<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON NOVEMBER 22, 1996
REGISTRATION NO. 33-57684; 811-7454
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| POST-EFFECTIVE AMENDMENT NO. 8
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|X| AMENDMENT NO. 10
(CHECK APPROPRIATE BOX OR BOXES)
---------------------
PACIFIC CAPITAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
---------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (800) 554-3862
IRIMGA MCKAY
1230 COLUMBIA STREET
SAN DIEGO, CALIFORNIA 92101
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH A COPY TO:
JOEL H. GOLDBERG, ESQ.
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
|_| IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
|X| ON NOVEMBER 29, 1996 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
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
|_| THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT
|_| 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(i)
|_| ON (DATE) PURSUANT TO PARAGRAPH (a)(i)
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
PREVIOUSLY ELECTED TO REGISTER AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL
INTEREST, NO PAR VALUE. A RULE 24f-2 NOTICE WAS LAST FILED ON SEPTEMBER 26,
1996.
<PAGE> 2
PACIFIC CAPITAL FUNDS
---------------------
Cross Reference Sheet
---------------------
===============================================================================
Part A Prospectus Captions
- ------ -------------------
1 Cover Page
2 Fund Expenses; Highlights
3 (a) & (b) Financial Highlights
4 Investment Objectives and Policies of the Funds; General
Information
5 Highlights; Management, Advisory, and Other Service
Arrangements; General Information; Additional Discussion
Regarding Permitted Investment Activities; Additional Risk
Disclosure
5A Not Applicable
6 General Information; Dividend and Tax Information
7 How to Purchase Retail Class Shares; How to Purchase
Institutional Class Shares; Management, Advisory and Other
Service Arrangements; Valuation of Retail Class Shares;
Valuation of Institutional Class Shares
8 How to Redeem Retail Class Shares; How to Redeem
Institutional Class Shares
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover
11 Cover
12 Not Applicable
13 Investment Restrictions; Additional Information on Fund
Investments
14 Management
15 Management
16 Management; Distribution and Shareholder Service Plan;
Custodian; Independent Auditors
17 Portfolio Transactions
18 Capital Stock
19 Determination of Net Asset Value
20 Tax Information
21 Distribution and Shareholder Service Plan
22 Calculation of Yield and Total Return
23 Financial Statements
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of
this document.
===============================================================================
<PAGE> 3
PACIFIC CAPITAL FUNDS
GROWTH AND INCOME FUND
GROWTH STOCK FUND
BALANCED FUND
3435 Stelzer Road
Columbus, Ohio 43219-3035
Pacific Capital Funds (the "Trust") is a professionally managed, open-end,
management investment company with multiple funds available for investment. This
Prospectus contains information about three of the funds of the Trust--the
Growth and Income Fund, the Growth Stock Fund and the Balanced Fund (each a
"Fund" and collectively, the "Funds"). The Funds are advised by Hawaiian Trust
Company, Limited ("Hawaiian Trust") and sponsored, administered and distributed
by BISYS Fund Services ("BISYS" or the "Distributor"). The Balanced Fund has not
yet commenced operations.
This Prospectus relates only to the "Retail Class" of each Fund's shares;
certain investors may qualify to invest in a Fund's "Institutional Class," which
is not offered hereby. See "General Information--Description of the Trust and
its Shares." This Prospectus sets forth concisely the information a prospective
investor should know before investing in any of the Funds. Investors should read
this Prospectus carefully and retain it for future reference. A Statement of
Additional Information ("SAI") dated November 29, 1996 containing additional
information about the Funds has been filed with the Securities and Exchange
Commission (the "Commission") and is hereby incorporated by reference into this
Prospectus. The SAI is available without charge and can be obtained by writing
to the Funds at the address printed above or by calling 800-258-9232.
FOR PURCHASE, REDEMPTION, ACCOUNT OR GENERAL INQUIRIES, CONTACT THE TRUST'S
TRANSFER AGENT: ADMINISTRATIVE DATA MANAGEMENT CORPORATION, 581 MAIN STREET,
WOODBRIDGE, NEW JERSEY 07095
800-258-9232
THIS PROSPECTUS SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE
------------------------
SHARES OF PACIFIC CAPITAL FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, HAWAIIAN TRUST OR ANY OF ITS AFFILIATES. SUCH SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
HAWAIIAN TRUST IS THE INVESTMENT ADVISER TO PACIFIC CAPITAL FUNDS. BISYS FUND
SERVICES, WHICH IS NOT AFFILIATED WITH HAWAIIAN TRUST, IS
THE SPONSOR AND DISTRIBUTOR FOR PACIFIC CAPITAL
FUNDS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PROSPECTUS DATED NOVEMBER 29, 1996.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights............................................................................ 1
Fund Expenses......................................................................... 3
Financial Highlights.................................................................. 5
Investment Objectives and Policies of the Funds....................................... 6
Additional Discussion Regarding Permitted Investment Activities....................... 7
Additional Investment Restrictions.................................................... 15
Management, Advisory and Other Service Arrangements................................... 15
Valuation of Retail Class Shares...................................................... 18
How to Purchase Retail Class Shares................................................... 18
How to Redeem Retail Class Shares..................................................... 23
Dividend and Tax Information.......................................................... 25
General Information................................................................... 27
</TABLE>
<PAGE> 5
HIGHLIGHTS
This Prospectus describes the Funds, each of which has its own distinct
investment objectives and policies, which are described and summarized here.
GROWTH AND INCOME FUND--The primary investment objective of the Growth and
Income Fund, a diversified portfolio, is to seek current income. A secondary
objective of the Growth and Income Fund is long-term capital appreciation.
