Additional Information about the Trust dated July 31, 1997, (the
"Additional Statement") has been filed with the Securities and
Exchange Commission and is available without charge upon written
request to Administrative Data Management Corp., the Trust's
Shareholder Servicing Agent, at the address given below, or by
calling the telephone number(s) given below. The Additional
Statement contains information about the Trust and its management
not included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus. Only
when you have read both the Prospectus and the Additional
Statement are all material facts about the Trust available to
you.
SHARES OF THE TRUST ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY HAWAIIAN TRUST COMPANY, LTD. (THE
"ADVISER"), BANK OF HAWAII, ITS BANK OR NON-BANK AFFILIATES OR BY
ANY OTHER BANK. SHARES OF THE TRUST ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED
AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN THE TRUST INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact
The Trust's Shareholder Servicing Agent:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1104
Call 800-228-4228 toll free or 732-855-5731
For General Inquiries & Yield Information,
Call 800-228-4227 toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
HIGHLIGHTS
Hawaiian Tax-Free Trust, founded by Aquila Management
Corporation in 1984 and one of the Aquilasm Group of Funds, is an
open-end mutual fund which invests primarily in tax-free
municipal bonds, the kind of obligations issued by the State of
Hawaii, its counties and various other local authorities to
finance such long-term projects as schools, roads, hospitals,
housing and harbor facilities throughout Hawaii. (See
"Introduction.")
Tax-Free Income - The municipal obligations in which the
Trust invests pay interest which is exempt from both regular
Federal and State of Hawaii income taxes. Dividends paid by the
Trust from this income are likewise free of both such taxes. It
is, however, possible that in certain circumstances, a small
portion of the dividends paid by the Trust will be subject to
income taxes. The Federal alternative minimum tax may apply to
some investors, but its impact will be limited, since not more
than 20% of the Trust's net assets can be invested in obligations
paying interest which is subject to this tax. The receipt of
exempt-interest dividends from the Trust may result in some
portion of social security payments or railroad retirement
benefits being included in taxable income. Capital gains
distributions, if any, are taxable. (See "Dividend and Tax
Information.")
Investment Grade - The Trust will acquire only those
municipal obligations which, at the time of purchase, are within
the four highest credit ratings assigned by Moody's Investors
Service, Inc., or Standard & Poor's Corporation, or are
determined by the Adviser to be of comparable quality. In
general, there are nine separate credit ratings, ranging from the
highest to the lowest credit ratings for municipal obligations.
Obligations within the top four ratings are considered
"investment grade," but those in the fourth rating may have
speculative characteristics as well. (See "Investment of the
Trust's Assets.")
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Trust.")
Additional Investments - You may make additional investments
at any time and in any amount, directly, or if in an amount of
$50 or more, through the convenience of having your investment
electronically transferred from your financial institution
account into the Trust by Automatic Investment or Telephone
Investment. (See "How to Invest in the Trust.")
Alternative Purchase Plans - The Trust provides alternative
ways to invest. (See "Description of the Trust and its Shares.")
For this purpose the Trust offers classes of shares, which differ
in their expense levels and sales charges:
Institutional Class Shares ("Class Y Shares") are offered by
this Prospectus. Class Y Shares 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. Class Y Shares are offered at
net asset value with no sales charge, no redemption fee, no
contingent deferred sales charge and no distribution fee.
(See "How to Purchase Class Y Shares.")
The other classes, Front-Payment Class Shares ("Class A
Shares") and Level-Payment Class Shares ("Class C Shares"), are
not offered by this Prospectus. See "General Information -
Description of the Trust and its Shares."
At the date of the Prospectus, Class Y Shares are
registered for sale only in certain states. (See "How to Invest
in the Trust.") If Class Y Shares of the Trust are sold outside
of those states, except to certain institutional investors, the
Trust can redeem them. If your state of residence is not Hawaii,
dividends from the Trust may be subject to income taxes of the
state in which you reside. Accordingly, you should consult your
tax adviser before acquiring shares of the Trust.
Monthly Income - Dividends are declared daily and paid
monthly. At your choice, dividends are paid by check mailed to
you, directly deposited into your financial institution account
or automatically reinvested without sales charge in additional
shares of the Trust at the then-current net asset value. Specific
classes of shares will have different dividend amounts due to
their particular expense levels. (See "Dividend and Tax
Information.")
Many Different Issues - You have the advantages of a
portfolio which consists of over 260 separate issues with
different maturities. (See "Investment of the Trust's Assets.")
Local Portfolio Management - Hawaiian Trust Company,
Limited serves as the Trust's Investment Adviser, providing
experienced local professional management. It is a subsidiary of
Bank of Hawaii, was founded in 1898, and is the oldest and
largest trust company in Hawaii, administering approximately $12
billion in client assets, including investment authority over $1
billion in Hawaiian municipal bonds. The Trust pays monthly fees
to its Adviser and to its Administrator at an aggregate rate of
0.40% of average annual net assets. (See "Table of Expenses" and
"Management Arrangements.")
Redemptions - Liquidity - You may redeem any amount of your
Class Y Shares account on any business day at the next determined
net asset value by telephone, FAX or mail request, with proceeds
being sent to a predesignated financial institution, if you have
elected Expedited Redemption. Proceeds will be wired or
transferred through the facilities of the Automated Clearing
House, wherever possible, upon request, if in an amount of $1,000
or more, or will be mailed. For these and other redemption
procedures see "How to Redeem Your Investment." There are no
redemption fees for redemption of Class Y Shares.
Certain Stabilizing Measures - The Trust will employ such
traditional measures as varying maturities, upgrading credit
standards for portfolio purchases, broadening diversification and
increasing its position in cash, in an attempt to protect against
declines in the value of its investments and other market risks.
(See "Certain Stabilizing Measures.")
Other Investments - The Trust may purchase certain taxable
short-term investments. Although it has no present intention of
doing so, the Trust may also, to a limited degree, buy and sell
futures contracts and options on futures contracts. (See
"Investment of the Trust's Assets.")
Exchanges - You may exchange Class Y Shares of the Trust
into Class Y Shares of other Aquila-sponsored tax-free municipal
bond mutual funds and two Aquila- sponsored equity funds. You may
also exchange them into shares of the Aquila-sponsored money
market funds. The exchange prices will be the respective net
asset values of the shares. (See "Exchange Privilege.")
Risks and Special Considerations - The share price,
determined on each business day, varies with the market prices of
the Trust's portfolio securities, which fluctuate with market
conditions, including prevailing interest rates. Accordingly, the
proceeds of redemptions may be more or less than your original
cost. (See "Factors Which May Affect the Value of the Trust's
Investments and Their Yields.") The Trust's assets, being
primarily or entirely Hawaiian issues, are subject to economic
and other conditions affecting Hawaii. (See "Risk Factors and
Special Considerations Regarding Investment in Hawaiian
Obligations.") Moreover, the Trust is classified as a
"non-diversified" investment company, because it may choose to
invest in the obligations of a relatively limited number of
issuers. (See "Investment of the Trust's Assets.") The Trust may
also, to a limited degree, buy and sell futures contracts and
options on futures contracts, although since inception the Trust
has not done so and has no present intention to do so. There may
be risks associated with these practices. (See "Certain
Stabilizing Measures.")
Statements and Reports - You will receive statements of your
account monthly as well as each time you add to your account or
take money out. Additionally, you will receive a Semi-Annual
Report and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
TABLE OF EXPENSES
Class Y
Shareholder Transaction Expenses Shares
<S> <C>
Maximum Sales Charge Imposed on Purchases.............. None
(as a percentage of the offering price)
Maximum Sales Charge Imposed on Reinvested Dividends... None
Deferred Sales Charge.................................. None
Redemption Fees........................................ None
Exchange Fee........................................... None
Annual Trust Operating Expenses (1)
(as a percentage of average net assets)
Investment Advisory Fee................................ 0.14%
All other expenses (2)................................. 0.41%
Administration Fee................................... 0.26%
Other Expenses (2)................................... 0.15%
Total Trust Operating Expenses (2)..................... 0.55%
Example (3)
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$6 $18 $31 $69
<FN>
(1) Estimated based upon actual expenses incurred by the Trust during its most
recent fiscal year.
</FN>
<FN>
(2) Does not reflect a 0.02% expense offset in custodian fees received for
uninvested cash balances. Reflecting this offset, other expenses, all other
expenses, and total Trust operating expenses for Class Y Shares would have
been 0.13%, 0.39% and 0.53%, respectively.
</FN>
<FN>
(3) The expense example is based upon the above annual Trust operating
expenses. It is also based upon amounts at the beginning of each year which
includes the prior year's assumed results. A year's results consist of an
assumed 5% annual return less total annual operating expenses; the expense
ratio was applied to an assumed average balance (the year's starting
investment plus one-half the year's results). Each figure represents the
cumulative expenses so determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL MUTUAL FUNDS USE
THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING THE ABOVE EXAMPLE.
The purpose of the above table is to assist the investor in understanding
the various costs that an investor in the Trust will bear directly or
indirectly. The assumed 5% annual return should not be interpreted as a
prediction of an actual return, which may be higher or lower.
<PAGE>
<TABLE>
<CAPTION>
HAWAIIAN TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights as it relates to the five
years ended March 31, 1997 has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon is included in the Trust's
financial statements contained in its Annual Report, which are incorporated
by reference into the Additional Statement. The information provided in the
table should be read in conjunction with the financial statements and related
notes. On October 24, 1989, Aquila Management Corporation, originally the
Trusts Sub-Adviser and Administrator, became Administrator only.
Class A(1) Class Y(2)
Year ended March 31,
1997 1996 1995 1994 1997
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Year............... $11.31 $11.13 $11.19 $11.60 $11.31
Income from
Investment Operations:
Net investment
income................ 0.59 O.61 0.62 0.63 0.74
Net gain (loss) on
securities (both
realized and
unrealized)........... (0.08) 0.18 (0.01) (0.38) (0.07)
Total from Investment
Operations............ (0.51) 0.79 0.61 0.25 0.67
Loss Distributions:
Dividends from net
investment income..... (0.58) (0.61) (0.62) (0.63) (0.73)
Distributions from
capital gains.......... 0.01 - (0.05) (0.03) (0.01)
Total Distributions... (0.59) (0.61) (0.67) (0.66) (0.74)
Net Asset Value,
End of Year............ $11.23 $11.31 $11.13 $11.19 $11.24
Total Return (not
reflecting sales
charge)(%)............. 4.67 7.16 5.75 2.01 6.14
Ratios/Supplemental
Data
Net Assets,
End of Year (in
thousands) ($)........ 640,989 659,925 642,556 640,465 0.1
Ratio of Expenses
to Average Net
Assets (%)............ 0.73 0.72 0.75 0.74 0.53
Ratio of Net
Investment
Income to Average
Net Assets (%)........ 5.12 5.32 5.65 5.46 4.92
Portfolio Turnover
Rate (%)............... 9 28 33 16 9
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary waiver
of fees and the expense offset in custodian fees for uninvested cash balances
would have been:
Net Investment
Income ($)............ 0.59 0.61 0.62 0.63 0.74
Ratio of Expenses
to Average Net
Assets (%)............ 0.75 0.73 0.77 0.76 0.55
Ratio of Net
Investment Income
to Average Net
Assets (%)............. 5.11 5.31 5.63 5.44 4.94
<CAPTION>
1993 1992 1991 1990 1989 1988
<C> <C> <C> <C> <C> <C>
$11.10 $10.85 $10.78 $10.60 $10.60 $11.14
0.68 0.71 0.72 0.74 0.75 0.75
0.50 0.25 0.07 0.18 - (0.54)
1.18 0.96 0.79 0.92 0.75 0.21
(0.68) (0.71) (0.72) (0.74) (0.75) (0.75)
- - - - - -
(0.68) (0.71) (0.72) (0.74) (0.75) (0.75)
$11.60 $11.10 $10.85 $10.78 $10.60 $10.60
10.98 9.15 7.62 8.88 7.23 2.18
597.828 475,469 397,258 336,503 254,098 224,321
0.71 0.70 0.71 0.73 0.78 0.77
5.92 6.44 6.68 6.80 7.02 7.06
11 16 27 7 19 34
0.68 0.71 0.72 0.74 0.75 0.75
0.73 0.72 0.73 0.80 0.80 0.78
5.90 6.42 6.67 6.75 7.00 7.04
<FN>
(1) Designated as Class A Shares on April 1, 1996.
</FN>
<FN>
(2) New Class of Shares established on April 1, 1996.
</FN>
</TABLE>
<PAGE>
INTRODUCTION
The Trust's shares are designed to be a suitable investment
for individuals, corporations, institutions and fiduciaries who
seek income exempt from regular Federal and Hawaiian State income
taxes.
You may invest in shares of the Trust as an alternative to
direct investments in Hawaiian Obligations, as defined below,
which may include obligations of certain non-Hawaiian issuers.
The Trust offers you the opportunity to keep assets fully
invested in a vehicle that provides a professionally managed
portfolio of Hawaiian Obligations which may, but not necessarily
will, be more diversified, higher yielding or more stable and
more liquid than you might be able to obtain on an individual
basis by direct purchase of Hawaiian Obligations. In some cases,
the portfolio may also contain taxable investments. Through the
convenience of a single security consisting of shares of the
Trust, you are also relieved of the inconvenience associated with
direct investments of fixed denominations, including the
selecting, purchasing, handling, monitoring call provisions and
safekeeping of Hawaiian Obligations.
Hawaiian Obligations are a type of municipal obligation.
Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities to obtain
funds for various public purposes. The two principal
classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less
while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government
guarantee; tax anticipation notes; revenue anticipation notes;
bond anticipation notes; construction loan notes and floating and
variable rate demand notes. Municipal obligations include
municipal lease/purchase agreements which are similar to
installment purchase contracts for property or equipment. The
purposes for which municipal obligations are issued include the
construction of a wide range of public facilities such as
highways, bridges, schools, hospitals, housing, mass
transportation, streets and water and sewer works. Other public
purposes for which municipal obligations may be issued include
the refunding of outstanding obligations, the obtaining of funds
for general operating expenses and the obtaining of funds to lend
to other public institutions and facilities.
INVESTMENT OF THE TRUST'S ASSETS
In seeking its objective of providing as high a level of
current income which is exempt from both Hawaiian State and
regular Federal income taxes as is consistent with the
preservation of capital, the Trust will invest primarily in
Hawaiian Obligations (as defined below). There is no assurance
that the Trust will achieve its objective, which is a fundamental
policy of the Trust. (See "Investment Restrictions.") The Trust
may also invest in Taxable Short-Term Obligations (as defined
below). Although it has no present intention of doing so, it may
purchase and sell futures contracts on municipal bond indices and
on U.S. Government securities and may write and purchase put and
call options on these contracts (see below).
As used in the Prospectus and the Additional Statement, the
term "Hawaiian Obligations" means obligations, including those of
certain non-Hawaiian issuers, of any maturity which pay interest
which, in the opinion of bond counsel or other appropriate
counsel, is exempt from Hawaiian State and regular Federal income
taxes. Although exempt from regular Federal income tax, interest
paid on certain types of Hawaiian Obligations, and dividends
which the Trust might pay from this interest, are preference
items as to the Federal alternative minimum tax; for further
information, see "Dividend and Tax Information." As a fundamental
policy, at least 80% of the Trust's net assets will be invested
in Hawaiian Obligations the income paid upon which will not be
subject to the alternative minimum tax; accordingly, the Trust
can invest up to 20% of its net assets in obligations which are
subject to the Federal alternative minimum tax. The Trust may
refrain entirely from purchasing these types of Hawaiian
Obligations. (See "Dividend and Tax Information.")
The non-Hawaiian bonds or other obligations the interest on
which is exempt under present law from Hawaiian State and regular
Federal income taxes are those issued by or under the authority
of Guam, Northern Mariana Islands, Puerto Rico and the Virgin
Islands. As a Hawaii-oriented trust, at least 65% of the Trust's
total assets will be invested in Hawaiian Obligations of Hawaiian
issuers.
In general, there are nine separate credit ratings, ranging
from the highest to the lowest quality standards for municipal
obligations. So that the Trust will have a portfolio of
quality-oriented (investment grade) securities, the Hawaiian
Obligations which the Trust will purchase must, at the time of
purchase, either (i) be rated within the four highest credit
ratings assigned by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Corporation ("S&P"); or (ii) if unrated, be
determined to be of comparable quality to municipal obligations
so rated, by Hawaiian Trust Company, Limited (the "Adviser"), the
Trust's investment adviser, subject to the direction and control
of the Trust's Board of Trustees. Municipal obligations rated in
the fourth highest credit rating are considered by such rating
agencies to be of medium quality and thus may present investment
risks not present in more highly rated obligations. Such bonds
lack outstanding investment characteristics and may in fact have
speculative characteristics as well; changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is
the case for higher grade bonds. If after purchase the rating of
any rated Hawaiian Obligation is downgraded such that it could
not then be purchased by the Trust, or, in the case of an unrated
Hawaiian Obligation, if the Adviser determines that the unrated
obligation is no longer of comparable quality to those rated
obligations which the Trust may purchase, it is the current
policy of the Trust to cause any such obligation to be sold as
promptly thereafter as the Adviser in its discretion determines
to be consistent with the Trust's objectives; such obligation
remains in the Trust's portfolio until it is sold. In addition,
because a downgrade often results in a reduction in the market
price of a downgraded obligation, sale of such an obligation may
result in a loss. See Appendix A to the Additional Statement for
further information as to these ratings. The Trust can purchase
industrial development bonds without limit but only if they meet
the definition of Hawaiian Obligations, i.e., the interest on
them is exempt from Hawaiian State and regular Federal income
taxes. The Trust may invest without limit in Hawaiian Obligations
which are repayable from economically related projects or
facilities. Such investments could involve an increased risk to
the Trust should any of such issuers or related projects or
facilities experience financial difficulties.
The "Taxable Short-Term Obligations" which the Trust may
purchase are obligations maturing in one year or less from the
date of purchase by the Trust which are either (i) obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Obligations"); see the
Additional Statement for further information; (ii) commercial
paper rated Prime-1 by Moody's or A-1 by S&P (see Appendix A to
the Additional Statement); or (iii) bank obligations, such as
certificates of deposit, bankers acceptances and fixed time
deposits, issued by a domestic bank subject to regulation by the
U.S. Government having total assets of at least $1.5 billion.
Under normal market conditions the Trust cannot purchase Taxable
Short-Term Obligations or purchase or sell Municipal Bond Index
Futures, U.S. Government Securities Futures or options on Futures
if thereafter more than 20% of its total assets would consist of
such Obligations, cash, margin deposits on such Futures and
margin deposits and premiums on options on such Futures, except
for defensive purposes, i.e., in anticipation of a decline or
possible decline in the value of Hawaiian Obligations. The Trust
may also invest in Taxable Short-Term Obligations (within such
20% limit) pending investment in Hawaiian Obligations of the
proceeds of the sale of shares or the sale of Hawaiian
Obligations. The Trust may enter into repurchase agreements as to
Taxable Short-Term Obligations; see "Repurchase Agreements"
below. Income from "Taxable Short-Term Obligations" and
repurchase agreements is taxable and therefore is not included in
the "exempt-interest" dividends which the Trust will pay; see
"Dividend and Tax Information."
The Trust is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940
Act"). The Trust also intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code
(the "Code"). One of the tests for such qualification under the
Code is, in general, that at the end of each fiscal quarter of
the Trust, at least 50% of its assets must consist of (i) cash
and (ii) securities which, as to any one issuer, do not exceed 5%
of the value of the Trust's assets. If the Trust had elected to
register under the 1940 Act as a "diversified" investment
company, it would have to meet the same test as to 75% of its
assets. The Trust may therefore not have as much diversification
among securities, and thus diversification of risk, as if it had
made this election under the 1940 Act. In general, the more the
Trust invests in the securities of specific issuers, the more the
Trust is exposed to risks associated with investments in those
issuers. The Trust's assets, being primarily or entirely Hawaiian
issues, are accordingly subject to economic and other conditions
affecting Hawaii. (See "Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations.")
Certain Stabilizing Measures
The Trust will employ such traditional measures as varying
maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash
and cash equivalents in attempting to protect against declines in
the value of its investments and other market risks. There can,
however, be no assurance that these will be successful.
Although the Trust has no current intention of using futures
and options, to the limited degree described below, the Trust may
purchase and sell futures contracts on municipal bond indices
("Municipal Bond Index Futures") and on United States government
securities ("U.S. Government Securities Futures"); both kinds of
futures contracts are "Futures." The Trust may also write and
purchase put and call options on Futures.
Although it does not currently do so, and since inception
has not done so, the Trust may buy and sell futures and options
to attempt to hedge against changes in the market price of the
Trust's Hawaiian Obligations caused by interest rate
fluctuations. Futures and options also may provide a hedge
against increases in the cost of securities the Trust intends to
purchase. Under normal market conditions, the Trust cannot
purchase or sell Municipal Bond Index Futures, U.S. Government
Securities Futures, or options on Futures if thereafter more than
20% of its total assets would consist of cash, margin deposits on
such Futures and margin deposits and premiums on such options,
except for temporary defensive purposes, i.e., in anticipation of
a decline or possible decline in the value of Hawaiian
Obligations.(See the Additional Statement.)
The primary risks associated with the use of Futures and
options are: (i) imperfect correlation between the change in the
market value of the securities held in the Trust's portfolio and
the prices of Futures or options purchased or sold by the Trust;
(ii) incorrect forecasts by the Adviser concerning interest rates
which may result in the hedge being ineffective; and (iii)
possible lack of a liquid secondary market for a Future or
option; the resulting inability to close a Futures or options
position could adversely affect the Trust's hedging ability.
For a hedge to be completely effective, the price change of
the hedging instrument should equal the price change of the
security being hedged. The risk of imperfect correlation of these
price changes is increased as the composition of the Trust's
portfolio is divergent from the debt securities underlying the
hedging instrument. To date the Adviser has had no experience in
the use of Futures or options on them.
The liquidity of a secondary market in a Future may be
adversely affected by "daily price fluctuation limits"
established by commodity exchanges which restrict the amount of
change in the contract price allowed during a single trading day.
Thus, once a daily limit is reached, no further trades may be
entered into beyond the limit, thereby preventing the liquidation
of open positions. Prices have in the past reached the daily
limit on a number of consecutive trading days. For further
information about Futures and options, see the Additional
Statement.
When and if the Trust determines to use Futures and options,
the Prospectus will be supplemented.
Floating and Variable Rate Demand Notes
Floating and variable rate demand notes are tax-exempt
obligations which may have a stated maturity in excess of one
year, but permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding one year, in each
case upon not more than 30-days' notice. The issuer of such notes
normally has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal amount of the
note plus accrued interest upon a specified number of days'
notice to the noteholders. The interest rate on a floating rate
demand note is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand note is
adjusted automatically at specified intervals.
Participation Interests
The Trust may purchase from financial institutions
participation interests in Hawaiian Obligations (such as
industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Trust an
undivided interest in the underlying Hawaiian Obligations in the
proportion that the Trust's participation interest bears to the
total amount of the underlying Hawaiian Obligations. All such
participation interests must meet the Trust's credit
requirements. (See "Limitation to 10% as to Certain
Investments.")
When-Issued and Delayed Delivery Purchases
The Trust may buy Hawaiian Obligations on a when-issued or
delayed delivery basis when it has the intention of acquiring
them. The Hawaiian Obligations so purchased are subject to market
fluctuation and no interest accrues to the Trust until delivery
and payment take place; their value at the delivery date may be
less than the purchase price. The Trust cannot enter into
when-issued commitments exceeding in the aggregate 15% of the
market value of the Trust's total assets, less liabilities other
than the obligations created by when-issued commitments. If the
Trust chooses to dispose of the right to acquire a when-issued
obligation prior to its acquisition, it could, as with the
disposition of any other portfolio holding, incur a gain or loss
due to market fluctuation; any such gain would be a taxable
short-term gain. The Trust places an amount of assets equal in
value to the amount due on the settlement date for the
when-issued or delayed delivery securities being purchased in a
segregated account with the Custodian, which is marked to market
every business day. See the Additional Statement for further
information.
Repurchase Agreements
The Trust may purchase securities (limited to Taxable
Short-Term Obligations) subject to repurchase agreements.
Repurchase agreements may be entered into only with commercial
banks or broker-dealers. A repurchase agreement occurs when, at
the time the Trust purchases a security, the Trust also resells
it to the vendor and must deliver the security (or securities
substituted for it) to the vendor on an agreed-upon date in the
future. (The securities so resold or substituted are referred to
herein as the "Resold Securities.") The Resold Securities will be
held by the Trust's custodian bank. The resale price is in excess
of the purchase price in that it reflects an agreed-upon market
interest rate effective for the period of time during which the
Trust's money is invested in the Resold Securities. The majority
of these transactions run from day to day, and the delivery
pursuant to the resale typically will occur within one to five
days of the purchase. The Trust's risk is limited to the ability
of the vendor to pay the agreed-upon sum upon the delivery date;
in the event of bankruptcy or other default by the vendor, there
may be possible delays and expenses in liquidating the Resold
Securities, decline in their value and loss of interest. However,
in the opinion of the Trust this risk is not material since, upon
default, the Resold Securities constitute security for the
repurchase obligation. Repurchase agreements can be considered as
"loans" collateralized by the Resold Securities (such agreements
being defined as "loans" in the 1940 Act). The return on such
"collateral" may be more or less than that from the repurchase
agreement. The Resold Securities under any repurchase agreement
will be marked to market every business day so that the value of
the "collateral" is at least equal to the value of the loan,
including the accrued interest earned thereon, plus sufficient
additional market value as is considered necessary to provide a
margin of safety. Additionally, the Adviser will regularly review
the financial strength of all vendors of repurchase agreements to
the Trust.
Limitation to 10% as to Certain Investments
Due to their possible limited liquidity, the Trust cannot
make certain investments if thereafter more than 10% of its net
assets would consist of such investments. The investments
included in this 10% limit are (i) repurchase agreements maturing
in more than seven days; (ii) fixed time deposits subject to
withdrawal penalties other than overnight deposits; (iii)
restricted securities, i.e., securities which cannot freely be
sold for legal reasons (which the Trust does not expect to own);
and (iv) securities for which market quotations are not readily
available. However, this 10% limit does not include any
investments as to which the Trust can exercise the right to
demand payment in full within three days and as to which there is
a secondary market. Floating and variable rate demand notes and
participation interests (including municipal lease/purchase
obligations) are considered illiquid unless determined by the
Board of Trustees to be readily marketable.
Factors Which May Affect the Value
of the Trust's Investments and Their Yields
The value of the Hawaiian Obligations and Taxable
Short-Term Obligations (collectively, "Obligations") in which the
Trust invests will fluctuate depending in large part on changes
in prevailing interest rates, and may be subject to other market
factors as well. If the prevailing interest rates go up after the
Trust buys Obligations, the value of the Obligations will
normally go down; if these rates go down, the value of the
Obligations will normally go up. Changes in value and yield based
on changes in prevailing interest rates may have different
effects on short-term Obligations than on long-term Obligations.
Long-term Obligations (which often have higher yields) may
fluctuate in value more than short-term ones.
Portfolio Insurance
The purpose of having insurance on some investments in
Hawaiian Obligations in the Trust's portfolio is to reduce
financial risk for investors in the Trust.
Insurance as to the timely payment of principal and interest
when due for Hawaiian Obligations is acquired as follows:
(i) obtained by the issuer of the Hawaiian Obligations at
the time of original issue of the obligations, known as "New
Issue Insurance," or
(ii) purchased by the Trust or a previous owner with respect
to specific Hawaiian Obligations, termed "Secondary Market
Insurance."
The insurance of principal under these types of insurance
policies refers to the payment of the face or par value of the
Hawaiian Obligation when due. Insurance is not affected by nor
does it insure the price paid by the Trust for the obligation.
The market value of obligations in the Trust will, from time to
time, be affected by various factors, including the general
movement of interest rates. The value of the Trust's shares is
not insured.
In order to attempt to reduce financial risk to the Trust's
investors, it is the Trust's current policy, which may be
changed, that the majority of the Trust's assets will be invested
in insured Hawaiian Obligations. However, if the Board of
Trustees determines that there is an inadequate supply in the
marketplace of Hawaiian Obligations covered by New Issue
Insurance and that appropriate Secondary Market Insurance cannot
be obtained for other Hawaiian Obligations on terms that are
financially advantageous to the Trust as a result of market
conditions or other factors, then the Trust will invest in
Hawaiian Obligations that are not insured. Use of insurance is
not a fundamental policy of the Trust.
New Issue Insurance is obtained by the issuer of the
Hawaiian Obligations and all premiums respecting such securities
are paid in advance by such issuer. Such policies are
noncancelable and continue in force so long as the Hawaiian
Obligations are outstanding and the insurer remains in business.
The Trust may also purchase Secondary Market Insurance on
any Hawaiian Obligation purchased by the Trust. By purchasing
Secondary Market Insurance, the Trust will obtain, upon payment
of a single premium, insurance against nonpayment of scheduled
principal and interest for the remaining term of the Hawaiian
Obligation, regardless of whether the Trust then owned such
security. Such insurance coverage is noncancelable and continues
in force so long as the security so insured is outstanding and
the insurer remains in business. The purposes of acquiring
Secondary Market Insurance are to insure timely payment of
principal and interest when due, and to enable the Trust to sell
a Hawaiian Obligation to a third party as a high rated insured
Hawaiian Obligation at a market price greater than what otherwise
might be obtainable if the security were sold without the
insurance coverage. There is no assurance that such insurance can
be obtained at rates that would make its purchase advantageous to
the Trust.
New Issue Insurance and Secondary Market Insurance will be
obtained from some or all of the following: Municipal Bond
Investors Assurance Corporation ("MBIA"), Financial Guaranty
Insurance Company ("FGIC") and AMBAC Indemnity Corporation
("AMBAC Indemnity"). See the Additional Statement for information
about these companies. The Trust may also purchase insurance
from, or Hawaiian Obligations insured by, other insurers.
Risk Factors and Special Considerations
Regarding Investment in Hawaiian Obligations
The following is a discussion of the general factors that
might influence the ability of Hawaiian issuers to repay
principal and interest when due on the Hawaiian Obligations
contained in the portfolio of the Trust. Such information is
derived from sources that are generally available to investors
and is believed by the Trust to be accurate, but has not been
independently verified and may not be complete.
As of the date of this Prospectus, economic data
available indicate that the real Gross State Product growth for
1996 was 1.0%, slightly lower than the 1.3% that was projected in
1995. Although total employment continues to contract, it is
anticipated that most downsizing has been completed, and that
there will be minor job growth of 0.0-0.5% in 1997. Although some
local companies have left the State, other substantial
organizations have indicated interest in new Hawaiian operations.
The State of Hawaii Convention Center is nearing completion with
a projected opening date in mid-1998.
Local economic sources expect that the deflationary
trend, apparent in 1995, has continued through 1996. Retailers
have kept retail prices down and the Honolulu Consumer Price
Index is projected to remain at the current 2.2% annual rate.
Rents have dropped as more rental inventory builds up and
property valuations remain soft, both in the residential and
commercial sectors. State tax credits for hotel renovations will
provide incentives to modernize and improve competitiveness while
providing a stimulus to the construction industry. The
Legislature has approved $1.0 billion in borrowing for the
construction budget for the 1998-1999 biennium to boost the
economy.
In 1996, tourism, the State's principal industry,
increased by 3.6% over 1995 to 6.8 million visitors for the year.
Eastbound visitors accounted for the majority of the increase,
attributable in part to the introduction of direct flights to
Kona from Japan. Trends indicate that tourism as the State's
major export industry, will continue to improve in 1997.
Uncertainties regarding sovereignty and privatization of
government contracts will be outstanding issues that will have
significant impact over the long term for the State. Limited
revenue growth and the need to reduce expenditures will continue
to be of paramount concern for the State government. The Hawaii
legislature recently approved a $1 billion capital improvement
program to stimulate the economy through construction spending.
The attendant accelerated issuance of debt to fund the program at
a time when revenue growth has remained stagnant prompted
Standard & Poor's to downgrade the State's General Obligation
debt from AA to A+. Moody's rates the State's debt as AA3, which
is at the lowest end of the AA range.
INVESTMENT RESTRICTIONS
The Trust has a number of policies about what it can and
cannot do. Certain of these policies, identified in the
Prospectus and Additional Statement as "fundamental policies,"
cannot be changed unless the holders of a "majority," as defined
in the 1940 Act, of the Trust's outstanding shares vote to
change them. (See the Additional Statement for a definition of
such a majority.) All other policies can be changed from time to
time by the Board of Trustees without shareholder approval. Some
of the more important of the Trust's fundamental policies, not
otherwise identified in the Prospectus, are set forth below;
others are listed in the Additional Statement.
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than those listed
under "Investment of the Trust's Assets"; the Trust may also
purchase and sell Futures and options on them within the limits
there discussed.
2. The Trust has industry investment requirements.
The Trust cannot buy the Obligations 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; Hawaiian
Obligations (except for the industrial development bonds
discussed below), U.S. Government Securities and domestic bank
Obligations are not included in this limit. In applying this
restriction, the Trust will consider that a non-governmental user
of facilities financed by industrial development bonds is an
issuer in an industry.
3. The Trust can make loans only by lending securities or
entering into repurchase agreements.
The Trust can buy those Obligations which it is permitted to
buy (see "Investment of the Trust's Assets"); this is investing,
not making a loan. The Trust can, to increase its income, lend
its portfolio securities up to 10% of the value of its total
assets on a collateralized basis to broker-dealers, banks and
certain financial institutions, (see the Additional Statement)
and enter into repurchase agreements (see "Repurchase Agreements"
above). The Trust 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 Trust 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. Income from securities loans is taxable and therefore it is
not included in the "exempt-interest" dividends which the Trust
may pay.
4. The Trust can only borrow in limited amounts for special
purposes.
The Trust can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets and 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. However, this shall not prohibit margin
arrangements in connection with the purchase or sale of
Municipal Bond Index Futures, U.S. Government Securities Futures
or options on them, or the payment of premiums on those options.
Interest on borrowings would reduce the Trust's income. The Trust
will not purchase any Obligations while it has any outstanding
borrowings which exceed 5% of the value of its total assets.
Except in connection with borrowings, the Trust will not issue
senior securities.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Trust's
three classes and offering price per share of each class is
determined as of 4:00 p.m., New York time, on each day that the
New York Stock Exchange is open (a "business day"), by dividing
the value of the Trust's net assets (i.e., the value of the
assets less liabilities) allocable to each class by the total
number of shares of such class then outstanding. Determination of
the value of the Trust's assets is subject to the direction and
control of the Trust's Board of Trustees. In general, it is based
on market value, except that Hawaiian Obligations maturing in 60
days or less are generally valued at amortized cost; see the
Additional Statement for further information.
HOW TO INVEST IN THE TRUST
Institutional Class Shares (Class Y Shares) are offered only
to institutional investors for investments held in a fiduciary,
advisory, agency, custodial or similar capacity, or through them
to their clients, and are not offered directly to retail
customers. Class Y Shares are offered at net asset value with no
sales charge, no redemption fee, no contingent deferred sales
charge and no distribution fee.
How to Purchase Class Y Shares
Class Y Shares of the Trust may be purchased through any
investment broker or dealer (a "selected dealer") which has a
sales agreement with Aquila Distributors, Inc. (the
"Distributor") or through the Distributor. There are two ways to
make an initial investment: (i) order the shares through your
investment broker or dealer, if it is a selected dealer; or (ii)
mail the Application with payment to Administrative Data
Management Corp. (the "Agent") at the address on the Application.
There is no sales charge on initial or subsequent investments.
You are urged to complete an Application and send it to the Agent
so that expedited shareholder services can be established at the
time of your investment.
The minimum initial investment for Class Y Shares is
$1,000, except as otherwise stated in the Prospectus or
Additional Statement. You may also make an initial investment by
establishing an Automatic Investment Program of at least $50. To
do this you must open an account for automatic investments of at
least $50 each month and make an initial investment of at least
$50. (See below and "Automatic Investment Program" in the
Application.) Such investment must be drawn in United States
dollars on a United States commercial or savings bank, a credit
union or a United States branch of a foreign commercial bank
(each of which is a "Financial Institution"). You may make
subsequent investments in Class Y Shares in any amount (unless
you have an Automatic Withdrawal Plan). Your subsequent
investment may be made through a selected dealer or by forwarding
payment to the Agent, with the name(s) of account owner(s), the
account number and the name of the Trust. With subsequent
investments, please send the pre-printed stub attached to the
Trust's confirmations.
Subsequent investments of $50 or more in Class Y Shares can
be made by electronic funds transfer from your demand account at
a Financial Institution. To use electronic funds transfer for
your purchases, your Financial Institution must be a member of
the Automated Clearing House and the Agent must have received
your completed Application designating this feature, or, after
your account has been opened, a Ready Access Features form
available from the Distributor or the Agent. A pre-determined
amount can be regularly transferred for investment ("Automatic
Investment"), or single investments can be made upon receipt by
the Agent of telephone instructions from anyone ("Telephone
Investment"). The maximum amount of each Telephone Investment is
$50,000. Upon 30 days' written notice to shareholders, the Trust
may modify or terminate these investment methods at any time or
charge a service fee, although no such fee is currently
contemplated.
The offering price for Class Y Shares is the net asset value
per share. The offering price determined on any day applies to
all purchase orders received by the Agent from selected dealers
that day, except that orders received by it after 4:00 p.m. New
York time will receive that day's offering price only if such
orders were received by selected dealers from customers prior to
such time and transmitted to the Distributor prior to its close
of business that day (normally 5:00 p.m. New York time); if not
so transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next
business day. In the case of Telephone Investment your order will
be filled at the next determined offering price. If your order is
placed after the time for determining the net asset value of the
Trust shares for any day it will be executed at the price
determined on the following business day. The sale of shares will
be suspended during any period when the determination of net
asset value is suspended and may be suspended by the Distributor
when the Distributor judges it in the Trust's best interest to do
so.
At the date of the Prospectus, Class Y Shares of the
Trust are registered for sale only in the following states:
Hawaii, Alaska, California, Colorado, District of Columbia,
Florida, Illinois, Nevada, New Jersey, New York and Virginia.
If you do not reside in those states and are not an
institutional investor, you should not purchase Class Y Shares of
the Trust. If shares are sold outside of those states, except to
certain institutional investors, the Trust can redeem them. Such
a redemption may result in a loss to you and may have tax
consequences. In addition, if your state of residence is not
Hawaiian, the dividends from the Trust may not be exempt from
income tax of the state in which you reside. Accordingly, you
should consult your tax adviser before acquiring shares of the
Trust.
Possible Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of
any class of shares of the Trust. Additional compensation may
include payment or partial payment for advertising of the Trust's
shares, payment of travel expenses, including lodging, incurred
in connection with attendance at sales seminars taken by
qualifying registered representatives to locations within or
outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences. In some instances, such compensation may be made
available only to certain dealers whose representatives have sold
or are expected to sell significant amounts of such shares.
Dealers may not use sales of the Trust's shares to qualify for
the incentives to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. The cost to the
Distributor of such promotional activities and such payments to
participating dealers will not exceed the amount of the sales
charges in respect of sales of all classes of shares of the Trust
effected through such participating dealers, whether retained by
the Distributor or reallowed to participating dealers. No such
additional compensation to dealers in connection with sales of
shares of the Trust will affect the price you pay for shares or
the amount that the Trust will receive from such sales. Any of
the foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and dealers may receive different levels of
compensation for selling different classes of shares.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to
you in an account maintained for you at the Agent in full and
fractional shares of the Trust (rounded to the nearest 1/1000th
of a share). No share certificates will be issued for Class Y
Shares.
The Trust and the Distributor reserve the right to 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
The Trust has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule 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 written
plan adopted under the Rule. No payments under the Plan from
assets represented by Class Y Shares are authorized.
The Plan contains provisions designed to protect against any
claim against or involving the Trust that some of the expenses
which might be considered to be sales-related which the Trust
pays or may pay come within the purview of the Rule. The Trust
believes that except for payments made with respect to Class A
Shares and Class C Shares it is not financing any such activity
and does not consider any payment enumerated in such provisions
as so financing any such activity. If and to the extent that any
payment as specifically listed in the Plan (see the Additional
Statement) is considered to be primarily intended to result in or
as indirect financing of any activity which is primarily intended
to result in the sale of Trust shares, these payments are
authorized under the Plan. In addition, if the Administrator, out
of its own funds, makes payment for distribution expenses such
payments are authorized. See the Additional Statement.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your Class Y Shares at the
net asset value next determined after acceptance of your
redemption request at the Agent. Redemptions can be made by the
various methods described below. There is no minimum period for
any investment in the Trust, except for shares recently purchased
by check, Automatic Investment or Telephone Investment as
discussed below. There are no redemption fees or penalties on
redemption of Class Y Shares. A redemption may result in a
transaction taxable to you.
For your convenience the Trust offers expedited redemption
for Class Y Shares to provide you with a high level of liquidity
for your investment.
Expedited Redemption Methods
You have the flexibility of two expedited methods of
initiating redemptions.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have predesignated
or
b) by check in the amount of $50,000 or less, mailed to you,
if your shares are registered in your name at the Trust and
the check is sent to your address of record, provided that
there has not been a change of your address of record during
the 30 days preceding your redemption request. You can make
only one request for telephone redemption by check in any
7-day period.
See "Redemption Payments," below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-228-4228 toll free or 732-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
2. By FAX or Mail. You may also request redemption
payments to a predesignated Financial Institution account by a
letter of instruction sent to: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, by FAX at 732-855-5730 or
by mail at 581 Main Street, Woodbridge, NJ 07095-1198, indicating
account name(s), account number, amount to be redeemed, and any
payment directions, signed by the registered holder(s). Signature
guarantees are not required. See "Redemption Payments," below for
payment methods.
If you wish to have redemption proceeds sent to a
Financial Institution Account, you should so elect on the
Expedited Redemption section of the Application or the Ready
Access Features form and provide the required information
concerning your Financial Institution account number. The
Financial Institution account must be in the exclusive name(s) of
the shareholder(s) as registered with the Trust. You may change
the designated Financial Institution account at any time by
completing and returning a Ready Access Features form. For
protection of your assets, this form requires signature
guarantees and possible additional documentation.
Regular Redemption Method
If you own Class Y Shares registered on the books of the
Trust, and you have not elected Expedited Redemption to a
predesignated Financial Institution account, you must use the
Regular Redemption Method. Under this redemption method you
should send a letter of instruction to: Administrative Data
Management Corp., Attn: Aquilasm Group of Funds, 581 Main Street,
Woodbridge, NJ 07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the
Trust);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
below.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required
if sufficient documentation is not on file with the Agent.
Additional documentation may be required where shares are held by
certain types of shareholders such as corporations, partnerships,
trustees or executors, or if redemption is requested by other
than the shareholder of record. If redemption proceeds of $50,000
or less are payable to the record holder and are to be sent to
the record address, no signature guarantee is required, except as
noted above. In all other cases, signatures must be guaranteed by
a member of a national securities exchange, a U.S. bank or trust
company, a state-chartered savings bank, a federally chartered
savings and loan association, a foreign bank having a U.S.
correspondent bank, a participant in the Securities Transfer
Association Medallion Program (STAMP), the Stock Exchanges
Medallion Program (SEMP) or the New York Stock Exchange, Inc.
Medallion Signature Program (MSP). A notary public is not an
acceptable signature guarantor.
Redemption Payments
Redemption payments will ordinarily be mailed to you at your
address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will,
wherever possible, be wired or transferred through the facilities
of the Automated Clearing House to the Financial Institution
account specified in the Expedited Redemption section of your
Application or Ready Access Features form. The Trust may impose a
charge, not exceeding $5.00 per wire redemption, after written
notice to shareholders who have elected this redemption
procedure. The Trust has no present intention of making this
charge. Upon 30 days' written notice to shareholders, the Trust
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 presently 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,
it may charge you a fee for this service.
The Trust will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven
days after acceptance of such a redemption request. However, the
right of redemption may be suspended or the date of payment
postponed (i) during periods when the New York Stock Exchange is
closed for other than weekends and holidays or when trading on
such Exchange is restricted as determined by the Securities and
Exchange Commission by rule or regulation; (ii) during periods in
which an emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption of 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 Financial Institution 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 Trust, that the purchase check or Automatic
Investment or Telephone Investment will be honored. Possible
delays in payment of redemption proceeds can be eliminated by
using wire payments or Federal Reserve drafts to pay for
purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Trust to
make payment wholly or partly in cash, the Trust may pay the
redemption price in whole or in part by the distribution in kind
of securities from the portfolio of the Trust, in lieu of cash,
in conformity with applicable rules of the Securities and
Exchange Commission. See the Additional Statement for details.
The Trust has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 as a result of shareholder redemptions
or failure to meet the minimum investment level under an
Automatic Purchase Program. If the Board elects to do this,
shareholders who are affected will receive prior written notice
and will be permitted 60 days to bring their accounts up to the
minimum before this redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase shares Class Y Shares of the Trust having a net asset
value of at least $5,000.
Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions
must be reinvested in your shareholder account. Redemption of
shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Trust are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Trust's Trustees and officers and provides
further information about them.
The Advisory Agreement
Hawaiian Trust Company, Limited (the "Adviser") supervises
the investment program of the Trust and the composition of its
portfolio.
The services of the Adviser are rendered under an Investment
Advisory Agreement (the "Advisory Agreement") which provides,
subject to the control of the Board of Trustees, for investment
supervision and for either keeping the accounting records of the
Trust, including the computation of the net asset value per share
and the dividends, or, at the Adviser's expense and
responsibility, delegating these accounting duties in whole or in
part to a company satisfactory to the Trust. The Advisory
Agreement states that the Adviser shall, at its expense, provide
to the Trust all office space and facilities, equipment and
clerical personnel necessary for the carrying out of the
Adviser's duties under the Advisory Agreement.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Trust and of
those Trustees, if any, who are affiliated with the Adviser,
provided that if a Trustee is an affiliate of the Adviser solely
by reason of being a member of its Board of Directors, the Trust
may pay compensation to such Trustee, but at a rate no greater
than the rate it pays to its other Trustees. Under the Advisory
Agreement, the Trust 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 the Advisory Agreement, all
costs and expenses not expressly assumed by the Adviser or by the
Administrator under the Administration Agreement or by the
Trust's Distributor (principal underwriter) are paid by the
Trust. The Advisory Agreement lists examples of such expenses
borne by the Trust, 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 Trust and its shares under Federal and State securities laws,
interest, taxes and brokerage commissions, and non-recurring
expenses, including litigation.