Growth and Income Fund pursues these objectives by investing primarily in a
diversified portfolio of high quality, dividend paying common stocks and
securities that are convertible into common stocks.
GROWTH STOCK FUND--The primary investment objective of the Growth Stock
Fund, a diversified portfolio, is to provide investors with long-term capital
appreciation. Income generation is a secondary objective of the Growth Stock
Fund. Growth Stock Fund pursues these objectives by investing primarily in
common stocks and securities that are convertible into common stocks of both
domestic and foreign companies. The Growth Stock Fund may invest in securities
issued by large, well-established companies, as well as those issued by smaller
companies, subject to a minimum market capitalization of $50 million. There may
be some additional risks associated with investments in smaller companies. See
"Additional Discussion Regarding Permitted Investment Activities--Additional
Risk Disclosure."
BALANCED FUND--The primary investment objective of the Balanced Fund, a
diversified portfolio, is to seek current income. A secondary objective of the
Balanced Fund is long-term capital appreciation. The Balanced Fund pursues these
objectives by investing in a diversified portfolio of common stocks, preferred
stocks, bonds and securities that are convertible into common stocks. Common
stocks will be selected on the basis of strong earnings growth trends,
above-average prospects for future earnings growth, and diversification among
industries and companies. Preferred stocks, bonds and convertible securities
will be selected on the basis of strong earnings and credit record, the ability
to provide current income, and the other characteristics described above with
respect to common stocks.
CERTAIN RISKS
Stocks held in the Funds' portfolios are subject to market risk (i.e., the
possibility that common stock prices will decline over short or even extended
periods). The U.S. stock market experiences periods when stock prices rise and
periods when stock prices decline. The Growth Stock Fund may invest a
significant portion of its assets in the securities of smaller and newer
issuers. Investments in such companies may present greater opportunities for
capital appreciation because of high potential earnings growth, but they may
also involve greater risk. Such companies, relative to larger concerns, may have
limited product lines, markets or financial resources, or may depend on a small
group of key managers. Their securities may trade less frequently or in limited
volume, or only in the over-the-counter market or on a regional securities
exchange. As a result, these securities may fluctuate in value more than those
of larger, more established companies and, as a group, may suffer more severe
price declines during periods of generally declining equity prices.
There can, of course, be no assurance that any mutual fund will achieve its
investment objective. In addition, unlike insured bank deposits, an investment
in the Funds is not insured against loss of principal. Equity securities such as
those in which the Funds may invest are more volatile and carry more risk than
some other forms of investment, such as short-term high-grade fixed income
securities. Depending upon the performance of a Fund's investments, the net
asset value per share of that Fund may decrease instead of increase.
PROSPECTUS
1
<PAGE> 6
For additional information concerning the investment policies and practices
of the Funds, see "Investment Objectives and Policies of the Funds," "Additional
Discussion Regarding Permitted Investment Activities" and "Additional Investment
Restrictions" in this Prospectus. Further information also is provided in the
SAI.
PURCHASE OF RETAIL CLASS SHARES
Retail Class Shares of each Fund are sold on a continuous basis and may be
purchased by mail or by electronic transfer. See "How to Purchase Retail Class
Shares." Initial purchases may be made with a minimum investment of $1,000 (the
$1,000 minimum may be waived or reduced for certain accounts; the minimum
initial purchase is $250 for Individual Retirement Accounts ("IRAs") and $100
for Auto Invest Plan participants). Subsequent investments may be made with as
little as $50. For more information about purchasing Fund shares call ADM at
1-800-258-9232 or contact your Participating Organization.
Shares of the Retail Class of the Funds are offered at net asset value plus
a sales load. See "Valuation of Retail Class Shares." Only institutions
(including Bank of Hawaii and its affiliated and correspondent banks)
("Institutions") acting on behalf of customers having a qualified trust account,
employee benefit account or other qualifying relationship at such Institution
are eligible to invest in the Institutional Class of each Fund's shares, which
are not offered hereby. See "General Information."
DIVIDENDS AND DISTRIBUTIONS
The Funds will declare and pay dividends of substantially all of their net
income monthly. Any net capital gains of a Fund will be distributed at least
annually. At an investor's choice, dividends are paid by mail, directly
deposited into a financial institution account, or automatically reinvested,
without sales charges, in additional shares at the then-current net asset value.
If no election is made, dividends will be automatically reinvested. See
"Dividend and Tax Information."
HAWAIIAN TRUST AND BISYS
For its services as investment adviser to the Funds, Hawaiian Trust
receives a fee from each Fund at annual rates that are based on the Fund's
average daily net assets. See "Fund Expenses" and "Management, Advisory and
Other Service Arrangements." A subsidiary of Bank of Hawaii, Hawaiian Trust (a
non-deposit taking institution) was founded in 1898 and is the oldest and
largest trust company in Hawaii. It has investment management authority over
approximately $6.3 billion in client financial assets. Hawaiian Trust is not
authorized to and does not carry on a banking business.
BISYS provides certain administrative services to the Funds, for which each
Fund pays it a fee at an annual rate based on the Fund's average daily net
assets. BISYS also distributes the Funds' shares, for which it may receive
certain additional fees. See "Management, Advisory and Other Service
Arrangements."
REDEMPTION OF RETAIL CLASS SHARES
Retail Class Shares may ordinarily be redeemed by mail or by telephone.
However, all or part of a customer's Retail Class Shares may be subject to
redemption in accordance with instructions and limitations pertaining to his or
her account held by a Participating Organization. See "How to Redeem Retail
Class Shares."
PROSPECTUS
2
<PAGE> 7
FUND EXPENSES
The following Table of Expenses lists the costs and expenses that a
shareholder can expect to incur as an investor in the Retail Class of a Fund.
Certain investors may qualify to invest in a Fund's Institutional Class, which
is not offered hereby. Long-term Retail Class shareholders could pay more in
distribution related charges than the economic equivalent of the maximum
front-end sales charges applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD").
TABLE OF EXPENSES*
<TABLE>
<CAPTION>
GROWTH AND GROWTH BALANCED
INCOME FUND STOCK FUND FUND
------------- ----------- ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. 4.00% 4.00% 4.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable)......................................... None None None
Redemption Fees**...................................... None None None
Exchange Fee........................................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.80% 0.80% 0.80%
12b-1 Fees (after waivers)............................. 0.25% 0.25% 0.25%
Other Expenses (after waivers and reimbursements)...... 0.32% 0.29% 0.32%
Total Fund Operating Expenses (after waivers).......... 1.37% 1.34% 1.37%
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in
Retail Class Shares assuming (1) 5% annual return*** and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
GROWTH AND GROWTH BALANCED
INCOME FUND STOCK FUND FUND
------------- ----------- ---------
<S> <C> <C> <C>
Time Period
1 year................................................. $ 53 $ 53 $ 53
3 years................................................ $ 82 $ 81 $ 82
5 years................................................ $ 112 $ 110 $ 112
10 years............................................... $ 198 $ 195 $ 198
<FN>
- ------------
* Investors who purchase shares through a Participating Organization,
including an affiliate of Hawaiian Trust or an Institution (as defined
above), may be charged account-level fees for additional services provided
to them by such Participating Organization in connection with investment in
a Fund.
** The Transfer Agent will reduce the amount of a wire redemption payment by
its then current wire redemption charge. As of the date of this Prospectus,
there is no charge for wire redemptions. While this policy is subject to
change at any time, it is not anticipated that such charge would exceed $7
per wire redemption.
*** The assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return. The actual rate of return
may be greater or lesser than the assumed rate. The Example should not be
considered a representation of past or future expenses, and actual expenses
may be greater or lesser than those shown.
</TABLE>
PROSPECTUS
3
<PAGE> 8
EXPLANATION OF TABLE
The purpose of the foregoing table is to assist shareholders in
understanding the various costs and expenses that an investor in the Retail
Class of the Funds will bear. With respect to Growth Stock Fund and Growth and
Income Fund, the amounts set forth under "Annual Fund Operating Expenses," as
well as expense amounts used in the Example, are based on actual amounts
incurred during the most recent fiscal year, restated to reflect fee waivers and
expense reimbursements in effect as of the date of this Prospectus. With respect
to the Balanced Fund (which has not yet commenced operations as of this date of
this Prospectus) all such amounts are based on estimated amounts for the current
fiscal year. See "Management, Advisory and Other Service Arrangements--The
Sponsor, Administrator and Distributor." In addition, "Rule 12b-1 Fees" have
been adjusted to reflect the current fee payable (after voluntary waiver) as of
the date of this Prospectus. The Example set forth above assumes reinvestment of
all dividends and distributions and utilizes a 5% annual rate of return as
mandated by Securities and Exchange Commission regulations.
Hawaiian Trust and BISYS each may elect, in its sole discretion, to
otherwise waive or reimburse its respective fees. Any such waivers or
reimbursements will reduce the total expenses of the Fund to which they apply,
thereby increasing yield or total return. As described above, the percentages
shown above under "12b-1 Fees," "Other Expenses" and "Total Fund Operating
Expenses" for the Funds reflect voluntary fee waivers and reimbursements. Absent
such waivers and reimbursements, these percentages would be (i) 0.75%, 0.33% and
1.88% for the Growth Stock Fund; (ii) 0.75%, 0.36% and 1.91% for the Growth and
Income Fund; and (iii) 0.75%, 0.36% and 1.91% for the Balanced Fund. There can
be no assurance that the foregoing waivers and expense reimbursements will
continue to apply.
PROSPECTUS
4
<PAGE> 9
FINANCIAL HIGHLIGHTS
The Financial Highlights in the table below set forth certain financial
data and investment results of the Growth Stock Fund and Growth and Income Fund
since the commencement of operations of the Retail Class shares of these Funds,
and are expressed in one share outstanding throughout the relevant period. The
Financial Highlights are derived from the financial statements of Pacific
Capital Funds which have been audited by Ernst & Young LLP, independent
auditors. The Financial Highlights should be read in conjunction with the
financial statements, related notes, and other financial information included in
the Statement of Additional Information. The Trust's annual report contains
additional performance information relating to the Funds and is available upon
request, without charge.