Under the Advisory Agreement, the Trust pays a fee payable
monthly and computed on the net asset value of the Trust as of
the close of business each business day at the annual rate of
0.19 of 1% of such net asset value, provided, however, that for
any day that the Trust pays or accrues a fee under the
Distribution Plan of the Trust based upon the assets of the
Trust, the annual investment advisory fee shall be payable at the
annual rate of 0.14 of 1% of such net asset value. Such fees
under the Plan commenced July 1, 1992 and since that date the
Trust's investment advisory fee has been payable at the annual
rate of 0.14 of 1% of such net asset value.
The Adviser agrees that the above fee shall be reduced, but
not below zero, by an amount equal to its pro-rata portion (based
upon the aggregate fees of the Adviser and the Administrator) of
the amount, if any, by which the total expenses of the Trust in
any fiscal year, exclusive of taxes, interest and brokerage fees,
shall exceed the lesser of (i) 2.5% of the first $30 million of
average annual net assets of the Trust plus 2% of the next $70
million of such assets and 1.5% of its average annual net assets
in excess of $100 million, or (ii) 25% of the Trust's total
annual investment income.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Trust; see the
Additional Statement. Under these provisions the Adviser, in
making such allocation, is authorized to consider sales of the
Trust's shares and sales of shares of certain other investment
companies (see "Exchange Privilege" below).
The Administration Agreement
Under an Administration Agreement (the "Administration
Agreement"), 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 Trust and pays all compensation of the
Trust's Trustees, officers and employees who are affiliated
persons of the Administrator.
Under the Administration Agreement, subject to the
control of the Trust's Board of Trustees, the Administrator
provides all administrative services to the Trust 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 Trust, and
overseeing all relationships between the Trust and its transfer
agent, custodian, legal counsel, auditors and principal
underwriter, including the negotiation of agreements in relation
thereto, the supervision and coordination of the performance of
such agreements, and the overseeing of all administrative matters
which are necessary or desirable for effective operation of the
Trust and for the sale, servicing, or redemption of the Trust's
shares. See the Additional Statement for a further description of
functions listed in the Administration Agreement as part of such
duties.
Under the Administration Agreement, the Trust pays the
Administrator, and the Administrator accepts as full compensation
for all services rendered thereunder, a fee payable monthly and
computed on the net asset value of the Trust at the end of each
business day at the annual rate of 0.36 of 1% of such net asset
value, provided, however, that for any day that the Trust pays or
accrues a fee under the Distribution Plan of the Trust based upon
the assets of the Trust, the annual administration fee will be
payable at the annual rate of 0.26 of 1% of such net asset value.
Such fees under the Distribution Plan commenced July 1, 1992 and
since that date the Trust's administration fee is payable at the
rate of 0.26 of 1% of such net asset value. The Administrator
agrees that the above fee shall be reduced, but not below zero,
by an amount equal to its pro-rata portion (based upon the
aggregate fees of the Adviser and the Administrator) of the
amount, if any, by which the total expenses of the Trust in any
fiscal year, exclusive of taxes, interest and brokerage fees,
exceed the lesser of (i) 2.5% of the first $30 million of average
annual net assets of the Trust plus 2% of the next $70 million of
such assets and 1.5% of its average annual net assets in excess
of $100 million, or (ii) 25% of the Trust's total annual
investment income.
Information about the Adviser,
the Administrator and the Distributor
The Adviser, a Hawaii corporation organized in 1898, is
the largest trust company in the State of Hawaii in terms of
assets under administration. As of March 31, 1997, the Adviser
had over $12 billion of clients' assets under administration. The
Adviser is not authorized to, and does not carry on, a banking
business. The Adviser is a wholly-owned subsidiary of Bank of
Hawaii, all of whose shares are owned by 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. See the Additional Statement as
to the legality, under the Federal banking laws, of the Adviser's
acting as the Trust's investment adviser.
Ms. Lorene Okimoto has been the Trust's portfolio manager
since December, 1991. She has been employed by the Adviser as a
portfolio manager since 1989, and has been a Vice President of
the Adviser since 1993. She was employed by the Bank of Hawaii
from 1979 to 1984 and by Bank of Hawaii International Corporation
from 1984 to 1988. Ms. Okimoto holds a B.A. degree from the
University of Hawaii.
The Trust's Administrator is founder and administrator to
the Aquilasm Group of Funds, which consists of tax-free municipal
bond funds, money market funds and two equity funds. As of June
30, 1997, these funds had aggregate assets of approximately $2.6
billion, of which approximately $1.9 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). See the Additional Statement for information on Mr.
Herrmann.
For the Trust's fiscal year ended March 31, 1997 fees of
$915,693 and $1,700,577, respectively, were paid and/or accrued
to the Adviser and to the Administrator under the Advisory
Agreement and the Administration Agreement.
The Distributor currently handles the distribution of
shares of fourteen funds (seven tax-free municipal bond funds,
five money market 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.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which
are currently owned 75% by Mr. Herrmann, and 25% by Diana P.
Herrmann will be owned by certain directors and/or officers of
the Administrator and/or the Distributor, including Mr.
Herrmann.
The Adviser, the Administrator and the Distributor have
entered into non-binding principles of cooperation, with the
approval of the Board of Trustees, relating to various matters
including suggestion of nominees to the Board of Trustees. In
addition, the Trust has entered into separate agreements with the
Adviser, the Administrator and the Distributor under which the
service providers have respectively agreed not to serve in the
same capacities for any mutual fund with the same objectives as
the Trust under the circumstances described in these agreements.
See the Additional Statement.
DIVIDEND AND TAX INFORMATION
Dividends and Distributions
The Trust will declare all of its net income, as defined
below, as dividends on every day, including weekends and
holidays, on those shares outstanding for which payment was
received by the close of business on the preceding business day.
Net income for dividend purposes includes all interest income
accrued by the Trust since the previous dividend declaration,
including accretion of any original issue discount, less expenses
paid or accrued. As such net income will vary, the Trust's
dividends will also vary. In addition, the dividends of each
class can vary because each class will bear certain
class-specific charges. Dividends and other distributions paid by
the Trust with respect to each class of its shares are calculated
at the same time and in the same manner.
It is the Trust's present policy to pay dividends so that
they will be received or credited by approximately the first day
of each month. On the Application or by completing a Ready Access
Features form, you may elect to have 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.
Redeemed shares continue to earn dividends through and
including the earlier of (i) the day before the day on which the
redemption proceeds are mailed, wired or transferred by the
facilities of the Automated Clearing House by the Agent or paid
by the Agent to a selected dealer; or (ii) the third day on which
the New York Stock Exchange is open after the day on which the
net asset value of the redeemed shares has been determined. (See
"How To Redeem Your Investment").
Net investment income includes amounts of income from the
Hawaiian Obligations in the Trust's portfolio which are allocated
as "exempt-interest dividends." "Exempt-interest dividends" are
exempt from regular Federal income tax. The allocation of
"exempt-interest dividends" will be made by the use of one
designated percentage applied uniformly to all income dividends
declared during the Trust's tax year. Such designation will
normally be made in the first month after the end of each of the
Trust's fiscal years as to income dividends paid in the prior
year. It is possible that in certain circumstances, a small
portion of the dividends paid by the Trust will be subject to
income taxes. During the Trust's fiscal year ended March 31,
1997, 97.89% of the Trust's dividends were "exempt-interest
dividends." For the calendar year 1996, 0.96 of 1% of the total
dividends paid were taxable.The percentage of income designated
as tax-exempt for any particular dividend may be different from
the percentage of the Trust's income that was tax-exempt during
the period covered by the dividend.
Distributions ("short-term gains distributions") from net
realized short-term gains, if any, and distributions ("long-term
gains distributions"), if any, from the excess of net long-term
capital gains over net short-term capital losses realized through
October 31st of each year and not previously paid out will be
paid out after that date; the Trust may also pay supplemental
distributions after the end of its fiscal year. If net capital
losses are realized in any year, they are charged against capital
and not against net investment income which is distributed
regardless of gains or losses. The Trust may be required to
impose backup withholding at a rate of 31% upon payment of
redemptions to shareholders, and from short- and long-term gains
distributions (if any) and any other distributions that do not
qualify as "exempt-interest dividends," if shareholders do not
comply with provisions of the law relating to the furnishing of
taxpayer identification numbers and reporting of dividends.
Unless you request otherwise by letter addressed to the
Agent or by filing an appropriate application prior to a given
ex-dividend date, dividends and distributions will be
automatically reinvested in full and fractional shares of the
Trust at net asset value on the record date for the dividend or
distribution or other date fixed by the Board of Trustees. An
election to receive cash will continue in effect until written
notification of a change is received by the Agent. All
shareholders, whether their dividends are received in cash or
are being reinvested, will receive a monthly account summary
indicating the current status of their investment. There is no
fixed dividend rate. Corporate shareholders of the Trust are not
entitled to any deduction for dividends received from the Trust.
Tax Information
The following is a brief description of certain federal
and State of Hawaii income tax considerations with respect to the
Trust and investment therein. There can be no assurance that such
considerations will not be altered by future changes in the law
or administrative interpretations. In addition, you may be
subject to local taxes or to tax in a state other than Hawaii.
These taxes are not described herein and may differ from the
taxes imposed under federal and Hawaii law.
The Trust qualified during its last fiscal year as a
"regulated investment company" under the Code, and intends to
continue to so qualify. If it does so qualify, it will not be
liable for Federal income taxes on amounts paid by it as
dividends and distributions. However, the Code contains a number
of complex tests relating to such qualification and it is
possible although not likely that the Trust might not meet one or
more of these tests in any particular year. If it does not so
qualify, it would be treated for tax purposes as an ordinary
corporation, would receive no tax deduction for payments made to
shareholders and would be unable to pay dividends or
distributions which would qualify as "exempt-interest dividends"
or "capital gains dividends," as discussed below.
The Trust intends to qualify during each fiscal year
under the Code to pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends which are derived from
net income earned by the Trust on Hawaiian Obligations will be
excludable from gross income of the shareholders for regular
Federal income tax purposes. Capital gains dividends are not
included in exempt-interest dividends. Although "exempt-interest
dividends" are not taxed, each taxpayer must report the total
amount of tax-exempt interest (including exempt-interest
dividends from the Trust) received or acquired during the
year.
The Omnibus Budget Reconciliation Act of 1993 requires that
either gains realized by the Trust on the sale of municipal
obligations acquired after April 30, 1993 at a price which is
less than face or redemption value be included as ordinary income
to the extent such gains do not exceed such discount or that the
discount be amortized and included ratably in taxable income.
There is an exception to the foregoing treatment if the amount of
the discount is less than 0.25% of face or redemption value
multiplied by the number of years from acquisition to maturity.
The Trust will report such ordinary income in the years of sale
or redemption rather than amortize the discount and report it
ratably. To the extent the resultant ordinary taxable income is
distributed to shareholders, it will be taxable to them as
ordinary income.
Capital gains dividends (net long-term gains over net
short-term losses which the Trust distributes and so designates)
are reportable by shareholders as long-term capital gains. This
is the case whether the shareholder takes the distribution in
cash or elects to have the distribution reinvested in Trust
shares and regardless of the length of time the shareholder has
held his or her shares. Capital gains are taxed at the same rates
as ordinary income, except that for individuals, trusts and
estates the maximum tax rate on capital gains distributions is
28% even if the applicable rate on ordinary income for such
taxpayers is higher than 28%.
Short-term gains, when distributed, are taxed to
shareholders as ordinary income. Capital losses of the Trust are
not distributed but carried forward by the Trust to offset gains
in later years and thereby lessen the later-year capital gains
dividends and amounts taxed to shareholders.
The Trust's gains or losses on sales of Obligations will be
long-term or short-term depending upon the length of time the
Trust has held such Obligations. Capital gains and losses of the
Trust will also include gains and losses on Futures and Options,
if any, including gains and losses actually realized on sales and
exchanges and gains and losses deemed to be realized. Those
deemed to be realized are on Futures and Options held by the
Trust at year-end, which are "marked to the market," that is,
deemed sold for fair market value. Net gains or losses realized
and deemed realized on Futures and Options will be reportable by
the Trust as long-term to the extent of 60% of the gains or
losses and short-term to the extent of 40% regardless of the
actual holding period of such investments.
Information as to the tax status of the Trust's dividends
and distributions will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders
to enable them to purchase or carry shares of the Trust 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 Trust
may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the
purchase of shares. The receipt of exempt-interest dividends from
the Trust by an individual shareholder may result in some portion
of any social security payments or railroad retirement benefits
received by the shareholder or the shareholder's spouse being
included in taxable income.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds
or private activity bonds should consult their own tax advisers
before purchasing shares.
While interest from all Hawaiian Obligations is tax-exempt
for purposes of computing the shareholder's regular tax, interest
from so-called private activity bonds issued after August 7,
1986, constitutes a tax preference for both individuals and
corporations and thus will enter into a computation of the
alternative minimum tax. Whether or not that computation will
result in a tax will depend on the entire content of the
taxpayer's return. The Trust will not invest in the types of
Hawaiian Obligations which would give rise to interest that would
be subject to alternative minimum taxation if more than 20% of
its net assets would be so invested, and may refrain from
investing in that type of bond completely. The 20% limit is a
fundamental policy of the Trust.
Corporate shareholders must add to or subtract from
alternative minimum taxable income, as calculated before taking
into consideration this adjustment, 75% of the difference between
what is called adjusted current earnings (essentially current
earnings and profits) and alternative minimum taxable income, as
previously calculated. Since tax-exempt bond interest is included
in earnings and profits and therefore in adjusted current
earnings, this adjustment will tend to make it more likely that
corporate shareholders will be subject to the alternative minimum
tax.
Tax Effects of Redemptions
Normally, when you redeem shares of the Trust you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid
for the shares. The gain or loss will be long-term if you held
the redeemed shares for over a year, and short-term if for a year
or less. However, if shares held for six months or less are
redeemed and you have a loss, two special rules apply: the loss
is reduced by the amount of exempt-interest dividends, if any,
which you received on the redeemed shares, and any loss over and
above the amount of such exempt-interest dividends is treated as
a long-term loss to the extent you have received capital gains
dividends on the redeemed shares.
Hawaiian Tax Information
The Trust, and dividends and distributions made by the Trust
to Hawaii residents, will generally be treated for Hawaii income
tax purposes in the same manner as they are treated under the
Code for Federal income tax purposes. Under Hawaiian law,
however, interest derived from obligations of states (and their
political subdivisions) other than Hawaii will not be exempt from
Hawaiian income taxation. (Interest derived from bonds or
obligations issued by or under the authority of the following is
exempt from Hawaiian income taxation: Guam, Northern Mariana
Islands, Puerto Rico, and the Virgin Islands.)
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 services loan
companies, financial corporations, and small business investment
companies.
Persons or entities who are not Hawaii residents should not
be subject to Hawaiian income taxation on dividends and
distributions made by the Trust but may be subject to other state
and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Trust and certain tax-free municipal bond funds and two
equity funds (the "Bond or Equity Funds") and certain money
market funds (the "Money-Market Funds"), all of which are
sponsored by Aquila Management Corporation and Aquila
Distributors, Inc., and have the same Administrator and
Distributor as the Trust. All exchanges are subject to certain
conditions described below. As of the date of the Prospectus, the
Aquila-sponsored Bond or Equity Funds are this Trust, Aquila
Rocky Mountain Equity Fund, Aquila Cascadia Equity Fund, Tax-Free
Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For
Utah and Narragansett Insured Tax-Free Income Fund. The Aquila
Money-Market Funds are Capital Cash Management Trust, Pacific
Capital Cash Assets Trust (Original Shares), Pacific Capital
Tax-Free Cash Assets Trust (Original Shares), Pacific Capital
U.S. Treasuries Cash Assets Trust (Original Shares) and Churchill
Cash Reserves Trust.
Class Y Shares of the Trust may be exchanged only for Class
Y Shares of the Bond or Equity Funds or for shares of a
Money-Market Fund.
Under the Class Y exchange privilege, once Class Y Shares
of any Bond or Equity Fund have been purchased, those shares (and
any Class Y Shares acquired as a result of reinvestment of
dividends and/or distributions) may be exchanged any number of
times between Money-Market Funds and Class Y Shares of the Bond
or Equity Funds without the payment of any sales charge.
The "Class Y Eligible Shares" of any Bond or Equity Fund
are those shares which were (a) acquired by direct purchase,
including by exchange by an institutional investor from a
Money-Market Fund, or which were received in exchange for Class Y
Shares of another Bond or Equity Fund; or (b) acquired as a
result of reinvestment of dividends and/or distributions on
otherwise Class Y Eligible Shares. Shares of a Money-Market Fund
not acquired in exchange for Class Y Eligible Shares of a Bond
or Equity Fund can be exchanged for Class Y Shares of a Bond or
Equity Fund only by persons eligible to make an initial purchase
of Class Y Shares.
This Trust, as well as the Money-Market Funds and other 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 Trust
may also modify or terminate this exchange privilege at any time.
In the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take
effect on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset
value of the shares surrendered for exchange are at least equal
to the minimum investment requirements of the investment company
whose shares are being acquired and (iii) the ownership of the
accounts from which and to which the exchange is made are
identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-228-4228 toll free or 732-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
Exchanges of Class Y Shares will be effected at the relative
net asset values of the Class Y Shares being exchanged next
determined after receipt by the Agent of your exchange request.
Prices for exchanges are determined in the same manner as for
purchases of the Trust's shares. See "How to Invest in the
Trust."
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the
realization of a capital gain or loss, depending on the cost or
other tax basis of the shares exchanged and the holding period
(see "Tax-Effects of Redemptions" and the Additional Statement);
no representation is made as to the deductibility of any such
loss should such occur.
Dividends paid by the Money-Market Funds are taxable,
except to the extent that a portion or all of the dividends paid
by Pacific Capital Tax-Free Cash Assets Trust (a tax-free
money-market Fund) are exempt from regular Federal income tax,
and to the extent that a portion or all of the dividends paid by
Pacific Capital U.S. Treasuries Cash Assets Trust (which invests
in U.S. Treasury obligations) are exempt from state income taxes.
Dividends paid by Aquila Rocky Mountain Equity Fund 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 bond
fund or a tax-free money-market fund under the exchange privilege
arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Trust's
performance, including current yield, taxable equivalent yield,
various expressions of total return, current distribution rate
and taxable equivalent distribution rate.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes any applicable sales charge) for 1-, 5- and 10-year
periods and for a period since the inception of the Trust, to the
extent applicable, through the end of such periods, assuming
reinvestment (without sales charge) of all distributions. The
Trust may also furnish total return quotations for other periods
or based on investments at various applicable sales charge levels
or at net asset value. For such purposes total return equals the
total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a
percentage of the purchase price. See the Additional
Statement.
Current yield reflects the income per share earned by each
of the Trust's portfolio investments; it is calculated by (i)
dividing the Trust's net investment income per share during a
recent 30-day period by (ii) the maximum public offering price on
the last day of that period and by (iii) annualizing the result.
Taxable equivalent yield shows the yield from a taxable
investment that would be required to produce an after-tax yield
equivalent to that of the Trust, which invests in tax-exempt
obligations. It is computed by dividing the tax-exempt portion of
the Trust's yield (calculated as indicated) by one minus a stated
income tax rate and by adding the product to the taxable portion
(if any) of the Trust's yield. See the Additional Statement.
Current yield and taxable equivalent yield, which are
calculated according to a formula prescribed by the Securities
and Exchange Commission (see the Additional Statement), are not
indicative of the dividends or distributions which were or will
be paid to the Trust's shareholders. Dividends or distributions
paid to shareholders are reflected in the current distribution
rate or taxable equivalent distribution rate which may be quoted
to shareholders. The current distribution rate is computed by (i)
dividing the total amount of dividends per share paid by the
Trust during a recent 30-day period by (ii) the current maximum
offering price and by (iii) annualizing the result. A taxable
equivalent distribution rate shows the taxable distribution rate
that would be required to produce an after-tax distribution rate
equivalent to the Trust's distribution rate (calculated as
indicated above). The current distribution rate differs from the
current yield computation because it could include distributions
to shareholders from sources, if any, other than dividends and
interest, such as short-term capital gains or return of capital.
If distribution rates are quoted in advertising, they will be
accompanied by calculations of current yield in accordance with
the formula of the Securities and Exchange Commission.
In each case performance figures are based upon past
performance, reflect as appropriate all recurring charges against
the Trust's income net of fee waivers and reimbursement of
expenses, if any, and will assume the payment of the maximum
sales charge, if any, on the purchase of shares, but not on
reinvestment of income dividends. The investment results of the
Trust, like all other investment companies, will fluctuate over
time; thus, performance figures should not be considered to
represent what an investment may earn in the future or what the
Trust's yield, tax equivalent yield, distribution rate, taxable
equivalent distribution rate or total return may be in any future
period. The annual report of the Trust contains additional
performance information that will be made available upon request
and without charge.
Description of the Trust and its Shares
The Trust is an open-end, non-diversified management
investment company organized in 1984 as a Massachusetts business
trust. (See "Investment of the Trust's Assets" for further
information about the Trust's status as "non-diversified"). 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 the
Trust with each other share of its class; shares of the
respective classes represent proportionate interests in the Trust
in accordance with their respective net asset values. Upon
liquidation of the Trust, shareholders are entitled to share
pro-rata in the net assets of the Trust available for
distribution to shareholders, in accordance with the respective
net asset values of the shares of each of the Trust's classes at
that time. All shares are presently divided into three classes;
however, 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, which may differ from each other as
provided in rules and regulations of the Securities and Exchange
Commission or by exemptive order.The Board of Trustees may, at
its own discretion, create additional series of shares, each of
which may have separate assets and liabilities (in which case any
such series will have a designation including the word "Series").
See the Additional Statement for further information about
possible additional series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
The other two classes of shares of the Trust are
Front-Payment Class Shares ("Class A Shares") and Level-Payment
Class Shares ("Class C Shares"), which are fully described in a
separate prospectus that can be obtained by calling the Trust at
800-228-4227.
The primary distinction among the Trust's three classes
of shares lies in their different sales charge structures and
ongoing expenses, which are likely to be reflected in differing
yields and other measures of investment performance. All three
classes represent interests in the same portfolio of Hawaiian
Obligations and have the same rights, except that each class
bears the separate expenses, if any, of its participation in the
Distribution Plan and Shareholder Services Plan and has exclusive
voting rights with respect to such participation. There are no
Distribution fees with respect to Class Y Shares.
The Trust's Distribution Plan has three parts. In
addition to the defensive provisions described above, Parts I and
II of the Plan authorize payments, to certain "Qualified
Recipients," out of the Trust assets allocable to the Class A
Shares and Class C Shares, respectively. See the Additional
Statement. The Trust has also adopted a Shareholder Services Plan
under which the Trust is authorized to make certain payments out
of the Trust assets allocable to the Class C Shares. See the
Additional Statement.
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) per share 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. Shares vote by
classes on any matter specifically affecting one or more classes,
such as an amendment of an applicable part of the Distribution
Plan. 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, except that the Trust's Board of
Trustees may change the name 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 the Trust.
If not so terminated, the Trust will continue indefinitely.
<PAGE>
APPLICATION FOR HAWAIIAN TAX-FREE TRUST
FOR CLASS Y SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: AQUILAsm GROUP OF FUNDS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
Tel.# 1-800-228-4228
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship unless
otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.________________________________________________________________ First
Name Middle Initial Last Name Social Security Number
2.________________________________________________________________ First
Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name Custodian for
____________________________________________________
Minor's First Name Middle Initial Last Name Under the ___________UGTMA**
_____________________________________ Name of State Minors
Social Security Number 4.
____________________________________________________
____________________________________________________
(Name of Corporation or Partnership. 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
Indicate Method of Payment (For either method, make check
payable to: HAWAIIAN TAX-FREE TRUST)
___Initial Investment $ ______________ (Minimum investment $1,000)
___Automatic Investment $______________ (Minimum $50)
For Automatic Investment of at least $50 per month, you must complete Step 3,
Section A, Step 4, Sections A & B and ATTACH A PRE-PRINTED DEPOSIT SLIP OR
VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise indicated
below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions 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. (A
Financial Institution is a commercial bank, savings bank or credit
union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Hawaiian Tax-Free Trust 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
Trust toll-free at 1-800-437-1000. 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, Administrative Data Management Corp. (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 Aquila SM Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
persons telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund 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
their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorneys 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.
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
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT YOU MUST ALSO
COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to my/our
account any drafts or debits drawn on my/our account initiated by the Agent,
Administrative Data Management Corp., and to pay such sums in accordance
therewith, provided my/our account has sufficient funds to cover such drafts
or debits. I/We further agree that your treatment of such orders will be the
same as if I/we personally signed or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you receive
my/our written instructions to cancel this service. I/We also agree that if
any such drafts or debits are dishonored, for any reason, you shall have no
liabilities.
Financial Institution Account Number _______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account is
registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(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. I/We acknowledge that shares purchased either through
Automatic Investment or Telephone Investment are subject to applicable
sales 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 183 days during each calendar year and does not conduct a business
in the U.S. which would receive any gain from the Trust, or is exempt
under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST, ALL
TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied by
proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trusts 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
1-800-228-4227 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.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to the terms
and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan") as
agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Trust purchased for
and held under the Plan, but the Agent will credit all such shares to the
Planholder on the records of the Trust. Any share certificates now held by
the Planholder may be surrendered unendorsed to the Agent with the
application so that the shares represented by the certificate may be held
under the Plan.
3. Dividends and distributions will be reinvested in shares of the Trust
at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of business
on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Trust) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with the
Trust's usual redemption procedures and will mail a check for the proceeds
of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Trust. The Agent will also terminate the Plan upon receipt
of evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of the Plan by the Agent or the Trust, shares
remaining unredeemed will be held in an uncertificated account in the name
of the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper instructions
are received from the Planholder, his executor or guardian, or as otherwise
appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Trust, the Planholder will be deemed to have appointed any successor
transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made. Accordingly,
a Planholder may not maintain this Plan while simultaneously making
regular purchases. While an occasional lump sum investment may be made,
such investment should normally be an amount equivalent to three times the
annual withdrawal or $5,000, whichever is less.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
(after September 30, 1997)
Pacific Century Trust
a division of
Bank of Hawaii
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Sherri Foster, Senior Vice President
William C. Wallace, Senior Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1104
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights
Table of Expenses
Financial Highlights
Introduction
Investment Of The Trust's Assets
Investment Restrictions
Net Asset Value Per Share
How To Invest In The Trust
How To Redeem Your Investment
Automatic Withdrawal Plan
Management Arrangements
Dividend And Tax Information
Exchange Privilege
General Information
Application
HAWAIIAN
TAX-FREE TRUST
A TAX-FREE
INCOME INVESTMENT
[LOGO]
PROSPECTUS
[LOGO]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
Hawaiian Tax-Free Trust
380 Madison Avenue, Suite 2300
New York, New York 10017
800-228-4227
212-697-6666
Statement of Additional Information
July 31, 1997
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. There are two Prospectuses for
the Trust dated: one Prospectus describes Front Payment Class
Shares ("Class A Shares") and Level Payment Class Shares ("Class
C Shares") of the Trust and the other describes Institutional
Class Shares ("Class Y Shares") of the Trust. References in the
Additional Statement to "the Prospectus" refer to either of these
Prospectuses. The Additional Statement should be read in
conjunction with the Prospectus for the class of shares in which
you are considering investing. Either or both Prospectuses may be
obtained from the Trust's Shareholder Servicing Agent,
Administrative Data Management Corp., by writing to: 581 Main
Street, Woodbridge, New Jersey 07095-1198 or by calling at the
following numbers:
800-288-4228 toll free or 732-855-5731
or from Aquila Distributors, Inc., the Trust's Distributor, by
writing to it at
380 Madison Avenue, Suite 2300, New York, New York 10017
or by calling: 800-228-4227 toll free
or 212-697-6666
The Annual Report of the Trust for the fiscal year ended
March 31, 1997 (audited) will be delivered with the Additional
Statement.
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . .2
Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . 10
Performance . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Restrictions . . . . . . . . . . . . . . . . . . . 14
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . 15
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . 21
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 23
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 23
Additional Information as to Management Arrangements . . . . . 30
Computation of Net Asset Value . . . . . . . . . . . . . . . . 34
Automatic Withdrawal Plan. . . . . . . . . . . . . . . . . . . 35
Additional Tax Information . . . . . . . . . . . . . . . . . . 36
Conversion of Class C Shares . . . . . . . . . . . . . . . . . 36
General Information . . . . . . . . . . . . . . . . . . . . . 37
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The investment objective and policies of the Trust are
described in the Prospectus, which refers to the matters
described below. See the Prospectus for the definitions of
"Hawaiian Obligations" and "Taxable Short-Term Obligations"
(collectively "Obligations").
Information On U.S. Government Securities
U.S. Government Securities (i.e., obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S.
Government, which in turn include Treasury Bills (which mature
within one year of the date they are issued) and Treasury Notes
and Bonds (which are issued with longer maturities).
All Treasury securities are backed by the full faith and credit
of the United States.
U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the Farmers
Home Administration, Federal Farm Credit System, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Housing Administration, Federal National Mortgage Association,
Financing Corporation, Government National Mortgage Association,
Resolution Funding Corporation, Small Business Administration,
Student Loan Marketing Association and the Tennessee Valley
Authority.
Securities issued or guaranteed by U.S. Government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States Government. 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
Government, 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 Trust will invest in securities of agencies and
instrumentalities only if Hawaiian Trust Company, Limited (the
"Adviser") is satisfied that the credit risk involved is minimal.
Ratings
The ratings assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") represent
their respective opinions of the quality of the municipal bonds
and notes and Taxable Short-Term Obligations which they undertake
to rate. It should be emphasized, however, that ratings are
general and not absolute standards of quality. Consequently,
obligations with the same maturity, stated interest rate and
rating may have different yields, while obligations of the same
maturity and stated interest rate with different ratings may have
the same yield. See Appendix A to this Additional Statement for
further information about the ratings of Moody's and S&P as to
the various rated Hawaiian Obligations and Taxable Short-Term
Obligations which the Trust may purchase.
The table below gives information as to the percentage of
Trust assets invested, as of March 31, 1997, in Hawaiian
Obligations in the various rating categories:
Highest rating (1) . . . . . . . . . . . . . . . . . . 77.31%
Second highest rating (2). . . . . . . . . . . . . . . . . 13.79%
Third highest rating (3) . . . . . . . . . . . . . . . . . 2.85%
Fourth highest rating (4). . . . . . . . . . . . . . . . . . 0.0%
Not rated: . . . . . . . . . . . . . . . . . . . . . . . . 6.05%
100.0%
(1) Aaa of Moody's or AAA of S&P (or other highest rating).
(2) Aa of Moody's or AA of S&P (or other second highest rating).
(3) A of Moody's or A of S&P (or other third highest rating).
(4) Baa of Moody's or BBB of S&P (or other fourth highest
rating).
When-Issued and Delayed Delivery Obligations
The Trust may buy Obligations on a when-issued or delayed
delivery basis. The purchase price and the interest rate payable
on the Obligations are fixed on the transaction date. At the time
the Trust makes the commitment to purchase Obligations on a
when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value each day of such
Obligations in determining its net asset value. The Trust will
make commitments for such when-issued transactions only when it
has the intention of actually acquiring the Obligations. The
Trust will maintain with the Custodian a separate account with
portfolio obligations in an amount at least equal to such
commitments. On delivery dates for such transactions, the Trust
will meet its commitments by selling the obligations held in the
separate account and/or from cash flow.
Loans of Portfolio Securities
The Trust may, to increase its income, lend its Obligations
on a short- or long-term basis to broker-dealers, banks or
certain other financial institutions (see below) if (i) the loan
is collateralized in accordance with applicable regulatory
requirements (the "Guidelines") and if (ii) after any loan, the
value of the Obligations loaned does not exceed 10% of the value
of its total assets. The financial institutions other than
broker-dealers or banks to which the Trust can lend its
Obligations are limited to "accredited investors," as that term
is defined in Section 2(15) of the Securities Act of 1933. (In
general, such institutions are insurance companies, investment
companies and certain employee benefit plans.) Under the present
Guidelines (which are subject to change) the loan collateral
must, on each business day, at least equal the value of the
loaned obligations and must consist of cash, bank letters of
credit or U.S. Government Securities. To be acceptable as
collateral, a letter of credit must obligate a bank to pay
amounts demanded by the Trust if the demand meets the terms of
the letter. Such terms and the issuing banks would have to be
satisfactory to the Trust. Any loan might be secured by any one
or more of the three types of collateral.
The Trust receives amounts equal to the interest or other
distributions on loaned Obligations and also receives one or more
of the negotiated loan fees, interest on Obligations used as
collateral or interest on the securities purchased with such
collateral, either of which type interest may be shared with the
borrower. The Trust may also pay reasonable finder's, custodian
and administrative fees but only to persons not affiliated with
the Trust. The terms of the Trust's loans will meet certain tests
under the Internal Revenue Code and permit the Trust to terminate
the loan and thus reacquire loaned securities on five days'
notice.
Futures Contracts and Options
Although the Trust does not presently do so, it is
permitted to buy and sell Futures contracts relating to municipal
bond indices ("Municipal Bond Index Futures") and to U.S.
Government securities ("U.S. Government Securities Futures,"
together referred to as "Futures"), and exchange traded options
based on Futures as a possible means to protect the asset value
of the Trust during periods of changing interest rates. The
following discussion is intended to explain briefly the workings
of Futures and options on them which would be applicable if the
Trust were to use them.
Unlike when the Trust purchases or sells a Hawaiian
Obligation, no price is paid or received by the Trust upon the
purchase or sale of a Future. Initially, however, when such
transactions are entered into, the Trust will be required to
deposit with the Futures commission merchant ("broker") an amount
of cash or Hawaiian Obligations equal to a varying specified
percentage of the contract amount. This amount is known as
initial margin. Subsequent payments, called variation margin, to
and from the broker, will be made on a daily basis as the price
of the underlying index or security fluctuates making the Future
more or less valuable, a process known as marking to market.
Insolvency of the broker may make it more difficult to recover
initial or variation margin. Changes in variation margin are
recorded by the Trust as unrealized gains or losses. Margin
deposits do not involve borrowing by the Trust and may not be
used to support any other transactions. At any time prior to
expiration of the Future, the Trust may elect to close the
position by taking an opposite position which will operate to
terminate the Trust's position in the Future. A final
determination of variation margin is then made. Additional cash
is required to be paid by or released to the Trust and it
realizes a gain or a loss. Although Futures by their terms call
for the actual delivery or acceptance of cash, in most cases the
contractual obligation is fulfilled without having to make or
take delivery. All transactions in the Futures markets are
subject to commissions payable by the Trust and are made, offset
or fulfilled through a clearing house associated with the
exchange on which the contracts are traded. Although the Trust
intends to buy and sell Futures only on an exchange where there
appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular
Future at any particular time. In such event, or in the event of
an equipment failure at a clearing house, it may not be possible
to close a Futures position.
Municipal Bond Index Futures currently are based on a
long-term municipal bond index developed by the Chicago Board of
Trade ("CBT") and The Bond Buyer (the "Municipal Bond Index").
Futures contracts based on the Municipal Bond Index began trading
on June 11, 1985. The Municipal Bond Index is comprised of 40
tax-exempt municipal revenue and general obligation bonds. Each
bond included in the Municipal Bond Index must be rated A or
higher by Moody's or S&P and must have a remaining maturity of 19
years or more. Twice a month new issues satisfying the
eligibility requirements are added to, and an equal number of old
issues are deleted from, the Municipal Bond Index. The value of
the Municipal Bond Index is computed daily according to a formula
based on the price of each bond in the Municipal Bond Index, as
evaluated by six dealer-to-dealer brokers.
The Municipal Bond Index Futures contract is traded only
on the CBT. Like other contract markets, the CBT assures
performance under Futures contracts through a clearing
corporation, a nonprofit organization managed by the exchange
membership, which is also responsible for handling daily
accounting of deposits or withdrawals of margin.
There are at present U.S. Government Securities Futures
contracts based on long-term Treasury bonds, Treasury notes, GNMA
Certificates and three-month Treasury bills. U.S. Government
Securities Futures have traded longer than Municipal Bond Index
Futures, and the depth and liquidity available in the trading
markets for them are in general greater.
Call Options on Futures Contracts. The Trust may also
purchase and sell exchange related call and put options on
Futures. The purchase of a call option on a Future is analogous
to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the
Future upon which it is based, or upon the price of the
underlying debt securities, it may or may not be less risky than
ownership of the Futures contract or underlying debt securities.
Like the purchase of a Futures contract, the Trust may purchase a
call option on a Future to hedge against a market advance when
the Trust is not fully invested.
The writing of a call option on a Future constitutes a
partial hedge against declining prices of the securities which
are deliverable upon exercise of the Future. If the price at
expiration of the Future is below the exercise price, the Trust
will retain the full amount of the option premium which provides
a partial hedge against any decline that may have occurred in the
Trust's portfolio holdings.
Put Options on Futures Contracts. The purchase of put
options on a Future is analogous to the purchase of protective
put options on portfolio securities. The Trust may purchase a put
option on a Future to hedge the Trust's portfolio against the
risk of rising interest rates.
The writing of a put option on a Future constitutes a
partial hedge against increasing prices of the securities which
are deliverable upon exercise of the Future. If the Future price
at expiration is higher than the exercise price, the Trust will
retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities
which the Trust intends to purchase.
The writer of an option on a Future is required to deposit
initial and variation margin pursuant to requirements similar to
those applicable to Futures. Premiums received from the writing
of an option will be included in initial margin. The writing of
an option on a Future involves risks similar to those relating to
Futures.
Risk Factors in Futures Transactions and Options
One risk in employing Futures or options on them to attempt
to protect against the price volatility of the Trust's Hawaiian
Obligations is that the Adviser could be incorrect in its
expectations as to the extent of various interest rate movements
or the time span within which the movements take place. For
example, if the Trust sold a Future in anticipation of an
increase in interest rates, and then interest rates went down
instead, the Trust would lose money on the sale.
Another risk as to Futures or options on them arises because
of the imperfect correlation between movement in the price of the
Future and movements in the prices of the Hawaiian Obligations
which are the subject of the hedge. The risk of imperfect
correlation increases as the composition of the Trust's portfolio
diverges from the municipal bonds included in the applicable
index or from the security underlying the U.S. Government
Securities Futures. The price of the Future or option may move
more than or less than the price of the Hawaiian Obligations
being hedged. If the price of the Future or option moves less
than the price of the Hawaiian Obligations which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the Hawaiian Obligations being hedged has moved in an
unfavorable direction, the Trust would be in a better position
than if it had not hedged at all. If the price of the Hawaiian
Obligations being hedged has moved in a favorable direction, this
advantage will be partially offset by the Future or option. If
the price of the Future or option has moved more than the price
of the Hawaiian Obligations, the Trust will experience either a
loss or gain on the Future or option which will not be completely
offset by movements in the price of the Hawaiian Obligations
which are the subject of the hedge. To compensate for the
imperfect correlation of movements in the price of the Hawaiian
Obligations being hedged and movements in the price of the
Futures or options, the Trust may buy or sell Futures or options
in a greater dollar amount than the dollar amount of the Hawaiian
Obligations being hedged if the historical volatility of the
prices of the Hawaiian Obligations being hedged is less than the
historical volatility of the debt securities underlying the
hedge. It is also possible that, where the Trust has sold Futures
or options to hedge its portfolio against a decline in the
market, the market may advance and the value of the Hawaiian
Obligations held in the Trust's portfolio may decline. If this
occurred the Trust would lose money on the Future or option and
also experience a decline in value of its portfolio securities.
Where Futures or options are purchased to hedge against a
possible increase in the price of Hawaiian Obligations before the
Trust is able to invest in them in an orderly fashion, it is
possible that the market may decline instead; if the Trust then
concludes not to invest in them at that time because of concern
as to possible further market decline or for other reasons, the
Trust will realize a loss on the Futures or options that is not
offset by a reduction in the price of the Hawaiian Obligations
which it had anticipated purchasing.
The particular municipal bonds comprising the index
underlying Municipal Bond Index Futures will vary from the bonds
held by the Trust. The correlation of the hedge with such bonds
may be affected by disparities in the average maturity, ratings,
geographical mix or structure of the Trust's investments as
compared to those comprising the Index, and general economic or
political factors. In addition, the correlation between movements
in the value of the Municipal Bond Index may be subject to change
over time, as additions to and deletions from the Municipal Bond
Index alter its structure. The correlation between U.S.
Government Securities Futures and the municipal bonds held by the
Trust may be adversely affected by similar factors and the risk
of imperfect correlation between movements in the prices of such
Futures and the prices of Municipal Bonds held by the Trust may
be greater.
Trading in Municipal Bond Index Futures may be less liquid
than that in other Futures. The trading of Futures and options is
also subject to certain market risks, such as inadequate trading
activity or limits on upward or downward price movements, which
could at times make it difficult or impossible to liquidate
existing positions.
Regulatory Aspects of Futures and Options
The Trust will, due to requirements under the Investment
Company Act of 1940 (the "1940 Act"), deposit in a segregated
account with its custodian bank liquid Hawaiian Obligations or
cash, in an amount equal to the fluctuating market value of long
Futures or options it has purchased, less any margin deposited on
long positions.
The Trust must operate as to its long and short positions
in Futures under in conformity with a rule (the "CFTC Rule")
adopted by the Commodity Futures Trading Commission ("CFTC")
under the Commodity Exchange Act (the "CEA") to be eligible for
the exclusion provided by the CFTC Rule as a "commodity pool
operator" (as defined under the CEA). Pursuant to the rule, the
Trust will represent to the CFTC that it will not, as to any
positions, whether long, short or a combination thereof, enter
into Futures or options for which the aggregate initial margins
and premiums paid for options exceed 5% of the fair market value
of its assets. The Trust will also represent that as to its short
positions, it will use Futures and options solely for bona-fide
hedging purposes within the meaning and intent of the applicable
provisions under the CEA. As to the Trust's long positions which
are used as part of its portfolio strategy and are incidental to
its activities in the underlying cash market, the "underlying
commodity value" (see below) of its Futures must not exceed the
sum of (i) cash set aside in an identifiable manner, or
short-term U.S. debt obligations or other U.S. dollar-denominated
high quality short-term money market instruments so set aside,
plus any funds deposited as margin; (ii) cash proceeds from
existing investments due in 30 days and (iii) accrued profits
held at the futures commission merchant. (There is described
above the segregated account which the Trust must maintain with
its custodian bank as to its Futures and options activities due
to requirements other than those of the CFTC Rule; the Trust
will, as to long positions, be required to abide by the more
restrictive of this other requirement or the above requirements
of the CFTC Rule.) The "underlying commodity value" of a Future
or option is computed by multiplying the size of the Future by
the daily settlement price of the Future or option.
The "sale" of a Future means the acquisition by the Trust
of an obligation to deliver an amount of cash equal to a
specified dollar amount times the difference between the value of
the index or government security at the close of the last trading
day of the Future and the price at which the Future is originally
struck (which the Trust anticipates will be lower because of a
subsequent rise in interest rates and a corresponding decline in
the index value). This is referred to as having a "short" Futures
position. The "purchase" of a Future means the acquisition by the
Trust of a right to take delivery of such an amount of cash. In
this case, the Trust anticipates that the closing value will be
higher than the price at which the Future is originally struck.
This is referred to as having a "long" Futures position. No
physical delivery of the bonds making up the index or the U.S.
government securities, as the case may be, is made as to either a
long or a short Futures position.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage
computed by taking the lesser of purchases or sales of portfolio
securities for a year and dividing it by the monthly average
value of such securities during the year, excluding certain
short-term securities. Since the turnover rate of the Trust will
be affected by a number of factors, the Trust is unable to
predict what rate the Trust will have in any particular period or
periods, although such rate is not expected to exceed 100%.
However, the rate could be substantially higher or lower in any
particular period.
Insurance Feature
As a matter of practice, insurers of municipal obligations
provide insurance only on issues which on their own credit rating
are of investment grade, i.e., those within the top four credit
ratings of the Nationally Recognized Statistical Rating
Organizations. In some instances, insurers restrict issuance of
insurance to those issues which would be credit rated "A" or
better by those organizations. These practices by the insurers
tend to reduce the risk that they might not be able to respond to
the default in payment of principal or interest on any particular
issue.
In general, New Issue Insurance provides that if an issuer
fails to make payment of principal or interest on an insured
Obligation, the payment will be made promptly by the insurer.
There are no deductible clauses, the insurance is non-cancelable
and the tax-exempt character of any payment in respect of
interest received is not affected. Premiums for such insurance
are not paid by the Trust but are paid once and for all for the
life of the issue at the time the securities are issued,
generally by the issuer and sometimes by the underwriter. The
right to receive the insurance proceeds is a part of the security
and is transferable on any resale.
The following information regarding Municipal Bond Investors
Assurance Corporation ("MBIA"), Financial Guaranty Insurance
Company ("Financial Guaranty") and AMBAC Indemnity Corporation
("AMBAC Indemnity"),has been derived from publicly available
information. The Trust has not independently verified any of the
information, but the Trust is not aware of facts which would
render such information inaccurate.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance
corporation, regulated by the Insurance Department of the State
of Wisconsin, and licensed to do business in 50 states and the
District of Columbia. AMBAC Indemnity is a wholly-owned
subsidiary of AMBAC, Inc., a publicly held company.The
claims-paying ability of AMBAC Indemnity is rated "AAA" by S&P
and "Aaa" by Moody's.
MBIA is a limited liability corporation domiciled in New
York and licensed to do business in 50 states and the District of
Columbia. It is the principal operating subsidiary of MBIA Inc.,
a New York Stock Exchange listed company. Neither MBIA Inc. nor
its shareholders are obligated to pay the debts of or claims
against MBIA. The claims-paying ability of MBIA is rated "AAA" by
S&P and "Aaa" by Moody's.
Financial Guaranty is a New York stock insurance company
regulated by the New York State Department of Insurance and
authorized to provide insurance in 49 states and the District of
Columbia. Financial Guaranty is a wholly-owned subsidiary of FGIC
Corporation, a Delaware holding company, which is 99% owned by
General Electric Capital Corporation and 1% owned by Sumitomo
Marine and Fire Insurance Company Limited. Neither FGIC
Corporation nor GE Capital Corporation is obligated to pay the
debts of or the claims against Financial Guaranty.The
claims-paying ability of Financial Guaranty is rated "AAA" by S&P
and "Aaa" by Moody's.
Other insurance companies from which the Trust may purchase
insurance from, or may purchase Obligations insured by, include
the following:
Financial Security Assurance Co., which is owned by U.S.
West Capital Corp. (50.3%), Public & Employees (22.1%), Fund
America Enterprises (7.6%) and Tokyo Marine & Fire Insurance Co,
Ltd. (6.1%); Publicly held (35.8%) it is rated Aaa by Moody's and
AAA by S&P;
Connie Lee Insurance Company, a semi-public company,
owned by Student Loan Marketing Association (36.1%), Private
Shareholders (30.0%), PA School Employees Retirement System (20%)
and the U.S.Department of Education (14%); it is rated AAA by S&P
and Aaa by Moody's; and
Capital Guaranty Insurance Co., owned by Constellation
Investments, Inc. (12.6%), Safeco (3.0%), Sibag Finance Corp.
(1.8%) and 82% by the public; it is rated Aaa by Moody's and AAA
by S&P.
The Fund may also use other insurers. However, the Fund will
seek to ensure that any insurer used will itself have a AAA or
Aaa rating.
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 or special tax 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.
Since the Trust may invest in industrial development bonds
or private activity bonds, the Trust may not be an appropriate
investment for entities which are "substantial users" of
facilities financed by those 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 those 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 or private
activity bonds.
As indicated in the Prospectus, there are certain Hawaiian
Obligations the interest on which is subject to the Federal
alternative minimum tax on individuals. While the Trust may
purchase these obligations, it may, on the other hand, refrain
from purchasing particular Hawaiian Obligations due to this tax
consequence. Also, as indicated in the Prospectus, the Trust will
not purchase obligations of Hawaiian issuers the interest on
which is subject to regular Federal income tax. The foregoing may
reduce the number of issuers of obligations which are available
to the Trust.
As stated in the Prospectus, floating and variable rate
demand notes and participation interests (including municipal
lease/purchase obligations) are considered illiquid unless
determined by the Board of Trustees to be readily marketable. In
determining marketability of any such securities, the Board of
Trustees will consider the following factors, not all of which
may be applicable to any particular issue: the quality, maturity
and coupon rate of the issue, ratings received from the
nationally recognized statistical rating organizations and any
changes or prospective changes in such ratings, the likelihood
that the issuer will continue to appropriate the required
payments for the issue, recent purchases and sales of the same or
similar issues, the general market for municipal securities of
the same or similar quality, the Adviser's opinion as to
marketability of the issue and other factors that may be
applicable to any particular issue.
PERFORMANCE
As noted in the Prospectus, the Trust may from time to time
quote various performance figures to illustrate its past
performance.
Performance quotations by investment companies are
subject to rules of the Securities and Exchange Commission
("SEC"). These rules require the use of standardized performance
quotations or, alternatively, that every non-standardized
performance quotation furnished by the Trust be accompanied by
certain standardized performance information computed as required
by the SEC. Current yield and average annual compounded total
return quotations used by the Trust are based on these
standardized methods and are computed separately for each of the
Trust's three classes of shares. Prior to April 1, 1996, the
Trust had outstanding only one class of shares which are
currently designated "Class A Shares." On that date the Trust
began to offer shares of two other classes, Class C Shares and
Class Y Shares. During most of the historical periods listed
below, there were no Class C Shares or Class Y Shares outstanding
and the information below relates solely to Class A Shares unless
otherwise indicated. Each of these and other methods that may be
used by the Trust are described in the following material.
Total Return
Average annual total return is determined by finding the
average annual compounded rates of return over 1-, 5- and 10-year
periods and a period since the inception of the operations of the
Trust (on February 20, 1985) that would equate an initial
hypothetical $1,000 investment in shares of each of the Trust's
three classes to the value such an investment would have if it
were completely redeemed at the end of each such period.
In the case of Class A Shares, the calculation assumes
the maximum sales charge is deducted from the hypothetical
initial $1,000 purchase. In the case of Class C Shares, the
calculation assumes the applicable Conditional Deferred Sales
Charge ("CDSC") imposed on a redemption of Class C shares held
for the period is deducted. In the case of Class Y Shares, the
calculation assumes that no sales charge is deducted and no CDSC
is imposed. For all three classes, it is assumed that on each
reinvestment date during each such period any capital gains are
reinvested at net asset value, and all income dividends are
reinvested at net asset value, without sales charge (because the
Trust does not impose any sales charge on reinvestment of
dividends for any class). The computation further assumes that
the entire hypothetical account was completely redeemed at the
end of each such period.
Investors should note that the maximum sales charge (4%)
reflected in the following quotations for Class A Shares is a one
time charge, paid at the time of initial investment. The greatest
impact of this charge is during the early stages of an investment
in the Trust. Actual performance will be affected less by this
one time charge the longer an investment remains in the
Trust.
Average Annual Compounded Rates of Return:
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
One Year 0.49% 2.38%(1) 6.14%(1)
Five Years 5.21% N/A N/A
Ten Years 6.09% N/A N/A
Since
inception on
February 20,
1985 7.67% 2.38%(1) 6.14%(1)
<FN>
(1) Period from April 1, 1996 (inception of class) through March 31, 1997.
</FN>
</TABLE>
These figures were calculated according to the following SEC
formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1-, 5- and 10-year periods or the period
since inception, at the end of each such
period.
As discussed in the Prospectus, the Trust may quote total
rates of return in addition to its average annual total return
for each of its three classes of shares. Such quotations are
computed in the same manner as the Trust's average annual
compounded rate, except that such quotations will be based on the
Trust's actual return for a specified period as opposed to its
average return over the periods described above.
Total Return
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
One Year 0.49% 2.38%(1) 6.14%(1)
Five Years 28.90% N/A N/A
Ten Years 80.61% N/A N/A
Since
inception on
February 20,
1985 144.91% 2.38%(1) 6.14%(1)
<FN>
(1) Period from April 1, 1996 (inception of class) through March 31, 1997.
</FN>
</TABLE>
Yield
Current yield reflects the income per share earned by the
Trust's portfolio investments. Current yield is determined by
dividing the net investment income per share earned for each of
the Trust's three classes during a 30-day base period by the
maximum offering price per share on the last day of the period
and annualizing the result. Expenses accrued for the period
include any fees charged to all shareholders of each class during
the base period net of fee waivers and reimbursements of
expenses, if any.
The Trust may also quote a taxable equivalent yield for
each of its three classes of shares which shows the taxable yield
that would be required to produce an after-tax yield equivalent
to that of a fund which invests in tax-exempt obligations. Such
yield is computed by dividing that portion of the yield of the
Trust (computed as indicated above) which is tax-exempt by one
minus the highest applicable combined federal and Hawaiian income
tax rate (and adding the result to that portion of the yield of
the Trust that is not tax-exempt, if any).
The Hawaiian and the combined Hawaiian and federal income
tax rates upon which the Trust's tax equivalent yield quotations
are based are 10% and 46.71%, respectively. The latter rate
reflects currently-enacted Federal income tax law. From time to
time, as any changes to such rates become effective, tax
equivalent yield quotations advertised by the Trust will be
updated to reflect such changes. Any tax rate increases will tend
to make a tax-free investment, such as the Trust, relatively more
attractive than taxable investments. Therefore, the details of
specific tax increases may be used in Trust sales material.
Yield for the 30-day period ended March 31, 1997 (the
date of the Trust's most recent audited financial statements:
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
Yield 4.61% 3.93% 6.56%
Taxable
Equivalent
Yield 8.40% 6.28% 10.48%
</TABLE>
These figures were obtained using the Securities and
Exchange Commission formula:
6
Yield = 2 [(a-b + 1) -1]
----
cd
where:
a = interest earned during the period
b = expenses accrued for the period (net of waivers and
reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
Current Distribution Rate
Current yield and tax equivalent yield, which are calculated
according to a formula prescribed by the SEC, are not indicative
of the amounts which were or will be paid to the Trust's
shareholders. Amounts paid to shareholders are reflected in the
quoted current distribution rate or taxable equivalent
distribution rate. The current distribution rate is computed by
(i) dividing the total amount of dividends per share paid by the
Trust during a recent 30-day period by (ii) the current maximum
offering price and by (iii) annualizing the result. A taxable
equivalent distribution rate shows the taxable distribution rate
that would be required to produce an after-tax distribution rate
equivalent to the Trust's current distribution rate (calculated
as indicated above). The current distribution rate can differ
from the current yield computation because it could include
distributions to shareholders from additional sources (i.e.,
sources other than dividends and interest), such as short-term
capital gains.
Other Performance Quotations
With respect to those categories of investors who are
permitted to purchase Class A Shares of the Trust at net asset
value, the Trust may quote a "Current Distribution Rate for Net
Asset Value Investments." This rate is computed by (i) dividing
the total amount of dividends per share paid by the Trust during
a recent 30-day period by (ii) the current net asset value of the
Trust and by (iii) annualizing the result. Figures for yield,
total return and other measures of performance for Net Asset
Value Investments may also be quoted. These will be derived as
described above with the substitution of net asset value for
public offering price.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used. If distribution rates are quoted in advertising, they will
be accompanied by calculations of current yield in accordance
with the formula of the Securities and Exchange Commission.
The Trust may include in advertisements and sales
literature, information, examples and statistics that illustrate
the effect of taxable versus tax-free compounding income at a
fixed rate of return to demonstrate the growth of an investment
over a stated period of time resulting from the payment of
dividends and capital gains distributions in additional shares.
The examples used will be for illustrative purposes only, and are
not representations by the Trust of past or future yield or
return.
From time to time, in reports and promotional literature,
the Trust may compare its performance to, or cite the historical
performance of, U.S. Treasury bills, notes and bonds, or indices
of broad groups of unmanaged securities considered to be
representative of, or similar to, that Fund's portfolio holdings,
such as:
Lipper Analytical Services, Inc. ("Lipper") is a
widely-recognized independent service that monitors and ranks the
performance of regulated investment companies. The Lipper
performance analysis includes the reinvestment of capital gain
distributions and income dividends but does not take sales
charges into consideration. The method of calculating total
return data on indices utilizes actual dividends on ex-dividend
dates accumulated for the quarter and reinvested at quarter
end.
Morningstar Mutual Funds ("Morningstar"), a semi-monthly
publication of Morningstar, Inc. Morningstar proprietary ratings
reflect historical risk-adjusted performance, and are subject to
change every month. Funds with at least three years of
performance history are assigned ratings from one star (lowest)
to five stars (highest). Morningstar ratings are calculated from
the funds' three-, five-, and ten-year average annual returns
(when available) and a risk factor that reflects fund performance
relative to three-month Treasury bill monthly returns. Fund's
returns are adjusted for fees and sales loads. Ten percent of the
funds in an investment category receive five stars, 22.5% receive
four stars, 35% receive three stars, 22.5% receive two stars, and
the bottom 10% receive one star.
Salomon Brothers Inc., "Market Performance," a monthly
publication which tracks principal return, total return and yield
on the Salomon Brothers Broad Investment-Grade Bond Index and the
components of the Index.
Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable
Bond Indices," a monthly corporate government index publication
which lists principal, coupon and total return on over 100
different taxable bond indices which Merrill Lynch tracks. They
also list the par weighted characteristics of each Index.
Lehman Brothers, Inc., "The Bond Market Report," a
monthly publication which tracks principal, coupon and total
return on the Lehman Govt./Corp. Index and Lehman Aggregate Bond
Index, as well as all the components of these Indices.
The Consumer Price Index, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of inflation. The
Index shows changes in the cost of selected consumer goods and
does not represent a return on an investment vehicle.
From time to time, in reports and promotional literature,
performance rankings and ratings reported periodically in
national financial publications such as MONEY, FORBES, BUSINESS
WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may also be used. In
addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE
WALL STREET JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS
may be cited.
INVESTMENT RESTRICTIONS
The Trust has a number of policies concerning what it can
and cannot do. Those that are called fundamental policies cannot
be changed unless the holders of a "majority" (as defined in the
1940 Act) of the Trust's outstanding shares vote to change them.
Under the 1940 Act, the vote of the holders of a "majority" of
the Trust's outstanding shares means the vote of the holders of
the lesser of (a) 67% or more of the Trust'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 the Trust's outstanding shares. Those fundamental policies not
set forth in the Prospectus are set forth below:
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than those listed
under "Investment of the Trust's Assets" in the Prospectus;
therefore the Trust cannot buy any voting securities, any
commodities or commodity contracts other than Municipal Bond
Index Futures and U.S. Government Securities Futures, any mineral
related programs or leases, any shares of other investment
companies or any warrants, puts, calls or combinations thereof
other than on Municipal Bond Index Futures or on U.S. Government
Securities Futures.
The Trust cannot purchase or hold the securities of any
issuer if, to its knowledge, Trustees, Directors or officers of
the Trust or its Adviser individually owning beneficially more
than 0.5% of the securities of that issuer together own in the
aggregate more than 5% of such securities.
The Trust cannot buy real estate or any non-liquid interests
in real estate investment trusts; however, it can buy any
securities which it can otherwise buy even though the issuer
invests in real estate or has interests in real estate.
2. The Trust does not buy for control.
The Trust cannot invest for the purpose of exercising
control or management of other companies.
3. The Trust does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin; however, the
Trust can make margin deposits in connection with the purchase or
sale of Municipal Bond Index Futures, U.S. Government Securities
Futures or options on them, and can pay premiums on these
options.
4. The Trust is not an underwriter.
The Trust cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, it cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
DISTRIBUTION PLAN
The Trust's Distribution Plan has three parts, relating
respectively to distribution payments with respect to Class A
Shares (Part I), to distribution payments relating to Class C
Shares (Part II) and to certain defensive provisions (Part III).
Provisions Relating to Class A Shares (Part I)
At the date of the Additional Statement, most of the
outstanding shares of the Trust would be considered Qualified
Holdings of various broker-dealers unaffiliated with the Adviser
or the Distributor. The Distributor will consider shares which
are not Qualified Holdings of such unrelated broker-dealers to be
Qualified Holdings of the Distributor and will authorize
Permitted Payments to the Distributor with respect to such shares
whenever Permitted Payments are being made under the Plan.
Part I of the Plan applies only to the Front-Payment Class
Shares ("Class A Shares") of the Trust (regardless of whether
such class is so designated or is redesignated by some other
name).
As used in Part I of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors,
Inc. (the "Distributor"), including but not limited to any
principal underwriter of the Trust, with which the Trust or the
Distributor has entered into written agreements in connection
with Part I ("Class A Plan Agreements") and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's Front-Payment Class
Shares or servicing of shareholder accounts with respect to such
shares. "Qualified Holdings" shall mean, as to any Qualified
Recipient, all Front-Payment Class Shares beneficially owned by
such Qualified Recipient, or beneficially owned by its brokerage
customers, other customers, other contacts, investment advisory
clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase
and/or retention of such shares and/or in providing
administrative assistance or other services in relation thereto.
Subject to the direction and control of the Trust's
Board of Trustees of the Trust, the Trust may make payments
("Class A Permitted Payments") to Qualified Recipients, which
Class A Permitted Payments may be made directly, or through the
Distributor or shareholder servicing agent as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as
adjusted for any part or parts of a fiscal year during which
payments under the Plan are not accruable or for any fiscal year
which is not a full fiscal year), 0.20 of 1% of the average
annual net assets of the Trust represented by the Front-Payment
Class Shares. Such payments shall be made only out of the Trust's
assets allocable to the Front-Payment Class Shares. The
Distributor shall have sole authority (i) as to the selection of
any Qualified Recipient or Recipients; (ii) not to select any
Qualified Recipient; and (iii) as to the amount of Class A
Permitted Payments, if any, to each Qualified Recipient provided
that the total Class A Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above.
Payments under the Plan commenced as of July 1, 1992 with
respect to shares currently designated as Class A Shares. During
the fiscal years ended March 31, 1997, 1996 and 199525,
$1,304,201, $1,330,035 and $1,275,442, respectively, were paid
under the Plan to Qualified Recipients. Of those amounts,
$76,168, $78,658 and $70,008, respectively, were paid to the
Distributor. During the same period, $14,765 was paid with
respect to Class C Shares all of which was retained by the
Distributor.
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 Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Front Payment Shares,
including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Trust may be effected; assisting shareholders in
designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving
funds in connection with customer orders to purchase or redeem
shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year-end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Trust, proxy
statements, annual reports, updating prospectuses and other
communications from the Trust to its shareholders; receiving
tabulating and transmitting to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the
Distributor or a shareholder may request from time to time; 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. Amounts within the above limits accrued to a Qualified
Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
While Part I is in effect, the Trust's Distributor shall
report at least quarterly to the Trust's Trustees in writing for
their review on the following matters: (i) all Class A Permitted
Payments made under Section 9 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which
the amounts were expended; and (ii) all fees of the Trust to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the 1940 Act, of
the Trust, the Adviser, the Administrator or the Distributor,
such person shall agree to furnish to the Distributor for
transmission to the Board of Trustees of the Trust an accounting,
in form and detail satisfactory to the Board of Trustees, to
enable the Board of Trustees to make the determinations of the
fairness of the compensation paid to such affiliated person, not
less often than annually.
Part I originally went into effect when it was approved (i)
by a vote of the Trustees, including the Independent Trustees,
with votes cast in person at a meeting called for the purpose of
voting on Part I of the Plan; and (ii) by a vote of holders of at
least a "majority" (as so defined) of the outstanding voting
securities of the Front-Payment Class Shares class (or of any
predecessor class or category of shares, whether or not
designated as a class) and a vote of holders of at least a
"majority" (as so defined) of the outstanding voting securities
of the Level-Payment Class Shares and/or of any other class whose
shares are convertible into Front-Payment Class Shares. Part I
has continued, and will, unless terminated as hereinafter
provided, continue in effect, until the June 30 next succeeding
such effectiveness, and from year to year thereafter only so long
as such continuance is specifically approved at least annually by
the Trust's Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. Part I may be terminated at any time by the 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 Trust to which Part I
applies. Part I may not be amended to increase materially the
amount of payments to be made without shareholder approval of the
class or classes of shares affected by Part I as set forth in
(ii) above, and all amendments must be approved in the manner set
forth in (i) above.
In the case of a Qualified Recipient which is a principal
underwriter of the Trust, the Class A 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, the Rule. In the case of
Qualified Recipients which are not principal underwriters of the
Trust, the Class A Plan Agreements with them shall be (i) their
agreements with the Distributor with respect to payments under
the Trust's Distribution Plan in effect prior to April 1, 1996 or
(ii) Class A Plan Agreements entered into thereafter.
Provisions relating to Class C Shares (Part II)
Part II of the Plan applies only to the Level Payment Shares
Class ("Class C Shares") of the Trust (regardless of whether such
class is so designated or is redesignated by some other name).
As used in Part II of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors,
Inc. (the "Distributor"), including but not limited to any
principal underwriter of the Trust, with which the Trust or the
Distributor has entered into written agreements in connection
with Part II ("Class C Plan Agreements") and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's Level- Payment Class
Shares or servicing of shareholder accounts with respect to such
shares. "Qualified Holdings" shall mean, as to any Qualified
Recipient, all Level-Payment Class Shares beneficially owned by
such Qualified Recipient, or beneficially owned by its brokerage
customers, other customers, other contacts, investment advisory
clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase
and/or retention of such shares and/or in providing
administrative assistance or other services in relation thereto.
Subject to the direction and control of the Trust's Board of
Trustees, the Trust may make payments ("Class C Permitted
Payments") to Qualified Recipients, which Class C Permitted
Payments may be made directly, or through the Distributor or
shareholder servicing agent as disbursing agent, which may not
exceed, for any fiscal year of the Trust (as adjusted for any
part or parts of a fiscal year during which payments under the
Plan are not accruable or for any fiscal year which is not a full
fiscal year) 0.75 of 1% of the average annual net assets of the
Trust represented by the Level-Payment Class Shares. Such
payments shall be made only out of the Trust's assets allocable
to the Level-Payment Class Shares. The Distributor shall have
sole authority (i) as to the selection of any Qualified Recipient
or Recipients; (ii) not to select any Qualified Recipient; and
(iii) the amount of Class C Permitted Payments, if any, to each
Qualified Recipient provided that the total Class C Permitted
Payments to all Qualified Recipients 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 Qualified Recipient; (b) the extent to which the
Qualified Recipient has, at its expense, taken steps in the
shareholder servicing area with respect to holders of Level
Payment Shares, including without limitation, any or all of the
following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Trust may be effected; assisting
shareholders in designating and changing dividend options,
account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Trust, proxy
statements, annual reports, updating prospectuses and other
communications from the Trust to its shareholders; receiving
tabulating and transmitting to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the
Distributor or a shareholder may request from time to time; 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. Amounts within the above limits accrued to a Qualified
Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
While Part II is in effect, the Trust's Distributor shall
report at least quarterly to the Trust's Trustees in writing for
their review on the following matters: (i) all Class C Permitted
Payments made under Section 15 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which
the amounts were expended; and (ii) all fees of the Trust to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Trust, the Adviser, the Administrator or the Distributor, such
person shall agree to furnish to the Distributor for transmission
to the Board of Trustees of the Trust an accounting, in form and
detail satisfactory to the Board of Trustees, to enable the Board
of Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part II originally went into effect when it was approved (i)
by a vote of the Trustees, including the Independent Trustees,
with votes cast in person at a meeting called for the purpose of
voting on Part II of the Plan; and (ii) by a vote of holders of
at least a "majority" (as so defined) of the outstanding voting
securities of the Level-Payment Class Shares. Part II has
continued, and will, unless terminated as hereinafter provided,
continue in effect, until the June 30 next succeeding such
effectiveness, and from year to year thereafter only so long as
such continuance is specifically approved at least annually by
the Trust's Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. Part II may be terminated at any time by the 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 Trust to which Part II
applies. Part II may not be amended to increase materially the
amount of payments to be made without shareholder approval of the
class or classes of shares affected by Part II as set forth in
(ii) above, and all amendments must be approved in the manner set
forth in (i) above.
In the case of a Qualified Recipient which is a principal
underwriter of the Trust, the Class C 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, the Rule. In the case of
Qualified Recipients which are not principal underwriters of the
Trust, the Class C Plan Agreements with them shall be (i) their
agreements with the Distributor with respect to payments under
the Trust's Distribution Plan in effect prior to April 1, 1996 or
(ii) Class C Plan Agreements entered into thereafter.
Defensive Provisions (Part III)
Another part of the Plan (Part III) states that if and to
the extent that any of the payments listed below are considered
to be "primarily intended to result in the sale of" shares issued
by the Trust 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 Trust 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 Trust'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 Trust 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 Trust'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.
The Plan states that while it is in effect, the selection
and nomination of those Trustees of the Trust who are not
"interested persons" of the Trust 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.
The Plan states that while it is in effect, the Trust's
Administrator and Distributor shall report at least quarterly to
the Trust's Board of Trustees in writing for their review on the
following matters: (i) all Permitted Payments made under this
Plan, the identity of the Qualified Recipient of each Payment,
and the purposes for which the amounts were expended; (ii) all
costs of each item of cost specified in the Plan (making
estimates of such costs where necessary or desirable) during the
preceding calendar or fiscal quarter; and (iii) all fees of the
Trust to the distributor, sub-adviser or administrator paid or
accrued during such quarter. In addition if any such Qualified
Recipient is an affiliate, as that term is defined in the Act, of
the Trust, the Adviser, the Administrator or the Distributor,
such person shall agree to furnish to the Distributor for
transmission to the Board of Trustees of the Trust an accounting,
in form and detail satisfactory to the Board of Trustees, to
enable the Board of Trustees to make the determinations of the
fairness of the compensation paid to such affiliated person, not
less often than annually.
The Plan defines as the Trust's Independent Trustees those
Trustees who are not "interested persons" of the Trust 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. 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 Trust's Board of 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 the Plan, those Trustees who vote to approve such
implementation or continuance must conclude that there is a
reasonable likelihood that the Plan will benefit the Trust and
its shareholders. 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 Trust. 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 the Plan.
The Plan and each Part of it shall also be subject to all
applicable terms and conditions of Rule 18f-3 under the 1940 Act
as now in force or hereafter amended. Specifically, but without
limitation, the provisions of Part III shall be deemed to be
severable, within the meaning of and to the extent required by
Rule 18f-3, with respect to each outstanding class of shares of
the Trust.
SHAREHOLDER SERVICES PLAN
The Trust has adopted a Shareholder Services Plan (the
"Services Plan") to provide for the payment with respect to Class
C Shares of the Trust of "Service Fees" within the meaning of the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc. The Services Plan applies only to the Class C
Shares of the Trust (regardless of whether such class is so
designated or is redesignated by some other name).
As used in the Services Plan, "Qualified Recipients"
shall mean broker-dealers or others selected by Aquila
Distributors, Inc. (the "Distributor"), including but not limited
to the Distributor and any other principal underwriter of the
Trust, who have, pursuant to written agreements with the Trust or
the Distributor, agreed to provide personal services to
shareholders of Level-Payment Class Shares and/or maintenance of
Level-Payment Class Shares shareholder accounts. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all
Level-Payment Class Shares beneficially owned by such Qualified
Recipient's customers, clients or other contacts. "Administrator"
shall mean Aquila Management Corporation or any successor serving
as sub-adviser or administrator of the Trust.
Subject to the direction and control of the Trust's Board
of Trustees, the Trust may make payments ("Service Fees") to
Qualified Recipients, which Service Fees (i) may be paid directly
or through the Distributor or shareholder servicing agent as
disbursing agent and (ii) may not exceed, for any fiscal year of
the Trust (as adjusted for any part or parts of a fiscal year
during which payments under the Services Plan are not accruable
or for any fiscal year which is not a full fiscal year), 0.25 of
1% of the average annual net assets of the Trust represented by
the Level-Payment Class Shares. Such payments shall be made only
out of the Trust's assets allocable to the Level-Payment Class
Shares. The Distributor shall have sole authority with respect to
the selection of any Qualified Recipient or Recipients and the
amount of Service Fees, if any, paid to each Qualified Recipient,
provided that the total Service Fees paid to all Qualified
Recipients may not exceed the amount set forth above and
provided, further, that no Qualified Recipient may receive more
than 0.25 of 1% of the average annual net asset value of shares
sold by such Recipient. 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 Qualified Recipient and (b) the extent
to which the Qualified Recipient has, at its expense, taken steps
in the shareholder servicing area with respect to holders of
Level-Payment Class Shares, including without limitation, any or
all of the following activities: answering customer inquiries
regarding account status and history, and the manner in which
purchases and redemptions of shares of the Trust may be effected;
assisting shareholders in designating and changing dividend
options, account designations and addresses; providing necessary
personnel and facilities to establish and maintain shareholder
accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with customer
orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; and
providing such other related services as the Distributor or a
shareholder may request from time to time. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a Qualified
Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years. Service Fees with respect to Class C Shares
will be paid to the Distributor. During the fiscal year ended
March 31, 1997, $4,922 was paid to the Distributor.
While the Services Plan is in effect, the Trust's
Distributor shall report at least quarterly to the Trust's
Trustees in writing for their review on the following matters:
(i) all Service Fees paid under the Services Plan, the identity
of the Qualified Recipient of each payment, and the purposes for
which the amounts were expended; and (ii) all fees of the Trust
to the Distributor paid or accrued during such quarter. In
addition, if any Qualified Recipient is an "affiliated person,"
as that term is defined in the 1940 Act, of the Trust, the
Adviser, the Administrator or the Distributor, such person shall
agree to furnish to the Distributor for transmission to the Board
of Trustees of the Trust an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
The Services Plan has been approved by a vote of the
Trustees, including those Trustees who, at the time of such vote,
were not "interested persons" (as defined in the 1940 Act) of the
Trust and had no direct or indirect financial interest in the
operation of the Services Plan or in any agreements related to
the Services Plan (the "Independent Trustees"), with votes cast
in person at a meeting called for the purpose of voting on the
Services Plan. It will continue in effect for a period of more
than one year from its original effective date only so long as
such continuance is specifically approved at least annually as
set forth in the preceding sentence. It may be amended in like
manner and may be terminated at any time by vote of the
Independent Trustees.
The Services Plan shall also be subject to all applicable
terms and conditions of Rule 18f-3 under the 1940 Act as now in
force or hereafter amended.
While the Services Plan is in effect, the selection and
nomination of those Trustees of the Trust who are not "interested
persons" of the Trust, as that term is defined in the 1940 Act,
shall be committed to the discretion of such disinterested
Trustees. Nothing herein 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.
LIMITATION OF REDEMPTIONS IN KIND
The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust 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 Trust during any 90-day period for
any one shareholder. Should redemptions by any shareholder exceed
such limitation, the Trust will have the option of redeeming the
excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting
the assets into cash. The method of valuing securities used to
make redemptions in kind will be the same as the method of
valuing portfolio securities described under "Net Asset Value Per
Share" in the Prospectus, and such valuation will be made as of
the same time the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their affiliations,
if any, with the Administrator and the Adviser, and their
principal occupations during at least the past five years are set
forth below. Each of the Trustees holds the same position(s) with
Cash Assets Trust, a Massachusetts business trust with three
series, each of which is a money market fund having the same
Adviser and Administrator as the Trust. Mrs. Thelma Chun-Hoon
Zen, a founding Trustee, resigned as of March 31, 1996 because of
health reasons. Mr. Herrmann is an interested person of the
Trust, as that term is defined in the 1940 Act, as an officer of
the Trust, as a Director and officer of Aquila Distributors, Inc.
(the "Distributor") and as a shareholder of the Distributor. Mr.
Philpotts is an interested person of the Trust, as that term is
so defined, as an officer and Director of the Adviser and as a
shareholder of the Adviser's corporate parent. They are so
designated by an asterisk. As of the date of this Additional
Statement, the Trustees and officers of the Trust owned less than
1% of its outstanding shares.
Lacy B. Herrmann*, President and Chairman of the Board of
Trustees, 380 Madison Avenue, New York, New York 10017
Founder, President and Chairman of the Board of Aquila
Management Corporation since 1984, the sponsoring organization
and Administrator and/or Adviser or Sub-Adviser to the following
open-end investment companies, and Founder, Chairman of the Board
of Trustees, and President of each:Tax-Free Trust of Arizona
since 1986; Tax-Free Trust of Oregon since 1986; Tax-Free Fund of
Colorado since 1987; Churchill Tax-Free Fund of Kentucky since
1987; Tax-Free Fund For Utah since 1992; and Narragansett Insured
Tax-Free Income Fund since 1992; each of which is a tax-free
municipal bond fund, and two equity funds, Aquila Rocky Mountain
Equity Fund since 1993 and Aquila Cascadia Equity Fund, since
1996, which, together with this Trust are called the Aquila Bond
and Equity Funds; and Pacific Capital Cash Assets Trust since
1984; Churchill Cash Reserves Trust since 1985; Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988; Pacific Capital
Tax-Free Cash Assets Trust since 1988; each of which is a money
market fund, and together with Capital Cash Management Trust
("CCMT") are called the Aquila Money-Market Funds; Vice
President, Director, Secretary and formerly Treasurer of Aquila
Distributors, Inc. since 1981, distributor of the above funds;
President and Chairman of the Board of Trustees of CCMT, a money
market fund since 1981, and an Officer and Trustee/Director of
its predecessors since 1974; Chairman of the Board of Trustees
and President of Prime Cash Fund (which is inactive), since 1982
and of Short Term Asset Reserves 1984-1996; President and a
Director of STCM Management Company, Inc., sponsor and
sub-adviser to CCMT; Chairman, President, and a Director since
1984, of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves,
and Founder and Chairman of several other money market funds;
Director or Trustee of OCC Cash Reserves, Inc., Oppenheimer Quest
Global Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and
Trustee of Quest For Value Accumulation Trust, The Saratoga
Advantage Trust, and of the Rochester Group of Funds, each of
which is an open-end investment company; Trustee of Brown
University, 1990-1996 and currently Trustee Emeritus; actively
involved for many years in leadership roles with university,
school and charitable organizations.
Vernon R. Alden, Trustee, 420 Boylston Street, Suite 403, Boston,
Massachusetts 02116
Director of Colgate Palmolive Company since 1974, Digital
Equipment Corporation, a computer manufacturing corporation,
since 1959, Intermet Corporation, an independent foundry, since
1986, and Sonesta International Hotels Corporation since 1978;
Chairman of the Board and Executive Committee of The Boston
Company, Inc., a financial services company, 1969-1978; Trustee
of Tax-Free Trust of Oregon since 1988, of Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and
Pacific Capital U.S. Treasuries 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 of the Boston
Symphony Orchestra since 1975; Chairman of the Massachusetts
Council on the Arts and Humanities, 1972-1984; Member of the
Board of Fellows of Brown University, 1969-1986; Trustee and
member of the Executive Committee, Plimoth Plantation; trustee of
various other cultural and educational organizations; Honorary
Consul General of the Royal Kingdom of Thailand.
Arthur K. Carlson, Trustee, 8702 North Via La Serena, Paradise
Valley, Arizona 85253
Retired; Advisory Director of the Renaissance Companies (design
and construction companies of commercial, industrial and upscale
residential properties) since 1996; Senior Vice President and
Manager of the Trust Division of The Valley National Bank of
Arizona, 1977-1987; Trustee of Tax-Free Fund of Colorado,
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. Treasuries 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,
currently, Director of Mercy Healthcare of Arizona, Phoenix,
Arizona since 1990; Director of Northern Arizona University
Foundation since 1990; present or formerly an officer and/or
director of various other community and professional
organizations.
William M. Cole, Trustee, 852 Ramapo Way, Westfield, New Jersey
07090
President of Cole International, Inc., financial and shipping
consultants, since 1974; President of Cole Associates, shopping
center and real estate developers, 1974-1976; President of
Seatrain Lines, Inc., 1970-1974; former General Partner of Jones
& Thompson, international shipping brokers; Trustee of Pacific
Capital Cash Assets Trust since 1984, of Tax-Free Fund of
Colorado since 1987 and of Pacific Capital Tax-Free Cash Assets
Trust and Pacific Capital U.S. Treasuries Cash Assets Trust since
1988; Chairman of Cole Group, a financial consulting and real
estate firm, since 1985.
Thomas W. Courtney, C.F.A., Trustee, P.O. Box 8186, Naples,
Florida 33941
President of Courtney Associates, Inc., a venture capital firm,
since 1988; General Partner of Trivest Venture Fund, 1983-1988;
President of Federated Investment Counseling Inc., 1975-1982;
President of Boston Company Institutional Investors, Inc.,
1970-1975; formerly a Director of the Financial Analysts
Federation; Trustee of 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.
Treasuries Cash Assets Trust since 1988; Director or Trustee of
OCC Cash Reserves, Inc., Oppenheimer Quest Global Value Fund,
Inc., Oppenheimer Quest Value Fund, Inc., and Trustee of Quest
For Value Accumulation Trust and of the Rochester Group of Funds,
each of which is an open-end investment company.
Richard W. Gushman, II, Trustee, 700 Bishop Street, Suite 200,
Honolulu, Hawaii 96813
President and Chief Executive Officer of OKOA, INC., a private
Hawaii corporation involved in real estate; adviser to RAMPAC,
Inc., a wholly owned subsidiary of the Bank of Hawaii, involved
with commercial real estate finance; Trustee of Pacific Capital
Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and
Pacific Capital U.S. Treasuries Cash Assets Trust since 1993;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Member of the Boards of Aloha United Way,
Downtown Improvement Association, Boys and Girls Club of Honolulu
and Oceanic Cablevision, Inc.
Stanley W. Hong, Trustee, 4976 Poola Street, Honolulu, Hawaii
96821
President and Chief Executive Officer of The Chamber of
Commerce of Hawaii since 1996; Business consultant since 1994;
Senior Vice President of McCormack Properties, Ltd., 1993-1994;
President and Chief Executive of the Hawaii Visitors Bureau,
1984-1993; Vice President, General Counsel and Corporate
Secretary at TheoDavies & Co., Ltd., a multiple business company,
1973-1984; formerly Legislative Assistant to U.S. Senator Hiram
L. Fong; member of the Boards of Directors of several community
organizations; Trustee of Pacific Capital Cash Assets Trust,
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries 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 1995; Trustee of Nature Conservancy of Hawaii since 1990;
Regent of Chaminade University of Honolulu since 1990.
Theodore T. Mason, Trustee, 26 Circle Drive, Hastings-on-Hudson,
New York 10706
Managing Director of EastWind Power Partners, Ltd. since 1994;
Director of Alumni Association, SUNY Maritime College since 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 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. Treasuries 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, 888 Mililani Street, Suite 601,
Honolulu, Hawaii 96813-298
Executive Director, Hawaii Government Employees Association
AFSCME Local 152, AFL-CIO; Trustee of Pacific Capital Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust and Pacific
Capital U.S. Treasuries 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 several charitable organizations.
Douglas Philpotts, Trustee, Financial Plaza of the Pacific, P.O.
Box 3170, Honolulu, Hawaii, 96802
Retired; Director of Hawaiian Trust Company, Limited since 1986,
Chairman of the Board, 1992-1994 and President, 1986-1992;
Director of Victoria Ward, Limited; Trustee of Pacific Capital
Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and
Pacific Capital U.S. Treasuries Cash Assets Trust since 1992;
Trustee of Pacific Capital Funds, which includes bond and stock
funds, since 1993; Trustee of the Strong Foundation; present or
former director or trustee of a number of civic and charitable
organizations in Hawaii.
Oswald K. Stender, Trustee, P.O. Box 3466, Honolulu, Hawaii 96801
Trustee of the Bernice Pauahi Bishop Estate since 1990; Director
of Hawaiian Electric Industries, Inc., a public utility holding
company, since 1993; Senior Advisor to the Trustees of The Estate
of James Campbell, 1987-1989 and Chief Executive Officer,
1976-1988; Director of several housing and real estate
associations; Director, member or trustee of several community
organizations; Trustee of Pacific Capital Cash Assets Trust,
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries Cash Assets Trust since 1993; Trustee of Pacific
Capital Funds, which includes bond and stock funds, since 1993.
Sherri Foster, Senior Vice President, 100 Ridge Road, Suite
1813-15, Lahaina, Hawaii 96761
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. Treasuries Cash Assets
Trust since 1988; Registered Representative of the Distributor
since 1985; Realtor-Associate of Sherrian Bender Realty,
successor to John Wilson Enterprises, 1983-1994; Executive
Secretary of the Hyatt Regency, Maui, 1981-1983.
William C. Wallace, Senior Vice President, 380 Madison Avenue,
New York, New York 10017
Vice President of Capital Cash Management Trust and Pacific
Capital Cash Assets Trust since 1984; Vice President, 1984-1985;
Senior Vice President of Tax-Free Trust of Arizona since 1989 and
Vice President, 1986-1988; Vice President of Tax-Free Trust of
Oregon since 1986, of Churchill Tax-Free Fund of Kentucky and
Tax-Free Fund of Colorado since 1987, of Pacific Capital Tax-Free
Cash Assets Trust and Pacific Capital U.S. Treasuries Cash Assets
Trust since 1988 and of Narragansett Insured Tax-Free Income Fund
since 1992; Secretary and Director of STCM Management Company,
Inc. since 1974; President of the Distributor since 1995 and
formerly Vice President of the Distributor, 1986-1992; Member of
the Panel of Arbitrators, American Arbitration Association, since
1978; Assistant Vice President, American Stock Exchange, Market
Development Division, and Director of Marketing, American Gold
Coin Exchange, a subsidiary of the American Stock Exchange,
1976-1984.
Diana P. Herrmann, Vice President, 380 Madison Avenue, New York,
New York 10017
Trustee of Tax-Free Trust of Arizona and Tax-Free Trust of
Oregon since 1994, of Churchill Tax-Free Fund of Kentucky and
Churchill Cash Reserves Trust since 1995, of Aquila Cascadia
Equity Fund since 1996 and of Aquila Rocky Mountain Equity Fund
and Tax-Free Fund for Utah since 1997; President and Chief
Operating Officer of the Administrator since 1997; Senior Vice
President and Secretary, formerly Vice President of the
Administrator since 1986 and Director since 1984; Senior Vice
President or Vice President and formerly Assistant Vice President
of the Aquila Money-Market Funds since 1986; Vice President of
the Aquila Bond and Equity Funds since 1997; Vice President of
InCap Management Corporation since 1986 and Director since 1983;
Assistant Vice President of Oxford Cash Management Fund,
1986-1988; Assistant Vice President and formerly Loan Officer of
European American Bank, 1981-1986; daughter of the Trust's
President; Trustee of the Leopold Schepp Foundation (academic
scholarships) since 1995; actively involved in mutual fund and
trade associations and in college and other volunteer
organizations.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer
of Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of
the Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New
York 10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond
and Equity Funds and of Aquila Distributors, Inc. since 1992;
Associate Director of Furman Selz Incorporated, 1991-1992; Vice
President of Scudder, Stevens & Clark, Inc. and Treasurer of
Scudder Institutional Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer of Lazard Freres
Group of Investment Companies and HT Insight Funds, Inc.,
1986-1988; Vice President of Lehman Management Co., Inc. and
Assistant Treasurer of Lehman Money Market Funds, 1981-1985;
Controller of Seligman Group of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New
York 10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-1986; Secretary of
Oxford Cash Management Fund, 1982-1988.
John M. Herndon, Assistant Secretary, 380 Madison Avenue, New
York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995 and Vice President of the
Aquila Money-Market Funds since 1990; Vice President of the
Administrator since 1990; Investment Services Consultant and Bank
Services Executive of Wright Investors' Service, a registered
investment adviser, 1983-1989; Member of the American Finance
Association, the Western Finance Association and the Society of
Quantitative Analysts.
Patricia A. Craven, Assistant Secretary & Compliance Officer, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995; Counsel to the
Administrator and the Distributor since 1995; formerly a Legal
Associate for Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
The Trust does not currently pay fees to any of the
Trust's officers or to Trustees affiliated with the Administrator
or the Adviser, except for Trustees affiliated with the Adviser
solely because of membership on its Board of Directors. During
the fiscal year ended March 31, 1997, the Trust paid $174,902 in
fees and reimbursement of expenses to its other Trustees. The
Trust is one of the 14 funds in the Aquilasm Group of Funds,
which consist of tax-free municipal bond funds, money market
funds and two equity funds. The following table lists the
compensation of all Trustees who received compensation from the
Trust and the compensation they received during the Trust's
fiscal year from other funds in the Aquilasm Group of Funds. None
of such Trustees has any pension or retirement benefits from the
Trust or any of the other funds in the Aquila group.
<TABLE>
<CAPTION>
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Trust Group now serves
<S> <C> <C> <C>
Vernon R.
Alden $15,660 $50,245 7
Arthur K.
Carlson $15,587 $57,927 7
William M.
Cole $17,146 $47,251 5
Thomas W.
Courtney $15,805 $48,628 5
Richard W.
Gushman, II $15,650 $37,050 4
Stanley W.
Hong $14,906 $34,956 4
Theodore T.
Mason $15,954 $52,780 8
Russell K.
Okata $16,104 $36,102 4
Douglas
Philpotts $14,181 $32,752 4
Oswald K.
Stender $14,500 $34,750 4
</TABLE>
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Advisory Agreement
The Investment Advisory Agreement (the "Advisory Agreement")
between the Trust and Hawaiian Trust Company, Limited (the
"Adviser") contains the provisions described below, in addition
to those described in the Prospectus.
The Advisory Agreement may be terminated by the Adviser at
any time without penalty upon giving the Trust sixty days'
written notice, and may be terminated by the Trust at any time
without penalty upon giving the Adviser sixty days' written
notice, provided that such termination by the Trust shall be
directed or approved by the vote of a majority of all its
Trustees in office at the time or by the vote of the holders of a
majority (as defined in the 1940 Act) of its voting securities at
the time outstanding and entitled to vote; it automatically
terminates in the event of its assignment (as so defined).
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The 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. The Trust agrees to indemnify the
Adviser to the full extent permitted under the Trust's
Declaration of Trust.
The Advisory Agreement states that it is agreed that the
Adviser shall have no responsibility or liability for the
accuracy or completeness of the Trust's Registration Statement
under the Securities Act of 1933 and the 1940 Act except for the
information supplied by the Adviser for inclusion therein.
The Advisory Agreement contains the following provisions as
to the Trust's portfolio transactions. In connection with its
duties to arrange for the purchase and sale of the Trust's
portfolio securities, the Adviser shall select such
broker-dealers ("dealers") as shall, in the Adviser's judgment,
implement the policy of the Trust to achieve "best execution",
i.e., prompt, efficient and reliable execution of orders at the
most favorable net price. The Adviser shall cause the Trust to
deal directly with the selling or purchasing principal or market
maker without incurring brokerage commissions unless the Adviser
determines that better price or execution may be obtained by
paying such commissions; the Trust expects that most transactions
will be principal transactions at net prices and that the Trust
will incur little or no brokerage costs. The Trust understands
that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread
between the bid and asked price. In allocating transactions to
dealers, the Adviser is authorized to consider, in determining
whether a particular dealer will provide best execution, the
dealer's reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the difficulty of
the transaction in question, and thus need not pay the lowest
spread or commission available if the Adviser determines in good
faith that the amount of commission is reasonable in relation to
the value of the brokerage and research services provided by the
dealer, viewed either in terms of the particular transaction or
the Adviser's overall responsibilities as to the accounts as to
which it exercises investment discretion. If, on the foregoing
basis, the transaction in question could be allocated to two or
more dealers, the Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of the Trust or any other investment
company or companies having the Adviser as its investment adviser
or having the same sub-adviser, Administrator or principal
underwriter as the Trust. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries as well as on market, economic or
institutional activities. The Trust recognizes that no dollar
value can be placed on such research services or on execution
services, that such research services may or may not be useful to
the Trust and/or other accounts of the Adviser, and that research
received by such other accounts may or may not be useful to the
Trust.