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND GROWTH STOCK FUND
------------------------------- ----------------------------------------------
OCTOBER 14, 1994 YEAR ENDED NOVEMBER 1, 1993
YEAR ENDED TO JULY 31, YEAR ENDED TO
JULY 31, 1996 JULY 31, 1995(A) 1996 JULY 31, 1995(F) JULY 31, 1994(A)
------------- ---------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.44 $10.00 $ 11.71 $ 9.83 $ 10.00
------------- ------ ---------- ------ -------
Investment Activities
Net investment income............... 0.16 0.17 0.07 0.12 0.07
------------- ------ ---------- ------ -------
Net realized and unrealized gain
(loss) on investments............. 1.19 1.44 0.89 1.87 (0.18)
------------- ------ ---------- ------ -------
Total from Investment
Activities.................... 1.35 1.61 0.96 1.99 (0.11)
------------- ------ ---------- ------ -------
Distributions
Net investment income............... (0.15) (0.17) (0.07) (0.11) (0.06)
------------- ------ ---------- ------ -------
In excess of net investment
income............................ (0.01) -- -- -- --
------------- ------ ---------- ------ -------
Net realized gains.................. (0.31) -- (0.22) -- --
------------- ------ ---------- ------ -------
In excess of net realized gains..... -- -- (0.49) -- --
------------- ------ ---------- ------ -------
Total Distributions............. (0.47) (0.17) (0.78) (0.11) (0.06)
------------- ------ ---------- ------ -------
NET ASSET VALUE, END OF PERIOD.......... $ 12.32 $11.44 $ 11.89 $11.71 $ 9.83
============ =============== ========== =============== ================
Total Return (excludes sales charges)... 11.96%(b) 16.35%(b) 8.25%(b) 20.43% (1.05%)(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)... $ 1,160 $ 328 $ 5,261 $3,905 $ 56,121
Ratio of expenses to average net
assets............................ 1.37%(c) 1.40%(c) 1.34%(c) 1.36% 1.41%(c)
Ratio of net investment income to
average net assets................ 1.03%(c) 2.08%(c) 0.60%(c) 1.12% 0.98%(c)
Ratio of expenses to average net
assets*........................... 1.91%(c) 1.99%(c) 1.88%(c) 1.98% 2.31%(c)
Ratio of net investment income to
average net assets*............... 0.49%(c) 1.49%(c) 0.06%(c) 0.50% 0.07%(c)
Portfolio Turnover(d)................... 80.83% 12.78% 61.30% 32.40% 25.89%
Average Commission Rate paid(e)......... $0.0921 -- $ 0.0895 -- --
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. In addition, with
respect to the Growth Stock Fund, the investment adviser reimbursed
expenses. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
(f) The Financial Highlights presented for the Retail Class reflects operations
and distributions for the Fund, as a whole, for the period from August 1,
1994 through October 13, 1994 combined with the operations and distributions
of the Retail Class only for the period from October 14, 1994 through July
31, 1995.
Balanced Fund has not yet commenced operations and, therefore, no
information is provided for the Fund.
</TABLE>
PROSPECTUS
5
<PAGE> 10
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each Fund has its own investment objectives, as described earlier in this
Prospectus. Each Fund also follows its own investment policies and practices,
subject to certain investment restrictions, all described further below and in
"Additional Discussion Regarding Permitted Investment Activities." The SAI also
contains more specific descriptions of investment restrictions which govern the
investments of each of the Funds.
GROWTH AND INCOME FUND
The Growth and Income Fund invests primarily in a diversified portfolio of
high quality, dividend-paying common stocks and securities convertible into
common stocks. The Growth and Income Fund anticipates investing in securities
that currently have in the aggregate an above average dividend yield, with the
anticipation that the dividend will remain constant or be increased in the
future. These securities generally represent the core holdings of the Growth and
Income Fund. However, these holdings may be balanced with lower yielding but
higher growth-oriented securities to achieve more growth potential. Under normal
market conditions, the Growth and Income Fund will invest at least 65% of the
value of its total assets in income producing common stocks and securities
convertible into common stocks.
GROWTH STOCK FUND
The Growth Stock Fund invests primarily in common stocks and securities
that are convertible into common stocks of both domestic and foreign companies.
Under normal market conditions, the Growth Stock Fund will invest at least 65%
of its total assets in common stocks or securities convertible into common
stocks.
BALANCED FUND
The Balanced Fund invests primarily in common stocks, preferred stocks,
bonds, and securities that are convertible into common stocks. Under normal
market conditions, the Balanced Fund will invest in common stocks, fixed income
securities and securities convertible into common stocks (i.e., warrants,
convertible preferred stock, fixed rate preferred stock, convertible
fixed-income securities, options and rights). At least 25% of the value of the
Balanced Fund's assets will be invested in senior fixed-income securities.
The Balanced Fund will invest in common stocks of issuers that exhibit
strong earnings growth trends and that are believed by the Fund to have
above-average prospects for future earnings growth. The Balanced Fund will
maintain a portfolio of common stocks diversified among industries and
companies. The Balanced Fund may invest in common stocks of large companies
(i.e., those companies with more than $750 million in capitalization) which the
Fund believes offer the potential for long-term earnings growth and/or
above-average dividend yield. Some investments may also be made in common stocks
of medium and smaller sized companies (i.e., those companies with at least $250
million, but less than $750 million in capitalization) which have the potential
to generate high levels of future revenue and earnings growth and where the
investment opportunity may not be fully reflected in the price of the securities
but which may involve greater volatility than investments in larger companies.
The Balanced Fund intends to invest less than 50% of its total assets in
the securities of medium and smaller sized companies and the remainder in
securities of larger sized companies. However, the actual percentage may vary
according to changes in market conditions and the judgment of Hawaiian Trust of
how best to achieve the Balanced Fund's investment objective. For risk
disclosure regarding investments in medium and smaller sized companies, see
"Highlights--Certain Risks."
------------------------
Debt obligations acquired by the Funds will, at the time of purchase, be
rated investment grade or
PROSPECTUS
6
<PAGE> 11
better, that is, obligations rated in one of the top four rating categories
assigned by a nationally recognized statistical rating organization (an
"NRSRO"), or unrated obligations determined by Hawaiian Trust to be of
comparable quality. See SAI, "Appendix A."
ADDITIONAL DISCUSSION REGARDING PERMITTED INVESTMENT ACTIVITIES
CONVERTIBLE SECURITIES
To the extent described above, the Funds may invest in convertible
securities that provide current income and are issued by companies with the
characteristics described above. The Funds may purchase convertible securities
that are fixed-income debt securities or preferred stocks, and which may be
converted at a stated price within a specified period of time into a certain
quantity of the common stock of the same or other issuers. Convertible
securities, while usually subordinated to nonconvertible debt securities of the
same issuer, are senior to common stocks in an issuer's capital structure.
Convertible securities may offer more flexibility by providing the investor with
a steady income stream (generally yielding a lower amount than nonconvertible
securities of the same issuer and a higher amount than common stocks) as well as
the opportunity to take advantage of increases in the price of the issuer's
common stock through the conversion feature. Convertible securities prices tend
to be influenced by changes in the market value of the common stock as well as
changes in interest rates. Convertible securities in which the Funds invest are
subject to the same rating criteria as the Funds' investments in debt
obligations. See "Investment Objectives and Polices of the Funds," above.
U.S. GOVERNMENT OBLIGATIONS
Each of the Funds may invest in U.S. Government Obligations which include,
in addition to U.S. Treasury Securities, the obligations of Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Student Loan Marketing Association ("SLMA"), Federal National Mortgage
Association ("FNMA"), Resolution Trust Corporation and Federal Home Loan
Mortgage Corporation ("FHLMC"). U.S. Treasury Securities and certain other
obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of FNMA, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the SLMA, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored instrumentalities if it
is not obligated to do so by law. Some of these instruments may be variable or
floating rate instruments. The Funds will invest in the obligations of such
instrumentalities only when Hawaiian Trust believes that the credit risk with
respect to the instrumentality is minimal.
BANK AND SAVINGS AND LOAN OBLIGATIONS
Each of the Funds may invest in Bank and Savings and Loan obligations.
These obligations include negotiable certificates of deposit, fixed-time
deposits, bankers' acceptances, and interest bearing demand accounts. The Funds
limit their bank investments to dollar-denominated obligations of U.S.,
Canadian, Asian or European banks which have more than $500 million in total
assets at the time of investment or of United States savings and loan
associations which have more than $1 billion in total assets at the time of
investment and, in the case of U.S. banks, are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the Federal Deposit Insurance Corporation.
PROSPECTUS
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COMMERCIAL PAPER
Each of the Funds may invest in commercial paper that is rated at the time
of purchase in the highest short-term rating category by an NRSRO or unrated if
considered by Hawaiian Trust to be of comparable quality. Commercial paper
includes short-term unsecured promissory notes, and variable floating rate
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions as well as similar taxable and tax-exempt instruments
issued by government agencies and instrumentalities.
CORPORATE SECURITIES
Each of the Funds may invest in debt securities issued by domestic
corporations, U.S. dollar-denominated debt securities issued by Canadian
corporations, Yankee bonds and supra-national obligations. Yankee bonds are U.S.
dollar-denominated obligations issued by foreign governments or companies.
Supra-national obligations are U.S. dollar-denominated obligations issued by
international entities such as the World Bank and the Inter-American Development
Bank.
PREFERRED STOCK
Each of the Funds may invest in preferred stock which is a class of capital
stock that pays dividends at a specified rate and that has preference over
common stock in the payment of dividends and the liquidation of assets.
Preferred stock does not ordinarily carry voting rights.
ILLIQUID SECURITIES
Each of the Funds may invest in illiquid securities. The Funds will not
knowingly invest more than 15% of the value of their respective net assets in
securities that are illiquid. Repurchase agreements with a duration of more than
seven days, time deposits that do not provide for payment to a Fund within seven
days after notice, Guaranteed Investment Contracts ("GICs") and most commercial
paper issued in reliance upon the exemption in Section 4(2) of the Securities
Act of 1933 (the "1933 Act") (other than variable amount master demand notes
with maturities of nine months or less) are subject to this 15% limit.
If otherwise consistent with its investment objectives and policies, any of
the Funds may purchase securities which are not registered under the 1933 Act
but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as it is determined by Hawaiian Trust, acting under guidelines and
procedures that are developed, established and monitored by the Board of
Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in the Funds during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities. The ability to sell to
qualified institutional buyers under Rule 144A is a recent development, and it
is not possible to predict how this market will develop.
BORROWINGS
Each Fund may borrow from banks up to 20% of the current value of its net
assets for temporary purposes in order to meet redemptions. Each Fund may borrow
funds for temporary purposes by entering into reverse repurchase agreements
which are considered to be borrowings under the Investment Company Act of 1940
(the "1940 Act"). At the time a Fund enters into a reverse repurchase agreement
(an agreement under which the Fund sells portfolio securities and agrees to
repurchase them at an agreed upon date and price), it will place in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high-grade debt securities having a value equal to or greater than the
repurchase price (including accrued interest) and will subsequently monitor the
account so that such value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the price of the securities it is obligated to repurchase. The Funds would
pay interest
PROSPECTUS
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<PAGE> 13
on amounts obtained pursuant to a reverse repurchase agreement.
LOANS OF PORTFOLIO SECURITIES
Each of the Funds may lend securities from its portfolio to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government securities or other high-grade debt obligations equal to the current
market value of the securities loaned (including accrued interest thereon) plus
the interest payable to the Fund with respect to the loan is maintained with the
Fund. In determining whether to lend a security to a particular broker, dealer
or financial institution, Hawaiian Trust will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily by Hawaiian Trust. No Fund will
enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that a Fund may receive as collateral will
not become part of such Fund's portfolio at the time of the loan and, in the
event of a default by the borrower, the Fund will, if permitted by law, dispose
of such collateral except for such part thereof that is a security in which such
Fund may invest. During the time securities are on loan, the borrower will pay
the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn additional income or receive an agreed-upon fee from a
borrower that had delivered cash-equivalent collateral. No Fund will lend
securities having a value that exceeds 30% of the current value of its total
assets. Loans of securities by a Fund will be subject to termination at the
Fund's or the borrower's option. The Funds may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Trust, Hawaiian Trust, or BISYS.