The Adviser has advised the Trust that it is a subsidiary
of Bank of Hawaii, and after September 30, 1997, will be a
division of the Bank of Hawaii, which is a state-chartered bank.
The Adviser has advised the Trust that it is not at the date of
the Additional Statement, and after September 30, 1997, will not
be, prohibited under current Federal banking laws from performing
the services for the Trust required by the Advisory Agreement.
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 Trust.
During the Trust's fiscal year ended March 31, 1996, all of
its transactions were principal transactions and no brokerage
commissions were paid.
For the three fiscal years ended March 31, 1997, 1996
and 1995, fees of $915,693, $929,291 and $893,788 respectively,
were paid and or accrued to the Adviser under the Advisory
Agreement.
Additional Information as to the Administration Agreement
The Administration Agreement (the "Administration
Agreement") between Aquila Management Corporation, as
Administrator, and the Trust contains the provisions described
below in addition to those described in the Prospectus.
Subject to the control of the Trust's Board of Trustees, the
Administrator also provides all administrative services to the
Trust other than those relating to its investment portfolio and
the maintenance of its accounting books and records (see below
for discussion); as part of such duties, the Administrator (i)
provides office space, personnel, facilities, and equipment for
the performance of the following functions and for the
maintenance of the Trust's headquarters; (ii) oversees all
relationships between the Trust and its transfer agent,
custodian, legal counsel, auditors and principal underwriter,
including the negotiation, subject to the approval of the Trust's
Board of Trustees, 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 and for
the sale, servicing, or redemption of the Trust's shares; (iii)
provides to the Adviser and to the Trust statistical and other
factual information and advice regarding economic factors and
trends, but does not generally furnish advice or make
recommendations regarding the purchase or sale of securities;
(iv) maintains the Trust's books and records (other than
accounting books and records), and prepares (or assists counsel
and auditors in the preparation of) all required proxy
statements, reports to shareholders and Trustees, reports to and
other filings with the Securities and Exchange Commission and any
other governmental agencies, and tax returns, and oversees the
Trust's insurance relationships; (v) prepares, on the Trust's
behalf and at its expense, such applications and reports as may
be necessary to register or maintain the Trust's registration or
that of its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time; and (vi)
responds to any inquiries or other communications from
shareholders and broker-dealers, or if any such inquiry or
communication is more properly to be responded to by the Trust's
shareholder servicing and transfer agent or distributor, oversees
such shareholder servicing and transfer agent's or distributor's
response thereto. Since the Trust pays its own legal and audit
expenses, to the extent that the Trust's counsel and accountants
prepare or assist in the preparation of prospectuses, proxy
statements and reports to shareholders, the costs of such
preparation or assistance are paid by the Trust.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Trust and the Adviser; it may be terminated by the
Trust at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Trust shall be directed or approved by a vote of a majority of
the Trustees in office at the time, including a majority of the
Trustees who are not interested persons of the Trust. In either
case the notice provision may be waived.
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Trust in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Trust agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
For the three fiscal years ended March 31, 1997, 1996
and 1995, fees of $1,700,577, $1,725,826 and $1,659,892,
respectively, were paid and or accrued to Aquila Management
Corporation under the Administration Agreement.
Additional Information as to The Adviser, Administrator and
Distributor
The Adviser, the Administrator and the Distributor have
entered into non-binding principles of cooperation, with the
approval of the Board of Trustees, pursuant to which they have
agreed to cooperate with each other in coordinating the services
that they respectively provide to the Trust, to refrain from
taking any actions to remove each other from their respective
positions and to continue in those positions on terms at least as
favorable as at present. The parties have also agreed to consult
with each other with respect to suggested nominations to the
Board of Trustees, recognizing that ultimate selection of
nominees as "Independent Trustees" within the meaning of the
Trust's Distribution Plan is to be made by the Independent
Trustees, (See "Distribution Plan," above.) The principles apply
as well to Pacific Capital Cash Assets Trust, Pacific Capital
Tax-Free Cash Assets Trust and Pacific Capital U.S. Treasuries
Cash Assets Trust. In addition, the Trust has entered into
separate agreements with the Adviser, the Administrator and the
Distributor under which the service providers have respectively
agreed that so long as they each hold those positions with the
Trust, and for a period of two years thereafter, they will not
serve in the same capacity for any mutual fund with the same
objectives as the Trust under the circumstances described in
those agreements.
COMPUTATION OF NET ASSET VALUE
The net asset value of the shares of each of the Trust's
three classes is determined as of 4:00 p.m., New York time, on
each day that the New York Stock Exchange is open, by dividing
the value of the Trust's net assets allocable to each class by
the total number of its shares of such class then outstanding.
Securities having a remaining maturity of less than sixty days
when purchased and securities originally purchased with
maturities in excess of sixty days but which currently have
maturities of sixty days or less are valued at cost adjusted for
amortization of premiums and accretion of discounts. All other
portfolio securities are valued at the mean between bid and asked
quotations which, for Hawaiian Obligations, may be obtained from
a reputable pricing service or from one or more broker-dealers
dealing in Hawaiian Obligations either of which may, in turn,
obtain quotations from broker-dealers or banks which deal in
specific issues. However, since Hawaiian Obligations are
ordinarily purchased and sold on a "yield" basis by banks or
dealers which act for their own account and do not ordinarily
make continuous offerings, quotations obtained from such sources
may be subject to greater fluctuations than is warranted by
prevailing market conditions. Accordingly, some or all of the
Hawaiian Obligations in the Trust's portfolio may be priced, with
the approval of the Trust's Board of Trustees, by differential
comparisons to the market in other municipal bonds under methods
which include consideration of the current market value of
tax-free debt instruments having varying characteristics of
quality, yield and maturity. Any securities or assets for which
market quotations are not readily available are valued at their
fair value as determined in good faith under procedures
established by and under the general supervision and
responsibility of the Trust's Board of Trustees. In the case of
Hawaiian Obligations, such procedures may include "matrix"
comparisons to the prices for other tax-free debt instruments on
the basis of the comparability of their quality, yield, maturity
and other special factors, if any, involved. With the approval of
the Trust's Board of Trustees, the Adviser may at its own expense
and without reimbursement from the Trust employ a pricing
service, bank or broker-dealer experienced in such matters to
perform any of the above described functions.
As indicated above, the net asset value per share of the
Trust's shares will be determined on each day that the New York
Stock Exchange is open. That Exchange annually announces the days
on which it will not be open. The most recent announcement
indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, that Exchange may close on days not included in that
announcement.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a
number of instances in which the Trust's Class A Shares are sold
or issued on a basis other than the maximum public offering
price, that is, the net asset value plus the highest sales
charge. Some of these relate to lower or eliminated sales charges
for larger purchases, whether made at one time or over a period
of time as under a Letter of Intent or right of accumulation.
(See the table of sales charges in the Prospectus.) The reasons
for these quantity discounts are, in general, that (i) they are
traditional and have long been permitted in the industry and are
therefore necessary to meet competition as to sales of Class A
Shares of other funds having such discounts; and (ii) they are
designed to avoid an unduly large dollar amount of sales charge
on substantial purchases in view of reduced selling expenses.
Quantity discounts are made available to certain related persons
("single purchasers") for reasons of family unity and to provide
a benefit to tax-exempt plans and organizations.
The reasons for the other instances in which there are
reduced or eliminated sales charges are as follows. Exchanges at
net asset value are permitted because a sales charge has already
been paid on the Class A Shares exchanged. Sales without sales
charge are permitted to Trustees, officers and certain others due
to reduced or eliminated selling expenses and/or since such sales
may encourage incentive, responsibility and interest and an
identification with the aims and policies of the Trust. Limited
reinvestments of redemptions of Class A Shares and Class C Shares
at no sales charge are permitted to attempt to protect against
mistaken or incompletely informed redemption decisions. Shares
may be issued at no sales charge in plans of reorganization due
to reduced or eliminated sales expenses and since, in some cases,
such issuance is exempted in the 1940 Act from the otherwise
applicable restrictions as to what sales charge must be imposed.
In no case in which there is a reduced or eliminated sales charge
are the interests of existing shareholders adversely affected
since, in each case, the Trust receives the net asset value per
share of all shares sold or issued.
AUTOMATIC WITHDRAWAL PLAN
Any shareholder who owns or purchases Class A Shares or
Class Y Shares of the Trust having a net asset value of at least
$5,000 may establish an Automatic Withdrawal Plan under which he
or she 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
and distributions must be reinvested. Shares will be redeemed on
the last business day of the month or quarter as may be necessary
to meet withdrawal payments.
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.
ADDITIONAL TAX INFORMATION
If you incur a sales commission on purchase of shares of
one mutual fund (the original fund) and then sell such shares or
exchange them for shares of a different mutual fund without
having held them at least 91 days, you must reduce the tax basis
for the shares sold or exchanged to the extent that the standard
sales commission charged for acquiring shares in the exchange or
later acquiring shares of the original fund or another fund is
reduced because of the shareholder's having owned the original
fund shares. The effect of the rule is to increase your gain or
reduce your loss on the original fund shares. The amount of the
basis reduction on the original fund shares, however, is added on
the investor's basis for the fund shares acquired in the exchange
or later acquired. The provision applies to commissions charged
after October 3, 1989.
CONVERSION OF CLASS C SHARES
Level Payment Class Shares ("Class C Shares") of the Trust,
which you hold will automatically convert to Front-Payment Class
Shares ("Class A Shares") of the Trust based on the relative net
asset values per share of the two classes as of the close of
business on the first business day of the month in which the
sixth anniversary of the your initial purchase of such Class C
Shares occurs. For these purposes, the date of your initial
purchase shall mean (1) the first business day of the month in
which such Class C Shares were issued to you, or (2) for Class C
Shares of the Trust you have obtained through an exchange or
series of exchanges under the Exchange Privilege (see "Exchange
Privilege" in the Prospectus), the first business day of the
month in which you made the original purchase of Class C Shares
so exchanged. For conversion purposes, Class C Shares purchased
through reinvestment of dividends or other distributions paid in
respect of Class C Shares will be held in a separate sub-account.
Each time any Class C Shares in your regular account (other than
those in the sub-account) convert to Class A Shares, a pro-rata
portion of the Class C Shares in the sub-account will also
convert to Class A Shares. The portion will be determined by the
ratio that your Class B Shares then converting to Class A Shares
bears to the total of your Class C Shares not acquired through
reinvestment of dividends and distributions.
The availability of the conversion feature is subject to the
continuing applicability of a ruling of the Internal Revenue
Service ("IRS"), or an opinion of counsel, that: (1) the
dividends and other distributions paid on Class A Shares and
Class C Shares will not result in "preferential dividends" under
the Code; and (2) the conversion of shares does not constitute a
taxable event. If the conversion feature ceased to be available,
the Class C Shares of the Trust would not be converted and would
continue to be subject to the higher ongoing expenses of the
Class C Shares beyond six years from the date of purchase. The
Trust has no reason to believe that these conditions for the
availability of the conversion feature will not continue to be
met.
If the Trust implements any amendments to its Distribution
Plan that would increase materially the costs that may be borne
under such Distribution Plan by Class A Shares shareholders,
Class C Shares will stop converting into Class A Shares unless a
majority of Class C Shares shareholders, voting separately as a
class, approve the proposal.
GENERAL INFORMATION
Possible Additional Series
If additional Series (as discussed in the Prospectus) were
created by the Board of Trustees, shares of each such Series
would be entitled to vote as a Series only to the extent
permitted by the 1940 Act (see below) or as permitted by the
Board of Trustees. Income and operating expenses would be
allocated among two or more series in a manner acceptable to the
Board of Trustees.
Under Rule 18f-2 under the 1940 Act, any matter required
to be submitted to shareholder vote is not deemed to have been
effectively acted upon unless approved by the holders of a
"majority" (as defined in that Rule) of the voting securities of
each Series affected by the matter. Such separate voting
requirements do not apply to the election of trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, Series. A change in
investment policy may go into effect as to one or more Series
whose holders so approve the change even though the required vote
is not obtained as to the holders of other affected Series.
Ownership of Securities
Of the shares of the Trust outstanding on July 2, 1997,
Merrill Lynch Pierce Fenner & Smith, Inc., P.O. Box 30561, New
Brunswick, NJ, held of record 8,376,423 Class A Shares (14.7% of
the class) and 84,193 Class C Shares (19.6% of the class) and BHC
Securities Inc., 2005 Market Street, Philadelphia, PA held of
record 3,025,642 Class A Shares (5.3% of the class) and 89,324
Class C Shares (20.7% of the class). On the basis of information
received from the holders, the Trust's management believes that
all of the shares indicated are held for the benefit of clients.
The Administrator held of record 10 Class Y Shares (100% of the
class). The Trust's management is not aware of any other person
beneficially owning more than 5% of its outstanding shares as of
such date.
Indemnification of Shareholders and Trustees
Under Massachusetts law, shareholders of a trust such as the
Trust may, under certain circumstances, be held personally liable
as partners for the obligations of the Trust. For shareholder
protection, however, an express disclaimer of shareholder
liability for acts or obligations of the Trust is contained in
the Declaration of Trust which requires that notice of such
disclaimer be given in each agreement, obligation, or instrument
entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of the
Trust's property of any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust also
provides that the Trust shall, upon request, assume the defense
of any claim made against any shareholder for any act or
obligation of the 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 Trust itself would be unable to meet
its obligations. In the event the Trust had two or more Series,
and if any such Series were to be unable to meet the obligations
attributable to it (which, as is the case with the Trust, is
relatively remote), the other Series would be subject to such
obligations, with corresponding increase in the risk of the
shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees of
the Trust out of the property of the Trust 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 or she 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 or her office.
Custodian and Auditors
The Trust's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Trust's assets.
The Trust's auditors, KPMG Peat Marwick LLP, perform an
annual audit of the Trust's financial statements.
Underwriting Commissions
During the Trust's fiscal year ended March 31, 1997, the
aggregate dollar amount of sales charges on sales of shares of
the Trust was $980,636 and the amount retained by the Distributor
was $81,561.
Financial Statements
The financial statements of the Trust for the fiscal year
ended March 31, 1997, which are contained in the Annual Report
for that fiscal year, are hereby incorporated by reference into
the Additional Statement. The financial statements as of the end
of the Trust's fiscal year have been audited by KPMG Peat Marwick
LLP, independent auditors, whose report thereon is incorporated
herein by reference.
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL BOND AND COMMERCIAL PAPER RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment
may take into consideration obligors such as guarantors, insurers
or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit
in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest
and repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category
than in higher rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the debt
being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and
risk.
Standard & Poor's ratings for municipal note issues are
designated SP in order to help investors distinguish more clearly
the credit quality of notes as compared to bonds. Notes bearing
the designation SP-1 are deemed very strong or to have strong
capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a
plus (+) designation. Notes bearing the designation SP-2 are
deemed to have a satisfactory capacity to pay principal and
interest.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's
Investment Grade as MIG 1 through MIG 4. In the case of variable
rate demand obligations (VRDOs), two ratings are assigned; one
representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the other
representing an evaluation of the degree of risk associated with
the demand feature. The short-term rating assigned to the demand
feature of VRDOs is designated as VMIG. When no rating is applied
to the long or short-term aspect of a VRDO, it will be designated
NR. Issues or the features associated with MIG or VMIG ratings
are identified by date of issue, date of maturity or maturities
or rating expiration date and description to distinguish each
rating from other ratings. Each rating designation is unique with
no implication as to any other similar issue of the same obligor.
MIG ratings terminate at the retirement of the obligation while
VMIG rating expiration will be a function of each issuer's
specific structural or credit features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality.
Margins of protection are ample although not
so large as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access
for refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of
an investment security is present and
although not distinctly or predominantly
speculative, there is specific risk.
Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations. Moody's
employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of
rated issuers: Prime 1 -- Highest Quality; Prime 2 -- Higher
Quality; Prime 3 -- High Quality.
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment. Ratings are
graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as
having the greatest capacity for timely payment. Issues in this
category are designed with the numbers 1, 2 and 3 to indicate
the relative degree of safety. The designation A-1 indicates
that the degree of safety regarding timely payment is either
overwhelming or very strong. A "+" designation is applied to
those issues rated "A-1" which possess safety characteristics.
Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as high as
for issues designated A-1. Issues carrying the designation A-3
have a satisfactory capacity for timely payment. They are,
however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
<PAGE>
INVESTMENT ADVISER
Hawaiian Trust Company, Limited
(after September 30, 1997)
Pacific Century Trust
a division of
Bank of Hawaii
Financial Plaza of the Pacific
P.O. Box 3170
Honolulu, Hawaii 96802
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Arthur K. Carlson
William M. Cole
Thomas W. Courtney
Richard W. Gushman, II
Stanley W. Hong
Theodore T. Mason
Russell K. Okata
Douglas Philpotts
Oswald K. Stender
OFFICERS
Lacy B. Herrmann, President
Sherri Foster, Senior Vice President
William C. Wallace, Senior Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1104
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
LEGAL COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
HAWAIIAN
TAX-FREE TRUST
A TAX-FREE
INCOME INVESTMENT
[LOGO]
STATEMENT OF ADDITIONAL INFORMATION
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
HAWAIIAN TAX-FREE TRUST
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Per Share Income and Capital Changes
Incorporated by reference into Part B:
Report of Independent Certified Public
Accountants
Statement of Assets and Liabilities as of
March 31, 1997
Statement of Operations for the year ended
March 31, 1997
Statement of Changes in Net Assets for the
years ended March 31, 1997 and 1996
Statement of Investments as of March 31, 1997
Notes to Financial Statements
Included in Part C:
Consent of Independent Certified Public
Accountants
(b) Exhibits:
(1) (a) Amended & Restated
Declaration of Trust (ii)
(2) By-laws (ii)
(3) Not applicable
(4) Specimen share certificate (iii)
(5) Investment Advisory Agreement (i)
(6) (a) Distribution Agreement (iii)
(b) Sales Agreement (for brokerage firms) (iii)
(c) Sales Agreement (for financial insti-
tutions (iii)
(d) Sales Agreement (for investment advi-
sers) (iii)
(e) Group Sales Agreement (iii)
(f) Related Agreement (iii)
(g) Services Agreement (ii)
(7) Not applicable
(8) Custody Agreement (iii)
(9) (a) Transfer Agency Agreement (iii)
(b) Administration Agreement (i)
(c) Agreement between the Trust and Aquila
Distributors, Inc. (iii)
(d) Agreement between the Trust and Aquila
Management Corporation (iii)
(e) Agreement between the Trust and
Hawaiian Trust Company, Limited (iii)
(10) Opinion and consent of counsel (ii)
(11) Not applicable
(12) Not applicable
(13) Not Applicable
(14) Not applicable
(15) Distribution Plan (ii)
(15) (a) Services Plan (ii)
(16) Schedule for computation of performance
quotations (iii)
(17) (a) Principles of Cooperation (iii)
(17) (b) Financial Data Schedules (iii)
(18) Plan pursuant to Rule 18f-3
under the 1940 Act (ii)
(i) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 14 dated March 25, 1996 and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 15 dated July 25, 1997 and
incorporated herein by reference.
(iii) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control with
Registrant
None
ITEM 26. Number of Holders of Securities
As of July 2, 1997 Registrant had 10,277 holders
of record of its Class A Shares, 91 of its Class C Shares
and 1 of its Class Y Shares.
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Supplemental Declaration of Trust Amending and
Restating the Declaration of Trust, filed as Exhibit 1 to
Registrant's Post-Effective Amendment No. 15 dated March 28,
1996, is incorporated herein by reference. Insofar as
indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers, and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that
in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the pay-ment by Registrant of expenses incurred
or paid by a Trustee, officer, or controlling person of
Registrant in the successful defense of any action,suit, or
proceeding) is asserted by such Trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment
Adviser
Hawaiian Trust Company, Limited, Registrant's
investment adviser, is a trust company. Hawaiian
Trust Company, Limited is a subsidiary of Bank of
Hawaii. Bank of Hawaii is a state-chartered bank.
Bank of Hawaii is a subsidiary of Bancorp Hawaii,
Inc. Bancorp Hawaii, Inc. is a bank holding com-
pany.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal
underwriter to the following Funds, including the
Registrant: Capital Cash Management Trust, Churchill
Cash Reserves Trust, Churchill Tax-Free Fund of
Kentucky, Hawaiian Tax-Free Trust, Narragansett Insured
Tax- Free Income Fund, Pacific Capital Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust,
Pacific Capital U.S. Treasuries Cash Assets Trust,
Prime Cash Fund, Tax-Free Fund For Utah, Tax-Free Fund
of Colorado, Tax-Free Trust of Arizona, Aquila Rocky
Mountain Equity Fund, Aquila Cascadia Equity Fund and
Tax-Free Trust of Oregon.
(b) For information about the Directors and officers of
Aquila Distributors, Inc., reference is made to the
Form BD filed by it under the Securities Exchange
Act of 1934.
(c) Not applicable.
ITEM 30. Locations of Accounts and Records
All such accounts, books, and other documents are
maintained by the adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectus
and Statement of Additional Information.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
c) If the information called for by Item 5A is contained
in the latest annual report to shareholders, the
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest Annual Report to Shareholders, upon request and
without charge.
<PAGE>
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Consent of Independent Auditors
To The Shareholders and Board of Trustees
Hawaiian Tax-Free Trust:
We consent to the use of our report, dated May 9, 1997
incorporated herein by reference, and to the reference to our
firm under the headings "Financial Highlights" in the Prospectus
and "Custodian and Auditors" and "Financial Statements" in the
Statement of Additional Information.
KPMG Peat Marwick LLP
/s/KPMG Peat Marwick LLP
New York, New York
July 25, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933, and has caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 28th day of July, 1997.
HAWAIIAN TAX-FREE TRUST
(Registrant)
By /s/ Lacy B. Herrmann
_________________________
Lacy B. Herrmann,
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
/s/ Lacy B. Herrmann
____________________ President, Chairman of 7/28/97
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/ Vernon Alden
_____________________ Trustee 7/28/97
Vernon Alden
/s/ Arthur K. Carlson
_____________________ Trustee 7/28/97
Arthur K. Carlson
/s/ William M. Cole
_______________________ Trustee 7/28/97
William M. Cole
/s/ Thomas W. Courtney
_______________________ Trustee 7/28/97
Thomas W. Courtney
/s/ Richard W. Gushman, II
_______________________ Trustee 7/28/97
Richard W. Gushman, II
/s/ Stanley W. Hong
_______________________ Trustee 7/28/97
Stanley W. Hong
/s/ Theodore T. Mason
_______________________ Trustee 7/28/97
Theodore T. Mason
/s/ Russell K. Okata
_______________________ Trustee 7/28/97
Russell K. Okata
/s/ Douglas Philpotts
_______________________ Trustee 7/28/97
Douglas Philpotts
/s/ Oswald K. Stender
_______________________ Trustee 7/28/97
Oswald K. Stender
/s/ Rose F. Marotta
_______________________ Chief Financial Officer 7/28/97
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
HAWAIIAN TAX-FREE TRUST
EXHIBIT INDEX
Exhibit Exhibit
Number Name
(4) Specimen share certificate
(6) (a) Distribution Agreement
(b) Sales Agreement (for brokerage firms)
(c) Sales Agreement (for financial institutions)
(d) Sales Agreement (for investment advisers)
(e) Group Sales Agreement
(f) Related Agreement
(8) Custody Agreement
(9) (a) Transfer Agency Agreement
(c) Agreement between the Trust and Aquila
Distributors, Inc.
(d) Agreement between the Trust and Aquila
Management Corporation
(e) Agreement between the Trust and
Hawaiian Trust Company, Limited
(16) Schedule for computation of performance
quotations
(17) (a) Principles of Cooperation
(b) Financial Data Schedules
Correspondence
HAWAIIAN TAX-FREE TRUST
A MASSACHUSETTS BUSINESS TRUST
I. FRONT OF CERTIFICATE (all text and other matter lies within
7-1/2" x 11-1/2" decorative border, 1/2" wide)
(upper right) oval with heading: SHARES
(upper left) oval with heading: NUMBER
(below right oval) SEE REVERSE FOR CERTAIN DEFINITIONS
(at left) THIS CERTIFIES THAT (at right) is the owner of
SHARES without par value of
HAWAIIAN TAX-FREE TRUST
(hereinafter called the "Trust"), transferable on the books of the
Trust by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly endorsed.
This Certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Declaration
of Trust of the Trust to all of which the holder by acceptance
hereof assents. This certificate is not valid until countersigned
by the Transfer Agent.
WITNESS the seal of the Trust and the signatures of its duly
authorized officers or facsimiles thereof.
Dated:
______________________ _____________________
Secretary President
(at lower right, printed vertically)
Countersigned:
THE FIRST JERSEY NATIONAL BANK,
(JERSEY CITY, N.J.) Transfer Agent,
By
____________________________
Authorized Signature.
II. BACK OF CERTIFICATE (text reads from top to bottom of 11-1/2"
dimension)
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT -................Custodian.......................
(Cust) (Minor)
under Uniform Gifts to Minors Act...............
(State)
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED, ________________ HEREBY SELL, ASSIGN AND
TRANSFER UNTO
PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFYING NUMBER
OF ASSIGNEE
_______________
[ (box for SS#) ]
[_______________]________________________________________________
(Please print or typewrite name and address
of assignee)
_________________________________________________________________
_________________________________________________________________
___________________________________________________________SHARES
OF THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
___________________________________________ ATTORNEY TO TRANSFER
THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED TRUST WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES.
Dated_________________ Signed____________________________
____________________________
(Both must sign if joint
tenancy)
Signature(s)
guaranteed________________________
Firm or Bank
by
__________________________________
Officer
(text printed in box to left of signature(s))
Signatures must be guaranteed by a commercial bank or a member firm
of a domestic stock exchange.
(text printed vertically to right)
NOTICE: The signature to this assignment must correspond with the
name as written upon the face of the certificate in every
particular, without alteration or enlargement or any change
whatever.
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
AGREEMENT, made as of this 24th day of October,
1989, by and between Hawaiian Tax-Free Trust (hereinafter
called the "Trust"), and Aquila Distributors, Inc.
(hereinafter called the "Distributor").
W I T N E S S E T H :
WHEREAS, the Trust and the Distributor have
previously entered into a Distribution Agreement; and
WHEREAS, the Trust and the Distributor now wish to
amend and restate their agreement as herein set forth,
(referred to hereafter as "this Agreement");
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
it is agreed by and between the parties hereto as follows:
1. The Distributor agrees to act as principal
underwriter and exclusive distributor of the shares of the
Trust. The price at which shares of the Trust are issued to
the public by the Distributor shall be as computed and
effective as set forth in the Prospectus and Statement of
Additional Information of the Trust current as of the time
of such sale (collectively, the "Current Prospectus"). The
Distributor is authorized to determine from time to time (i)
the sales charges forming part of the public offering price
and any dealer discount paid to dealers and any agency
commissions paid to brokers; (ii) the terms of any privilege
reducing or eliminating such sales charges; and (iii) the
terms of any sales agreement entered into by the Distributor
relating to the sale of the Trust's shares and the identity
of any broker or dealer with which such agreements are
entered into. The Trust agrees that it will promptly amend
or supplement the Current Prospectus in connection with any
change in any of the foregoing. The Distributor agrees to
bear the costs of printing and distributing all copies of
the Trust's prospectuses, statements of additional
information and reports to shareholders which are not sent
to the Trust's shareholders, as well as the costs of
supplemental sales literature, advertising and other
promotional activities.
2. The Trust agrees to issue shares of the
Trust, subject to the provisions of its Declaration of Trust
and By-Laws, to the Distributor as ordered by the
Distributor, but only to the extent that the Distributor
shall have received purchase orders therefor at the times
and subject to the conditions set forth in the Current
Prospectus. Certificates for shares need not be created or
delivered by the Trust in any case in which the purchase is
made under terms not calling for such certificates. Shares
issued by the Trust shall be registered in such name or
names and amounts as the Distributor may request from time
to time and all shares when so paid for and issued shall be
fully paid and non-assessable to the extent set forth in the
Current Prospectus.
3. The Distributor shall act as principal in all
matters relating to promotion of the growth of the Trust and
shall enter into all of its engagements, agreements and
contracts as principal on its own account. The title to
shares of the Trust issued and sold through the Distributor
shall pass directly from the Trust to the dealer or
investor, or shall, if the Distributor so consents, first
pass to the Distributor, as may from time to time be
determined by the Board of Trustees of the Trust.
4. The Trust hereby consents to any arrangements
whereby the Distributor may act as principal underwriter for
other investment companies or as principal underwriter,
sponsor or depositor for unit investment trusts and periodic
payment plan certificates issued thereby, or as investment
adviser, sub-adviser or administrator to the Trust or other
investment companies or persons. The Trust also consents to
the Distributor carrying on a business as a broker, dealer
and underwriter in securities and to carrying on any other
lawful business.
5. The Trust covenants and agrees that it will
not during the term of this Agreement, without the consent
of the Distributor, offer any shares of the Trust for sale
directly or through any person or corporation other than the
Distributor excepting only (a) the reinvestment of dividends
and/or distributions, or their declaration in shares of the
Trust, in optional form or otherwise; (b) the issuance of
additional shares through stock splits or stock dividends;
(c) sales of shares to another investment or securities
holding company in the process of purchasing all or a
portion of its assets; or (d) in connection with an exchange
of the Trust's shares for shares of another investment
company or securities holding company.
6. The Trust agrees to use its best efforts to
register from time to time under the Securities Act of 1933
adequate amounts of shares of the Trust for sale by the
Distributor to the public and to register or qualify, or to
permit the Distributor to register or qualify, such shares
for offering to the public in such States or other
jurisdictions as may be designated by the Distributor.
7. The Trust agrees to advise the Distributor of
the net asset value of the Trust's shares as often as
computed. The Trust will also furnish to the Distributor,
as soon as practicable, such information as may reasonably
be requested by the Distributor in order that it may know
all of the facts necessary to sell shares of the Trust.
8. The Distributor is familiar with the
Declaration of Trust and By-Laws of the Trust, each as
presently in effect. Insofar as they are applicable to the
Distributor as principal underwriter of the Trust, it will
comply with the provisions of the Declaration of Trust and
By-Laws of the Trust and with the provisions of all acts
administered by the Securities and Exchange Commission (the
"Commission") and rules thereunder.
9. This amended and restated Agreement shall go
into effect on the date first above written, and shall,
unless terminated as hereinafter provided, continue in
effect until the June 30 which next precedes the second
anniversary of the effective date of this Agreement, and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually as
provided in the Investment Company Act of 1940 (the "Act").
This Agreement shall automatically terminate in the event of
its assignment (as defined in the Act) and may be terminated
by either party on sixty days written notice to the other
party.
10. The Trust agrees with the Distributor, for
the benefit of the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of
the Securities Act of 1933 (the "Securities Act") and each
and all and any of them, to indemnify and hold harmless the
Distributor and any such controlling person from and against
any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject
under the Securities Act, under any other statute, at common
law or otherwise, and to reimburse the Distributor and such
controlling persons, if any, for any legal or other expenses
(including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection
with any litigation whether or not resulting in any
liability, insofar as such losses, claims, damages,
liabilities or litigation arise out of, or are based upon,
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, filed with the Commission, or any amendment
thereof or supplement thereto, or which arise out of, or are
based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided,
however, that this indemnity agreement shall not apply to
amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Trust or
to any such losses, claims, damages, liabilities or
litigation arising out of, or based upon, any untrue
statement or alleged untrue statement of a material fact
contained in any such Registration Statement or Prospectus,
or any amendment thereof or supplement thereto, or arising
out of, or based upon, the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon
information furnished in writing to the Trust by the
Distributor for inclusion in any such Registration Statement
or Prospectus or any amendment thereof or supplement
thereto. The Distributor and each such controlling person
shall, promptly after the complaint shall have been served
upon the Distributor or such controlling person in respect
of which indemnity may be sought from the Trust on account
of its agreement contained in this paragraph, notify the
Trust in writing of the commencement thereof. The omission
of the Distributor or such controlling person so to notify
the Trust of any such litigation shall relieve the Trust
from any liability which it may have to the Distributor or
such controlling person on account of the indemnity
agreement contained in this paragraph, but shall not relieve
the Trust from any liability which it may have to the
Distributor or controlling person otherwise than on account
of the indemnity agreement contained in the paragraph. In
case any such litigation shall be brought against the
Distributor or any such controlling person and notice of the
commencement thereof shall have been given to the Trust, the
Trust shall be entitled to participate in (and, to the
extent that it shall wish, to direct) the defense thereof at
its own expense, but such defense shall be conducted by
counsel of good standing and satisfactory to the Distributor
or such controlling person or persons, defendant or
defendants in the litigation. The indemnity agreement of
the Trust contained in this paragraph shall remain operative
and in full force and effect regardless of any investigation
made by or on behalf of the Distributor or any such
controlling person, and shall survive any delivery of shares
of the Trust. The Trust agrees to notify the Distributor
promptly of the commencement of any litigation or proceeding
against it or any of its officers or directors of which it
may be advised in connection with the issue and sale of
shares of the Trust.
11. Anything herein to the contrary
notwithstanding, the agreement in paragraph 10, insofar as
it constitutes a basis for reimbursement by the Trust for
liabilities (other than payment by the Trust of expenses
incurred or paid in the successful defense of any action,
suit or proceeding) arising under the Securities Act, shall
not extend to the extent of any interest therein of any
person who is an underwriter or a partner or controlling
person of an underwriter within the meaning of Section 15 of
the Securities Act or who, at the date of this Agreement, is
a Trustee of the Trust, except to the extent that an
interest of such character shall have been determined by a
court of appropriate jurisdiction as not against public
policy as expressed in the Securities Act. Unless in the
opinion of counsel for the Trust the matter has been
adjudicated by controlling precedent, the Trust, will, if a
claim for such reimbursement is asserted, submit to a court
of appropriate jurisdiction the question of whether or not
such interest is against the public policy as expressed in
the Securities Act.
12. The Distributor agrees to indemnify and hold
harmless the Trust and its Trustees and such officers as
shall have signed any Registration Statement filed with the
Commission from and against any and all losses, claims,
damages or liabilities, joint or several, to which the Trust
or such Trustees or officers may become subject under the
Securities Act, under any other statute, at common law or
otherwise, and will reimburse the Trust or such Trustees or
officers for any legal or other expenses (including the cost
of any investigation and preparation) reasonably incurred by
it or them or any of them in connection with any litigation,
whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out
of, or are based upon, any untrue statement or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Trust
by the Distributor for inclusion in any Registration
Statement or any Prospectus, or any amendment thereof or
supplement thereto. The Distributor shall not be liable for
amounts paid in settlement of any such litigation if such
settlement was effected without its consent. The Trust and
its Trustees and such officers, defendant or defendants, in
any such litigation shall, promptly after the complaint
shall have been served upon the Trust or any such Trustee or
officer in respect of which indemnity may be sought from the
Distributor on account of its agreement contained in this
paragraph, notify the Distributor in writing of the
commencement thereof. The omission of the Trust or such
Trustee or officer so to notify the Distributor of any such
litigation shall relieve the Distributor from any liability
which it may have to the Trust or such Trustee or officer on
account of the indemnity agreement contained in this
paragraph, but shall not relieve the Distributor from any
liability which it may have to the Trust or such Trustee or
officer otherwise than on account of the indemnity agreement
contained in this paragraph. In case any such litigation
shall be brought against the Trust or any such Trustee or
officer and notice of the commencement thereof shall have
been so given to the Distributor, the Distributor shall be
entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but
such defense shall be conducted by counsel of good standing
and satisfactory to the Trust. The indemnity agreement of
the Distributor contained in this paragraph shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of the Trust and shall
survive any delivery of shares of the Trust. The
Distributor agrees to notify the Trust promptly of the
commencement of any litigation or proceeding against it or
any of its officers or directors or against any such
controlling person of which it may be advised, in connection
with the issue and sale of the Trust's shares.
13. Notwithstanding any provision contained in
this Agreement, no party hereto and no person or persons in
control of any party hereto shall be protected against any
liability to the Trust or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence, in the performance of their
duties, or by reason of their reckless disregard of their
obligations and duties under this Agreement.
14. The Trust shall immediately advise the
Distributor (a) when any post-effective amendment to its
Registration Statement or any further amendment or
supplement thereto or any further Registration Statement or
amendment or supplement thereto becomes effective, (b) of
any request by the Commission for amendments to the
Registration Statement or the then effective Prospectus or
for additional information, (c) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement, or the initiation of any
proceedings for that purpose, and (d) of the happening of
any event which makes untrue any material statement made in
the Registration Statement or the Current Prospectus or
which in the opinion of counsel for the Trust requires the
making of a change in the Registration Statement or the
Current Prospectus in order to make the statements therein
not misleading. In case of the happening at any time of any
event which materially affects the Trust or its securities
and which should be set forth in a supplement to or an
amendment of the then effective Prospectus in order to make
the statements therein not misleading the Trust shall
prepare and furnish to the Distributor such amendment or
amendments to the then effective Prospectus as will correct
the Prospectus so that as corrected it will not contain, or
such supplement or supplements to the then effective
Prospectus which when read in conjunction with the then
effective Prospectus will make the combined information not
contain, any untrue statement of a material fact or any
omission to state any material fact necessary in order to
make the statements in the then effective Prospectus not
misleading. The Trust shall, if at any time the Commission
shall issue any stop order suspending the effectiveness of
the Registration Statement, make every reasonable effort to
obtain the prompt lifting of such order.
15. Except as expressly provided in paragraphs 10
and 12 hereof, the agreements herein set forth have been
made and are made solely for the benefit of the Trust, the
Distributor, and the persons expressly provided for in
paragraphs 10 and 12, their respective heirs, successors,
personal representatives and assigns, and except as so
provided, nothing expressed or mentioned herein is intended
or shall be construed to give any person, firm or
corporation, other than the Trust, the Distributor, and the
persons expressly provided for in paragraphs 10 and 12, any
legal or equitable right, remedy or claim under or in
respect of this Agreement or any representation, warranty or
agreement herein contained. Except as so provided, the term
"heirs, successors, personal representatives and assigns"
shall not include any purchaser of shares merely because of
such purchase.
16. The Distributor understands that the
obligations of this Agreement are not binding upon any
shareholder of the Trust personally, but bind only the
Trust's property; the Distributor represents that it has
notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly
authorized officers and their seals to be affixed as of the
day and year first above written.
Hawaiian Tax-Free Trust
By:______________________________
ATTEST:
__________________________
Aquila Distributors, Inc.
By:________________________________
ATTEST:
__________________________
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with brokerage firms)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you for sale and
distribution of the shares of any of the mutual funds of
which you are, or may become, Distributor (hereinafter
collectively referred to as the "Funds" and individually as
the "Fund"). Upon acceptance of this Agreement by you, we
understand that we may offer and sell shares of the Funds,
subject to all terms and conditions hereof and to your right
without notice to suspend or terminate the sale of shares of
any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold at the current offering price in effect as set
forth in each Fund's then current Prospectus (which term as
used herein includes any related Statement of Additional
Information). All purchase requests and applications
submitted by us are subject to acceptance or rejection as
set forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are a
foreign firm not eligible for membership in the NASD. In
any case, we and you agree to abide by all the rules and
regulations of the NASD concerning distribution of the
securities of open-end investment companies, including
without limitation, Section 26 of Article III of the NASD
Rules of Fair Practice, all of which are incorporated herein
as if set forth in full. We and you further agree to comply
with all applicable State and Federal laws and regulations.
We and you agree that we and you will sell or offer for sale
shares of the Funds only in those states or jurisdictions
whose laws permit the offers or sales in question, whether
or not such permission is dependent on registration or
qualification of the Funds or their shares under such laws.
3. We shall offer and sell shares of the Funds only in
accordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no
representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We agree
to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that such
shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws and
regulations. We agree to hold you and the Funds harmless
and to indemnify you and the Funds in the event that we, or
any of our sales representatives, violate any law or
regulation, or any provisions of this Agreement, which
violation may result in liability to you and/or any Fund;
and in the event you and/or such Fund determine to refund
any amounts paid by any investor by reason of any such
violation on our part, we shall return to you and/or such
Fund any commissions previously paid or discounts allowed by
you to us with respect to the transaction for which the
refund is made. All expenses which we incur in connection
with our activities under this Agreement will be borne by
us.
4. We understand and agree that the sales charge and dealer
commission relative to sales of shares of any Fund made by
us will be in an amount as set forth in the then current
Prospectus of such Fund or in separate written notice to us.
5. Payment for purchases of shares of any Fund made by wire
order from us will be received by you or such Fund within
five business days after the acceptance of our order or such
shorter time as may be required by law. If such payment is
not so received, we understand that you reserve the right,
without notice, forthwith to cancel the sale, or, at your
option, to sell the shares ordered by us back to such Fund,
in which latter case we may be held responsible for any
loss, including loss of profit, suffered by you and/or such
Fund resulting from our failure to make the aforesaid
payment. Where sales of shares of any Fund are contingent
upon such Fund's receipt of Federal funds in payment
therefor, we shall forward promptly to you any purchase
orders and payments received by us from investors.
6. We agree to purchase shares only from you or from our
customers. If we purchase shares from you, we agree that
all such purchases shall be made only to cover orders
received by us from our customers, or for our own bona fide
investment. If we purchase shares from our customers, we
agree to pay such customers not less than the applicable
redemption price as established by the then current
Prospectus.
7. Unless at the time of transmitting an order we advise you
to the contrary, you may consider the order to be the total
holding of the investor and assume that the investor is not
entitled to any reduction in sales price beyond that
accorded to the amount of the purchase as determined by the
schedule set forth in the then current Prospectus.
8. We understand and agree that if shares of any Fund sold
by us under the terms of this Agreement are redeemed by such
Fund (including redemptions resulting from an exchange for
shares of another investment company) or are repurchased by
you as agent for such Fund or are tendered to such Fund for
redemption within seven business days after the confirmation
to us of our original purchase order for such shares, we
shall pay forthwith to you the full amount of the commission
allowed to us on the original sale, provided you notify us
of such repurchase or redemption within ten days of the date
upon which written redemption requests (and, if applicable,
share certificates) are delivered to you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in
performing our services covered by this Agreement we are
acting as principal, and you are in no way responsible for
the manner of our performance or for any of our acts or
omissions in connection therewith. Nothing in this
Agreement shall be construed to constitute us or any of our
agents, employees or representatives as your agent, partner
or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. We agree that
you have and reserve the right, in your sole discretion
without notice, to suspend sales of shares of any one or
more of the Funds, or to withdraw entirely the offering of
shares of any one or more of the Funds, or, in your sole
discretion, to modify, amend, or cancel this Agreement upon
written notice to us of such modification, amendment, or
cancellation, which shall become effective on the date
stated in such notice. Without limiting the foregoing, you
may terminate this Agreement for cause on violation by us of
any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. Without limiting the foregoing, any provision
hereof to the contrary notwithstanding, our expulsion from
the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of
applicable State or Federal laws or regulations will
terminate this Agreement effective upon the date of your
mailing notice to us of such termination. Your failure to
terminate for any cause will not constitute a waiver of your
right to terminate at a later date for any such cause. All
notices hereunder will be to the respective parties at the
addresses listed hereon, unless changed by notice given in
accordance with this Agreement.
11. This Agreement will become effective when it is executed
and dated by you, and will be in substitution of any prior
agreement between you and us covering shares of the Funds.
This Agreement is not assignable or transferable, except
that you may assign or transfer this Agreement to any
successor firm or corporation which becomes a principal
underwriter of the Funds.
_________________________________
(name of brokerage firm)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19___
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with financial institutions)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you to make avail-
able to our customers the shares of any of the funds of
which you are, or may become, Distributor (hereinafter col-
lectively referred to as the "Funds" or individually as the
"Fund") on a fully disclosed basis wherein you would confirm
transactions of our customers in such shares directly to
them. Upon acceptance of this Agreement by you, we under-
stand that we may make shares of the Funds available to our
customers, subject to all terms and conditions hereof and to
your right without notice to suspend or terminate the sale
of shares of any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold by you at the current offering price in effect as
set forth in each Fund's then current Prospectus (which term
as used herein includes any related Statement of Additional
Information). All purchase requests and applications sub-
mitted by us are subject to acceptance or rejection as set
forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are either
(i) a foreign firm not eligible for membership in the NASD,
or (ii) a bank, as defined in Section 3(a)(6) of the Securi-
ties Exchange Act of 1934. In any case, we and you agree to
abide by all applicable rules and regulations of the NASD,
including without limitation, Section 26 of Article III of
the NASD Rules of Fair Practice, all of which are incorpora-
ted herein as if set forth in full. We and you further
agree to comply with all applicable State and Federal laws
and regulations. We and you agree that we and you will make
available for sale shares of the Funds only in those states
or jurisdictions whose laws so permit, whether or not such
permission is dependent on registration or qualification of
the Funds or their shares under such laws.
3. We shall make shares of the Funds available only in ac-
cordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no representa-
tions not included in said Prospectus or in any authorized
supplemental material supplied by you. In no transaction
where we make shares of the Funds available to our customers
shall we have any authority to act as agent for the Funds.
The customers in question are for all purposes our customers
and not your customers. However, you will be responsible
for mailing each Fund's then current Prospectus (not inclu-
ding the related Statement of Additional Information) with
the confirmations. You will clear transactions for each of
our customers only upon our authorization, it being under-
stood in all cases that (i) we are acting as agent for the
customer, (ii) the transactions are without recourse against
us by the customer except to the extent that our failure to
transmit orders in a timely fashion results in a loss to our
customer, (iii) our customer will have full beneficial own-
ership of the shares, (iv) each transaction is initiated
solely upon the order of the customer, and (v) each trans-
action is for the account of the customer and not for our
account. We agree to be responsible for the proper instruc-
tion and training of all personnel employed by us in this
area, in order that such shares will be offered in accor-
dance with the terms and conditions of this Agreement and
all applicable laws and regulations. We agree to hold you
and the Funds harmless and to indemnify you and the Funds in
the event that we, or any of such personnel, violate any law
or regulation, or any provisions of this Agreement, which
violation may result in liability to you and/or any Fund;
and in the event you and/or such Fund determine to refund
any amounts paid by any investor by reason of any such vio-
lation on our part, we shall return to you and/or such Fund
any agency commissions previously paid to us with respect to
the transaction for which the refund is made. All expenses
which we incur in connection with our activities under this
Agreement will be borne by us.