FUTURES CONTRACTS AND RELATED OPTIONS
Each of the Funds may enter into contracts for the future delivery of
securities and futures contracts based on a specific security, class of
securities, or an index, purchase or sell options on any such futures contracts
and engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index.
The Funds may engage in such futures contracts in an effort to hedge
against market risks and/ or manage cash flow into the Funds. For example, when
interest rates are expected to rise or market values of portfolio securities are
expected to fall, the Funds can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, the Funds, through
the purchase of such contracts, can attempt to secure better rates or prices for
the Funds than might later be available in the market when it effects
anticipated purchases. Alternatively, futures may be used to manage cash flows
into and out of the Funds. For example, the investment manager may wish to be
fully invested in a particular asset class. Through the use of futures, the
manager can achieve this objective immediately while temporarily deferring
industry and security selection, in the interest of timeliness.
The acquisition of put and call options on futures contracts will,
respectively, give the Funds the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid
for related options, may not exceed five percent of each Fund's total assets,
and the value of securities that are the subject of such futures and options
(both for receipt and delivery) may not exceed one-third of the market value of
each Fund's total assets. Futures
PROSPECTUS
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transactions will be limited to the extent necessary to maintain each Fund's
qualification as a regulated investment company.
Futures transactions involve brokerage costs and require the Funds to
segregate assets to cover contracts that would require it to purchase securities
or currencies. The Funds may lose the expected benefit of futures transactions
if interest rates, exchange rates or securities prices move in an unanticipated
manner. Such losses are potentially significant and unanticipated changes may
also result in poorer overall performance than if the Funds had not entered into
any futures transactions. In addition, the value of each Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities, limiting each Fund's ability to hedge effectively
against interest rate, exchange rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions. Where a liquid secondary market does
not exist, a Fund is unlikely to be able to control losses by closing out
futures positions. Finally, gains and losses on investments in options and
futures depend on Hawaiian Trust's ability to predict correctly the direction of
stock prices, interest rates and other economic factors.
ASSET BACKED SECURITIES
Each of the Funds may invest in Asset Backed Securities. Asset Backed
Securities arise through the grouping by governmental, government-related, and
private organizations of loans, receivables, and other assets originated by
various lenders. Asset Backed Securities acquired by a Fund consist of both
mortgage and non-mortgage backed securities. Interest in pools of these assets
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal paid at maturity or
specified call dates. Instead, Asset Backed Securities provide periodic payments
which generally consist of both interest and principal payments.
The life of an Asset Backed Security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of an Asset Backed Security, will be primarily a function of
current market interest rates, although other economic and demographic factors
may be involved. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, Asset Backed Securities
are not as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
One such type of mortgage backed security is a GNMA Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a FNMA
Certificate; the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. Government. Another type is
a FHLMC Participation Certificate. This type of obligation is guaranteed by
FHLMC as to timely payment of principal and interest. However, like a FNMA
security, it is not guaranteed by the full faith and credit of the U.S.
Government. Mortgage backed securities issued by private issuers, whether or not
such obligations are subject to guarantees by the private issuer, may entail
greater risk than obligations directly or indirectly guaranteed by the U.S.
Government. Such securities will be purchased for the Funds only when Hawaiian
Trust determines
PROSPECTUS
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that they are readily marketable at the time of purchase.
The average life of mortgage backed securities varies with the maturities
of the underlying mortgage instruments, which have maximum maturities of 40
years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
mortgage prepayments, mortgage refinancings, or foreclosures. The rate of
mortgage prepayments, and hence the average life of the certificates, will be a
function of the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
Such prepayments are passed through to the registered holder with the regular
monthly payments of principal and interest and have the effect of reducing
future payments. Estimated average life will be determined by Hawaiian Trust and
used for the purpose of determining, respectively, the average weighted maturity
of the Funds. Various independent mortgage backed securities dealers publish
average remaining life data using proprietary models and, in making such
determinations for the Funds, Hawaiian Trust might deem such data unreasonable
if such data appeared to present a significantly different average remaining
expected life for a security when compared to data relating to the average
remaining life of comparable securities as provided by other independent
mortgage backed securities dealers.
The Funds also may invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pool of assets. Such securities also may be debt
instruments, which also are known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. Non-mortgage backed securities will be purchased
by the Funds only when such securities are readily marketable and rated in one
of the two highest rating categories by an NRSRO or if unrated, deemed to be of
comparable quality at the time of purchase. In addition, such securities
generally will have remaining estimated lives at the time of purchase of five
years or less. See the SAI, "Additional Information on Fund Investments."
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. A Fund may enter into repurchase agreements only with respect to
obligations that could otherwise be purchased by the Fund. All repurchase
agreements will be fully collateralized based on values that are marked to
market daily by Hawaiian Trust. If the seller defaults and the value of the
underlying securities has declined, the Fund may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
the Fund's disposition of the security may be delayed or limited.
OTHER INVESTMENT COMPANIES
In connection with the management of its daily cash position, each of the
Funds may invest in securities issued by other investment companies, including
other investment companies managed by Hawaiian Trust. Securities of other
investment companies will be acquired by a Fund within the limits prescribed by
the 1940 Act. Each of the
PROSPECTUS
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Funds intends to limit its investments so that as determined immediately after a
securities purchase is made: (a) not more than 5% of the value of its total
assets will be invested in the securities of any one investment company; (b) not
more than 10% of the value of its total assets will be invested in the aggregate
in securities of investment companies as a group; (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Fund; and (d) the Fund, together with other investment companies having the same
investment adviser and companies controlled by such companies, owns not more
than 10% of the total stock of any one closed-end company. As a shareholder of
another investment company, a Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that a Fund bears directly in connection with its own operations.
However, Hawaiian Trust has undertaken to waive or reimburse the Funds its
advisory fees with respect to Fund assets so invested (except when such purchase
is part of a plan of merger, consolidation, reorganization or acquisition).