4. We understand and agree that the sales charge to the cus-
tomer and the agency commission payable to us relative to
sales of shares of any Fund made by us will be in an amount
as set forth in the then current Prospectus of such Fund or
in separate written notice to us.
5. Payment for purchases by our customers of shares of any
Fund made by wire order from us will be received by you or
such Fund within five business days after the acceptance of
our order or such shorter time as may be required by law.
If such payment is not so received, we understand that you
reserve the right, without notice, forthwith to cancel the
sale, or, at your option, to sell the shares ordered by us
back to such Fund, in which latter case we may be held re-
sponsible for any loss, including loss of profit, suffered
by you and/or such Fund resulting from our failure to make
the aforesaid payment. Where sales of shares of any Fund
are contingent upon such Fund's receipt of Federal funds in
payment therefor, we shall forward promptly to you any pur-
chase orders and payments received by us from our customers.
6. We agree to make shares available to our customers only
(a) at the public offering price (except as provided in Pa-
ragraph 12 hereunder), (b) from you, and (c) to cover orders
already received from our customers. We shall not withhold
placing with you orders received from our customers so as to
profit ourselves as a result of such withholding; e.g., by a
change in the net asset value from that used in determining
the public offering price to our customers.
7. Unless at the time of transmitting an order we advise you
to the contrary, you may consider the order to be the total
holding of the investor and assume that the investor is not
entitled to any reduction in sales price beyond that accor-
ded to the amount of the purchase as determined by the sche-
dule set forth in the then current Prospectus. If we make
shares available to our customers as provided in Paragraph
12 hereunder, we shall so indicate to you at the time of
transmitting such order.
8. We understand and agree that if any shares sold to our
customers under the terms of this Agreement are redeemed by
any Fund (including redemptions resulting from an exchange
for shares of another investment company) or are repurchased
by you as agent for such Fund or are tendered to such Fund
for redemption within seven business days after the confir-
mation to our customers of our original purchase order for
such shares, we shall pay forthwith to you the full amount
of the commission allowed to us on the original sale, pro-
vided you notify us of such repurchase or redemption within
ten days of the date upon which written redemption requests
(and, if applicable, share certificates) are delivered to
you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in perfor-
ming our services covered by this Agreement we are acting as
agent for our customers, and you are in no way responsible
for the manner of our performance or for any of our acts or
omissions in connection therewith. Nothing in this Agree-
ment shall be construed to constitute us or any of our a-
gents, employees or representatives as your agent, partner
or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. However, our
termination of this Agreement will not terminate our respon-
sibilities under sections (iv) and (v) of Paragraph 12 here-
under. We agree that you have and reserve the right, in
your sole discretion without notice, to suspend sales of
shares of any one or more of the Funds, or to withdraw en-
tirely the offering of shares of any one or more of the
Funds, or, in your sole discretion, to modify, amend, or
cancel this Agreement upon written notice to us of such mo-
dification, amendment, or cancellation, which shall become
effective on the date stated in such notice. Without limi-
ting the foregoing, you may terminate this Agreement for
cause on violation by us of any of the provisions of this
Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Without limi-
ting the foregoing, any provision hereof to the contrary
notwithstanding, our expulsion from the NASD, if we are a
member of the NASD, will automatically terminate this Agree-
ment without notice; our suspension from the NASD, if we are
a member of the NASD, or violation of applicable State or
Federal laws or regulations (whether or not we are a member
of the NASD) will terminate this Agreement effective upon
the date of your mailing notice to us of such termination.
Your failure to terminate for any cause will not constitute
a waiver of your right to terminate at a later date for any
such cause. All notices hereunder will be to the respective
parties at the addresses listed hereon, unless changed by
notice given in accordance with this Agreement.
11. This Agreement will become effective when it is executed
and dated by you, and will be in substitution of any prior
agreement between you and us covering shares of the Funds.
This Agreement is not assignable or transferable, except
that you may assign or transfer this Agreement to any suc-
cessor firm or corporation which becomes a principal under-
writer of the Funds.
12. We may make shares of the Funds available to our custo-
mers at the next determined net asset value of such shares
under the following circumstances: (i) each such purchase
order is on behalf of a trust, agency, or custodial client,
(ii) we have, as to each such purchase order, discretionary
investment responsibility over the assets in question, (iii)
the relationship between the us and the client was not
formed solely for the purpose of purchasing shares of any
Fund at net asset value, (iv) the shares purchased pursuant
to such purchase order will not be resold except by redemp-
tion, (v) there is no charge relating to such purchase other
than our normal service charge, and (vi) we may disclose the
name of any Fund to the client without your consent.
_________________________________
(name of financial institution)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19__
Revised 2/94
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with investment advisers)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you to make avail-
able to our clients the shares of any of the funds of which
you are, or may become, Distributor (hereinafter collective-
ly referred to as the "Funds" or individually as the "Fund")
on a fully disclosed basis wherein you would confirm trans-
actions of our clients in such shares directly to them.
Upon acceptance of this Agreement by you, we understand that
we may make shares of the Funds available to our clients,
subject to all terms and conditions hereof and to your right
without notice to suspend or terminate the sale of shares of
any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold by you at the current net asset value in effect as
set forth in each Fund's then current Prospectus (which term
as used herein includes any related Statement of Additional
Information). All purchase requests and applications sub-
mitted by us are subject to acceptance or rejection as set
forth in each Fund's then current Prospectus.
2. We certify that we are an investment adviser, registered
with the Securities and Exchange Commission under the In-
vestment Advisers Act of 1940 and registered under relevant
state statutes; we furthermore undertake to maintain such
registrations. You certify that you are a broker-dealer,
registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, registered with the Na-
tional Association of Securities Dealers, Inc., and regis-
tered under relevant state statutes; you furthermore under-
take to maintain such registrations. We and you further
agree to comply with all applicable statutes and regula-
tions. We and you agree that we and you will make available
for sale shares of the Funds only in those states or juris-
dictions whose laws so permit, whether or not such permis-
sion is dependent on registration or qualification of the
Funds or their shares under such laws.
3. We shall make shares of the Funds available only in ac-
cordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no representa-
tions not included in said Prospectus or in any authorized
supplemental material supplied by you. In no transaction
where we make shares of the Funds available to our clients
shall we have any authority to act as agent for the Funds.
The clients in question are for all purposes our clients and
not your clients. However, you will be responsible for mai-
ling each Fund's then current Prospectus (not including the
related Statement of Additional Information) with the con-
firmations. You will clear transactions for each of our
clients only upon our authorization, it being understood in
all cases that (i) we are acting as agent for the client,
(ii) the transactions are without recourse against us by the
client, (iii) our client will have full beneficial ownership
of the shares, and (iv) each transaction is for the account
of the client and not for our account. We agree to be re-
sponsible for the proper instruction and training of all
personnel employed by us in this area, in order that such
shares will be offered in accordance with the terms and con-
ditions of this Agreement and all applicable laws and regu-
lations. We agree to hold you and the Funds harmless and to
indemnify you and the Funds in the event that we, or any of
such personnel, violate any law or regulation, or any provi-
sions of this Agreement, which violation may result in lia-
bility to you and/or any Fund. All expenses which we incur
in connection with our activities under this Agreement will
be borne by us.
4. Payment for purchases by our clients of shares of any
Fund made by wire order from us will be received by you or
such Fund within five business days after the acceptance of
our order or such shorter time as may be required by law.
If such payment is not so received, we understand that you
reserve the right, without notice, forthwith to cancel the
sale, or, at your option, to sell the shares ordered by us
back to such Fund, in which latter case we may be held re-
sponsible for any loss, including loss of profit, suffered
by you and/or such Fund resulting from our failure to make
the aforesaid payment. Where sales of shares of any Fund
are contingent upon such Fund's receipt of Federal funds in
payment therefor, we shall forward promptly to you any pur-
chase orders and payments received by us from our clients.
5. We agree to make shares available to our clients only (a)
at the net asset value, (b) from you, and (c) to cover or-
ders already received from our clients. We shall not with-
hold placing with you orders received from our clients so as
to profit ourselves as a result of such withholding; e.g.,
by a change in the net asset value from that used in deter-
mining the net asset value to our clients.
6. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in perfor-
ming our services covered by this Agreement we are acting as
agent for our clients, and you are in no way responsible for
the manner of our performance or for any of our acts or
omissions in connection therewith. Nothing in this Agree-
ment shall be construed to constitute us or any of our a-
gents, employees or representatives as your agent, partner
or employee, or as the Funds' agent or employee.
7. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. However, our
termination of this Agreement will not terminate our respon-
sibilities under sections (iv) and (v) of Paragraph 9 here-
under. We agree that you have and reserve the right, in
your sole discretion without notice, to suspend sales of
shares of any one or more of the Funds, or to withdraw en-
tirely the offering of shares of any one or more of the
Funds, or, in your sole discretion, to modify, amend, or
cancel this Agreement upon written notice to us of such mo-
dification, amendment, or cancellation, which shall become
effective on the date stated in such notice. Without limi-
ting the foregoing, you may terminate this Agreement for
cause on violation by us of any of the provisions of this
Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Your failure
to terminate for any cause will not constitute a waiver of
your right to terminate at a later date for any such cause.
All notices hereunder will be to the respective parties at
the addresses listed hereon, unless changed by notice given
in accordance with this Agreement.
8. This Agreement will become effective when it is executed
and dated by you, and will be in substitution of any prior
agreement between you and us covering shares of the Funds.
This Agreement is not assignable or transferable, except
that you may assign or transfer this Agreement to any suc-
cessor firm or corporation which becomes a principal under-
writer of the Funds.
9. We agree that (i) each purchase order is on behalf of an
investment advisory client, (ii) the relationship between us
and the client was not formed solely for the purpose of pur-
chasing shares of any Fund at net asset value, (iii) the
shares purchased pursuant to such purchase order will not be
resold except by redemption, (iv) there is no charge rela-
ting to such purchase other than our normal service charge,
and (v) we may disclose the name of any Fund to the client
without your consent.
_________________________________
(name of investment adviser)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19__
AQUILA DISTRIBUTORS, INC.
AGREEMENT FOR GROUP PURCHASES
AT REDUCED PRICES
FROM:
TO: Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
(212) 697-6666
Gentlemen:
We desire to enter into an agreement with you for the purchase of
the shares of ____________________________ (name of Trust/Fund).
Upon acceptance of this Agreement by you, we understand that shares
of the Trust/Fund may be purchased by members of _________________
(name of Qualified Group), at a reduced price, subject however to
all of the terms and conditions hereof and to your right, without
notice, to suspend or terminate the sale of the shares.
1. We understand that the shares will be offered at a reduced price
to certain Qualified Groups as set forth in the Trust's/Fund's then
current Prospectus (which term as used herein includes any related
applications submitted on behalf of this Qualified Group are
subject to acceptance or rejection as set forth in the
Trust's/Fund's then current Prospectus.
2. Shares of the Trust/Fund will be offered only in accordance with
the terms and conditions of its then current Prospectus and no
representations will be made which are not included in said
Prospectus or in any authorized supplemental material supplied by
you.
3. We understand and agree that the sales charge relative to any
purchases at reduced prices of shares by _____________________
(Name of Qualified Group) will be ____% and that the dealer
reallowance will be ____%.
4. We represent that __________________ (name of Qualified Group)
is a Qualified Group whose members are eligible to purchase shares
at the reduced price. A Qualified Group is (i) a group,
association, or category of purchasers who are represented by a
fiduciary, professional, or other representative (other than a
registered broker-dealer), (ii) which satisfies uniform criteria
which enable you to realize economies of scale in your costs of
distributing shares, (iii) gives its endorsement or authorization
to an investment program to facilitate solicitation of its
membership by a broker or dealer, and (iv) complies with the
conditions of purchase that are set forth in any agreement entered
into between the Trust/Fund and the group, representative, broker,
or dealer.
5. We understand that at the time of purchase the investor, either
directly or through us, must furnish you, on behalf of the Transfer
Agent for the Trust/Fund, with information sufficient to permit
verification that his/her purchase qualifies for the reduced sales
charge.
6. Your obligations to us under this Agreement are subject to all
the provisions of any agreement entered into between you and the
Trust/Fund. We understand and agree that in performing our services
covered by this Agreement we are acting as principal, and you are
in no way responsible for the manner of our performance or for any
of our acts or omissions in connection therewith. Nothing in this
Agreement shall be construed to constitute us or any of our agents,
employees, or representatives as your agent, partner, or employee,
or the agent or employee of the Trust/Fund.
7. This Agreement is dependent upon the continued effectiveness of
a Sales Agreement by which you have agreed with us for distribution
of shares of the Trust/Fund. This Agreement is subject to all terms
of such Sales Agreement.
8. This Agreement may be terminated by either party on 30 days'
notice. All notices hereunder shall be in writing addressed to the
respective parties at the addresses listed hereon, unless changed
by notice given in accordance with this Agreement.
9. This Agreement shall become effective as of the date when it is
executed and dated by you. This Agreement is not assignable or
transferable.
BROKER OR DEALER FIRM (Name) _______________________
Address ____________________________________________
By (Signature) _____________________________________
Name and Title _____________________________________
Telephone Number ___________________________________
Accepted:
AQUILA DISTRIBUTORS, INC.
By ____________________________
Date __________________________
AQUILA DISTRIBUTORS, INC.
RELATED AGREEMENT FOR SALE OF SHARES OF
HAWAIIAN TAX-FREE TRUST
FROM:
__________________________________
__________________________________
__________________________________
TO: Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
1. We understand that Hawaiian Tax-Free Trust (the "Trust"), for
which you act as Distributor, has adopted a plan (the "Distribution
Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 as amended (the "Act"), for making distribution assistance
payments ("Permitted Payments") to selected brokers and other
persons ("Qualified Recipients") providing distribution assistance
to certain Trust accounts ("Qualified Holdings"). We have been
furnished a copy of the Distribution Plan and understand that this
letter is a "Related Agreement" as defined in the Distribution Plan
and that all defined terms in this letter have the same meanings as
in the Distribution Plan.
2. We intend to furnish distribution assistance to Qualified
Holdings which will make us a Qualified Recipient for Permitted
Payments. We understand that we may receive Permitted Payments only
in accordance with the Distribution Plan.
3. This Related Agreement is dependent upon the continued
effectiveness of a Sales Agreement by which you have agreed with us
for distribution of shares of the Trust. All terms of the Sales
Agreement are incorporated by reference into this Related Agreement
as if set forth in full.
4. We understand that, although the Permitted Payments cannot
exceed the limits specified in the Distribution Plan, the amount of
such payments up to such limit, the frequency and timing of such
payments, the terms of any right to sell in a territory, and any
other terms, conditions, or qualifications for us to receive such
payments are subject to change by you from time to time, upon at
least 30 days' written notice. Any orders placed after the
effective date of such change shall be subject to the rates in
effect at the time of receipt of the payment by the Trust. Such 30-
day period may be waived at your sole option in the event such
change increases the Permitted Payments due us. We understand that
you may pay the Permitted Payments yourself or pay them through a
paying agent.
5. We shall provide you with any documentation which the Federal
and state securities laws and regulations may from time to time
require as a prerequisite to the payment of Permitted Payments. We
shall bear the clerical costs of providing such documentation, and
shall be responsible for the accuracy of such documentation.
6. This Agreement is not assignable or transferable, except that
you may transfer or assign this Agreement to any successor firm or
corporation which becomes Distributor of the Trust.
7. If a quarterly Permitted Payment would be less than $50.00, it
will be aggregated with the following quarterly Permitted Payment,
and you will remit such aggregated Permitted Payments following the
quarter in which such aggregated Permitted Payments exceed $50.00.
8. This Agreement may be terminated by either party on 30 days'
written notice. All notices hereunder shall be in writing addressed
to the respective parties at the addresses listed hereon, unless
changed by notice given in accordance with this Agreement.
9. This Agreement will become effective on the date when it is
executed and dated by you below. This Agreement and all rights and
obligations of the parties hereunder will be governed by and
construed under the laws of the State of New York.
____________________________________________________
(name of firm)
____________________________________________________
By:
____________________________________________________
(name and title of officer)
____________________________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By: ____________________________
________________________________
(name and title of officer)
Dated: ________________, 19_____
<PAGE>
HAWAIIAN TAX-FREE TRUST
NOTICE TO FIRMS PROVIDING DISTRIBUTION ASSISTANCE
PURSUANT TO RELATED AGREEMENT
The Trust's Permitted Payments program will be implemented on the
first day of the calendar quarter after the Trust reaches the total
net asset level of $500 million, or will be implemented at a
certain earlier time, as provided in the Trust's Proxy Statement of
January 27, 1992.
Subject to the limits of the Distribution Plan of the Trust,
Permitted Payments to each firm which is a Qualified Recipient will
be made for each calendar quarter, based on each month's average
net asset value of the daily balances in such firm's accounts which
are Qualified Holdings, and will be at the annual rate of twenty
one-hundredths of one percent (0.20%).
Each such payment will be mailed by the 15th day of the month
following the end of each calendar quarter.
Date of this Notice: March 27, 1992
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of March 30, 1995, by and between
HAWAIIAN TAX-FREE TRUST, a business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust"), and BANK ONE
TRUST COMPANY, N.A., a banking company organized under the laws of
the United States (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that Securities and cash of the
Trust be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to
time serving under the Trust's Declaration of Trust, dated May 2,
1984, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form of
such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Fund computes the net asset value of the Fund.
1.5 "Fund" shall mean any of the individual investment
portfolios of the Trust, including any additional portfolios
hereafter created, as each are or will be identified in Exhibit A
hereto; provided, however, that in the event that the Trust
consists of only one such portfolio, "Fund" shall refer to the
Trust.
1.6 "NASD" shall mean The National Association of Securities
Dealers, Inc.
1.7 "Officer" shall mean the President, any Senior Vice
President, Vice President or Assistant Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer,
the Treasurer, or any Assistant Treasurer of the Trust.
1.8 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to have
been given by an Authorized Person, (ii) recorded and kept among
the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to
confirm them, the Custodian shall notify the Trust of such variance
but such Oral Instructions will govern unless the Custodian has not
yet acted.
1.9 "Custody Account" shall mean any account in the name of
a Fund, which is provided for in Section 3.2 below, or of the
Trust.
1.10 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.11 "Securities Depository" shall mean The Participants Trust
Company or The Depository Trust Company and (provided that the
Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the
use of such clearing agency as a depository for the Trust) any
other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of
1934 (the "1934 Act"), which acts as a system for the central
handling of Securities where all Securities of any particular class
or series of an issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.12 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options, debentures,
notes, bank certificates of deposit, bankers' acceptances,
mortgage-backed securities, other money market instruments or other
obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that
the Custodian has the facilities to clear and to service.
1.13 "Shares" shall mean the units of beneficial interest
issued by the Trust.
1.14 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by one
or more persons as the Board of Trustees shall have from time to
time authorized, or (ii) communications by telex or any other such
system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to the
Custodian and approved by resolutions of the Board of Trustees, a
copy of which, certified by an Officer, shall have been delivered
to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or
in the possession of the Trust at any time during the period of
this Agreement, provided that such Securities or cash at all times
shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund, except Securities
maintained in a Securities Depository or Book-Entry System, shall
be physically segregated from other Securities and non-cash
property in the possession of the Custodian and shall be identified
as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain
in its trust department a custody account in the name of each Fund,
subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other
assets of the Fund which are delivered to it.
3.3 Appointment of Agents. Subject to the continuing
approval of the Board of Trustees, the Custodian may appoint, and
at any time remove, any domestic bank or trust company, and is
qualified to act as a custodian under the 1940 Act, as sub-
custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such
a bank or trust company (any such accounts to be in the name of the
Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent shall not relieve
the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver,
or cause to be delivered, to the Custodian all of the Fund's
Securities, cash and other assets, including (a) all payments of
income, payments of principal and capital distributions received by
the Fund with respect to such Securities, cash or other assets
owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until
actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit
in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use
of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and
returns of collateral consisting of Securities.
(b) Securities of a Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes only
assets held by the Custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian and the Custodian's account
on the books of the Book-Entry System and Securities
Depository as the case may be, with respect to Securities
of a Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry or otherwise, identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice
from the Book-Entry System or Securities Depository that
such Securities have been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund
are held in a Book-Entry System or Securities Depository,
the Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities
has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Fund.
(e) Upon request, the Custodian shall provide the Fund with
copies of any report (obtained by the Custodian from a
Book-Entry System or Securities Depository in which
Securities of the Fund is kept) on the internal
accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of the
Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-
Entry System or Securities Depository. At its election,
the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry
System or Securities Depository or any other person for
any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and
to the extent that the Custodian has been made whole for
any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from a Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or any
sub-custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9
below in proper form for transfer, or if the purchase of
such Securities is effected through a Book-Entry System
or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and
options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title
thereto in favor of the Trust or any nominee referred to
in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the
Trust and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System
or Securities Depository for the account of the Fund with
such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned
by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Trust, including but not limited to the following
payments for the account of a Fund: interest; taxes;
administration, investment management, investment
advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating
expenses of a Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from a Custody Account but only in the following
cases:
(a) Upon the sale of Securities for the account of a Fund but
only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with
tender or other similar offers for Securities of a Fund;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to
the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by a Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of a Fund, but only against receipt of such collateral as
the Trust shall have specified to the Custodian in Proper
Instructions;
(j) For delivery as security in connection with any
borrowings by the Trust on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt
by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Trust
on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits
in connection with transactions by the Trust on behalf of
a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of
a resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with respect
to all Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Trust is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.9 Registration and Transfer of Securities. All Securities
held for a Fund that are issued or issuable only in bearer form
shall be held by the Custodian in that form, provided that any such
Securities shall be held in a Book-Entry System for the account of
the Trust on behalf of a Fund, if eligible therefor. All other
Securities held for a Fund may be registered in the name of the
Trust on behalf of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided,
however, that such Securities are held specifically for the account
of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name
of any of the nominees hereinabove referred to or in the name of a
Book-Entry System or Securities Depository, any Securities
registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund,
complete and accurate records with respect to Securities, cash or
other property held for the Trust, including (i) journals or other
records of original entry containing an itemized daily record in
detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and
Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of
the Trust as the Trust shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 31
and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be
maintained by Rule 31a-1 under the 1940 Act, be preserved for the
periods prescribed in Rule 31a-2 under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement by Fund and a summary of
all transfers to or from the Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement, by
Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide
the Trust with such reports, as the Trust may reasonably request
from time to time, on the internal accounting controls and
procedures for safeguarding Securities, which are employed by the
Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies, if any, relating to Securities which are not
registered in the name of a Fund, to be promptly executed by the
registered holder of such Securities, without indication of the
manner in which such proxies are to be voted, and shall include all
other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, and all notices to the
holders of such Securities.
3.14 Information on Corporate Actions. The Custodian will
promptly notify the Trust of corporate actions, limited to those
Securities registered in nominee name and to those Securities held
at a Depository or sub-Custodian acting as agent for the Custodian.
The Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Card Service, J.J.
Kenny's Munibase System, Depository Trust Reorganization Notices,
Xcitek Inc., Standard & Poor's Called Bond Listing or The Wall
Street Journal or received by first class mail from the agent. For
market announcements not yet received and distributed by the
Custodian's services, the Trust will inform its custody
representative with appropriate instructions. The Custodian will,
upon receipt of the Trusts's response within the required deadline,
effect such action for receipt or payment for the Trust. For those
responses received after the deadline, the Custodian will effect
such action for receipt or payment, subject to the limitations of
the agent(s) effecting such actions. The Custodian will promptly
notify the Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide or cause
to be provided to the Custodian with all relevant information
contained in the prospectus for any security which has unique
put/option provisions and provide the Custodian with specific
tender instructions at least ten business days prior to the
beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Trust, Written Instructions shall be delivered
to the Custodian, specifying (a) the Fund making the purchase, (b)
the name of the issuer or writer of such Securities, and the title
or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any) or other units purchased, (d)
the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the
name of the person to whom such amount is payable. The Custodian
shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein.
The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Fund, if in the
relevant Custody Account there is insufficient cash available to
the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of
Securities for a Fund is made by the Custodian in advance of
receipt for the account of the Fund of the Securities purchased but
in the absence of specific Written or Oral Instructions to so pay
in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by a Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the Fund making the purchase, (b) the
name of the issuer or writer of such Securities, and the title or
other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the
date of sale and settlement (e) the sale price per unit, (f) the
total amount payable upon such sale, and (g) the person to whom
such Securities are to be delivered. Upon receipt of the total
amount payable to the Trust as specified in such Written
Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall
be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3
above or any other provision of this Agreement, the Custodian, when
instructed to deliver Securities against payment, shall be
entitled, if so directed in Written Instructions and if in
accordance with generally accepted market practice, to deliver such
Securities prior to actual receipt of final payment therefor. In
any such case, the Trust shall bear the risk that final payment for
such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person
to whom they were delivered, and the Custodian shall have no
liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion
and from time to time, the Custodian may credit the relevant
Custody Account, prior to actual receipt of final payment thereof,
with (i) proceeds from the sale of Securities which it has been
instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii)
income from cash, Securities or other assets of the Trust. Any
such credit shall be conditional upon actual receipt by the
Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt
of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual
receipt of all final payments in anticipation of which funds were
credited to the Custody Account.
4.6 Advances by Custodian for Settlement. If the Custodian
should, in its sole discretion, advance funds to the Trust to
facilitate the settlement of transactions on behalf of a Fund in
its Custody Account, then such advance shall be repayable
immediately upon demand made by the Custodian and shall bear
interest from the date incurred at a rate per annum (based on a
360-day year from the actual number of days involved) equal to 1%
over the Federal Funds rate in effect from time to time as
announced by The Wall Street Journal under the section entitled
Money Rates, or any successor title, such rate to be adjusted on
the effective date of any changes in such rate.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the relevant Custody Account, and upon receipt
of Proper Instructions specifying that the funds are required to
redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not
be under any obligation to effect payment or distribution by any
bank designated in Proper Instructions given pursuant to Section
5.1 above of any amount paid by the Custodian to such bank in
accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of and in conformity with Proper Instructions,
the Custodian shall establish and maintain a segregated account or
accounts for and on behalf of each Fund, into and from which
account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Trust,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities made
by a Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees,
certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust for any
loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages, cost,
expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not
be under any obligation at any time to ascertain whether the Trust
is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be custodian of, any cash belonging to
the Trust or any money represented by a check, draft or other
instrument for the payment of money, until the Custodian or its
agents actually receive such cash or collect on such instrument.
7.3 No Responsibility for title, etc. So long as and to the
extent that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received or delivered by
it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. The Custodian shall not
be required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Trust if such Securities are in default or payment is
not made after due demand or presentation. The Custodian shall
inform the Trust promptly of any such default or failure to make
payment.
7.5 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
Oral Instructions and/or any Written Instructions actually received
by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties
or obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
7.7 Cooperation. The Custodian shall cooperate with and
supply necessary information to the entity or entities appointed by
the Trust to keep the books of account of the Trust and/or compute
the value of the assets of the Trust. The Custodian shall take all
such reasonable actions as the Trust may from time to time request
to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to
the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's filings on Form N-1A and Form N-SAR and
any other reports required by the Securities and Exchange
Commission, and (b) the fulfillment by the Trust of any other
requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant to
Section 3.3 above, and any nominee of the Custodian or of such sub-
custodian from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
or foreign securities and/or banking laws) or claim arising
directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any action
or inaction by the Custodian or such sub-custodian (i) at the
request or direction of or in reliance on the advice of the Trust,
or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-
custody agreement with a sub-custodian appointed pursuant to
Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement,
provided that neither the Custodian nor any such sub-custodian
shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the
Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which may,
in the opinion of the Custodian, result in the Custodian or its
nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any
failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its
reasonable control as may cause interruption, loss or malfunction
of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes, acts of
civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay
shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective
as of the date first set forth above and shall continue in full
force and effect until terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of the giving of such notice.
If a successor custodian shall have been appointed by the Board of
Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Trust and held by
the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or
for the benefit of the Trust at the successor custodian, provided
that the Trust shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall
then be entitled. Upon such delivery and transfer, the Custodian
shall be relieved of all obligations under this Agreement. The
Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
Custodian by regulatory authorities in the State of Ohio or upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, and (c) is doing business in New York, New
York, all Securities, cash and other property held by the Custodian
under this Agreement and to transfer to an account of or for the
Trust at such bank or trust company all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall be
relieved of all obligations under this Agreement. If, after
reasonable inquiry, the Custodian cannot find a successor custodian
as contemplated in this Section 10.3, then the Custodian shall have
the right to deliver to the Trust all Securities and cash then
owned by the Trust and to transfer any Securities held in a Book-
Entry System or Securities Depository to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own
custodian with respect to the Trust and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon
from time to time by the Trust and the Custodian. The fees and
other charges in effect on the date hereof and applicable to the
Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts and under a Declaration of Trust, to
which reference is hereby made a copy of which is on file at the
office of the Secretary of State of Massachusetts as required by
law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of the Trust entered into in the name of
the Trust or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons
dealing with any of the Funds of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given to a party
hereunder shall be in writing and shall be sent or delivered to the
party at the address set forth after its name herein below:
To the Trust:
HAWAIIAN TAX-FREE TRUST
380 Madison Avenue
New York, NY 10017
Attn: Mr. Richard F. West, Treasurer and Mr.
William Killeen, Senior Operations
Officer
Telephone: (212)-697-6666
Facsimile: (212)-687-5373
To the Custodian:
BANK ONE TRUST COMPANY, N.A.,
100 East Broad Street
Columbus, OH 43271-0187
Attention: Mr. Robert F. Schultz, Senior Trust
Officer
Telephone: (614)-248-5445
Facsimile: (614)-248-2554
or at such other address as either party shall have provided to the
other by notice given in accordance with this Article XIII.
Writing shall include transmission by or through teletype,
facsimile, central processing unit connection, on-line terminal and
magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 No Waiver. No failure by either party hereto to exercise
and no delay by such party in exercising, any right hereunder shall
operate as a waiver thereof. The exercise by either party hereto
of any right hereunder shall not preclude the exercise of any other
right, and the remedies provided herein are cumulative and not
exclusive of any remedies provided at law or in equity.
14.3 Amendments. This Agreement cannot be changed orally and
no amendment to this Agreement shall be effective unless evidenced
by an instrument in writing executed by the parties hereto.
14.4 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.5 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.6 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without
the written consent of the other party hereto.
14.7 Headings. The headings of sections in this Agreement are
for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its
behalf by its representatives thereunto duly authorized, all as of
the day and year first above written.
ATTEST: HAWAIIAN TAX-FREE TRUST
/s/Patricia A. Craven /s/Lacy B. Herrmann
_____________________ By: ______________________
Assistant Secretary President
ATTEST: BANK ONE TRUST COMPANY, N.A.
/s/Beth Hayes /s/Robert F. Schultz
______________________ By: _______________________
Senior Trust Officer
<PAGE>
EXHIBIT A
Name of Fund
(if different from the Trust Date Added (if
different from date of
original Custody Agreement
<PAGE>
EXHIBIT B
I, Richard F. West, Treasurer, and I, Patricia Craven, Assistant
Secretary, of HAWAIIAN TAX-FREE TRUST, a Massachusetts business
trust (the "Trust"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Trust in conformity with the Trust's Declaration of
Trust and By-Laws to give Oral Instructions and Certificate on
behalf of the Trust, and the signatures set forth opposite their
respective names are their true and correct signatures:
NAME SIGNATURE
/s/Lacy B. Herrmann
Lacy B. Herrmann _____________________________
Rose F. Marotta _____________________________
/s/Richard F. West
Richard F. West _____________________________
/s/William C. Wallace
William C. Wallace _____________________________
/s/Diana P. Herrmann
Diana P. Herrmann _____________________________
/s/Charles E. Childs III
Charles E. Childs III _____________________________
/s/John M. Herndon
John M. Herndon _____________________________
/s/William Killeen
William Killeen _____________________________
/s/Patricia A. Craven
Patricia A. Craven _____________________________
/s/Richard F. West /s/Patricia A. Craven
________________________ _____________________________
Richard F. West, Patricia A. Craven,
Treasurer Assistant Secretary
<PAGE>
EXHIBIT C
Compensation of Custodian - Equity Fund/Money Market Funds
Whereas Article XI of the Custody Agreement between Hawaiian Tax-
Free Trust and Bank One Trust Company, N.A. stipulates that the
compensation of Custodian shall be agreed upon by the Trust and
Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to
the following schedule:
I. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction "
includes, but is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit,
withdrawal, and collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement,
overdraft charges will be at 100 basis points above the
Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate
applied to 90% of each day's positive collected balance will reduce
custody, FDIC and other fees as allowed by law. For each month
that the charges exceed the earnings credit, the deficiency shall
be paid to Custodian. For each month that the earnings credit
exceeds the charges, the Custodian shall carry such surplus credits
forward to subsequent month(s) and calendar year(s) until utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to
be exceptional.
The above fee schedule will remain in effect until March 31, 1998
and thereafter unless changed.
As stated by the Custodian in bidding to provide custody services
to the Trust, if at any time the Trust is not completely satisfied
with the Custodian's service levels, the Custodian will cease to
charge custody fees until its responsiveness and accuracy meet the
requirements of the Trust.
<PAGE>
EXHIBIT C
Compensation of Custodian - Bond Funds
Whereas Article XI of the Custody Agreement between Hawaiian Tax-
Free Trust and Bank One Trust Company, N.A. stipulates that the
compensation of Custodian shall be agreed upon by the Trust and
Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to
the following schedule:
I. Annual Holding Fee:
.00006 times the market value of assets held
II. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction "
includes, but is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit,
withdrawal, and collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement,
overdraft charges will be at 100 basis points above the
Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate
applied to 90% of each day's positive collected balance will reduce
custody, FDIC and other fees as allowed by law. For each month
that the charges exceed the earnings credit, the deficiency shall
be paid to Custodian. For each month that the earnings credit
exceeds the charges, the Custodian shall carry such surplus credits
forward to subsequent month(s) and calendar year(s) until utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to
be exceptional.
The above fee schedule will remain in effect until March 31, 1998
and thereafter unless changed.
As stated by the Custodian in bidding to provide custody services
to the Trust, if at any time the Trust is not completely satisfied
with the Custodian's service levels, the Custodian will cease to
charge custody fees until its responsiveness and accuracy meet the
requirements of the Trust.
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made this 9th day of February, 1989, by and
between Hawaiian Tax-Free Trust, an unincorporated business trust
organized under the laws of Massachusetts (the "Fund"), and
Administrative Data Management Corp., a corporation organized and
existing under the laws of the State of New York ("ADM").
R E C I T A L S
WHEREAS, the Fund is registered as an open-end, non-diversi-
fied, management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act") currently offering one
class of shares (the "Shares"); and
WHEREAS, the Fund desires to retain ADM to serve as the Fund's
transfer agent, registrar and dividend disbursing agent, and ADM is
willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto
as follows:
1. Appointment. The Fund hereby appoints ADM to serve as
transfer agent, registrar and dividend disbursing agent for the
Fund, for the period and on the terms set forth in this Agreement.
ADM accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided for in
Paragraph 15 of this Agreement.
2. Delivery of Documents. (a) The Fund has furnished ADM
with copies properly certified or authenticated of each of the
following:
(i) Resolutions of the Fund's Board of Trustees
authorizing the execution of this Agreement;
(ii) Appendix B identifying and containing the
signatures of the Fund's officers and other persons authorized to
sign Written Instructions and give Oral Instructions, each as
hereinafter defined, on behalf of the Fund;
(iii) The Fund's Declaration of Trust filed with the
Secretary of State of the Commonwealth of Massachusetts and all
amendments thereto (such Declaration of Trust, as presently in
effect and as it shall from time to time be amended, is herein
called the "Declaration");
(iv) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time
be amended, are herein called the "By-Laws");
(v) The Fund's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended (the "1933 Act") and under
the 1940 Act as filed with the Securities and Exchange Commission
("SEC") and all amendments thereto;
(vi) The Fund's most recent prospectus and statement of
additional information (such prospectus and statement of additional
information, as from time to time in effect and all amendments and
supplements thereto are herein called the "Prospectus").
(b) ADM has furnished the Fund with copies properly
certified or authenticated its Registration Statement on Form TA-1
under the Securities Exchange Act of 1934, as amended and all
annual or other public reports filed with the SEC as may be
requested by the Fund.
(c) Each party from time to time will furnish the other
with copies, properly certified or authenticated, of all amendments
or supplements to the foregoing, if any. Neither party is
obligated hereby to provide the other with otherwise confidential
information.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the
term "Authorized Person" means the Fund's officers and other
persons duly authorized by the Board of Trustees of the Fund to
give Oral and Written Instructions on behalf of the Fund and listed
on the Certificate annexed hereto as Appendix B or any amendment
thereto as may be received by ADM from time to time.
(b) "Oral Instructions". As used in this Agreement, the
term "Oral Instructions" means verbal instructions actually
received by ADM from an Authorized Person or from a person
reasonably believed by ADM to be an Authorized Person. The Fund
agrees to deliver to ADM Written Instructions confirming Oral
Instructions.
(c) "Written Instructions". As used in this Agreement,
the term "Written Instructions" means written instructions
delivered by mail, telegram, cable, telex or facsimile sending
device, and received by ADM and signed by an Authorized Person or
reasonably believed by ADM to have been signed by or authorized by
an Authorized Person unless otherwise required by a resolution of
the Board of Trustees furnished to ADM pursuant to Section 2(a)
hereof.
4. Instructions Consistent with Declaration, etc.
(a) Unless otherwise provided in this Agreement, ADM
shall act only upon Oral or Written Instructions. Although ADM may
take cognizance of the provisions of the Declaration and By-Laws of
the Fund, the Fund's Prospectus and the laws, rules and regulations
applicable to the Fund, ADM may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent
with any provisions of such Declaration or By-Laws, the Fund's
Prospectus or with any laws, rules or regulations applicable to the
Fund or any vote, resolution or proceeding of the Shareholders, or
of the Board of Trustees, or of any committee thereof.
(b) ADM shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by ADM
pursuant to this Agreement and shall have no liability for any
action which it takes or omits in accordance with such Oral
Instructions or Written Instructions, whether received from
personnel of the Fund, its investment adviser, its administrator,
or otherwise. The Fund agrees to forward to ADM Written
Instructions confirming Oral Instructions in such manner that the
Written Instructions are received by ADM, whether by hand delivery,
telex, facsimile sending device or otherwise, as promptly as
practicable after Oral Instructions are given to ADM. The Fund
agrees that the fact that such confirming Written Instructions are
not received by ADM shall in no way affect the validity of the
actions or transactions or enforceability of the actions or
transactions authorized by the Fund by giving Oral Instructions.
5. Transactions Not Requiring Instructions.
(a) In the absence of contrary Written Instructions, ADM
is authorized to take and to the extent set forth in the Activities
List shall take the following actions:
(i) issuance, transfer and redemption of Shares;
(ii) opening, maintenance, servicing and closing of
accounts of Shareholders or prospective Shareholders;
(iii) acting as agent of the Fund, in connection
with plan accounts, upon the terms and subject to the conditions
contained in the application relating to the plan account in
question;
(iv) causing the reinvestment in Shareholders'
accounts of dividends and distributions declared upon shares;
(v) transferring the investment of an investor
into, or from, the shares of other open-end investment companies,
if and to the extent permitted by the Prospectus;
(vi) processing redemptions;
(vii) examining and approving legal transfers;
(viii) furnishing to Shareholders confirmations
of transactions relating to their Shares;
(ix) preparing and mailing to the Internal Revenue
Service and all payees all information returns and payee statements
required under the Internal Revenue Code in respect to the Fund's
dividends and distributions and taking all other necessary actions
in connection with the dividend and other withholding requirements
of that Code;
(x) mailing to Shareholders annual and semi-annual
reports prepared by or on behalf of the Fund, and mailing new
Prospectuses upon their issue to shareholders.
(xi) preparation and sending such other information
from the Fund records held by ADM as may be reasonably requested by
the Fund;
(xii) preparation and sending to the Fund such
affidavits of mailing and certifications as are reasonably
requested by an officer of the Fund;
(xiii) transferring stock certificates
representing shares for other stock certificates representing such
shares;
(xiv) replacing allegedly lost, stolen or
destroyed stock certificates with or without surety bonds; and
(xv) maintaining such books and records relating to
transactions effected by ADM as are required by the 1940 Act, or by
any other applicable provisions of law, to be maintained by the
Fund or its transfer agent with respect to such transactions, and
preserving, or causing to be preserved, any such books and records
for such periods as may be required by any such law, rule or
regulation.
(b) ADM agrees to act as Proxy Agent in connection with
the holding of annual or special meetings of Shareholders, mailing
to Shareholders notices, proxies and proxy statements in connection
with the holding of such meetings, receiving and tabulating votes
cast by proxy and communicating to the Fund the results of such
tabulation accompanied by appropriate certificates, and preparing
and furnishing to the Fund certified lists of Shareholders as of
such date, and in such form and containing such information as may
be required by the Fund to comply with any applicable provisions of
law or its Declaration and/or By-Laws relating to such meetings.
ADM shall be reimbursed for out-of-pocket expenses in performing
such services, such as the costs of forms, envelopes and postage.
ADM at its cost with the consent of the Fund may employ another
firm to perform all or some of the functions required by this
subsection. The Fund shall pay such additional charges as the
parties may agree upon for the services of the Transfer Agent in
connection with special meetings of shareholders of the Fund in
excess of one such meeting held in any fiscal year of the Fund.
(c) ADM shall furnish to the Fund such information and
at such intervals as the Fund may reasonably request for the Fund
to comply with the normal registration and/or the normal reporting
requirements of the SEC, Blue Sky authorities or other regulatory
agencies. All such information shall be materially correct and
complete based upon information supplied to ADM.
(d) ADM shall, in addition to the services herein
itemized, if so requested by the Fund and for such additional fees
as the Fund and ADM may from time to time agree, perform and do all
other acts and services that are customarily performed and done by
transfer agents, dividend disbursing agents and shareholder
servicing agents of open-end mutual funds such as the Fund,
provided that normally occurring improvements in the services of
such agents will be provided without initial capital cost to the
Fund and at service fees which are competitive with those
prevailing in the industry.
(e) The parties hereto agree that without prejudice to
any other provisions of this Agreement, the functions of ADM and
the Fund under this Agreement will be substantially performed in
accordance with the Activities List set out in Appendix A to this
Agreement. Such activities List as amended from time to time is an
integral part of this Agreement. In the event that the provisions
of this Agreement are in conflict with or are inconsistent with
those set forth in such Activity List the provisions of the
Activities List shall govern.
(f) ADM agrees to provide to the Fund upon request such
information as may reasonably be required to enable the Fund to
reconcile the number of outstanding shares of the Fund between
ADM's records and the account books of the Fund.
6. Authorized Shares. The Fund hereby represents that the
Declaration authorizes the Board of Trustees to issue an unlimited
number of shares.
7. Dividends and Distributions. The Fund shall furnish ADM
with the amount of each daily dividend and with appropriate
evidence of action by the Fund's Board of Trustees authorizing the
daily declaration of dividends and distributions in respect of
Shares as described in the then current Prospectus. Upon
declaration of each dividend other than daily dividends, each
capital gain distribution or other distribution by the Board of
Trustees of the Fund, the Fund shall promptly notify ADM of the
date of such declaration, the amount payable per share, the record
date for determining the shareholders entitled to payment, the
payment date, and the reinvestment date and price which is to be
used to purchase shares for reinvestment, all sufficiently in
advance to permit ADM to process properly such dividend or capital
gain distribution or other distribution in a timely and orderly
manner.
Sufficiently in advance of each payment date to permit ADM to
have federal funds available to it for the payment thereof, the
Fund will transfer, or cause the Custodian to transfer, to ADM in
its capacity as dividend disbursing agent, at First Financial
Savings Bank, S.L.A. or at such bank or other financial institution
as ADM with the consent of the Fund shall select, which may but
need not be an affiliate of ADM, the total amount of the dividend
or distribution currently payable. After deducting any amount
reasonably believed by ADM to be required to be withheld by any
applicable tax laws, rules and regulations or other applicable
laws, rules and regulations, based upon information available to
it, ADM shall, as agent for each Shareholder and in accordance with
the provisions of the Fund's Declaration and then current
Prospectus, invest dividends in Shares in the manner described in
the Prospectus or pay them in cash.
ADM shall prepare, file with the Internal Revenue Service, and
address and mail to shareholders such returns and information
relating to dividends and distributions paid by the Fund as are
required to be so prepared, filed and mailed by applicable laws,
rules and regulations, or such substitute form of notice as may
from time to time be permitted or required by the Internal Revenue
Service. The Fund shall promptly provide ADM with the information
necessary to prepare such returns and information, all sufficiently
in advance to permit ADM to prepare properly and mail such returns
and information in a timely and orderly manner. On behalf of the
Fund, ADM shall pay on a timely basis to the appropriate Federal
authorities any taxes withheld on dividends and distributions paid
by the Fund.
8. Notification of ADM: The Fund shall promptly notify ADM
of the closing net asset value per share and the offering price per
share each day there are any transaction in shares of the Fund, but
in any event not later than sixty (60) minutes after the closing of
the New York Stock Exchange (if the Fund is not a money market
Fund) or before 1:00 p.m. New York Time (if the Fund is a money
market Fund.) In the event ADM is not so notified, it may assume
that the price is unchanged from the prior price.
9. Communications with Shareholders.
(a) Communications to Shareholders. The Fund shall
prepare, print and provide ADM with sufficient quantities of all
communications by the Fund to its shareholders all sufficiently in
advance to permit ADM to properly address and mail in a timely and
orderly manner all communications by the Fund to its Shareholders,
including reports to Shareholders, dividend and distribution
notices and proxy material for its meetings of Shareholders. ADM
agrees to mail all such material to shareholders of the Fund in a
timely manner. ADM or a firm employed by ADM will at ADM'S cost and
expense receive and tabulate the proxy cards for the meetings of
the Fund's Shareholders.