REAL ESTATE MORTGAGE INVESTMENT CONDUITS
Each of the Funds may invest in Real Estate Mortgage Investment Conduits
("REMICs"). REMICs are a pass-through vehicle created to issue multiclass
mortgage-backed securities. REMICs may be organized as corporations,
partnerships, or trusts and those meeting certain qualifications are not subject
to double taxation. Interests in REMICs may be senior or junior, regular (debt
instruments) or residual (equity interests).
FLOATING AND VARIABLE RATE DEBT INSTRUMENTS
Each of the Funds may invest in floating and variable rate debt
instruments. Floating and variable rate debt instruments bear interest at rates
that are not fixed, but vary with changes in specified market rates or indices
or at specified intervals. Certain of these instruments may carry a demand
feature that would permit the holder to tender them back to the issuer at a par
value prior to maturity. The floating and variable rate instruments that the
Funds may purchase include certificates of participation in such obligations
purchased from banks. Hawaiian Trust will monitor on an ongoing basis the
ability of an issuer of a demand instrument to make payment when due, which
could be affected by events occurring between the date the Funds elect to demand
payment and the date payment is due, except when such demand instruments permit
same-day settlement. In this regard, Hawaiian Trust, pursuant to direction of
the Board of Trustees, will determine the liquidity of those instruments with
demand features that cannot be exercised within seven days.
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS
Each of the Funds may purchase securities on a "when-issued" basis and may
also purchase or sell securities on a "forward commitment" basis. These
transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit a Fund to lock-in a price or yield on
a security it owns or intends to purchase, regardless of future changes in
interest rates. When-issued and forward commitment transactions involve the
risk, however, that the yield obtained in a transaction may be less favorable
than the yield available in the market when the securities delivery takes place.
The Funds do not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of their investment
objectives. The forward commitments and when-issued purchases are not expected
to exceed 25% of the value of any of the Funds' total assets absent unusual
market conditions.
The Funds will not start earning interest or dividends on when-issued
securities until they are received. The value of the securities underlying a
when-issued purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their value, is taken into account when determin-
PROSPECTUS
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ing the net asset value of a Fund starting on the date such Fund agrees to
purchase the securities. Each Fund will establish a segregated account in which
it will maintain liquid assets in an amount at least equal in value to such
Fund's commitment to purchase securities on a when-issued or forward commitment
basis. If the value of these assets declines, the Fund will replace additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.
LETTERS OF CREDIT AND LIQUIDITY AGREEMENTS
Each of the Funds may purchase debt obligations that are backed by an
irrevocable letter of credit or liquidity agreement of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Hawaiian Trust, are of investment quality comparable to other permitted
investments of such Fund, may be used for letter of credit and liquidity
agreement backed investments.
FOREIGN SECURITIES
Each of the Funds may invest in securities of foreign governmental and
private issuers that are denominated in and pay interest in U.S. dollars.
Investments in foreign securities involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, tax on
interest, gains and/or dividends may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
WARRANTS
Each of the Funds may invest in warrants. A warrant gives the holder
thereof the right to subscribe by a specified date to a stated number of shares
of stock of the issuer at a fixed price. Warrants tend to be more volatile than
the underlying stock, and if at a warrant's expiration date the stock is trading
at a price below the price set in the warrant, the warrant will expire
worthless. Conversely, if at the expiration date the stock is trading at a price
higher than the price set in the warrant, the Fund can acquire the stock at a
price below its market value. It is anticipated that the Board of Trustees will
approve, effective January 1, 1997, elimination of the requirement that no Fund
may invest more than 5% of its net assets at the time of purchase in warrants
(other than those that have been acquired in units or attached to other
securities), or more than 2% of its net assets in warrants which are not listed
on the New York or American Stock Exchange, and adoption of a policy that no
Fund may invest more than 10% of its net assets in warrants.
OPTIONS
Each of the Funds may purchase put and call options and write covered put
and call options on securities in which such Fund may invest directly and that
are traded on registered domestic securities exchanges or that result from
separate, privately negotiated transactions with primary U.S. Government
securities dealers recognized by the Board of Governors of the Federal Reserve
System in an amount not exceeding 5% of the Fund's net assets. Options may be
entered into in an attempt to hedge a Fund's portfolio against market risk or to
enhance income (e.g., to attempt to realize through the receipt of premiums a
greater current return than would be realized on the underlying securities
alone). See the SAI, "Additional Information on Fund Investments."
PROSPECTUS
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INTEREST ONLY OR PRINCIPAL ONLY OBLIGATIONS
Each of the Funds may make limited investments (not exceeding 5% of the
relevant Fund's net assets) in separately traded principal and interest
components of securities issued by the United States Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPs"). Under the STRIPs program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
GUARANTEED INVESTMENT CONTRACTS
Each of the Funds may invest up to 5% of its net assets in Guaranteed
Investment Contracts ("GICs") issued by highly rated U.S. insurance companies.
GICs are considered to be illiquid, and accordingly, are subject to each Fund's
15% limitation on investment in illiquid securities. See the SAI, "Additional
Information on Fund Investments."
ADDITIONAL RISK DISCLOSURE
Obligations rated in the lowest of the top four rating categories by an
NRSRO have speculative characteristics, and 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 with higher grade bonds.
Subsequent to its purchase by a Fund, an issue of securities may cease to be
rated or its rating category may be reduced below the minimum rating required
for purchase by the respective Fund. Hawaiian Trust will consider such an event
in determining whether the relevant Fund should continue to hold the obligation.