(b) Correspondence. ADM will answer such correspondence
from Shareholders, securities brokers and others relating to its
duties hereunder and such other correspondence as may from time to
time be mutually agreed upon between ADM and the Fund.
10. Records. ADM shall keep the records described on the
Activities List, including but not limited to the following:
(a) accounts for each Shareholder showing the following
information:
(i) name, address and United States Tax
Identification or Social Security number;
(ii) number of Shares held and number of Shares for
which certificates, if any, have been issued, including certificate
numbers and denominations;
(iii) historical information regarding the
account of each Shareholder, including dividends and distributions
paid and the date and the price, if applicable, for all
transactions in a Shareholder's account;
(iv) any stop or restraining order placed against a
Shareholder's account;
(v) any correspondence relating to the current
maintenance of a Shareholder's account;
(vi) information with respect to withholdings in the
case of a foreign account; and
(vii) information with respect to withholding in
the case of an account subject to backup withholding;
(ix) any information required in order for ADM to
perform any calculations contemplated or required by this
Agreement.
(b) If agreed between the Fund and ADM, subaccounts may
be maintained for each Shareholder requesting such services in
connection with shares held by such Shareholder for separate
accounts containing the same information for each subaccount as
required by subparagraph (a) above.
The books and records pertaining to the Fund which
are in the possession of ADM shall be the property of the Fund.
Such books and records shall be prepared and maintained as required
by the 1940 Act and other applicable securities laws and rules and
regulations in effect from time to time. ADM will, if so requested
by the counsel to the Fund, modify the manner in which such books
and records are prepared and maintained so as to comply with the
reasonable opinion of such counsel as to such laws and rules. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records at all times during ADM's normal business
hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by ADM to the Fund or the
Fund's authorized representative at the Fund's expense.
11. Reports and Other Information.
Upon reasonable request of the Fund, provided that the
cost or effort required therefor are, singly or in the aggregate,
not unduly burdensome or expensive to it, ADM will promptly
transmit to the Fund, at no additional cost to the Fund, (a)
documents and information in the possession of ADM and not
otherwise available necessary to enable it and its affiliates to
comply with the requirements of the Internal Revenue Service, the
SEC, the National Association of Securities Dealers, Inc., state
blue sky authorities, and any other regulatory bodies having
jurisdiction; (b) documents and information in the possession of
ADM necessary to enable the Fund to conduct annual and special
meetings of its shareholder; and (c) such other information,
including shareholder lists and statistical information concerning
accounts as may be agreed upon from time to time between the Fund
and ADM.
12. Cooperation with Accountants. ADM shall cooperate with
the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made
available on a timely basis to such accountants for the expression
of their unqualified opinion, including but not limited to the
opinion included in the Fund's annual report to Shareholders and on
Form N-SAR, or similar form.
13. Confidentiality. ADM agrees on behalf of itself and its
employees to treat confidentially all confidential records and
other confidential information relative to the Fund and its prior,
present or potential shareholders and relative to the Fund's
Distributor and its prior, present or potential customers. ADM
will under normal circumstances not divulge any such confidential
records or information to anyone other than the shareholder,
dealer, Fund or other person, firm, corporation or other entity
which ADM reasonably believes is entitled to such records or
information except, after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where ADM may be exposed to civil
or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
ADM shall not be considered to have breached this provision if
it, in good faith, has provided information or documents to an
individual, firm, corporation or other entity (governmental or
otherwise) which it reasonably believes is entitled to such
information or documents; provided that it shall, with respect to
any non-routine governmental investigation or inquiry, first
provide notice thereof to the Fund.
14. Equipment Failures. ADM shall maintain adequate and
reliable computer and other equipment necessary or appropriate to
carry out its obligations under this Agreement. In the event of
computer or other equipment failures at its own facilities beyond
ADM's reasonable control, ADM shall, at its expense, take
reasonable steps to minimize service interruptions. The foregoing
obligation of ADM shall not extend to computer terminals owned or
maintained by others, located outside of premises maintained by
ADM. ADM represents that it has presently in effect backup and
emergency systems described on Appendix C hereto. ADM will
maintain such arrangements or equivalent while this Agreement is in
force unless ADM notifies the Fund to the contrary and establishes
to the satisfaction of the Fund that industry standards no longer
require such arrangements.
15. Compensation. As compensation for the services rendered
by ADM during the term of this Agreement, ADM shall be entitled to
receive such reimbursement for out-of-pocket expenses and such
compensation is specified on Appendix D attached hereto or as may
from time to time be otherwise agreed on in writing between the
parties.
16. Responsibility of ADM. In the performance of its duties
hereunder, ADM shall be obligated to exercise care and diligence
and to act in good faith and to use its best efforts within
reasonable limits to insure the accuracy and completeness of all
services performed under this Agreement.
ADM and the affiliates and agents of ADM shall not be
responsible for or liable for any taxes, assessments, penalties,
fines or other governmental charges of whatever description which
may be levied or assessed on any basis whatsoever in connection
with withholding of amounts, verifying or providing taxpayer
identification numbers or otherwise under applicable tax laws and
preparing and filing of tax forms, excepting only for taxes
assessed on the basis of its compensation hereunder, provided that
ADM exercises the care and diligence required by this Agreement,
and in the case of its responsibilities for backup withholding,
verifying or providing taxpayer identification numbers or
otherwise, as to any shareholder from whom such withholding is
required, it withholds the necessary amount and attempts with
reasonable frequency, but no less often than once a calendar
quarter, to obtain the necessary information from the shareholder
until withholding is no longer required.
ADM and the affiliates and agents of ADM shall not be
responsible or liable for the actions, inactions, or any losses or
damages caused by any such actions or inactions of any agents,
brokers or others who are specifically selected by the Fund in
writing.
17. Release. ADM understands that the obligations of this
Agreement are not binding upon any Shareholder of the Fund
personally, but bind only the Fund's property; ADM represents that
it has notice of the provisions of the Fund's Declaration
disclaiming Shareholder liability for acts or obligations of the
Fund.
The Fund understands that the obligations of this
Agreement are not binding upon the parent corporation of ADM or any
affiliates or subsidiaries of ADM and that the Fund, its Directors,
Trustees, Officers, Shareholders and others shall look only to the
separate assets of ADM.
18. Right to Receive Advice. (a) Advice of Fund. If ADM
shall be in doubt as to any action to be taken or omitted by it, it
may request, and shall receive, from the Fund directions or advice,
including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If ADM shall be in doubt as to
any question of law involved in any action to be taken or omitted
by ADM, it may request advice without cost to itself from counsel
of its own choosing (who may be counsel for the Adviser, the Fund
or ADM, at the option of ADM).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by ADM
pursuant to subparagraph (a) of this paragraph and advice received
by ADM pursuant to subparagraph (b) of this paragraph, ADM shall be
entitled to rely on and follow the advice received pursuant to the
latter provision alone.
(d) Protection of ADM. ADM shall be fully protected in
any action or inaction which it takes in reliance on the provisions
of the Fund's Prospectus, procedures established between ADM and
the Fund, or in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraph (a) or (b)
of this paragraph which ADM, after receipt of any such directions,
advice or Oral or Written Instructions, in good faith believes to
be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. However, nothing in this
paragraph shall be construed as imposing upon ADM any obligation
(i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions when received, unless, under
the terms of another provision of this Agreement, the same is a
condition to ADM's properly taking or omitting to take such action.
19. Compliance with Governmental Rules and Regulations.
ADM shall have no responsibility for insuring that the
contents of each Prospectus of the Fund complies with all
applicable requirements of the 1933 Act, the 1940 Act, and any
laws, rules and regulations of governmental authorities having
jurisdiction, except that ADM shall cause a senior officer of ADM,
who shall be its General Counsel unless otherwise agreed upon, or
his designee to provide such information and represents and
warrants that all information so furnished by it for specific use
in any such Prospectus will be correct and complete in all material
respects.
20. Records From Others: ADM, its affiliates and agents
shall have no responsibility or liability for the accuracy or
completeness of any documents, records, or information maintained
or provided by or reasonably believed by ADM to have been
maintained or provided by any prior transfer agent, any shareholder
or dealer, or by the Fund or anyone on behalf of the Fund and the
Fund hereby specifically agrees that ADM, its affiliates and agents
may rely on and will be fully protected in so relying on the
completeness and accuracy of all such documents, records and
information; provided, that ADM will inform the Fund of material
errors coming to its attention in the course of the performance of
its duties hereunder.
ADM, its affiliates and agents may conclusively rely on, and
will be fully protected in relying on, the authenticity and
accuracy of any documents or communications, whether oral, written
or facsimile, it receives from the Fund or which ADM, its
affiliates or agents reasonably believes are from the Fund,
provided these are received from Authorized Persons in accordance
with this Agreement. This provision will apply to, among other
things, the daily public offering and net asset value prices for
Fund shares; instructions from the Fund concerning dividends and
other distributions; and other matters relating to the Fund and its
shareholders.
21. Responsibilities of the Fund: The Fund and the Agents of
the Fund hereby acknowledge and agree that ADM, its affiliates and
its agents are responsible only for those functions and duties set
forth in this Agreement and unless so set forth are not responsible
for any of the following which are to be handled by the Fund:
(a) creating or maintaining any records on behalf of the Fund
or others required by any federal or state law, or
regulation or rule of any agency thereof or any self-
regulatory authority except (i) those relating to
shareholder account information set forth in Rule 31a-
1(b)(2)(iv) promulgated under the 1940 Act or equivalent
regulation applicable from time to time; and (ii) such
additional records as may reasonably be requested from
time to time by the Fund which are customarily maintained
by transfer agents to mutual funds, and which ADM by use
of its best efforts may provide at minimal cost and
inconvenience to it; with respect to these records ADM
agrees that they: (i) are the property of the Fund; (ii)
will be maintained by ADM for the period prescribed in
Rule 31a-2 or equivalent regulation; (iii) will be made
available, upon request to the Fund and the SEC; and (iv)
will be surrendered promptly upon the request of the
Fund;
(b) determining the legality of any sale, exchange, issuance
or redemption of any shares of the Fund;
(c) determining the legality of any communications, oral or
written, which is sent or provided by ADM, its affiliates
or its agents on behalf of the Fund;
(d) complying with any federal or state laws or the
regulations or rules of any agency thereof or of any
self-regulatory authority except those specifically
applicable to ADM as a transfer agent;
(e) filing any documents on behalf of the Fund or any one
else with any federal or state government or with any
agency thereof or of any self-regulatory authority except
ADM will file with the Internal Revenue Service copies of
1099 Div, 1099R and 1099B Forms sent to shareholders of
the Fund and forms relating to withholding and non-
resident alien withholding;
(f) monitoring the activities of the Fund or any one else or
their compliance with applicable law, rules and
regulations or with the provisions of the Fund's
Prospectus, of Trust, By-Laws or other governing
instruments; or
(g) compliance of the Fund or others with applicable federal
and state laws, regulations and rules of any agency
thereof, or of any self-regulatory authority pertaining
to the registration of the Fund or of shares of the Fund
or the legality of their sale although ADM will, in order
to provide the Fund with assistance in complying with
normal Blue Sky requirements, upon the reasonable request
of the Fund provide the Fund with a report generated from
the information readily available to ADM detailing the
amount of shares of the Fund purchased and redeemed and
the states of residence of the shareholders purchasing or
redeeming such shares.
22. Information and Documents: (a) The Fund shall promptly
provide ADM with the current Prospectus for the Fund, the Annual
and Semi-Annual Reports to shareholders of the Fund, Proxy
Statement and other Fund material, all in sufficient quantities and
sufficiently in advance to permit ADM to provide them to
shareholders of the Fund in a timely and orderly fashion.
(b) To the extent necessary or appropriate to enable ADM to
carry out its responsibilities under this Agreement, the Fund shall
(i) promptly notify ADM of all material events which
affect the Fund or any affiliate of the Fund;
(ii) promptly notify ADM of any suits or other
proceedings threatened or actually instituted
against the Fund or any affiliate of the Fund by
the federal government, any state government, or
any agency thereof (including but not limited to
the SEC, the Securities Commission of any state) or
by the National Association of Securities Dealers,
Inc., or any other self-regulatory authority;
(iii) promptly notify ADM of any consent order, stop
orders or similar orders affecting the Fund or any
affiliate of the Fund issued by the federal
government, any state government, or any agency
thereof (including but not limited to the SEC, the
Securities Commission of any state) or by the
National Association of Securities Dealers, Inc. or
any other self-regulatory authority;
(iv) promptly provide ADM, with copies of the audited
Annual Financial Statements for each affiliate of
the Fund which is an Investment Advisor, Investment
Sub-Advisor, Distributor or Administrator of the
Fund;
(v) promptly provide ADM, upon request, with copies of
any filings made by the Fund or any affiliate of
the Fund which is an Investment Advisor, Investment
Sub-Advisor, Distributor or Administrator of the
Fund with the federal government or any state
government or any agency thereof or with any self-
regulatory authority; and
(vi) promptly provide ADM, upon request, with copies of
any documents relating to items (ii) and (iii)
above.
(vii) discuss with ADM changes in the description of ADM
and the services which ADM provides to shareholders
contained in the Prospectus of the Fund at the time
of filing any amendments to the registration
statement of the Fund involving any such change.
ADM shall use its best efforts to assure the
accuracy and completeness of all material
information furnished by it for inclusion in any
such document.
23. Indemnification. Neither party nor any of its nominees
shall be indemnified against any liability to the other party (or
any expenses incident to such liability) arising solely out of (a)
such party's or such nominee's own willful misfeasance, bad faith
or gross negligence or reckless disregard of its duties in
connection with the performance of any duties, obligations or
responsibilities provided for in this Agreement or (b) such party's
or such nominee's own negligent failure to perform its duties
expressly provided for in this Agreement or otherwise agreed to in
writing.
24. Liability. (a) ADM shall be responsible for the
performance of its obligations under this Agreement notwithstanding
the delegation of some or all of such obligations to others in
accordance with the terms of this Agreement.
(b) ADM shall not be responsible for loss, liability cost
or expense arising out of occurrences beyond its control caused by
fire, flood, power failure, unanticipated equipment failure, acts
of God, or war or civil insurrection; provided, however, that it
shall have contingency planning for equipment or electrical failure
and such other contingencies as provided in this Agreement.
25. Insurance. ADM shall maintain fidelity, errors and
omissions and other insurance coverage in amounts and on terms and
conditions as set forth in information provided to the Fund from
time to time.
26. Advancement of Monies: Nothing in this Agreement shall
require ADM or any affiliate or agent of ADM to pay any monies
prior to its receipt of federal funds for such payment or for ADM
or any of its affiliates or agents to incur or assume any liability
for the payment of any such monies prior to its receipt of federal
funds for such payment.
27. Exclusivity. It is expressly understood and agreed that
the services to be rendered by ADM to the Fund under the provisions
of this Transfer Agency Agreement are not deemed to be exclusive
and ADM shall be free to render similar or different services to
others.
28. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are reasonably
necessary to effectuate the purposes hereof.
29. Amendments. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the
party against which enforcement of such change or waiver is sought.
30. Assignment. This Agreement and the performance hereunder
may not be assigned by ADM without the Fund's written consent. Not
withstanding the previous sentence, ADM may, without the Fund's
consent, assign the performance of all or a portion of its
responsibilities and duties hereunder to an affiliate of ADM,
provided that the Fund shall incur no additional cost or expense in
connection therewith.
31. Declaration and Termination. This Agreement shall
continue until termination by the Fund on sixty (60) days' written
notice or by ADM on ninety (90) days' written notice.
32. Notices. All notices and other communications, including
Written Instructions (collectively referred to as "Notice" or
"Notices" in this paragraph), hereunder shall be in writing or by
confirming telegram, cable, telex or facsimile sending device.
Notices shall be addressed;
(a) if to ADM at:
Administrative Data Management Corp.
10 Woodbridge Center Drive
Woodbridge, New Jersey 07095
Attn: Ms. Anne Condon, Vice President
or to such other address as ADM shall instruct the Fund, in
writing, from time to time;
(b) if to the Fund at:
___________________________
200 Park Avenue, Suite 4515
New York, New York 10017
Attention: President
or to such other address as the Fund shall instruct ADM, in
writing, from time to time; or
(c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or other
communication.
33. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and
supersedes all prior agreements and understandings relating to the
subject matter hereof, provided that the parties hereto may embody
in one or more separate documents their agreement, if any, with
respect to Oral Instructions. The captions in this Agreement are
included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a
contract made in New York and governed by New York law. If any
provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. None of the provisions
contained in this Agreement shall be deemed waived or modified
because of a previous failure of a party to insist upon strict
performance thereof. This Agreement shall be binding and shall
inure to the benefit of the parties hereto and their respective
successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the
day and year first above written.
Hawaiian Tax-Free Trust
/s/Kenneth L. MacRitchie /s/Lacy B. Herrmann
Attest:By: ______________________ By:______________________
Kenneth L. MacRitchie, Lacy B.
Herrmann,
Assistant Secretary President
ADMINISTRATIVE DATA
MANAGEMENT CORP.
/s/Andrew J. Donohue /s/Glenn O. Head
Attest:By: ______________________ By:_______________________
Name: Andrew J. Donohue Name: Glenn O. Head
Title: Secretary & General Title: Chairman
Counsel
<PAGE>
APPENDIX A
ACTIVITIES LIST
It is understood that the Fund, its Custodian, and other
persons, firms, corporations or other entities performing services
for or on behalf of the Fund shall provide ADM and the Fund with
such services, information, or other assistance as may be necessary
or appropriate to permit the Transfer Agent to properly perform the
services hereunder.
A. SHAREHOLDER ACCOUNTING SERVICES
1. General Scope
All terms used herein shall be as defined in the attached
Agreement (the "Agreement") except that ADM is referred
to as the "Transfer Agent." In accordance with the terms
of the Agreement the Transfer Agent will provide a
comprehensive Shareholder accounting service generally
consistent with that provided to other investment
companies, including:
a. dividend accounting;
b. arrangement for wire receipt and payout of
Shareholder funds;
c. to the extent that it is reasonably within the
control of, or can be reasonably arranged without
additional cost by, the Transfer Agent, the rapid
and efficient transfer of investment monies between
various accounts;
d. to the extent that it is reasonably within the
control of, or can reasonably be arranged without
additional cost by, the Transfer Agent, the
effective and controlled processing of expedited
redemptions and exchanges by telegraphic and
telephonic means.
2. Computer Accounting and Record Keeping
The Transfer Agent will perform daily maintenance and
routine file update.
The Transfer Agent will perform a dividend credit run as
required in order to credit all existing Shareholder
accounts with each daily dividend, monthly dividend,
capital gain distribution or other distribution. The
Transfer Agent will establish new and adjust or close
existing Shareholder accounts if necessary on or as of
each business day.
The Transfer Agent will take reasonable precautions for
safeguarding of all Shareholder accounts during these
computer runs.
The Transfer Agent will provide continuous proof to the
outstanding Shares maintained by the Fund on a daily
basis, and off-line availability of all file data
pertaining to Shareholder accounts.
The Transfer Agent will to the extent technically
feasible create and maintain the ability to liquidate and
back out dividends reinvested in accounts which are
subsequently liquidated by or on behalf of the Fund due
to nonreceipt of funds, improper registration, or other
sufficient reason.
3. Establishing and Servicing Accounts
The Transfer agent will, as set forth in the Fund's
Prospectus, or substantially in conformity with
procedures established by or on behalf of the Fund,
accept instructions from investors to open new accounts
and perform such functions consistent with opening a new
account:
a. Accept applications in proper form sent directly to
the Fund or its Custodian when they are properly
delivered to the Transfer Agent;
b. Accept applications in proper form sent directly to
it when they are received by the Transfer Agent;
c. Transfer Shares accompanied by apparent proper
instructions;
d. Audit and verify payment items for apparent
compliance with the requirements established by the
Fund, e.g. minimum investment amount, apparent
proper endorsements on third party checks or drafts
if the Fund elects to accept such third party
checks or drafts, and other particulars as
prescribed in the prospectus. The Fund will
provide the Transfer Agent, from time to time, with
names and taxpayer identification numbers of
individuals entitled to purchase shares at a
reduced offering price as described in the
prospectus;
e. Review existing accounts to determine whether there
are any other existing accounts with the same
registration; process W-9 or similar forms received
by the Transfer Agent; and compare upon receipt of
a computer tape from the Internal Revenue Service
taxpayer identification numbers contained in such
tape against those maintained by the Transfer Agent
for the Fund.
f. Assign account numbers as necessary and, where
appropriate, indicate the account number on
applications;
g. Review payment items to determine whether the
payee, original or by endorsement, on such payment
items corresponds to the registration of the
account to which it is to be credited (permitted
exceptions include ADM or the Fund specified as the
payee when accompanied by a valid account number or
all necessary documents to establish a new account
or such other exceptions as the Transfer Agent and
the Fund shall agree);
h. Upon opening incoming mail, record the date and
approximate time of day all checks were received;
i. Produce microfilm record of all incoming checks and
other documentation on filmstrips or other
microfilm retrieval method so as to be retrievable
and reproducible upon request;
j. Process address changes and acknowledge such
changes to previous address of record;
k. Answer inquiries from Shareholders or other
individuals, corporations, or other entity who
appear to be the Shareholder, dealer or otherwise
entitled to receive information as to account
information;
l. Open new accounts per telephone instructions
received from a prospective Shareholder, his dealer
or his fiduciary pending receipt of funds
transmitted by bank wire or other means; forward a
new account application to the prospective
investor; and issue a confirmation, including
duplicates where requested, when funds are received
by the Transfer Agent or the Fund's Custodian;
under normal circumstances the new account
application bearing the Shareholder account number
assigned must be completed by or appear to have
been completed by the Shareholder and received by
the Transfer Agent before any redemption orders are
accepted and processed for that account.
m. Prepare confirmations in such form as may be agreed
between the Fund and the Transfer Agent from time
to time for all "Open Accounts" after each non-
dividend transaction in a Shareholder's account
which affects the share balance; mailing
confirmations to the Shareholder as such changes
occur;
n. Process on a daily basis if necessary or
appropriate routine transactions such as:
(1) Deposit or withdrawal of Shares from
Shareholders' accounts;
(2) Changes of address;
(3) Miscellaneous changes;
(4) Stop-transfers;
(5) Instructions relating to the remittance or
reinstatement of Dividends and other
distributions;
o. Incorporate in the Shareholder accounting software
and procedures the necessary flags, audits, and
tests reasonably designed to assure that the
various provisions and requirements specified
elsewhere in this Agreement to be performed by the
Transfer Agent will be substantially satisfied.
B. TRANSFER AGENT SERVICES
In accordance with the Agreement, and in particular Section
5(d) thereof, the Transfer Agent will perform the functions
normally performed by the Transfer Agent for other investment
companies of a similar type. Such functions shall include but
not necessarily be limited to:
1. Processing
a. Keep such records in the form and manner as the
Transfer Agent may deem advisable but not
inconsistent with the rules and regulations of
appropriate governmental authorities applicable to
the Transfer Agent or as may otherwise be agreed
from time to time in writing between the Fund and
the Transfer Agent;
b. Process transfers as requested by Shareholders or
persons, firms, corporations or other entities the
Transfer Agent reasonably believes to be the
Shareholder or authorized to act on behalf of the
Shareholder including obtaining and reviewing
papers and all other documents necessary to satisfy
transfer requirements; the Fund will, upon request
of the Transfer Agent, advise the Transfer Agent of
the transfer requirements of the Fund, and the
Transfer Agent will be fully protected by the Fund
if it is following such transfer requirements;
c. Process initial and subsequent investments from
Shareholders;
d. On a semi-monthly or other basis acceptable to the
Transfer Agent and the Fund initiate, accept and
process pre-authorized checks or, when available,
electronic funds transfers drawn against
Shareholders' checking accounts;
e. Process and record redemption of Shares to satisfy
ordinary redemptions and Plan account;
f. Proportionally allocate dividends, which are
provided to the Transfer Agent by the Fund in gross
dollar amount, to the benefit of the Fund
Shareholders entitled to receive them. The
procedure used must show that the amounts allocated
daily substantially balance to the gross dollar
amount provided by the Fund to the Transfer Agent.
Until otherwise specified by the Fund, dividends
shall be in accordance with the following: Three-
day accrual on Monday for the previous weekend;
Two-day accrual on the first business day following
a holiday or Four-day accrual if the holiday
immediately precedes or follows a weekend;
compatibility with the Merrill Lynch Automatic
Investment of Dividends System, and the issuance of
all reports incidental thereto provided the Fund's
method of operation is so compatible.
2. Custody and Control of Shares and Certificates:
Certificates will not be issued except on Shareholder
request but shares will be credited to the Shareholder's
account in non-certificate form. The Transfer Agent will
examine certificates surrendered for transfer or
redemption, or requests for transfer or redemption of
shares not represented by certificates, for apparent
genuineness or alterations; pass upon the apparent
validity thereof including endorsements, signature
guarantees and (if applicable) tax stamps or waivers,
provided that the Transfer Agent shall not be required to
compare any such endorsements against other records it
maintains except in accordance with written procedures
agreed upon between it and the Fund. The Transfer Agent
will also:
a. Countersign all certificates;
b. Prepare, mail, or deliver certificates for original
issue, subsequent investments, exchanges, or
transfers upon request from the Shareholder or one
reasonably believed to be the Shareholder;
c. Prepare, mail, or deliver certificates for Shares
previously held in non-certificate form;
d. Deposit certificate Shares;
e. Cancel surrendered certificates;
f. Establish and maintain safeguards for cancelled and
uncancelled certificates;
g. Establish and maintain a system to monitor stop-
transfers;
h. Replace lost certificates.
C. SUBSCRIPTION AGENT SERVICES:
The Transfer Agent will act as Subscription Agent for the
Fund. In addition to subscription functions described
elsewhere in this Agreement, the Transfer Agent will:
1. Maintain a Subscription Account for the Fund. This
account shall be established and operated so as to
satisfy the following criteria:
a. The account shall be established by the Transfer
Agent for the benefit of the Fund in accordance
with the terms of the Agreement;
b. The account shall be provided at no additional cost
except as may otherwise be stated in Appendix D of
the Agreement;
c. The account shall serve as the sole depository for
subscription monies intended for the purchase of
Fund Shares until such funds are transferred to the
Custody Account;
d. The Transfer Agent shall be prepared to receive and
efficiently process incoming cash, checks, Federal
Reserve Drafts and bank wire transfers of funds;
e. Withdrawals from the account shall be for the
purpose of transferring funds into the Custody
Account or, where appropriate, the crediting or
payment of commission or dealer's commissions;
withdrawals are also permitted to accommodate net
settlements with the Custodian;
f. No dividend or redemption or any other payments
shall be made to Fund Shareholders from the
Subscription Account;
g. The Transfer Agent will cashier all items presented
in payment as expeditiously as possible.
2. In connection with managing the Subscription Account, the
Transfer Agent will exercise all possible care in
satisfying operational requirements in each of the
following critical areas:
a. Validation Receipt of Good Subscription Funds
Procedures and criteria are to be established by
the Transfer Agent and approved by the Fund for the
purpose of providing assurance that good
(collected) funds were received from Shareholders
prior to paying out any redemption proceeds (under
a Plan account or as a result of one or more
specific redemption requests). Such procedures are
to deal with:
(1) Screening subscriptions to prevent:
-forgery, fraud, improper endorsement or other
unauthorized use particularly when accepting third
party funds;
-maintenance of accounts in names other than proper
form; funds received where the legal existence or
legal capacity of the subscriber is in doubt shall
be employed in a temporary investment status until
a proper account is established to which prior
income will be credited, or until the funds are
returned upon determination that no subscriber of
legal existence and capacity exits.
(2) Establishing and maintaining procedures
reasonably designed to assure the clearance and
collection of checks which are otherwise properly
drawn.
In this regard, the Transfer Agent with the
approval of the Fund will:
-Establish for all parts of the United States the
normal number of days required for check clearance
and return notice of uncollectability;
-Establish redemption amount and clearing time
criteria which together place an automatic stop on
issuance of certificates, if any, and upon
redemption payments until the Transfer Agent
reasonably believes that good subscription funds
were received.
In general, the redemption of a subscription
payment received in the form of a check, draft or
similar instrument shall not be made until the
Transfer Agent has determined, by telephone call to
the drawee bank or otherwise, that the deposit has
cleared the drawee bank or until fifteen (15)
calendar days after the receipt of such
subscription payment, in order to permit the
orderly clearing thereof.
-Provide a means to record and promptly retrieve
the status of a subscription received (which may
include days remaining before redemptions
permitted, name of bank, or other similar
information as may be agreed upon.)
Shareholder checks returned for insufficient funds or
other reasons will be promptly processed for liquidation
on or after the date of receipt or notification to the
effect that a check is being returned. Returned checks
will be cleared promptly and processed through a Returned
Check Account in conjunction with the following actions:
(1) Place a freeze on the account to prevent redemption
of the amount of such returned check or such lesser
amount as is in the affected account;
(2) Determine how many shares are to be liquidated due
to the investment attributable to such returned
check;
(3) Calculate and back out accrued dividends, if any,
attributable to such investment;
(4) Process the liquidation for the appropriate amount;
(5) Mail the Shareholder confirmation of the
liquidation and the check with a letter of
explanation;
(6) Allocate the accrued dividends, if any, which were
attributable to such investment, as the Fund shall
direct which will normally be to the remaining
Shareholder accounts as of the next month-end
dividend run;
(7) Take reasonable steps to recover commissions or
dealer concessions applicable to such returned
check, although the Distributor shall be ultimately
responsible therefor.
b. Establish Procedures to Process Effectively Bank
Wire Transfers
Establish and maintain procedures reasonably
designed by the Transfer Agent and approved by the
Fund to maintain positive control over movements of
incoming money by bank wire so as to:
(1) Accept requests (WATS and local calls) for bank
wire instructions, record account information and
client telephone number, assign as appropriate a
wire control number, establish Shareholder pending
file, and if appropriate alert the bank wire
department;
(2) Advise the Fund of pending bank wire receipts at
selected cutoff times during the course of each
business day so as to facilitate full investment of
Fund assets;
(3) Confirm to the Fund actual bank wire receipts at
selected cutoff times during the course of each
business day;
(4) Close out pending Shareholder files if bank wire
receipts are not received as of the date agreed
upon;
(5) Open new or credit existing Shareholder account in
accordance with the provisions of the current
prospectus upon receipt of bank wire funds;
(6) Take appropriate action to secure from Shareholders
who invest by bank wire the necessary written
applications and redemption authorizations.
D. DIVIDEND DISBURSING AND REDEMPTION AGENT SERVICES
In performance of the Dividend Disbursing and Redemption Agent
functions, the Transfer Agent will provide the Fund with
regular checks (or electronic funds transfer if available, at
the Shareholder's option) and carry out the following
functional activities:
1. Dividends
a. The Fund shall advise the Transfer Agent of
dividend amounts which shall then be applied as
described in the Prospectus or as directed by the
Fund, or its officers or Trustees;
b. Confirmation of dividend reinvestments shall be
mailed to Shareholders after each reinvestment.
c. Additional dividend information, if provided by the
Fund to the Transfer Agent shall then be provided
to Shareholders upon written request.
2. Redemption Procedures
The Transfer Agent with the approval of the Fund shall
establish procedures reasonably designed to insure that
redemption requirements established by the Transfer Agent
and agreed to by the Fund have been met, including the
receipt and examination of stock certificates,
endorsements, signature guarantees and obtaining any
needed papers or documents, including properly completed
Application, where lacking. More specifically:
a. The Transfer Agent will accept redemption requests
in written, telegraphic or telephonic form provided
the necessary instructions and authorizations are
reasonably believed by the Transfer Agent to be in
good form. Generally, telephonic redemption
requests will be repeated for confirmation to the
person making the request, and upon voice
confirmation by such person, will be recorded in a
log kept for that purpose.
b. Requests for the redemption of shares not
represented by certificates received and without
signature guarantees will be honored only if:
(1) the applicable portion of the Application has been
completed and the proceeds are forwarded to the
previously designated bank account, address, or
other destination identified on the Application;
(2) Expedited Redemption Authorization instructions
filed at any time other than upon the original
opening of a Shareholder's account are filed on an
appropriate form and bear or reasonably appear to
bear a signature guarantee;
(3) Shareholder accounts in the name of joint tenants
shall generally be handled on the basis of jointly
signed instructions and signature guarantees (where
applicable) for any payments.
c. The Transfer Agent will provide a means to record,
call up, and display on Cathode Ray tube or
otherwise an appropriate symbol or other indication
that redemption authorization instructions are on
file and appear to be in proper form.
d. All redemption requests will be promptly reviewed
to insure:
(1) that there are sufficient shares available in the
Shareholder's account;
(2) the applicable subscription check has not been
returned to ADM or its agent and the applicable
period of days has expired before using the funds
for redemption (see above);
(3) that no redemptions in accounts represented in
whole or in part by certificates are effected
without cancellation of an adequate number of
certificate shares, if necessary.
(4) that no signature guarantees shall be acceptable
unless they reasonably appear to have been provided
by a commercial bank or by a brokerage firm which
is a member of the New York, American, Midwest, or
Pacific Stock Exchanges, except as otherwise stated
in the Prospectus or in instructions received from
the Fund.
e. Certificate acceptance and replacement:
(1) Accept for redemption, certificates received for
redemptions accompanied by what reasonably appears
to be Shareholder's instructions.
(2) Furnish to the Shareholder, after with the policies
and procedures established by the Fund and the
Transfer Agent proper investigation and receipt of
necessary documentation for protection of the Fund,
replacement certificates and dividend and
redemption checks alleged to have been lost,
stolen, destroyed, or not received.
3. Dividend Account
The Transfer Agent will maintain a Dividend Account for
the Fund. This account shall be established and operated so as to
satisfy the following criteria:
1. This account shall be used to disburse cash in
payment of dividends, capital gain distributions and
returns of capital.
2. This account shall be operated in the same manner as
the Redemption Account (see below) except as otherwise
required by the purpose for which it shall be used; it
may, at the election of the Transfer Agent, be operated
as a combined account with the Redemption Account (see
below).
4. Redemption Account
The Transfer Agent will maintain a Redemption Account for
the Fund. This account shall generally be established
and operated so as to satisfy the following criteria.
1. All withdrawals from the account shall be for the
exclusive purpose of making payments to Fund
Shareholders. These payments are to be made only to
satisfy automatic or other account liquidation payment
requirements.
2. No deposits or subscription receipts shall be made
directly in the Redemption Account.
3. The Transfer Agent will advise the Fund at various
mutually established times during each business day as to
the total demand for valid payments to be honored that
day or the following day. Valid payments consist of
liquidations of shares for which funds are payable in
cash or check to shareholders, whether initiated by
check, wire, letter, automatic distribution plan,
determination of the Fund or otherwise. The notification
of demand for payments shall only include valid demands
for payment which are actually in hand, such that the
Fund need not fund the Redemption Account with any more
funds than are actually required. The Fund agrees to
fund, or cause the Custodian to fund, the Redemption
Account sufficiently to cover all demands for payment
which are currently valid or will become valid the
following business day. The Fund and the Transfer Agent
agree that a goal of this procedure is to allow for the
maximum employment of Fund Assets while still adequately
funding the Redemption Account. The Transfer Agent and
its affiliates shall not be required to honor any demand
for payment for which previously collected funds have not
been received from the Custodian or other Agent of the
Fund.
4. The Transfer Agent with the approval of the Fund will
develop specific procedures reasonably designed to
protect against:
(a) raising of dollar amounts or any other alteration
of instruments representing redemption payments;
(b) fraudulent or forged endorsements;
(c) other improper use of a redemption item which could
result in the Fund or its Shareholders being
defrauded.
Such procedures shall take into account the type of
accounts involved, the sums involved and the cost
effectiveness of such procedures.
5. Employ due diligence in servicing redemption requests as
promptly as possible.
E. EXCHANGE AGENT SERVICES
The Transfer Agent will provide services as required to
implement the exchange privileges described from time to time
in the prospectus of the Fund. The Transfer Agent will
install and utilize a telephonic system that is designed to
afford the Shareholder the opportunity to exchange Shares
among eligible Funds and that will record the telephone
request for such exchange. It is understood that the Transfer
Agent is only able to effect exchanges among funds for which
the Transfer Agent has entered into an agreement similar to
this Agreement for provision of Transfer Agency services.
F. PROXY AGENT SERVICES
The Transfer Agent agrees to act as Proxy Agent in connection
with the holding of annual or special meetings of
Shareholders, mailing to Shareholders notice, proxies and
proxy statements in connection with the holding of such
meetings, receiving and tabulating votes cast by proxy and
communicating to the Fund the results of such tabulation
accompanied by appropriate certificates, and preparing and
communicating to the Fund certified lists of Shareholders as
of such date, and in such form and containing such information
as may be required by the Fund to comply with any applicable
provisions relating to such meetings. The Transfer Agent may
at its expense employ another firm to provide all or a portion
of such services.
I. Reports to be provided by Transfer Agent:
A. Daily
1. Payment Journals
2. Transfers
3. Non-Certificate Redemption Journal
4. Original Issue Non-Certificate Shares
5. Clerical Journal
6. New Account Journal
7. Closed Account Journal
B. Monthly
1. Sales By State and Dividends Reinvested
2. Withdrawals and Dividends Paid in Cash List
3. Record of Out-of-Pocket Costs Incurred
C. Annual Reports
Provide Fund Management upon request with all
reports reasonably required to conduct an annual
review of Transfer Agency functions relating to the
Fund, including but not limited to performance,
volume, error ratios, costs and other matters
relating to the Fund. The Transfer Agent shall
also provide to the Fund general information
concerning its operations which might be believed
to affect adversely the future services to the
Fund.
D. Periodic Marketing Reports - Provided these reports
are readily available from existing information and
can be produced without unreasonable effort or
expense by the Transfer Agent, including, e.g.,
1. Geographic Distribution Data
2. Size of Holdings Data
II. Other Services
The Transfer Agent will provide the following additional
services:
A. Security
1. Design and maintain security procedures reasonably
designed to guard against the possible theft and/or
use by others of the names and addresses of Fund
Shareholders.
2. Periodic duplication of all records
(computer/microfilm/hardcopy/copy) at a frequency
and in a detail reasonably designed to assure
protection of Shareholder record information in the
event of a disaster to the Transfer Agent's
facilities, including:
(a) significant voltage drop;
(b) power blackout;
(c) major destruction of the Transfer Agent's
central facilities.
3. The Transfer Agent will maintain equipment
reasonably designed or represented to assure an
uninterrupted power supply of at least 10 minutes
at the offices of the Transfer Agent to allow for
orderly shut down of hardware in the event of a
power outage; periodic back-up of tapes to be
stored at an offsite facility of the Transfer
Agent's choosing; and will provide redundancy
capacity in accordance with the Agreement.
B. Statements
1. Provide for up to two extra lines of print on
Shareholder statements which may be employed by the
Fund to advise Shareholders of such information as
yield or other explanatory account information.
The Fund will advise the Transfer Agent of such
information sufficiently in advance to permit it to
properly insert such information in a timely and
orderly manner.
2. Provide a combined dividend check and statement to
Shareholders electing cash distributions.
C. Processing Routine Shareholder Inquiries
1. Receive, control, research, and promptly reply to
all routine Shareholder and other inquiries whether
received by written or telephonic means which
pertain to a Shareholder's account.
2. Exercise due care to protect confidential
information in responding to inquiries.
3. Request ATT or such other telephone company as may
be appropriate to provide, at the Distributor's
expense, for a dedicated transmission line between
Aquila Distributors, 380 Madison Avenue, New York
and Transfer Agent, Woodbridge, N.J. for inquiry
via a dedicated or P.C. terminal.
4. Provide if possible for continuity of present 800
telephone numbers for existing funds and adequate
personnel for live telephone response generally
until 7:00 PM, New York time on normal business
days. It is mutually understood that continuity of
the 800 numbers is dependant on cooperation from
the prior transfer agent and appropriate telephone
companies.
5. Provide for the automated tracking of all
Shareholder/Dealer telephone inquiries with on line
update status.
D. Other Mailings
1. Mailing services include addressing, enclosing, and
mailing quarterly reports, semi-annual reports,
annual reports, prospectuses and notices to all
accounts will be provided. To the extent the
Transfer Agent utilizes the services of another
firm to accomplish this for any First Investors
Fund, it shall be permitted to do so for the Fund,
at the Transfer Agent's expense.
2. All routine mailings to Shareholder/Dealers will,
where appropriate, utilize pre-sorted zip codes.
3. All month-end reinvestment statements, with any
month-end dividend check attached, will generally
be mailed to Shareholders, with duplicates to
dealer and representative, by the fourth business
day of the next month.
4. Commission checks and statements will generally be
mailed to brokerage firms on at least a weekly
basis for direct investments of prior weeks.
E. Other Services
1. Refer all Shareholder, dealer or governmental
inquiries of a policy or non-routine nature to the
Fund.
2. Provide an Account Officer to serve as the primary
point of contact between the Fund and the Transfer
Agent. The Transfer Agent will exercise due care
in assigning an individual who is both conversant
with standard investment company practices and of
sufficient stature to deal quickly and efficiently
with problems peculiar to placing a new investment
company on line.
F. Messenger Service
Provide messenger pick-up and delivery as necessary but
no less frequently than once daily between the Fund's
offices provided they are located within the borough of
Manhattan and the offices of the Transfer Agent.
<PAGE>
Exhibit 1
The Fund and the Transfer Agent anticipate that the following
activities should be incorporated into and become a part of
Appendix A as they become effective:
1. Installation of the National Security Clearing
Corporation, Fund/SERV system which shall be
operational no later than June 30, 1989.
2. The Transfer Agent will make a best effort to
provide networking capabilities with tape
transmission to dealers when and as required by
market competitiveness.
3. The Transfer Agent will work with the Distributor
to define criteria for an Audio Response system and
arrange for the implementation of such a system on
a timely basis.
<PAGE>
HAWAIIAN TAX-FREE TRUST
APPENDIX B
Signatures
On the date of the Agreement and thereafter until further
notice, the following persons shall be Authorized Persons as
defined therein:
/s/Lacy B. Herrmann
Lacy B Herrmann _____________________
Chairman of the Board of Trustees Lacy B. Herrmann
/s/William C. Wallace
William C. Wallace _____________________
Vice President William C. Wallace
/s/Robert P. Sanchez
Robert P. Sanchez _____________________
Vice President Robert P. Sanchez
/s/Rose F. Marotta
Rose F. Marotta _____________________
Treasurer Rose F. Marotta
/s/Kenneth L. MacRitchie
Kenneth L. MacRitchie _____________________
Assistant Secretary Kenneth L. MacRitchie
/s/William K. Killeen
William K. Killeen _____________________
William K. Killeen
/s/Diana P. Herrmann
Diana P. Herrmann _____________________
Diana P. Herrmann
/s/Charles E. Childs III
Charles E. Childs III ______________________
Charles E. Childs III
/s/Stephen J. Caridi
Stephen J. Caridi ______________________
Stephen J. Caridi
/s/Brian R. Katzman
Brian R. Katzman ______________________
Brian R. Katzman
/s/Sandra J. Hermida
Sandra J. Hermida ______________________
Sandra J. Hermida
<PAGE>
APPENDIX C
Backup Arrangement
ADM currently has in effect a redundancy arrangement with
Comdisco Disaster Recovery Services, Inc. The agreement with
Comdisco provides that in the event of a data processing systems
disaster at ADM's facilities in Woodbridge, New Jersey, ADM may use
equipment available at Comdisco's facilities for routine and other
processing. The agreement with Comdisco also provides for
dedicated time on Comdisco's data processing equipment each year to
allow ADM to test the redundancy system.
<PAGE>
APPENDIX D
Compensation
In accordance with the provisions of Section 15 of the
attached Agreement, the Fund shall pay ADM the monthly amount of
$1.25 for each account in the Fund open at any time during the
month. The minimum amount of compensation for each month shall be
$208.33.
In addition to the above charges, the Fund shall pay or
reimburse ADM for out-of pocket expenses, including but not limited
to: postage; forms relating to the Fund or shareholders of the
Fund; envelopes; paper; bank charges; costs relating to the
production of special reports for the Fund, its distributor, or
otherwise; and similar expenses. The Fund will also reimburse ADM
for counsel fees in accordance with the Agreement.
<PAGE>
Exhibit 1 to Appendix D
February 7, 1989
Aquila Distributors, Inc.
200 Park Avenue, Suite 4515
New York, New York 10017
Attn: Mr. William Killeen
Dear Mr. Killeen
Below please find a listing of the revised business checking fees
that will be applied to the Aquila accounts. This list supercedes
the listing included in my letter of February 1, 1989.
Account maintenance $15.00
Currency shipments (per $1000) .20
Currency shipments (per shipment) 1.50
Coin orders (per order) 2.00
Checks cleared .05
Check deposits .50
Deposited items .07
Coin and currency deposits .50
Returned deposited items 7.50
Returned checks 15.00
Incoming wire transfers 5.00
Outgoing wire transfers 5.00
Bond redemptions 10.00
Facsimilies / Photocopies 3.00
Stop payment orders 10.00
Tax deposits 10.00
Very truly yours,
/s/Marc S. Milgram
Marc S. Milgram
Vice President and Treasurer
MSM/hs
copies to: Kathryn S. Head
Gina Walling
Anne Condon
Randy Pagan
Greg Miller
Jay G. Baris, Esq.
Romelle Holmgren
Edward M.W. Hines, Esq.
This Agreement, made the day of December, 1992, by and
between Hawaiian Tax-Free Trust (the "Trust"), a Massachusetts
business trust with principal offices in New York, New York and
Aquila Distributors, Inc. ("Aquila"), a corporation organized under
the laws of New York with offices in New York, New York,
W I T N E S S E T H:
PREMISES:
1) The Trust is registered under the Investment Company Act
of 1940 (the "1940 Act") and invests in a portfolio of obligations
principally of Hawaii issuers the interest paid on which is exempt
from regular Federal and State of Hawaii income taxes;
2) Aquila serves and has served since 1985 as Distributor of
the Trust pursuant to a written distribution agreement (the
"Distribution Agreement");
3) Aquila in its capacity as Distributor of the Trust has, in
the course of performing its obligations to the Trust and its
activities in the best interests of the shareholders of the Trust,
acquired valuable and sensitive information as to the operation and
management of investment companies such as the Trust, and, although
not directly involved in management of the portfolio of the Trust
or the administration of the Trust, Aquila has by reason of its
association with the Trust been informed of valuable and sensitive
information concerning such portfolio management and
administration;
4) The Trust and Aquila have agreed upon certain additional
arrangements set forth herein that would be beneficial to the
Trust, not as a part of the Distribution Agreement or related to
the subject matter covered thereby, but in furtherance of the
relationship contemplated by the Distribution Agreement;
5) The Trust and Aquila have agreed that in the best
interests of shareholders of the Trust, the information which
Aquila has obtained in its capacity of provider of services to the
Trust should, as provided herein, continue to be applied solely on
behalf of the Trust and its shareholders so long as Aquila provides
such services to the Trust and for a reasonable period thereafter;
6) The parties recognize that the Trust relies and may in the
future rely on the covenants of Aquila contained herein in the
Trust's continuing determinations to refrain from the exercise of
its right to terminate the Distribution Agreement at any time upon
sixty days' notice and in its annual determinations as to whether
or not the Trust will renew the Distribution Agreement, although
this Agreement does not in any way restrict the free exercise of
the right of the Trust, and its Board of Trustees, in connection
with such determinations to make such decisions and to take into
account such matters as the Board of Trustees believes appropriate;
7) Aquila is controlled by Lacy B. Herrmann, all direct and
indirect parents, subsidiaries and affiliates of Aquila and all
corporations controlled by Mr. Herrmann, now or in the future,
being referred to herein as the "Aquila Affiliates";
8) Hawaiian Trust Company, Limited ("HTCo"), a trust company
organized under the laws of the State of Hawaii with principal
offices in Honolulu, Hawaii, serves as investment adviser for the
Trust pursuant to a written advisory agreement with respect to the
Trust, HTCo being a subsidiary of Bank of Hawaii and an indirect
subsidiary of Bancorp Hawaii, Inc., a bank holding company
registered under the Bank Holding Company Act of 1956, as amended,
all direct and indirect parents, subsidiaries and affiliates of
HTCo, now or in the future, being referred to herein as the "HTCo
Affiliates";
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, the parties hereto agree as
follows:
1. Obligation as to Undivided Loyalty. Neither Aquila
nor any Aquila Affiliate shall serve as investment adviser,
administrator, sponsor, promoter, or principal underwriter of any
investment company that competes directly with the Trust, nor shall
they provide services directly or indirectly in the capacities here
specified to, or to receive fees for such services from, any
investment company which has a portfolio consisting primarily of
obligations principally of Hawaii issuers the interest paid on
which is exempt from regular Federal and State of Hawaii income
taxes; provided, however, that Aquila or any Aquila Affiliate may
provide services directly or indirectly to, or to receive fees for
such services from, any investment company
a. listed on Schedule A hereto; or
b. the portfolio of which consists initially of
assets previously held in a common or collective trust fund (other
than an investment company created after the date hereof which has
a portfolio consisting primarily of obligations principally of
Hawaii issuers the interest paid on which is exempt from regular
Federal and State of Hawaii income taxes) managed by HTCo or any
HTCo Affiliate; or
c. if HTCo or the HTCo Affiliate became a provider
of services to such investment company upon and solely by reason of
the fact that a person, firm, or corporation that provides such
investment company services in any of the capacities listed herein
has been directly or indirectly acquired by, or merged with, HTCo
or an HTCo affiliate, as long as such investment company does not
operate in a manner that permits ready exchange with an investment
company the investment adviser of which is HTCo or an HTCo
Affiliate.
2. Duration. The Obligations specified in this
Agreement shall be binding upon Aquila so long as it provides
services to the Trust, and for a period of two years thereafter;
provided, however, that such obligations shall not bind Aquila if
the Board of Trustees of the Trust terminates or does not renew the
Distribution Agreement absent a good faith determination that
Aquila has failed to perform its responsibilities under the
Distribution Agreement by reason of willful misfeasance, bad faith
or gross negligence or that Aquila has recklessly disregarded its
obligations and duties under the Distribution Agreement.
3. Application of Agreement. The obligations under this
Agreement shall apply to Aquila and all Aquila Affiliates and
Aquila shall not provide services or receive compensation, directly
or indirectly, in a manner prohibited by this Agreement.
4. Applicable Law; Enforcement. This Agreement shall be
construed in accordance with and governed by the laws applicable to
contracts made in, and to be performed within, the State of New
York. This Agreement shall be enforced by proceedings in a federal
or state court located in the State and County of New York or in
the State of Hawaii, and the parties hereby submit to personal
jurisdiction of such courts for purposes of such proceedings only.
The parties recognize that remedies at law may be inadequate, that
any breach of this Agreement may cause irreparable harm and that
money damages may be difficult or impossible to calculate;
therefore the parties shall have the right to such equitable relief
as may be appropriate, including specific performance of this
Agreement and temporary and/or permanent injunctive relief.
5. Notices. Except as otherwise provided herein, any
written notice or other written communication required or permitted
to be given under this Agreement shall be delivered or sent by
United States registered mail, postage prepaid, and,
if to the Trust, addressed to:
William C. Wallace, Senior Vice President
380 Madison Avenue
Suite 2300
New York, NY 10017;
if to Aquila, addressed to:
Lacy B. Herrmann, Vice President
380 Madison Avenue
Suite 2300
New York, NY 10017;
unless another address is substituted by notice delivered or sent
as provided herein. Any such notice shall be deemed given when
received.
6. Headings. Headings are used for reference purposes
only and shall not be deemed a part of this Agreement.
7. Entire Agreement. This Agreement embodies the entire
agreement of the parties with respect to the subject matter hereof,
and supersedes all previous negotiations, representations and
agreements with respect thereto.
8. Waiver. Except where specific time limits are herein
provided, no delay on the part of any party hereto in exercising
any power or right hereunder nor any single or partial exercise
thereof nor the exercise of any other power of right shall operate
as a waiver thereof. No waiver shall be enforceable against any
party hereto unless in writing, signed by the party against whom
such waiver is claimed, and shall be limited solely to the one
event. The rights, remedies and benefits herein expressly
specified are cumulative and not exclusive of any rights, remedies
or benefits which the parties hereto may otherwise have.
9. Separability. If any provision of this Agreement
shall contravene or be invalid under the laws of any state, country
or jurisdiction in which this Agreement shall be performed or
enforced, then such contravention or invalidity shall not
invalidate the entire Agreement. Such provision shall be deemed to
be modified to the extent necessary to render it valid and
enforceable, or if no such modification will render it valid and
enforceable, then the Agreement shall be constructed as if not
containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced
accordingly.
10. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same Agreement.
11. Amendment. This Agreement cannot be changed or
modified orally, but only by an agreement in writing signed by the
party against whom enforcement of any change or modification is
sought.
12. Persons Bound. This Agreement shall be binding upon
and shall inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. No assignment shall
be made by any party without the prior written consent of the other
party hereto.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed and delivered on its behalf as of the date
first written above.
HAWAIIAN TAX-FREE TRUST
by_______________________________
William C. Wallace
Senior Vice President
AQUILA DISTRIBUTORS, INC.
by_______________________
Lacy B. Herrmann,
Vice President
<PAGE>
SCHEDULE A
Hawaiian Tax-Free Trust
Cash Assets Trust
Tax-Free Cash Assets Trust
U.S. Treasuries Cash Assets Trust
Pacific Capital Funds Trust, and any series or class thereof,
managed by HTCo or any HTCo Affiliate, except to the extent that
its portfolio consists primarily of obligations principally of
Hawaii issuers the interest paid on which is exempt from regular
Federal and State of Hawaii income taxes. Notwithstanding the
exception contained in the prior sentence, the Pacific Capital
Funds Trust may include any series or class that is intended to
consist initially of assets previously held in the Discretionary
Common Trust Fund "C" of Hawaiian Trust Company, Limited (referred
to as the Tax Exempt Bond Fund) or Discretionary Common Trust Fund
"H" of Hawaiian Trust Company, Limited (referred to as the Tax
Exempt Short Intermediate Bond Fund).
This Agreement, made the day of December, 1992, by
and between Hawaiian Tax-Free Trust (the "Trust"), a
Massachusetts business trust with principal offices in New
York, New York and Aquila Management Corporation
("Aquila"), a corporation organized under the laws of New
York with offices in New York, New York,
W I T N E S S E T H:
PREMISES:
1) The Trust is registered under the Investment
Company Act of 1940 (the "1940 Act") and invests in a
portfolio of obligations principally of Hawaii issuers the
interest paid on which is exempt from regular Federal and
State of Hawaii income taxes;
2) Aquila serves and has served since 1985 as
Administrator of the Trust pursuant to a written
administration agreement (the "Administration Agreement");
3) Aquila in its capacity as Administrator of the
Trust has, in the course of performing its obligations to
the Trust and its activities in the best interests of the
shareholders of the Trust, acquired valuable and sensitive
information as to the operation and management of
investment companies such as the Trust, and, although not
directly involved in management of the portfolio of the
Trust or the marketing and distribution of shares of the
Trust, Aquila has by reason of its association with the
Trust been informed of valuable and sensitive information
concerning such portfolio management, marketing and
distribution;
4) The Trust and Aquila have agreed upon certain
additional arrangements set forth herein that would be
beneficial to the Trust, not as a part of the
Administration Agreement or related to the subject matter
covered thereby, but in furtherance of the relationship
contemplated by the Administration Agreement;
5) The Trust and Aquila have agreed that in the best
interests of shareholders of the Trust, the information
which Aquila has obtained in its capacity of provider of
services to the Trust should, as provided herein, continue
to be applied solely on behalf of the Trust and its
shareholders so long as Aquila provides such services to
the Trust and for a reasonable period thereafter;
6) The parties recognize that the Trust relies and
may in the future rely on the covenants of Aquila contained
herein in the Trust's continuing determinations to refrain
from the exercise of its right to terminate the
Administration Agreement at any time upon sixty days'
notice and in its annual determinations as to whether or
not the Trust will renew the Administration Agreement,
although this Agreement does not in any way restrict the
free exercise of the right of the Trust, and its Board of
Trustees, in connection with such determinations to make
such decisions and to take into account such matters as the
Board of Trustees believes appropriate;
7) Aquila is controlled by Lacy B. Herrmann, all
direct and indirect parents, subsidiaries and affiliates of
Aquila and all corporations controlled by Mr. Herrmann, now
or in the future, being referred to herein as the "Aquila
Affiliates";
8) Hawaiian Trust Company, Limited ("HTCo"), a trust
company organized under the laws of the State of Hawaii
with principal offices in Honolulu, Hawaii, serves as
investment adviser for the Trust pursuant to a written
advisory agreement with respect to the Trust, HTCo being a
subsidiary of Bank of Hawaii and an indirect subsidiary of
Bancorp Hawaii, Inc., a bank holding company registered
under the Bank Holding Company Act of 1956, as amended, all
direct and indirect parents, subsidiaries and affiliates of
HTCo, now or in the future, being referred to herein as the
"HTCo Affiliates";
NOW, THEREFORE, in consideration of the premises and
the mutual promises contained herein, the parties hereto
agree as follows:
1. Obligation as to Undivided Loyalty. Neither
Aquila nor any Aquila Affiliate shall serve as investment
adviser, administrator, sponsor, promoter, or principal
underwriter of any investment company that competes
directly with the Trust, nor shall they provide services
directly or indirectly in the capacities here specified to,
or to receive fees for such services from, any investment
company which has a portfolio consisting primarily of
obligations principally of Hawaii issuers the interest paid
on which is exempt from regular Federal and State of Hawaii
income taxes; provided, however, that Aquila or any Aquila
Affiliate may provide services directly or indirectly to,
or to receive fees for such services from, any investment
company
a. listed on Schedule A hereto; or
b. the portfolio of which consists
initially of assets previously held in a common or
collective trust fund (other than an investment company
created after the date hereof which has a portfolio
consisting primarily of obligations principally of Hawaii
issuers the interest paid on which is exempt from regular
Federal and State of Hawaii income taxes) managed by HTCo
or any HTCo Affiliate; or
c. if HTCo or the HTCo Affiliate became a
provider of services to such investment company upon and
solely by reason of the fact that a person, firm, or
corporation that provides such investment company services
in any of the capacities listed herein has been directly or
indirectly acquired by, or merged with, HTCo or an HTCo
affiliate, as long as such investment company does not
operate in a manner that permits ready exchange with an
investment company the investment adviser of which is HTCo
or an HTCo Affiliate.
2. Duration. The Obligations specified in this
Agreement shall be binding upon Aquila so long as it
provides services to the Trust, and for a period of two
years thereafter; provided, however, that such obligations
shall not bind Aquila if the Board of Trustees of the Trust
terminates or does not renew the Administration Agreement
absent a good faith determination that Aquila has failed to
perform its responsibilities under the Administration
Agreement by reason of willful misfeasance, bad faith or
gross negligence or that Aquila has recklessly disregarded
its obligations and duties under the Administration
Agreement.
3. Application of Agreement. The obligations
under this Agreement shall apply to Aquila and all Aquila
Affiliates and Aquila shall not provide services or receive
compensation, directly or indirectly, in a manner
prohibited by this Agreement.
4. Applicable Law; Enforcement. This Agreement
shall be construed in accordance with and governed by the
laws applicable to contracts made in, and to be performed
within, the State of New York. This Agreement shall be
enforced by proceedings in a federal or state court located
in the State and County of New York or in the State of
Hawaii, and the parties hereby submit to personal
jurisdiction of such courts for purposes of such
proceedings only. The parties recognize that remedies at
law may be inadequate, that any breach of this Agreement
may cause irreparable harm and that money damages may be
difficult or impossible to calculate; therefore the parties
shall have the right to such equitable relief as may be
appropriate, including specific performance of this
Agreement and temporary and/or permanent injunctive relief.
5. Notices. Except as otherwise provided
herein, any written notice or other written communication
required or permitted to be given under this Agreement
shall be delivered or sent by United States registered
mail, postage prepaid, and, if to the Trust, addressed to:
William C. Wallace, Senior Vice President
380 Madison Avenue
Suite 2300
New York, NY 10017;
if to Aquila, addressed to:
Lacy B. Herrmann, President
380 Madison Avenue
Suite 2300
New York, NY 10017;
unless another address is substituted by notice delivered
or sent as provided herein. Any such notice shall be
deemed given when received.
6. Headings. Headings are used for reference
purposes only and shall not be deemed a part of this
Agreement.
7. Entire Agreement. This Agreement embodies
the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all previous
negotiations, representations and agreements with respect
thereto.
8. Waiver. Except where specific time limits
are herein provided, no delay on the part of any party
hereto in exercising any power or right hereunder nor any
single or partial exercise thereof nor the exercise of any
other power of right shall operate as a waiver thereof. No
waiver shall be enforceable against any party hereto unless
in writing, signed by the party against whom such waiver is
claimed, and shall be limited solely to the one event. The
rights, remedies and benefits herein expressly specified
are cumulative and not exclusive of any rights, remedies or
benefits which the parties hereto may otherwise have.
9. Separability. If any provision of this
Agreement shall contravene or be invalid under the laws of
any state, country or jurisdiction in which this Agreement
shall be performed or enforced, then such contravention or
invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent
necessary to render it valid and enforceable, or if no such
modification will render it valid and enforceable, then the
Agreement shall be constructed as if not containing the
provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced
accordingly.
10. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which together
shall constitute one and the same Agreement.
11. Amendment. This Agreement cannot be changed
or modified orally, but only by an agreement in writing
signed by the party against whom enforcement of any change
or modification is sought.
12. Persons Bound. This Agreement shall be
binding upon and shall inure to the benefit of the
undersigned parties and their respective successors and
permitted assigns. No assignment shall be made by any
party without the prior written consent of the other party
hereto.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed and delivered on its behalf
as of the date first written above.
HAWAIIAN TAX-FREE TRUST
by_______________________________
William C. Wallace
Senior Vice President
AQUILA MANAGEMENT CORPORATION
by_______________________________
Lacy B. Herrmann,
President
<PAGE>
SCHEDULE A
Hawaiian Tax-Free Trust
Cash Assets Trust
Tax-Free Cash Assets Trust
U.S. Treasuries Cash Assets Trust
Pacific Capital Funds Trust, and any series or class
thereof, managed by HTCo or any HTCo Affiliate, except to
the extent that its portfolio consists primarily of
obligations principally of Hawaii issuers the interest paid
on which is exempt from regular Federal and State of Hawaii
income taxes. Notwithstanding the exception contained in
the prior sentence, the Pacific Capital Funds Trust may
include any series or class that is intended to consist
initially of assets previously held in the Discretionary
Common Trust Fund "C" of Hawaiian Trust Company, Limited
(referred to as the Tax Exempt Bond Fund) or Discretionary
Common Trust Fund "H" of Hawaiian Trust Company, Limited
(referred to as the Tax Exempt Short Intermediate Bond
Fund).
This Agreement, made the day of December, 1992,
by and between Hawaiian Tax-Free Trust (the "Trust"), a
Massachusetts business trust with principal offices in New
York, New York and Hawaiian Trust Company, Limited
("HTCo"), a trust company organized under the laws of
Hawaii with principal offices in Honolulu, Hawaii,
W I T N E S S E T H:
PREMISES:
1) The Trust is registered under the Investment
Company Act of 1940 (the "1940 Act") and invests in a
portfolio of obligations principally of Hawaii issuers the
interest paid on which is exempt from regular Federal and
State of Hawaii income taxes;
2) HTCo serves and has served since 1985 as
investment adviser for the Trust pursuant to a written
advisory agreement (the "Advisory Agreement"), which in
accordance with a provision of the 1940 Act is terminable
upon 60 days' notice by the Trust;
3) HTCo in its capacity as investment adviser to the
Trust has, in the course of performing its obligations to
the Trust and its activities in the best interests of the
shareholders of the Trust, acquired valuable and sensitive
information as to the operation and management of
investment companies, and although not involved in
administration of the Trust or the marketing or
distribution of shares of the Trust, HTCo has by reason of
its association with the Trust been informed of valuable
and sensitive information concerning such administration,
marketing and distribution;
4) The Trust and HTCo have agreed upon certain
additional arrangements set forth herein that would be
beneficial to the Trust, not as a part of the Advisory
Agreement or related to the subject matter covered thereby,
but in furtherance of the relationship contemplated by the
Advisory Agreement;
5) The Trust and HTCo have agreed that in the best
interests of shareholders of the Trust, the information
which HTCo has obtained in its capacity of provider of
services to the Trust should, as provided herein, continue
to be applied solely on behalf of the Trust and its
shareholders so long as HTCo provides such services to the
Trust and for a reasonable period thereafter;
6) The parties recognize that the Trust relies and
may in the future rely on the covenants of HTCo contained
herein in the Trust's continuing determinations to refrain
from the exercise of its right to terminate the Advisory
Agreement at any time upon sixty days' notice and in its
annual determinations as to whether or not the Trust will
renew the Advisory Agreement, although this Agreement does
not in any way restrict the free exercise of the right of
the Trust, and its Board of Trustees, in connection with
such determinations to make such decisions and to take into
account such matters as the Board of Trustees believes
appropriate;
7) HTCo is a subsidiary of Bank of Hawaii and an
indirect subsidiary of Bancorp Hawaii, Inc., a bank holding
company registered under the Bank Holding Company Act of
1956, as amended, all direct and indirect parents,
subsidiaries and affiliates of HTCo, now or in the future,
being referred to herein as the "HTCo Affiliates";
NOW, THEREFORE, in consideration of the premises and
the mutual promises contained herein, the parties hereto
agree as follows:
1. Obligation as to Undivided Loyalty. Neither
HTCo nor any HTCo Affiliate shall serve as investment
adviser, administrator, sponsor, promoter, or principal
underwriter of any investment company that competes
directly with the Trust and shall not provide services
directly or indirectly in the capacities here specified to,
or receive fees for such service from, any investment
company which has a portfolio consisting primarily of
obligations principally of Hawaii issuers, the interest
paid on which is exempt from regular Federal and State of
Hawaii income taxes; provided, however, that HTCo or any
HTCo Affiliate may provide services directly or indirectly
in the capacities listed herein to, or to receive fees for
such services from, any investment company
a. listed on Schedule A hereto; or
b. the portfolio of which consists initially
of assets previously held in a common or collective trust
fund (other than an investment company created after the
date hereof which has a portfolio consisting primarily of
obligations principally of Hawaii issuers the interest paid
on which is exempt from regular Federal and State of Hawaii
income taxes) managed by HTCo or any HTCo Affiliate; or
c. if HTCo or the HTCo Affiliate became a
provider of services to such investment company upon and
solely by reason of the fact that a person, firm, or
corporation that provides such investment company services
in any of the capacities listed herein has been directly or
indirectly acquired by, or merged with, HTCo or an HTCo
Affiliate, as long as such investment company does not
operate in a manner that permits ready exchange with an
investment company the investment adviser of which is HTCo
or an HTCo Affiliate.
2. Duration. The obligations specified in this
Agreement shall be binding upon HTCo so long as it provides
services to the Trust, and for a period of two years
thereafter; provided, however, that such obligations shall
not bind HTCo if the Board of Trustees of the Trust
terminates or does not renew the Advisory Agreement absent
a good faith determination that HTCo has failed to perform
its responsibilities under the Advisory Agreement by reason
of willful misfeasance, bad faith or gross negligence or
that HTCo has recklessly disregarded its obligations and
duties under the Advisory Agreement.
3. Application of Agreement. The obligations
under this Agreement shall apply to HTCo and all HTCo
Affiliates and HTCo shall not provide services or receive
compensation, directly or indirectly, in a manner
prohibited by this Agreement.
4. Applicable Law; Enforcement. This Agreement
shall be construed in accordance with and governed by the
laws applicable to contracts made in, and to be performed
within, the State of New York. This Agreement shall be
enforced by proceedings in a federal or state court located
in the State and County of New York or in the State of
Hawaii, and the parties hereby submit to personal
jurisdiction of such courts for purposes of such
proceedings only. The parties recognize that remedies at
law may be inadequate, that any breach of this Agreement
may cause irreparable harm and that money damages may be
difficult or impossible to calculate; therefore the parties
shall have the right to such equitable relief as may be
appropriate, including specific performance of this
Agreement and temporary and/or permanent injunctive relief.
5. Notices. Except as otherwise provided
herein, any written notice or other written communication
required or permitted to be given under this Agreement
shall be delivered or sent by United States registered
mail, postage prepaid, and, if to the Trust, addressed to:
Lacy B. Herrmann, Chairman and President
380 Madison Avenue
Suite 2300
New York, NY 10017;
if to HTCo, addressed to:
Douglas Philpotts, Chairman
Hawaiian Trust Company, Limited
Financial Plaza of the Pacific
Box 3170
Honolulu, HI 96802
unless another address is substituted by notice delivered
or sent as provided herein. Any such notice shall be
deemed given when received.
6. Headings. Headings are used for reference
purposes only and shall not be deemed a part of this
Agreement.
7. Entire Agreement. This Agreement embodies
the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all previous
negotiations, representations and agreements with respect
thereto.
8. Waiver. Except where specific time limits
are herein provided, no delay on the part of any party
hereto in exercising any power or right hereunder nor any
single or partial exercise thereof nor the exercise of any
other power of right shall operate as a waiver thereof. No
waiver shall be enforceable against any party hereto unless
in writing, signed by the party against whom such waiver is
claimed, and shall be limited solely to the one event. The
rights, remedies and benefits herein expressly specified
are cumulative and not exclusive of any rights, remedies or
benefits which the parties hereto may otherwise have.
9. Separability. If any provision of this
Agreement shall contravene or be invalid under the laws of
any state, country or jurisdiction in which this Agreement
shall be performed or enforced, then such contravention or
invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent
necessary to render it valid and enforceable, or if no such
modification will render it valid and enforceable, then the
Agreement shall be constructed as if not containing the
provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced
accordingly.
10. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which together
shall constitute one and the same Agreement.
11. Amendment. This Agreement cannot be changed
or modified orally, but only by an agreement in writing
signed by the party against whom enforcement of any change
or modification is sought.
12. Persons Bound. This Agreement shall be
binding upon and shall inure to the benefit of the
undersigned parties and their respective successors and
permitted assigns. No assignment shall be made by any
party without the prior written consent of the other party
hereto.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed and delivered on its behalf
as of the date first written above.
HAWAIIAN TAX-FREE TRUST
by_______________________________
Lacy B. Herrmann,
Chairman and President
HAWAIIAN TRUST COMPANY, LIMITED
by_______________________________
Douglas Philpotts,
Chairman
<PAGE>
SCHEDULE A
Hawaiian Tax-Free Trust
Cash Assets Trust
Tax-Free Cash Assets Trust
U.S. Treasuries Cash Assets Trust
Pacific Capital Funds Trust, and any series or class
thereof, managed by HTCo or any HTCo Affiliate, except to
the extent that its portfolio consists primarily of
obligations principally of Hawaii issuers the interest paid
on which is exempt from regular Federal and State of Hawaii
income taxes. Notwithstanding the exception contained in
the prior sentence, the Pacific Capital Funds Trust may
include any series or class that is intended to consist
initially of assets previously held in the Discretionary
Common Trust Fund "C" of Hawaiian Trust Company, Limited
(referred to as the Tax Exempt Bond Fund) or Discretionary
Common Trust Fund "H" of Hawaiian Trust Company, Limited
(referred to as the Tax Exempt Short Intermediate Bond
Fund).
PRINCIPLES OF COOPERATION
Hawaiian Tax-Free Trust (the "Bond Fund") is a tax-exempt bond
fund registered under the Investment Company Act of 1940 (the "1940
Act"). Each of Cash Assets Trust, Tax-Free Cash Assets Trust and
U.S. Treasuries Cash Assets Trust is a series (singly and
collectively, the "Series"), of the Cash Assets Trust (the "Money
Fund"), which is a money-market fund which is also registered under
the 1940 Act.
Hawaiian Trust Company, Limited ("HTCo") serves as Investment
Adviser for the Bond Fund and for each Series pursuant to a written
advisory agreement with respect to the Bond Fund or that Series.
Aquila Management Corporation serves as Administrator pursuant to
a written administration agreement with respect to the Bond Fund
and for each Series. Aquila Distributors, Inc. serves as principal
underwriter pursuant to a written distribution agreement with
respect to the Bond Fund and each Series. Aquila Management
Corporation and Aquila Distributors, Inc. are referred to herein
collectively as "Aquila."
The Bond Fund and the Money Fund, and any other investment
company registered under the 1940 Act which may in the future be
served by both HTCo and Aquila as Investment Adviser and as
Administrator and principal underwriter, respectively, are referred
to herein as the "Trusts."
Since 1984, HTCo and Aquila have worked together effectively
and harmoniously to provide a high level of service to the Bond
Fund and the Series, and as a result of their combined efforts, the
Bond Fund and the Series have achieved substantial size and have
evolved effective operating practices and procedures. HTCo and
Aquila now wish to address certain matters of concern to each of
them as set forth below. By addressing these matters the parties
desire to promote their continued joint efforts in the best
interests of the Trusts and the shareholders of the Trusts in a
spirit of good will.
The Board of Trustees of the Trusts are fully familiar with
the relevant background and have encouraged the discussions between
the parties which have led to the formulation of these principles.
They have also reviewed this document and have requested that in
the interests of the shareholders of the Trusts, HTCo and Aquila
subscribe to these principles in order to promote continued and
effective performance on behalf of the Trusts.
The parties consider that providing a contractual basis for
the observance of the principles here enumerated is impractical, in
view of constantly changing circumstances and the possibility of
unforeseen developments. Accordingly, this document is not intended
to be, and is not, a contract, and no legally enforceable rights or
remedies are intended to be, and are not, created hereby. Instead,
the parties consider that they may best address the matters with
which they are concerned by setting forth a set of principles as to
which they agree for their future guidance.
Application of all of the principles stated below is subject
to matters of law applicable to the parties and the Trusts; these
include the 1940 Act, the Rules promulgated thereunder, decisions
of the Securities and Exchange Commission and interpretations of
its staff, the fiduciary and other duties of the parties and the
exercise by the Board of Trustees of the Trusts and the majority of
Trustees who are not interested persons of the Trusts of their
responsibilities as required by law, and the receipt of necessary
shareholder approval if required by the 1940 Act.
Subject to the foregoing, the parties intend to be guided by
the following principles:
I. Mutual Cooperation
The parties shall endeavor to work together in an harmonious
manner, to communicate differences of opinion quickly and to
work together to resolve any divergence of viewpoint so as to
operate in the best interest of the Trusts and their
shareholders.
II. Continuance of Contractual Relations
A. HTCo will take no action nor will it initiate, suggest or
encourage any action to remove Aquila as Administrator or
Distributor of any Trust.
B. Aquila will take no action nor will it initiate, suggest
or encourage any action to remove HTCo as Investment
Adviser of any Trust.
C. Each of HTCo and Aquila will endeavor to see to it that
the other is continued as Investment Adviser or
Administrator and Distributor to each Trust, as the case
may be, on terms at least as favorable to the other party
as on the date hereof.
III. Continuation of Board Structure
A. The parties shall consult with each other as to
candidates for election as Trustees to be recommended or
proposed by either of them, and if a candidate is not
approved by one party, such person shall not be
recommended by the other party for election to the Board
of Trustees, provided that the proposing party may
recommend or propose any candidate to replace a Trustee
originally proposed by that party where the size of the
Board is not changed(1).
(1) For purposes of the Boards both of Hawaiian Tax-Free Trust
and of Cash Assets Trust, at the conclusion of the September, 1992
Annual Meeting of Shareholders of Hawaiian Tax-Free Trust, those
Trustees first elected to the Board of Hawaiian Tax-Free Trust
after January 1, 1992 shall be considered as having been proposed
by HTCo and the Trustees elected prior to that date shall be
considered as having been proposed by Aquila.
B. Any proposed Trustee who will take a place on the Board
previously occupied by a person originally proposed by
Aquila whose principal residence is in the State of
Hawaii shall have a principal residence which is also in
the State of Hawaii.
C. Neither party shall propose that the Board be reduced in
size.
IV. Continuation of Asset Growth
Each Party shall endeavor to maintain and increase the assets
of each Trust.
V. Modification by Agreement
Nothing shall prevent the parties from suggesting to each
other modifications of these principles, or from changing
their application or establishing exceptions by written
agreement from time to time.
By subscribing to this set of principles, the parties
acknowledge that they intend to observe the guidelines here set
forth.
March 31, 1993
HAWAIIAN TRUST COMPANY, LIMITED
/s/Douglas Philpotts
by ____________________________
Douglas Philpotts,
Chairman
AQUILA MANAGEMENT CORPORATION
/s/Lacy B. Herrmann
by ____________________________
Lacy B. Herrmann,
President
AQUILA DISTRIBUTORS, INC.
/s/Lacy B. Herrmann
by ____________________________
Lacy B. Herrmann,
Secretary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000750909
<NAME> HAWAIIAN TAX-FREE TRUST - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 615,156,778
<INVESTMENTS-AT-VALUE> 635,004,875
<RECEIVABLES> 12,109,298
<ASSETS-OTHER> 13,213
<OTHER-ITEMS-ASSETS> 12,314,886
<TOTAL-ASSETS> 659,442,272
<PAYABLE-FOR-SECURITIES> 10,586,578
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,499,791
<TOTAL-LIABILITIES> 13,086,369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 626,895,276
<SHARES-COMMON-STOCK> 57,070,761
<SHARES-COMMON-PRIOR> 58,326,382
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 387,470
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,848,097
<NET-ASSETS> 640,988,793
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,487,871
<OTHER-INCOME> 0
<EXPENSES-NET> 4,800,403
<NET-INVESTMENT-INCOME> 33,687,468
<REALIZED-GAINS-CURRENT> 528,297
<APPREC-INCREASE-CURRENT> (4,593,162)
<NET-CHANGE-FROM-OPS> 29,662,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34,081,182
<DISTRIBUTIONS-OF-GAINS> 247,784
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,435,559
<NUMBER-OF-SHARES-REDEEMED> 6,222,801
<SHARES-REINVESTED> 1,531,621
<NET-CHANGE-IN-ASSETS> (13,569,405)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 244,407
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 915,693
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,915,611
<AVERAGE-NET-ASSETS> 655,804,539
<PER-SHARE-NAV-BEGIN> 11.31
<PER-SHARE-NII> .59
<PER-SHARE-GAIN-APPREC> (.08)
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.23
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000750909
<NAME> HAWAIIAN TAX-FREE TRUST - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 615,156,778
<INVESTMENTS-AT-VALUE> 635,004,875
<RECEIVABLES> 12,109,298
<ASSETS-OTHER> 13,213
<OTHER-ITEMS-ASSETS> 12,314,886
<TOTAL-ASSETS> 659,442,272
<PAYABLE-FOR-SECURITIES> 10,586,578
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,499,791
<TOTAL-LIABILITIES> 13,086,369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 626,895,276
<SHARES-COMMON-STOCK> 478,038
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 387,470
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,848,097
<NET-ASSETS> 5,367,004
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,487,871
<OTHER-INCOME> 0
<EXPENSES-NET> 4,800,403
<NET-INVESTMENT-INCOME> 33,687,468
<REALIZED-GAINS-CURRENT> 528,297
<APPREC-INCREASE-CURRENT> (4,593,162)
<NET-CHANGE-FROM-OPS> 29,662,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 81,839
<DISTRIBUTIONS-OF-GAINS> 1,507
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 484,452
<NUMBER-OF-SHARES-REDEEMED> 10,885
<SHARES-REINVESTED> 4,471
<NET-CHANGE-IN-ASSETS> (13,569,405)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 244,407
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 915,693
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,915,611
<AVERAGE-NET-ASSETS> 1,970,261
<PER-SHARE-NAV-BEGIN> 11.31
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> (.08)
<PER-SHARE-DIVIDEND> (.45)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.23
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000750909
<NAME> HAWAIIAN TAX-FREE TRUST-CLASS Y
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 615,156,778
<INVESTMENTS-AT-VALUE> 635,004,875
<RECEIVABLES> 12,109,298
<ASSETS-OTHER> 13,213
<OTHER-ITEMS-ASSETS> 12,314,886
<TOTAL-ASSETS> 659,442,272
<PAYABLE-FOR-SECURITIES> 10,586,578
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,499,791
<TOTAL-LIABILITIES> 13,086,369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 626,895,276
<SHARES-COMMON-STOCK> 9
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 387,470
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,848,097
<NET-ASSETS> 106
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,487,871
<OTHER-INCOME> 0
<EXPENSES-NET> 4,800,403
<NET-INVESTMENT-INCOME> 33,687,468
<REALIZED-GAINS-CURRENT> 528,297
<APPREC-INCREASE-CURRENT> (2,236,378)
<NET-CHANGE-FROM-OPS> 31,979,387
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (13,569,405)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 244,407
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 915,693
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,915,611
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 11.31
<PER-SHARE-NII> .74
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> (.73)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.24
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N P O P
Hawaiian Tax-Free Trust (Class A Shares)
1-YR AVG. TOTAL RETURN AS OF 3/31/97 0.49%
1-YR CUM. TOTAL RETURN AS OF 3/31/97 0.49%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.31 As of 3/31/96
Public Offering Price Per Share (POP) $11.78 As of 3/31/96
Number of Shares Purchased 84.890 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1996 1,000.00 84.890 0.046017 * 3.91 11.27
MAY 1996 960.61 85.236 0.052569 4.48 11.25
JUNE 1996 963.39 85.635 0.047552 4.07 11.14
JULY 1996 958.04 86.000 0.048434 4.17 11.25
AUGUST 1996 971.67 86.370 0.050571 4.37 11.30
SEPTEMBER 1996 980.35 86.757 0.050646 4.39 11.32
OCTOBER 1996 986.48 87.145 0.050864 4.43 11.32
NOVEMBER 1996 990.91 87.537 0.047675 4.17 11.50
DECEMBER 1996 1,010.84 87.899 0.051972 4.57 11.46
JANUARY 1997 1,011.90 88.298 0.049973 4.41 11.35
FEBRUARY 1997 1,006.60 88.687 0.047082 4.18 11.50
MARCH 27, 1997** 1,024.07 89.050 0.048569 4.33 11.23
MARCH 31, 1997 1,004.36 89.435 0.006364 0.57 11.23
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1996 0.347 960.61 -3.94%
MAY 1996 0.398 963.39 -3.66%
JUNE 1996 0.366 958.04 -4.20%
JULY 1996 0.370 971.67 -2.83%
AUGUST 1996 0.387 980.35 -1.96%
SEPTEMBER 1996 0.388 986.48 -1.35%
OCTOBER 1996 0.392 990.91 -0.91%
NOVEMBER 1996 0.363 1,010.84 1.08%
DECEMBER 1996 0.399 1,011.90 1.19%
JANUARY 1997 0.389 1,006.60 0.66%
FEBRUARY 1997 0.363 1,024.07 2.41%
MARCH 27, 1997** 0.385 1,004.36 0.44%
MARCH 31, 1997 0.051 1,004.93 0.49%
<FN>
* For the period 4/1/96-4/26/96
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Hawaiian Tax-Free Trust (Class C Shares)
1-YR AVG. TOTAL RETURN AS OF 3/31/97 2.38%
1-YR CUM. TOTAL RETURN AS OF 3/31/97 2.38%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.31 As of 3/31/96
Number of Shares Purchased 88.417 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1996 1,000.00 88.417 0.006996 * 0.62 11.27
MAY 1996 997.08 88.472 0.043154 3.82 11.24
JUNE 1996 998.25 88.812 0.038902 3.45 11.13
JULY 1996 991.93 89.122 0.039024 3.48 11.24
AUGUST 1996 1,005.21 89.432 0.042051 3.76 11.29
SEPTEMBER 1996 1,013.44 89.765 0.041604 3.73 11.31
OCTOBER 1996 1,018.97 90.095 0.041841 3.77 11.32
NOVEMBER 1996 1,023.65 90.428 0.038596 3.49 11.49
DECEMBER 1996 1,042.51 90.732 0.040984 3.72 11.46
JANUARY 1997 1,043.50 91.056 0.042073 3.83 11.34
FEBRUARY 1997 1,036.41 91.394 0.039615 3.62 11.50
MARCH 27, 1997** 1,054.65 91.709 0.040844 3.75 11.23
MARCH 31, 1997 1,033.64 92.042 0.005373 0.49 11.12
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1996 0.055 997.08 -0.29%
MAY 1996 0.340 998.25 -0.18%
JUNE 1996 0.310 991.93 -0.81%
JULY 1996 0.309 1,005.21 0.52%
AUGUST 1996 0.333 1,013.44 1.34%
SEPTEMBER 1996 0.330 1,018.97 1.90%
OCTOBER 1996 0.333 1,023.65 2.36%
NOVEMBER 1996 0.304 1,042.51 4.25%
DECEMBER 1996 0.324 1,043.50 4.35%
JANUARY 1997 0.338 1,036.41 3.64%
FEBRUARY 1997 0.315 1,054.65 5.47%
MARCH 27, 1997** 0.334 1,033.64 3.36%
MARCH 31, 1997 0.044 1,023.80 2.38%
<FN>
* For the period 4/1/96-4/26/96
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Hawaiian Tax-Free Trust (Class Y Shares)
1-YR AVG. TOTAL RETURN AS OF 3/31/97 6.14%
1-YR CUM. TOTAL RETURN AS OF 3/31/97 6.14%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.31 As of 3/31/96
Number of Shares Purchased 88.417 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1996 1,000.00 88.417 0.004520 0.40 11.27
MAY 1996 996.86 88.453 0.072287 6.39 11.25
JUNE 1996 1,001.49 89.021 0.065080 5.79 11.14
JULY 1996 997.49 89.541 0.066935 5.99 11.25
AUGUST 1996 1,013.33 90.074 0.077648 6.99 11.24
SEPTEMBER 1996 1,019.43 90.696 0.068294 6.19 11.32
OCTOBER 1996 1,032.88 91.243 0.067890 6.19 11.39
NOVEMBER 1996 1,045.46 91.787 0.063133 5.79 11.52
DECEMBER 1996 1,063.18 92.290 0.069283 6.39 11.44
JANUARY 1997 1,062.19 92.849 0.066686 6.19 11.42
FEBRUARY 1997 1,066.53 93.391 0.059892 5.59 11.46
MARCH 31, 1997 1,075.86 93.879 0.065968 6.19 11.24
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1996 0.035 996.86 -0.31%
MAY 1996 0.568 1,001.49 0.15%
JUNE 1996 0.520 997.49 -0.25%
JULY 1996 0.533 1,013.33 1.33%
AUGUST 1996 0.622 1,019.43 1.94%
SEPTEMBER 1996 0.547 1,032.88 3.29%
OCTOBER 1996 0.544 1,045.46 4.55%
NOVEMBER 1996 0.503 1,063.18 6.32%
DECEMBER 1996 0.559 1,062.19 6.22%
JANUARY 1997 0.542 1,066.53 6.65%
FEBRUARY 1997 0.488 1,075.86 7.59%
MARCH 31, 1997 0.551 1,061.40 6.14%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N P O P
Hawaiian Tax-Free Trust (Class A Shares)
5-YR AVG. TOTAL RETURN AS OF 3/31/97 5.21%
5-YR CUM. TOTAL RETURN AS OF 3/31/97 28.90%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.10 As of 3/31/92
Public Offering Price Per Share (POP) $11.56 As of 3/31/92
Number of Shares Purchased 86.505 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1992 1,000.00 86.505 0.051950 * 4.49 11.11
MAY 1992 965.57 86.910 0.057639 5.01 11.15
JUNE 1992 974.05 87.359 0.057077 4.99 11.26
JULY 1992 988.65 87.802 0.057710 5.07 11.50
AUGUST 1992 1,014.79 88.242 0.055217 4.87 11.35
SEPTEMBER 1992 1,006.42 88.672 0.055393 4.91 11.37
OCTOBER 1992 1,013.11 89.104 0.056239 5.01 11.18
NOVEMBER 1992 1,001.19 89.552 0.054301 4.86 11.34
DECEMBER 1992 1,020.38 89.981 0.059981 5.40 11.37
JANUARY 1993 1,028.48 90.455 0.054741 4.95 11.43
FEBRUARY 1993 1,038.86 90.889 0.054392 4.94 11.72
MARCH 1993 1,070.16 91.310 0.056257 5.14 11.59
APRIL 1993 1,063.42 91.754 0.053120 4.87 11.64
MAY 1993 1,072.89 92.172 0.053382 4.92 11.63
JUNE 1993 1,076.88 92.595 0.054467 5.04 11.73
JULY 1993 1,091.19 93.025 0.052408 4.88 11.68
AUGUST 1993 1,091.41 93.443 0.052486 4.90 11.84
SEPTEMBER 1993 1,111.27 93.857 0.054350 5.10 11.93
OCTOBER 1993 1,124.82 94.285 0.052667 4.97 11.86
NOVEMBER 1993 1,123.18 94.703 0.052567 4.98 11.72
DECEMBER 1993 1,114.90 95.128 0.079486 7.56 11.83
JANUARY 1994 1,132.93 95.767 0.050977 4.88 11.84
FEBRUARY 1994 1,138.77 96.180 0.052934 5.09 11.62
MARCH 1994 1,122.70 96.618 0.050753 4.90 11.37
APRIL 1994 1,103.45 97.049 0.054179 5.26 11.22
MAY 1994 1,094.15 97.518 0.050441 4.92 11.18
JUNE 1994 1,095.17 97.958 0.050789 4.98 11.16
JULY 1994 1,098.18 98.403 0.052203 5.14 11.16
AUGUST 1994 1,103.32 98.864 0.052185 5.16 11.15
SEPTEMBER 1994 1,107.49 99.326 0.054138 5.38 11.05
OCTOBER 1994 1,102.93 99.813 0.048973 4.89 10.83
NOVEMBER 1994 1,085.86 100.264 0.052580 5.27 10.47
DECEMBER 1994 1,055.04 100.768 0.107867 10.87 10.63
JANUARY 1995 1,082.03 101.790 0.051222 5.21 10.75
FEBRUARY 1995 1,099.46 102.275 0.049202 5.03 11.05
MARCH 1995 1,135.18 102.731 0.052996 5.44 11.15
APRIL 1995 1,150.89 103.219 0.050835 5.25 11.19
MAY 1995 1,160.27 103.688 0.050673 5.25 11.35
JUNE 1995 1,182.11 104.151 0.052172 5.43 11.35
JULY 1995 1,187.55 104.630 0.051719 5.41 11.33
AUGUST 1995 1,190.87 105.107 0.053241 5.60 11.29
SEPTEMBER 1995 1,192.26 105.603 0.049607 5.24 11.29
OCTOBER 1995 1,197.50 106.067 0.049680 5.27 11.41
NOVEMBER 1995 1,215.49 106.529 0.050957 5.43 11.47
DECEMBER 1995 1,227.31 107.002 0.048868 5.23 11.59
JANUARY 1996 1,245.38 107.453 0.049032 5.27 11.59
FEBRUARY 1996 1,250.65 107.908 0.050689 5.47 11.54
MARCH 1996 1,250.73 108.382 0.049181 5.33 11.32
APRIL 1996 1,232.21 108.853 0.049260 5.36 11.27
MAY 1996 1,232.13 109.328 0.052569 5.75 11.25
JUNE 1996 1,235.69 109.839 0.047552 5.22 11.14
JULY 1996 1,228.83 110.308 0.048434 5.34 11.25
AUGUST 1996 1,246.31 110.783 0.050571 5.60 11.30
SEPTEMBER 1996 1,257.45 111.279 0.050646 5.64 11.32
OCTOBER 1996 1,265.31 111.777 0.050864 5.69 11.32
NOVEMBER 1996 1,271.00 112.279 0.047675 5.35 11.50
DECEMBER 1996 1,296.56 112.744 0.051972 5.86 11.46
JANUARY 1997 1,297.91 113.256 0.049973 5.66 11.35
FEBRUARY 1997 1,291.11 113.754 0.047082 5.36 11.50
MARCH 27, 1997** 1,313.53 114.220 0.048569 5.55 11.23
MARCH 31, 1997 1,288.24 114.714 0.006364 0.73 11.23
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1992 0.404 965.57 -3.44%
MAY 1992 0.449 974.05 -2.59%
JUNE 1992 0.443 988.65 -1.14%
JULY 1992 0.441 1,014.79 1.48%
AUGUST 1992 0.429 1,006.42 0.64%
SEPTEMBER 1992 0.432 1,013.11 1.31%
OCTOBER 1992 0.448 1,001.19 0.12%
NOVEMBER 1992 0.429 1,020.38 2.04%
DECEMBER 1992 0.475 1,028.48 2.85%
JANUARY 1993 0.433 1,038.86 3.89%
FEBRUARY 1993 0.422 1,070.16 7.02%
MARCH 1993 0.443 1,063.42 6.34%
APRIL 1993 0.419 1,072.89 7.29%
MAY 1993 0.423 1,076.88 7.69%
JUNE 1993 0.430 1,091.19 9.12%
JULY 1993 0.417 1,091.41 9.14%
AUGUST 1993 0.414 1,111.27 11.13%
SEPTEMBER 1993 0.428 1,124.82 12.48%
OCTOBER 1993 0.419 1,123.18 12.32%
NOVEMBER 1993 0.425 1,114.90 11.49%
DECEMBER 1993 0.639 1,132.93 13.29%
JANUARY 1994 0.412 1,138.77 13.88%
FEBRUARY 1994 0.438 1,122.70 12.27%
MARCH 1994 0.431 1,103.45 10.34%
APRIL 1994 0.469 1,094.15 9.41%
MAY 1994 0.440 1,095.17 9.52%
JUNE 1994 0.446 1,098.18 9.82%
JULY 1994 0.460 1,103.32 10.33%
AUGUST 1994 0.463 1,107.49 10.75%
SEPTEMBER 1994 0.487 1,102.93 10.29%
OCTOBER 1994 0.451 1,085.86 8.59%
NOVEMBER 1994 0.504 1,055.04 5.50%
DECEMBER 1994 1.023 1,082.03 8.20%
JANUARY 1995 0.485 1,099.46 9.95%
FEBRUARY 1995 0.455 1,135.18 13.52%
MARCH 1995 0.488 1,150.89 15.09%
APRIL 1995 0.469 1,160.27 16.03%
MAY 1995 0.463 1,182.11 18.21%
JUNE 1995 0.479 1,187.55 18.75%
JULY 1995 0.478 1,190.87 19.09%
AUGUST 1995 0.496 1,192.26 19.23%
SEPTEMBER 1995 0.464 1,197.50 19.75%
OCTOBER 1995 0.462 1,215.49 21.55%
NOVEMBER 1995 0.473 1,227.31 22.73%
DECEMBER 1995 0.451 1,245.38 24.54%
JANUARY 1996 0.455 1,250.65 25.07%
FEBRUARY 1996 0.474 1,250.73 25.07%
MARCH 1996 0.471 1,232.21 23.22%
APRIL 1996 0.476 1,232.13 23.21%
MAY 1996 0.511 1,235.69 23.57%
JUNE 1996 0.469 1,228.83 22.88%
JULY 1996 0.475 1,246.31 24.63%
AUGUST 1996 0.496 1,257.45 25.75%
SEPTEMBER 1996 0.498 1,265.31 26.53%
OCTOBER 1996 0.502 1,271.00 27.10%
NOVEMBER 1996 0.465 1,296.56 29.66%
DECEMBER 1996 0.511 1,297.91 29.79%
JANUARY 1997 0.499 1,291.11 29.11%
FEBRUARY 1997 0.466 1,313.53 31.35%
MARCH 27, 1997** 0.494 1,288.24 28.82%
MARCH 31, 1997 0.065 1,288.97 28.90%
<FN>
* For the period 4/1/92-4/27/92
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N P O P
Hawaiian Tax-Free Trust (Class A Shares)
10-YR AVG. TOTAL RETURN AS OF 3/31/97 6.09%
10-YR CUM. TOTAL RETURN AS OF 3/31/97 80.61%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.14 As of 3/31/87
Public Offering Price Per Share (POP) $11.60 As of 3/31/87
Number of Shares Purchased 86.207 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1987 1,000.00 86.207 0.062899 5.42 10.64
MAY 1987 922.66 86.717 0.060018 5.20 10.54
JUNE 1987 919.20 87.210 0.065902 5.75 10.63
JULY 1987 932.79 87.751 0.062715 5.50 10.59
AUGUST 1987 934.79 88.271 0.062483 5.52 10.60
SEPTEMBER 1987 941.18 88.791 0.061111 5.43 10.19
OCTOBER 1987 910.21 89.323 0.062018 5.54 10.20
NOVEMBER 1987 916.64 89.867 0.064331 5.78 10.38
DECEMBER 1987 938.60 90.424 0.063598 5.75 10.53
JANUARY 1988 957.91 90.970 0.060031 5.46 10.77
FEBRUARY 1988 985.20 91.477 0.064414 5.89 10.79
MARCH 1988 992.93 92.023 0.063315 5.83 10.60
APRIL 1988 981.27 92.572 0.058685 5.43 10.54
MAY 1988 981.15 93.088 0.064492 6.00 10.50
JUNE 1988 983.43 93.660 0.060732 5.69 10.57
JULY 1988 995.67 94.198 0.058227 5.48 10.56
AUGUST 1988 1,000.21 94.717 0.066943 6.34 10.59
SEPTEMBER 1988 1,009.40 95.316 0.061032 5.82 10.66
OCTOBER 1988 1,021.89 95.862 0.063482 6.09 10.78
NOVEMBER 1988 1,039.47 96.426 0.061839 5.96 10.63
DECEMBER 1988 1,030.97 96.987 0.061360 5.95 10.65
JANUARY 1989 1,038.86 97.546 0.065140 6.35 10.83
FEBRUARY 1989 1,062.78 98.133 0.057822 5.67 10.69
MARCH 1989 1,054.71 98.663 0.064697 6.38 10.60
APRIL 1989 1,052.22 99.266 0.057759 5.73 10.79
MAY 1989 1,076.81 99.797 0.068463 6.83 10.88
JUNE 1989 1,092.62 100.425 0.059599 5.99 10.93
JULY 1989 1,103.63 100.973 0.056950 5.75 10.97
AUGUST 1989 1,113.42 101.497 0.065173 6.61 10.87
SEPTEMBER 1989 1,109.88 102.105 0.058936 6.02 10.75
OCTOBER 1989 1,103.65 102.665 0.058596 6.02 10.85
NOVEMBER 1989 1,119.93 103.220 0.066505 6.86 10.87
DECEMBER 1989 1,128.86 103.851 0.058255 6.05 10.93
JANUARY 1990 1,141.14 104.405 0.061882 6.46 10.82
FEBRUARY 1990 1,136.12 105.002 0.065447 6.87 10.80
MARCH 1990 1,140.89 105.638 0.056625 5.98 10.79
APRIL 1990 1,145.82 106.192 0.060687 6.44 10.72
MAY 1990 1,144.83 106.794 0.060333 6.44 10.74
JUNE 1990 1,153.41 107.393 0.061988 6.66 10.77
JULY 1990 1,163.28 108.012 0.060489 6.53 10.83
AUGUST 1990 1,176.30 108.615 0.060413 6.56 10.65
SEPTEMBER 1990 1,163.31 109.231 0.061261 6.69 10.61
OCTOBER 1990 1,165.63 109.862 0.061533 6.76 10.69
NOVEMBER 1990 1,181.18 110.494 0.062873 6.95 10.80
DECEMBER 1990 1,200.28 111.137 0.058927 6.55 10.81
JANUARY 1991 1,207.94 111.743 0.059835 6.69 10.87
FEBUARY 1991 1,221.33 112.358 0.060330 6.78 10.95
MARCH 1991 1,237.10 112.977 0.056563 6.39 10.84
APRIL 1991 1,231.06 113.567 0.059170 6.72 10.90
MAY 1991 1,244.60 114.183 0.057007 6.51 10.95
JUNE 1991 1,256.82 114.778 0.060513 6.95 10.87
JULY 1991 1,254.58 115.417 0.059776 6.90 10.92
AUGUST 1991 1,267.25 116.048 0.062253 7.22 10.98
SEPTEMBER 1991 1,281.44 116.706 0.058078 6.78 11.05
OCTOBER 1991 1,296.38 117.320 0.057405 6.73 11.08
NOVEMBER 1991 1,306.64 117.928 0.059632 7.03 11.04
DECEMBER 1991 1,308.95 118.565 0.060317 7.15 11.17
JANUARY 1992 1,331.52 119.205 0.062239 7.42 11.2
FEBRUARY 1992 1,342.51 119.867 0.058537 7.02 11.13
MARCH 1992 1,341.14 120.498 0.058063 7.00 11.09
APRIL 1992 1,343.32 121.129 0.059649 7.23 11.11
MAY 1992 1,352.96 121.779 0.057639 7.02 11.15
JUNE 1992 1,364.85 122.408 0.057077 6.99 11.26
JULY 1992 1,385.31 123.029 0.057710 7.10 11.50
AUGUST 1992 1,421.93 123.646 0.055217 6.83 11.35
SEPTEMBER 1992 1,410.21 124.248 0.055393 6.88 11.37
OCTOBER 1992 1,419.58 124.853 0.056239 7.02 11.18
NOVEMBER 1992 1,402.88 125.481 0.054301 6.81 11.34
DECEMBER 1992 1,429.77 126.082 0.059981 7.56 11.37
JANUARY 1993 1,441.12 126.747 0.054741 6.94 11.43
FEBRUARY 1993 1,455.66 127.354 0.054392 6.93 11.72
MARCH 1993 1,499.52 127.945 0.056257 7.20 11.59
APRIL 1993 1,490.08 128.566 0.053120 6.83 11.64
MAY 1993 1,503.34 129.153 0.053382 6.89 11.63
JUNE 1993 1,508.94 129.746 0.054467 7.07 11.73
JULY 1993 1,528.99 130.348 0.052408 6.83 11.68
AUGUST 1993 1,529.30 130.933 0.052486 6.87 11.84
SEPTEMBER 1993 1,557.12 131.514 0.054350 7.15 11.93
OCTOBER 1993 1,576.11 132.113 0.052667 6.96 11.86
NOVEMBER 1993 1,573.82 132.699 0.052567 6.98 11.72
DECEMBER 1993 1,562.21 133.295 0.079486 10.60 11.83
JANUARY 1994 1,587.47 134.190 0.050977 6.84 11.84
FEBRUARY 1994 1,595.65 134.768 0.052934 7.13 11.62
MARCH 1994 1,573.14 135.382 0.050753 6.87 11.37
APRIL 1994 1,546.16 135.986 0.054179 7.37 11.22
MAY 1994 1,533.13 136.643 0.050441 6.89 11.18
JUNE 1994 1,534.56 137.259 0.050789 6.97 11.16
JULY 1994 1,538.79 137.884 0.052203 7.20 11.16
AUGUST 1994 1,545.98 138.529 0.052185 7.23 11.15
SEPTEMBER 1994 1,551.83 139.177 0.054138 7.53 11.05
OCTOBER 1994 1,545.44 139.859 0.048973 6.85 10.83
NOVEMBER 1994 1,521.52 140.492 0.052580 7.39 10.47
DECEMBER 1994 1,478.33 141.197 0.107867 15.23 10.63
JANUARY 1995 1,516.16 142.630 0.051222 7.31 10.75
FEBRUARY 1995 1,540.58 143.310 0.049202 7.05 11.05
MARCH 1995 1,590.62 143.948 0.052996 7.63 11.15
APRIL 1995 1,612.65 144.632 0.050835 7.35 11.19
MAY 1995 1,625.78 145.289 0.050673 7.36 11.35
JUNE 1995 1,656.39 145.938 0.052172 7.61 11.35
JULY 1995 1,664.01 146.608 0.051719 7.58 11.33
AUGUST 1995 1,668.66 147.278 0.053241 7.84 11.29
SEPTEMBER 1995 1,670.61 147.972 0.049607 7.34 11.29
OCTOBER 1995 1,677.95 148.622 0.049680 7.38 11.41
NOVEMBER 1995 1,703.16 149.269 0.050957 7.61 11.47
DECEMBER 1995 1,719.73 149.933 0.048868 7.33 11.59
JANUARY 1996 1,745.05 150.565 0.049032 7.38 11.59
FEBRUARY 1996 1,752.43 151.202 0.050689 7.66 11.54
MARCH 1996 1,752.53 151.866 0.049181 7.47 11.32
APRIL 1996 1,726.59 152.526 0.049260 7.51 11.27
MAY 1996 1,726.48 153.192 0.052569 8.05 11.25
JUNE 1996 1,731.47 153.908 0.047552 7.32 11.14
JULY 1996 1,721.86 154.565 0.048434 7.49 11.25
AUGUST 1996 1,746.34 155.231 0.050571 7.85 11.30
SEPTEMBER 1996 1,761.96 155.925 0.050646 7.90 11.32
OCTOBER 1996 1,772.97 156.623 0.050864 7.97 11.32
NOVEMBER 1996 1,780.94 157.327 0.047675 7.50 11.50
DECEMBER 1996 1,816.76 157.979 0.051972 8.21 11.46
JANUARY 1997 1,818.65 158.695 0.049973 7.93 11.35
FEBRUARY 1997 1,809.12 159.394 0.047082 7.50 11.50
MARCH 27, 1997* 1,840.54 160.047 0.048569 7.77 11.23
MARCH 31, 1997 1,805.10 160.739 0.006364 1.02 11.23
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1987 0.510 922.66 -7.73%
MAY 1987 0.494 919.20 -8.08%
JUNE 1987 0.541 932.79 -6.72%
JULY 1987 0.520 934.79 -6.52%
AUGUST 1987 0.520 941.18 -5.88%
SEPTEMBER 1987 0.532 910.21 -8.98%
OCTOBER 1987 0.543 916.64 -8.34%
NOVEMBER 1987 0.557 938.60 -6.14%
DECEMBER 1987 0.546 957.91 -4.21%
JANUARY 1988 0.507 985.20 -1.48%
FEBRUARY 1988 0.546 992.93 -0.71%
MARCH 1988 0.550 981.27 -1.87%
APRIL 1988 0.515 981.15 -1.89%
MAY 1988 0.572 983.43 -1.66%
JUNE 1988 0.538 995.67 -0.43%
JULY 1988 0.519 1,000.21 0.02%
AUGUST 1988 0.599 1,009.40 0.94%
SEPTEMBER 1988 0.546 1,021.89 2.19%
OCTOBER 1988 0.565 1,039.47 3.95%
NOVEMBER 1988 0.561 1,030.97 3.10%
DECEMBER 1988 0.559 1,038.86 3.89%
JANUARY 1989 0.587 1,062.78 6.28%
FEBRUARY 1989 0.531 1,054.71 5.47%
MARCH 1989 0.602 1,052.22 5.22%
APRIL 1989 0.531 1,076.81 7.68%
MAY 1989 0.628 1,092.62 9.26%
JUNE 1989 0.548 1,103.63 10.36%
JULY 1989 0.524 1,113.42 11.34%
AUGUST 1989 0.609 1,109.88 10.99%
SEPTEMBER 1989 0.560 1,103.65 10.36%
OCTOBER 1989 0.554 1,119.93 11.99%
NOVEMBER 1989 0.632 1,128.86 12.89%
DECEMBER 1989 0.554 1,141.14 14.11%
JANUARY 1990 0.597 1,136.12 13.61%
FEBRUARY 1990 0.636 1,140.89 14.09%
MARCH 1990 0.554 1,145.82 14.58%
APRIL 1990 0.601 1,144.83 14.48%
MAY 1990 0.600 1,153.41 15.34%
JUNE 1990 0.618 1,163.28 16.33%
JULY 1990 0.603 1,176.30 17.63%
AUGUST 1990 0.616 1,163.31 16.33%
SEPTEMBER 1990 0.631 1,165.63 16.56%
OCTOBER 1990 0.632 1,181.18 18.12%
NOVEMBER 1990 0.643 1,200.28 20.03%
DECEMBER 1990 0.606 1,207.94 20.79%
JANUARY 1991 0.615 1,221.33 22.13%
FEBUARY 1991 0.619 1,237.10 23.71%
MARCH 1991 0.590 1,231.06 23.11%
APRIL 1991 0.616 1,244.60 24.46%
MAY 1991 0.594 1,256.82 25.68%
JUNE 1991 0.639 1,254.58 25.46%
JULY 1991 0.632 1,267.25 26.72%
AUGUST 1991 0.658 1,281.44 28.14%
SEPTEMBER 1991 0.613 1,296.38 29.64%
OCTOBER 1991 0.608 1,306.64 30.66%
NOVEMBER 1991 0.637 1,308.95 30.90%
DECEMBER 1991 0.640 1,331.52 33.15%
JANUARY 1992 0.662 1,342.51 34.25%
FEBRUARY 1992 0.630 1,341.14 34.11%
MARCH 1992 0.631 1,343.32 34.33%
APRIL 1992 0.650 1,352.96 35.30%
MAY 1992 0.630 1,364.85 36.49%
JUNE 1992 0.620 1,385.31 38.53%
JULY 1992 0.617 1,421.93 42.19%
AUGUST 1992 0.602 1,410.21 41.02%
SEPTEMBER 1992 0.605 1,419.58 41.96%
OCTOBER 1992 0.628 1,402.88 40.29%
NOVEMBER 1992 0.601 1,429.77 42.98%
DECEMBER 1992 0.665 1,441.12 44.11%
JANUARY 1993 0.607 1,455.66 45.57%
FEBRUARY 1993 0.591 1,499.52 49.95%
MARCH 1993 0.621 1,490.08 49.01%
APRIL 1993 0.587 1,503.34 50.33%
MAY 1993 0.593 1,508.94 50.89%
JUNE 1993 0.602 1,528.99 52.90%
JULY 1993 0.585 1,529.30 52.93%
AUGUST 1993 0.580 1,557.12 55.71%
SEPTEMBER 1993 0.599 1,576.11 57.61%
OCTOBER 1993 0.587 1,573.82 57.38%
NOVEMBER 1993 0.595 1,562.21 56.22%
DECEMBER 1993 0.896 1,587.47 58.75%
JANUARY 1994 0.578 1,595.65 59.57%
FEBRUARY 1994 0.614 1,573.14 57.31%
MARCH 1994 0.604 1,546.16 54.62%
APRIL 1994 0.657 1,533.13 53.31%
MAY 1994 0.616 1,534.56 53.46%
JUNE 1994 0.625 1,538.79 53.88%
JULY 1994 0.645 1,545.98 54.60%
AUGUST 1994 0.648 1,551.83 55.18%
SEPTEMBER 1994 0.682 1,545.44 54.54%
OCTOBER 1994 0.632 1,521.52 52.15%
NOVEMBER 1994 0.706 1,478.33 47.83%
DECEMBER 1994 1.433 1,516.16 51.62%
JANUARY 1995 0.680 1,540.58 54.06%
FEBRUARY 1995 0.638 1,590.62 59.06%
MARCH 1995 0.684 1,612.65 61.26%
APRIL 1995 0.657 1,625.78 62.58%
MAY 1995 0.649 1,656.39 65.64%
JUNE 1995 0.671 1,664.01 66.40%
JULY 1995 0.669 1,668.66 66.87%
AUGUST 1995 0.695 1,670.61 67.06%
SEPTEMBER 1995 0.650 1,677.95 67.79%
OCTOBER 1995 0.647 1,703.16 70.32%
NOVEMBER 1995 0.663 1,719.73 71.97%
DECEMBER 1995 0.632 1,745.05 74.50%
JANUARY 1996 0.637 1,752.43 75.24%
FEBRUARY 1996 0.664 1,752.53 75.25%
MARCH 1996 0.660 1,726.59 72.66%
APRIL 1996 0.667 1,726.48 72.65%
MAY 1996 0.716 1,731.47 73.15%
JUNE 1996 0.657 1,721.86 72.19%
JULY 1996 0.665 1,746.34 74.63%
AUGUST 1996 0.695 1,761.96 76.20%
SEPTEMBER 1996 0.698 1,772.97 77.30%
OCTOBER 1996 0.704 1,780.94 78.09%
NOVEMBER 1996 0.652 1,816.76 81.68%
DECEMBER 1996 0.716 1,818.65 81.86%
JANUARY 1997 0.699 1,809.12 80.91%
FEBRUARY 1997 0.653 1,840.54 84.05%
MARCH 27, 1997* 0.692 1,805.10 80.51%
MARCH 31, 1997 0.091 1,806.12 80.61%
<FN>
* Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N P O P
Hawaiian Tax-Free Trust (Class A Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 3/31/97 7.67%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 3/31/97 144.91%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.60 As of 2/20/85
Public Offering Price Per Share (POP) $10.00 As of 2/20/85
Number of Shares Purchased 100.000 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
MARCH 1985 1,000.00 100.000 0.041000 4.10 9.53
APRIL 1985 957.10 100.430 0.058000 5.82 9.77
MAY 1985 987.03 101.026 0.067000 6.77 10.09
JUNE 1985 1,026.13 101.697 0.066370 6.75 10.11
JULY 1985 1,034.91 102.365 0.077184 7.90 10.04
AUGUST 1985 1,035.64 103.152 0.069461 7.17 9.97
SEPTEMBER 1985 1,035.59 103.870 0.072064 7.49 9.74
OCTOBER 1985 1,019.18 104.639 0.071547 7.49 9.98
NOVEMBER 1985 1,051.78 105.389 0.067451 7.11 10.10
DECEMBER 1985 1,071.54 106.093 0.073168 7.76 10.37
JANUARY 1986 1,107.95 106.842 0.071716 7.66 10.69
FEBRUARY 1986 1,149.80 107.558 0.064746 6.96 11.01
MARCH 1986 1,191.18 108.191 0.070578 7.64 10.94
APRIL 1986 1,191.24 108.889 0.066553 7.25 10.84
MAY 1986 1,187.60 109.557 0.064655 7.08 10.56
JUNE 1986 1,164.01 110.228 0.065784 7.25 10.64
JULY 1986 1,180.08 110.910 0.066319 7.36 10.66
AUGUST 1986 1,189.65 111.600 0.064410 7.19 10.93
SEPTEMBER 1986 1,226.97 112.257 0.068887 7.73 10.88
OCTOBER 1986 1,229.09 112.968 0.065865 7.44 11.04
NOVEMBER 1986 1,254.61 113.642 0.058541 6.65 11.14
DECEMBER 1986 1,272.62 114.239 0.069400 7.93 11.09
JANUARY 1987 1,274.84 114.954 0.063296 7.28 11.19
FEBRUARY 1987 1,293.61 115.604 0.058801 6.80 11.23
MARCH 1987 1,305.03 116.210 0.065995 7.67 11.14
APRIL 1987 1,302.24 116.898 0.062899 7.35 10.64
MAY 1987 1,251.15 117.589 0.060018 7.06 10.54
JUNE 1987 1,246.45 118.259 0.065902 7.79 10.63
JULY 1987 1,264.88 118.992 0.062715 7.46 10.59
AUGUST 1987 1,267.59 119.697 0.062483 7.48 10.60
SEPTEMBER 1987 1,276.26 120.402 0.061111 7.36 10.19
OCTOBER 1987 1,234.26 121.124 0.062018 7.51 10.20
NOVEMBER 1987 1,242.98 121.861 0.064331 7.84 10.38
DECEMBER 1987 1,272.75 122.616 0.063598 7.80 10.53
JANUARY 1988 1,298.94 123.356 0.060031 7.41 10.77
FEBRUARY 1988 1,335.95 124.044 0.064414 7.99 10.79
MARCH 1988 1,346.43 124.785 0.063315 7.90 10.60
APRIL 1988 1,330.62 125.530 0.058685 7.37 10.54
MAY 1988 1,330.45 126.229 0.064492 8.14 10.50
JUNE 1988 1,333.54 127.004 0.060732 7.71 10.57
JULY 1988 1,350.15 127.734 0.058227 7.44 10.56
AUGUST 1988 1,356.31 128.438 0.066943 8.60 10.59
SEPTEMBER 1988 1,368.76 129.250 0.061032 7.89 10.66
OCTOBER 1988 1,385.69 129.990 0.063482 8.25 10.78
NOVEMBER 1988 1,409.55 130.756 0.061839 8.09 10.63
DECEMBER 1988 1,398.02 131.516 0.061360 8.07 10.65
JANUARY 1989 1,408.72 132.274 0.065140 8.62 10.83
FEBRUARY 1989 1,441.14 133.070 0.057822 7.69 10.69
MARCH 1989 1,430.21 133.789 0.064697 8.66 10.60
APRIL 1989 1,426.82 134.606 0.057759 7.77 10.79
MAY 1989 1,460.17 135.326 0.068463 9.26 10.88
JUNE 1989 1,481.62 136.178 0.059599 8.12 10.93
JULY 1989 1,496.54 136.921 0.056950 7.80 10.97
AUGUST 1989 1,509.82 137.631 0.065173 8.97 10.87
SEPTEMBER 1989 1,505.02 138.457 0.058936 8.16 10.75
OCTOBER 1989 1,496.57 139.216 0.058596 8.16 10.85
NOVEMBER 1989 1,518.65 139.968 0.066505 9.31 10.87
DECEMBER 1989 1,530.76 140.824 0.058255 8.20 10.93
JANUARY 1990 1,547.41 141.574 0.061882 8.76 10.82
FEBRUARY 1990 1,540.60 142.384 0.065447 9.32 10.80
MARCH 1990 1,547.07 143.247 0.056625 8.11 10.79
APRIL 1990 1,553.75 143.999 0.060687 8.74 10.72
MAY 1990 1,552.41 144.814 0.060333 8.74 10.74
JUNE 1990 1,564.04 145.627 0.061988 9.03 10.77
JULY 1990 1,577.43 146.466 0.060489 8.86 10.83
AUGUST 1990 1,595.08 147.284 0.060413 8.90 10.65
SEPTEMBER 1990 1,577.47 148.119 0.061261 9.07 10.61
OCTOBER 1990 1,580.62 148.974 0.061533 9.17 10.69
NOVEMBER 1990 1,601.70 149.832 0.062873 9.42 10.80
DECEMBER 1990 1,627.60 150.704 0.058927 8.88 10.81
JANUARY 1991 1,637.99 151.526 0.059835 9.07 10.87
FEBUARY 1991 1,656.15 152.360 0.060330 9.19 10.95
MARCH 1991 1,677.53 153.199 0.056563 8.67 10.84
APRIL 1991 1,669.34 153.999 0.059170 9.11 10.90
MAY 1991 1,687.70 154.835 0.057007 8.83 10.95
JUNE 1991 1,704.26 155.641 0.060513 9.42 10.87
JULY 1991 1,701.23 156.507 0.059776 9.36 10.92
AUGUST 1991 1,718.41 157.364 0.062253 9.80 10.98
SEPTEMBER 1991 1,737.65 158.256 0.058078 9.19 11.05
OCTOBER 1991 1,757.92 159.088 0.057405 9.13 11.08
NOVEMBER 1991 1,771.82 159.912 0.059632 9.54 11.04
DECEMBER 1991 1,774.96 160.776 0.060317 9.70 11.17
JANUARY 1992 1,805.56 161.644 0.062239 10.06 11.2
FEBRUARY 1992 1,820.47 162.542 0.058537 9.51 11.13
MARCH 1992 1,818.61 163.397 0.058063 9.49 11.09
APRIL 1992 1,821.56 164.253 0.059649 9.80 11.11
MAY 1992 1,834.64 165.134 0.057639 9.52 11.15
JUNE 1992 1,850.77 165.988 0.057077 9.47 11.26
JULY 1992 1,878.50 166.829 0.057710 9.63 11.50
AUGUST 1992 1,928.17 167.667 0.055217 9.26 11.35
SEPTEMBER 1992 1,912.27 168.482 0.055393 9.33 11.37
OCTOBER 1992 1,924.98 169.303 0.056239 9.52 11.18
NOVEMBER 1992 1,902.33 170.155 0.054301 9.24 11.34
DECEMBER 1992 1,938.79 170.970 0.059981 10.25 11.37
JANUARY 1993 1,954.18 171.871 0.054741 9.41 11.43
FEBRUARY 1993 1,973.90 172.695 0.054392 9.39 11.72
MARCH 1993 2,033.37 173.496 0.056257 9.76 11.59
APRIL 1993 2,020.58 174.338 0.053120 9.26 11.64
MAY 1993 2,038.56 175.134 0.053382 9.35 11.63
JUNE 1993 2,046.16 175.938 0.054467 9.58 11.73
JULY 1993 2,073.33 176.755 0.052408 9.26 11.68
AUGUST 1993 2,073.76 177.548 0.052486 9.32 11.84
SEPTEMBER 1993 2,111.48 178.335 0.054350 9.69 11.93
OCTOBER 1993 2,137.23 179.147 0.052667 9.44 11.86
NOVEMBER 1993 2,134.12 179.943 0.052567 9.46 11.72
DECEMBER 1993 2,118.39 180.750 0.079486 14.37 11.83
JANUARY 1994 2,152.64 181.964 0.050977 9.28 11.84
FEBRUARY 1994 2,163.73 182.748 0.052934 9.67 11.62
MARCH 1994 2,133.20 183.580 0.050753 9.32 11.37
APRIL 1994 2,096.63 184.400 0.054179 9.99 11.22
MAY 1994 2,078.96 185.290 0.050441 9.35 11.18
JUNE 1994 2,080.89 186.126 0.050789 9.45 11.16
JULY 1994 2,086.62 186.973 0.052203 9.76 11.16
AUGUST 1994 2,096.38 187.848 0.052185 9.80 11.15
SEPTEMBER 1994 2,104.31 188.727 0.054138 10.22 11.05
OCTOBER 1994 2,095.65 189.652 0.048973 9.29 10.83
NOVEMBER 1994 2,063.21 190.509 0.052580 10.02 10.47
DECEMBER 1994 2,004.65 191.466 0.107867 20.65 10.63
JANUARY 1995 2,055.94 193.409 0.051222 9.91 10.75
FEBRUARY 1995 2,089.05 194.330 0.049202 9.56 11.05
MARCH 1995 2,156.91 195.196 0.052996 10.34 11.15
APRIL 1995 2,186.78 196.123 0.050835 9.97 11.19
MAY 1995 2,204.59 197.014 0.050673 9.98 11.35
JUNE 1995 2,246.10 197.894 0.052172 10.32 11.35
JULY 1995 2,256.42 198.804 0.051719 10.28 11.33
AUGUST 1995 2,262.73 199.711 0.053241 10.63 11.29
SEPTEMBER 1995 2,265.37 200.653 0.049607 9.95 11.29
OCTOBER 1995 2,275.33 201.535 0.049680 10.01 11.41
NOVEMBER 1995 2,309.52 202.412 0.050957 10.31 11.47
DECEMBER 1995 2,331.98 203.311 0.048868 9.94 11.59
JANUARY 1996 2,366.31 204.169 0.049032 10.01 11.59
FEBRUARY 1996 2,376.32 205.032 0.050689 10.39 11.54
MARCH 1996 2,376.47 205.933 0.049181 10.13 11.32
APRIL 1996 2,341.29 206.828 0.049260 10.19 11.27
MAY 1996 2,341.14 207.732 0.052569 10.92 11.25
JUNE 1996 2,347.90 208.702 0.047552 9.92 11.14
JULY 1996 2,334.87 209.593 0.048434 10.15 11.25
AUGUST 1996 2,368.07 210.496 0.050571 10.64 11.30
SEPTEMBER 1996 2,389.24 211.438 0.050646 10.71 11.32
OCTOBER 1996 2,404.18 212.384 0.050864 10.80 11.32
NOVEMBER 1996 2,414.98 213.338 0.047675 10.17 11.50
DECEMBER 1996 2,463.56 214.222 0.051972 11.13 11.46
JANUARY 1997 2,466.12 215.194 0.049973 10.75 11.35
FEBRUARY 1997 2,453.20 216.141 0.047082 10.18 11.50
MARCH 27, 1997* 2,495.80 217.026 0.048569 10.54 11.23
MARCH 31, 1997 2,447.74 217.965 0.006364 1.39 11.23
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
MARCH 1985 0.430 957.10 -4.29%
APRIL 1985 0.596 987.03 -1.30%
MAY 1985 0.671 1,026.13 2.61%
JUNE 1985 0.668 1,034.91 3.49%
JULY 1985 0.787 1,035.64 3.56%
AUGUST 1985 0.719 1,035.59 3.56%
SEPTEMBER 1985 0.769 1,019.18 1.92%
OCTOBER 1985 0.750 1,051.78 5.18%
NOVEMBER 1985 0.704 1,071.54 7.15%
DECEMBER 1985 0.749 1,107.95 10.79%
JANUARY 1986 0.717 1,149.80 14.98%
FEBRUARY 1986 0.633 1,191.18 19.12%
MARCH 1986 0.698 1,191.24 19.12%
APRIL 1986 0.669 1,187.60 18.76%
MAY 1986 0.671 1,164.01 16.40%
JUNE 1986 0.682 1,180.08 18.01%
JULY 1986 0.690 1,189.65 18.97%
AUGUST 1986 0.658 1,226.97 22.70%
SEPTEMBER 1986 0.711 1,229.09 22.91%
OCTOBER 1986 0.674 1,254.61 25.46%
NOVEMBER 1986 0.597 1,272.62 27.26%
DECEMBER 1986 0.715 1,274.84 27.48%
JANUARY 1987 0.650 1,293.61 29.36%
FEBRUARY 1987 0.605 1,305.03 30.50%
MARCH 1987 0.688 1,302.24 30.22%
APRIL 1987 0.691 1,251.15 25.11%
MAY 1987 0.670 1,246.45 24.64%
JUNE 1987 0.733 1,264.88 26.49%
JULY 1987 0.705 1,267.59 26.76%
AUGUST 1987 0.706 1,276.26 27.63%
SEPTEMBER 1987 0.722 1,234.26 23.43%
OCTOBER 1987 0.736 1,242.98 24.30%
NOVEMBER 1987 0.755 1,272.75 27.28%
DECEMBER 1987 0.741 1,298.94 29.89%
JANUARY 1988 0.688 1,335.95 33.60%
FEBRUARY 1988 0.741 1,346.43 34.64%
MARCH 1988 0.745 1,330.62 33.06%
APRIL 1988 0.699 1,330.45 33.05%
MAY 1988 0.775 1,333.54 33.35%
JUNE 1988 0.730 1,350.15 35.01%
JULY 1988 0.704 1,356.31 35.63%
AUGUST 1988 0.812 1,368.76 36.88%
SEPTEMBER 1988 0.740 1,385.69 38.57%
OCTOBER 1988 0.765 1,409.55 40.95%
NOVEMBER 1988 0.761 1,398.02 39.80%
DECEMBER 1988 0.758 1,408.72 40.87%
JANUARY 1989 0.796 1,441.14 44.11%
FEBRUARY 1989 0.720 1,430.21 43.02%
MARCH 1989 0.817 1,426.82 42.68%
APRIL 1989 0.721 1,460.17 46.02%
MAY 1989 0.852 1,481.62 48.16%
JUNE 1989 0.743 1,496.54 49.65%
JULY 1989 0.711 1,509.82 50.98%
AUGUST 1989 0.825 1,505.02 50.50%
SEPTEMBER 1989 0.759 1,496.57 49.66%
OCTOBER 1989 0.752 1,518.65 51.86%
NOVEMBER 1989 0.856 1,530.76 53.08%
DECEMBER 1989 0.751 1,547.41 54.74%
JANUARY 1990 0.810 1,540.60 54.06%
FEBRUARY 1990 0.863 1,547.07 54.71%
MARCH 1990 0.752 1,553.75 55.37%
APRIL 1990 0.815 1,552.41 55.24%
MAY 1990 0.814 1,564.04 56.40%
JUNE 1990 0.838 1,577.43 57.74%
JULY 1990 0.818 1,595.08 59.51%
AUGUST 1990 0.835 1,577.47 57.75%
SEPTEMBER 1990 0.855 1,580.62 58.06%
OCTOBER 1990 0.858 1,601.70 60.17%
NOVEMBER 1990 0.872 1,627.60 62.76%
DECEMBER 1990 0.822 1,637.99 63.80%
JANUARY 1991 0.834 1,656.15 65.62%
FEBUARY 1991 0.839 1,677.53 67.75%
MARCH 1991 0.799 1,669.34 66.93%
APRIL 1991 0.836 1,687.70 68.77%
MAY 1991 0.806 1,704.26 70.43%
JUNE 1991 0.866 1,701.23 70.12%
JULY 1991 0.857 1,718.41 71.84%
AUGUST 1991 0.892 1,737.65 73.77%
SEPTEMBER 1991 0.832 1,757.92 75.79%
OCTOBER 1991 0.824 1,771.82 77.18%
NOVEMBER 1991 0.864 1,774.96 77.50%
DECEMBER 1991 0.868 1,805.56 80.56%
JANUARY 1992 0.898 1,820.47 82.05%
FEBRUARY 1992 0.855 1,818.61 81.86%
MARCH 1992 0.855 1,821.56 82.16%
APRIL 1992 0.882 1,834.64 83.46%
MAY 1992 0.854 1,850.77 85.08%
JUNE 1992 0.841 1,878.50 87.85%
JULY 1992 0.837 1,928.17 92.82%
AUGUST 1992 0.816 1,912.27 91.23%
SEPTEMBER 1992 0.821 1,924.98 92.50%
OCTOBER 1992 0.852 1,902.33 90.23%
NOVEMBER 1992 0.815 1,938.79 93.88%
DECEMBER 1992 0.902 1,954.18 95.42%
JANUARY 1993 0.823 1,973.90 97.39%
FEBRUARY 1993 0.801 2,033.37 103.34%
MARCH 1993 0.842 2,020.58 102.06%
APRIL 1993 0.796 2,038.56 103.86%
MAY 1993 0.804 2,046.16 104.62%
JUNE 1993 0.817 2,073.33 107.33%
JULY 1993 0.793 2,073.76 107.38%
AUGUST 1993 0.787 2,111.48 111.15%
SEPTEMBER 1993 0.812 2,137.23 113.72%
OCTOBER 1993 0.796 2,134.12 113.41%
NOVEMBER 1993 0.807 2,118.39 111.84%
DECEMBER 1993 1.214 2,152.64 115.26%
JANUARY 1994 0.783 2,163.73 116.37%
FEBRUARY 1994 0.832 2,133.20 113.32%
MARCH 1994 0.819 2,096.63 109.66%
APRIL 1994 0.890 2,078.96 107.90%
MAY 1994 0.836 2,080.89 108.09%
JUNE 1994 0.847 2,086.62 108.66%
JULY 1994 0.875 2,096.38 109.64%
AUGUST 1994 0.879 2,104.31 110.43%
SEPTEMBER 1994 0.925 2,095.65 109.57%
OCTOBER 1994 0.858 2,063.21 106.32%
NOVEMBER 1994 0.957 2,004.65 100.46%
DECEMBER 1994 1.943 2,055.94 105.59%
JANUARY 1995 0.922 2,089.05 108.91%
FEBRUARY 1995 0.865 2,156.91 115.69%
MARCH 1995 0.928 2,186.78 118.68%
APRIL 1995 0.891 2,204.59 120.46%
MAY 1995 0.880 2,246.10 124.61%
JUNE 1995 0.910 2,256.42 125.64%
JULY 1995 0.907 2,262.73 126.27%
AUGUST 1995 0.942 2,265.37 126.54%
SEPTEMBER 1995 0.882 2,275.33 127.53%
OCTOBER 1995 0.877 2,309.52 130.95%
NOVEMBER 1995 0.899 2,331.98 133.20%
DECEMBER 1995 0.857 2,366.31 136.63%
JANUARY 1996 0.864 2,376.32 137.63%
FEBRUARY 1996 0.901 2,376.47 137.65%
MARCH 1996 0.895 2,341.29 134.13%
APRIL 1996 0.904 2,341.14 134.11%
MAY 1996 0.971 2,347.90 134.79%
JUNE 1996 0.891 2,334.87 133.49%
JULY 1996 0.902 2,368.07 136.81%
AUGUST 1996 0.942 2,389.24 138.92%
SEPTEMBER 1996 0.946 2,404.18 140.42%
OCTOBER 1996 0.954 2,414.98 141.50%
NOVEMBER 1996 0.884 2,463.56 146.36%
DECEMBER 1996 0.972 2,466.12 146.61%
JANUARY 1997 0.947 2,453.20 145.32%
FEBRUARY 1997 0.885 2,495.80 149.58%
MARCH 27, 1997* 0.939 2,447.74 144.77%
MARCH 31, 1997 0.124 2,449.13 144.91%
<FN>
* Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Hawaiian Tax-Free Trust (Class C Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 3/31/97 2.38%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 3/31/97 2.38%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.31 As of 3/31/96
Number of Shares Purchased 88.417 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1996 1,000.00 88.417 0.006996 * 0.62 11.27
MAY 1996 997.08 88.472 0.043154 3.82 11.24
JUNE 1996 998.25 88.812 0.038902 3.45 11.13
JULY 1996 991.93 89.122 0.039024 3.48 11.24
AUGUST 1996 1,005.21 89.432 0.042051 3.76 11.29
SEPTEMBER 1996 1,013.44 89.765 0.041604 3.73 11.31
OCTOBER 1996 1,018.97 90.095 0.041841 3.77 11.32
NOVEMBER 1996 1,023.65 90.428 0.038596 3.49 11.49
DECEMBER 1996 1,042.51 90.732 0.040984 3.72 11.46
JANUARY 1997 1,043.50 91.056 0.042073 3.83 11.34
FEBRUARY 1997 1,036.41 91.394 0.039615 3.62 11.50
MARCH 27, 1997** 1,054.65 91.709 0.040844 3.75 11.23
MARCH 31, 1997 1,033.64 92.042 0.005373 0.49 11.12
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1996 0.055 997.08 -0.29%
MAY 1996 0.340 998.25 -0.18%
JUNE 1996 0.310 991.93 -0.81%
JULY 1996 0.309 1,005.21 0.52%
AUGUST 1996 0.333 1,013.44 1.34%
SEPTEMBER 1996 0.330 1,018.97 1.90%
OCTOBER 1996 0.333 1,023.65 2.36%
NOVEMBER 1996 0.304 1,042.51 4.25%
DECEMBER 1996 0.324 1,043.50 4.35%
JANUARY 1997 0.338 1,036.41 3.64%
FEBRUARY 1997 0.315 1,054.65 5.47%
MARCH 27, 1997** 0.334 1,033.64 3.36%
MARCH 31, 1997 0.044 1,023.80 2.38%
<FN>
* For the period 4/1/96-4/26/96
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Hawaiian Tax-Free Trust (Class Y Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 3/31/97 6.14%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 3/31/97 6.14%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $11.31 As of 3/31/96
Number of Shares Purchased 88.417 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
APRIL 1996 1,000.00 88.417 0.004520 0.40 11.27
MAY 1996 996.86 88.453 0.072287 6.39 11.25
JUNE 1996 1,001.49 89.021 0.065080 5.79 11.14
JULY 1996 997.49 89.541 0.066935 5.99 11.25
AUGUST 1996 1,013.33 90.074 0.077648 6.99 11.24
SEPTEMBER 1996 1,019.43 90.696 0.068294 6.19 11.32
OCTOBER 1996 1,032.88 91.243 0.067890 6.19 11.39
NOVEMBER 1996 1,045.46 91.787 0.063133 5.79 11.52
DECEMBER 1996 1,063.18 92.290 0.069283 6.39 11.44
JANUARY 1997 1,062.19 92.849 0.066686 6.19 11.42
FEBRUARY 1997 1,066.53 93.391 0.059892 5.59 11.46
MARCH 31, 1997 1,075.86 93.879 0.065968 6.19 11.24
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
APRIL 1996 0.035 996.86 -0.31%
MAY 1996 0.568 1,001.49 0.15%
JUNE 1996 0.520 997.49 -0.25%
JULY 1996 0.533 1,013.33 1.33%
AUGUST 1996 0.622 1,019.43 1.94%
SEPTEMBER 1996 0.547 1,032.88 3.29%
OCTOBER 1996 0.544 1,045.46 4.55%
NOVEMBER 1996 0.503 1,063.18 6.32%
DECEMBER 1996 0.559 1,062.19 6.22%
JANUARY 1997 0.542 1,066.53 6.65%
FEBRUARY 1997 0.488 1,075.86 7.59%
MARCH 31, 1997 0.551 1,061.40 6.14%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Hawaiian Tax Free Trust
Class A
SEC Yield
3/31/97
<S> <C>
Dividend and Interest Income 2,938,718.16
Expenses Accrued for Period 391,716.27
Avg. Daily Shares Outstanding 57,157,679.301
Maximum Offering Price 11.70
Yield 4.61
--------------------------------------------------------------
<CAPTION>
Hawaiian Tax Free Trust
Class C
SEC Yield
3/31/97
<S> <C>
Dividend and Interest Income 24,139.37
Expenses Accrued for Period 6,776.91
Avg. Daily Shares Outstanding 476,370.986
Maximum Offering Price 11.23
Yield 3.93
--------------------------------------------------------------
<CAPTION>
Hawaiian Tax Free Trust
Class Y
SEC Yield
3/31/97
<S> <C>
Dividend and Interest Income 0.57
Expenses Accrued for Period 0.00
Avg. Daily Shares Outstanding 9.397
Maximum Offering Price 11.24
Yield 6.56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield
Hawaiian Tax-Free Trust
Class A
<S> <C>
y Yield (Pre-tax) 0.0461
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.1
Y Taxable Equivalent Yield 0.0840
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
------------------
<CAPTION>
Taxable Equivalent Yield
Hawaiian Tax-Free Trust
Class C
<S> <C>
y Yield (Pre-tax) 0.0393
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.1
Y Taxable Equivalent Yield 0.0716
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
------------------
<CAPTION>
Taxable Equivalent Yield
Hawaiian Tax-Free Trust
Class Y
<S> <C>
y Yield (Pre-tax) 0.0656
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.1
Y Taxable Equivalent Yield 0.1195
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
------------------
</TABLE>