PORTFOLIO TURNOVER
Generally, the Funds will purchase portfolio securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. However, a Fund may sell a portfolio investment soon after its
acquisition if Hawaiian Trust believes that such a disposition is consistent
with attaining the investment objective of the particular Fund. Portfolio
investments may be sold for a variety of reasons, such as a more favorable
investment opportunity or other circumstances bearing on the desirability of
continuing to hold such investments. The annual portfolio turnover rate is not
expected to exceed 100% for any Fund. For the fiscal years ended July 31, 1996
and July 31, 1995, the portfolio turnover rate for Growth Stock Fund was 61.30%
and 32.40%, respectively. For the fiscal year ended July 31, 1996 and the period
October 14, 1994 (commencement of operations) to July 31, 1995, the portfolio
turnover rate for Growth and Income Fund was 80.83% and 12.78%, respectively.
See "Portfolio Transactions" in the SAI for additional information relating to
portfolio turnover.
INVESTMENT POLICIES
Each Fund's investment objectives, as set forth in the first paragraph of
the description of each Fund in the "Highlights" section, are fundamental; that
is, they may not be changed without approval by vote of the holders of a
majority of the relevant Fund's outstanding voting securities, as described
under "Capital Stock" in the SAI. If the Trust's Board of Trustees determines,
however, that a Fund's investment objective can best be achieved by a
substantive change in a non-fundamental investment policy or strategy, the
Trust's Board may make such change without shareholder approval and will
disclose any such material changes in the then current prospectus. Any policy
that is not specified in a Fund's Prospectus, or in the SAI, as being
fundamental, is nonfundamental.
PROSPECTUS
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ADDITIONAL INVESTMENT RESTRICTIONS
As matters of fundamental policy, each of the Funds may not:
1. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund except
that up to 25% of the value of the Fund's total assets may be invested without
regard to these limitations.
2. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to U.S.
Government Obligations and repurchase agreements secured by such obligations;
(b) wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
3. Make loans, borrow money or issue senior securities, except under
certain circumstances, and subject to certain percentage limitations, specified
above and in the SAI.
MANAGEMENT, ADVISORY AND OTHER SERVICE 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 names and principal occupations of the
Trustees of the Trust are listed below. Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION
- ----------------------- ------------------------ ---------------------------------------------
<S> <C> <C>
Deborah G. Patterson* Trustee and Chairperson Senior Vice President of Bank of
Hawaii--Asset Management and Private Client
Group (1994- present); Director of KPMG Peat
Marwick (1993-1994); Senior Vice President
and Manager of Wells Fargo Bank (1987-1992)
Irimga McKay* Trustee and President Senior Vice President of BISYS Fund Services
(1994-present); Senior Vice President of
Concord Financial Group (1986-1994)
Douglas Philpotts* Trustee Chairman of the Board of Directors
(1992-1994), President (1986-1992), and
Director (1984-present) of Hawaiian Trust
Company Limited
Richard W. Gushman, II Trustee President and Chief Executive Officer of
OKOA, Inc. (1985-present); Adviser to RAMPAC,
Inc.
Stanley W. Hong Trustee President and Chief Executive Officer of the
Chamber of Commerce of Hawaii (1996-present);
Business Consultant (1994-present)
</TABLE>
PROSPECTUS
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<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION
- ----------------------- ------------------------ ---------------------------------------------
<S> <C> <C>
Russell K. Okata Trustee Executive Director of Hawaii Government
Employees Association (1981-present)
Oswald K. Stender Trustee Trustee of Bernice Pauahi Bishop Estate
(1990-present); Director of Hawaiian Electric
Industries, Inc. (1993-present)
</TABLE>
Trustees of the Trust who are not officers or employees of the Trust, BISYS
or Hawaiian Trust are entitled to receive from the Trust a quarterly retainer
and a fee for each Board of Trustees meeting attended. All Trustees are
reimbursed for all reasonable out-of-pocket expenses relating to attendance at
meetings.
THE ADVISER
Pursuant to an Advisory Agreement, the Funds are advised by Hawaiian Trust,
whose address is Financial Plaza of the Pacific, 111 S. King Street, Honolulu,
Hawaii 96813. Hawaiian Trust is a Hawaii corporation organized in 1898 and is
the largest trust company in the State of Hawaii, both in terms of assets under
administration and assets under management. As of June 30, 1996, Hawaiian Trust
had approximately $6.3 billion of client financial assets under management.
Hawaiian Trust is a wholly owned subsidiary of Bank of Hawaii, the largest
banking organization headquartered in the State of Hawaii, with approximately
$13 billion of assets as of June 30, 1996 and branches and offices throughout
the Pacific Basin, including Guam, Singapore, Tokyo, Seoul and Taiwan. All
shares of Bank of Hawaii are owned by Bancorp Hawaii, Inc. ("Bancorp") and Bank
of Hawaii's Directors (each of whom owns qualifying shares as required by Hawaii
law). Bancorp is a bank holding company, registered under the Bank Holding
Company Act of 1956, as amended, and its common stock is listed and traded on
the New York Stock Exchange (the "Exchange"). Bancorp files annual and periodic
reports with the Commission and the Exchange, which are available for public
inspection. Hawaiian Trust is not authorized to and does not carry on a banking
business.
The actual management of the portfolios of the Trust is coordinated by
Hawaiian Trust's investment unit, which is staffed with more than 30 people,
including six Chartered Financial Analysts and seven M.B.A.'s. All investment
decisions of the Funds are made by a committee, and no person is primarily
responsible for making recommendations to the committee. Hawaiian Trust has
served as investment adviser to other investment companies since 1984. These
include the Hawaiian Tax-Free Trust, with assets exceeding $650 million as of
June 30, 1996, and the Cash Assets Trust, with assets of approximately $670
million as of June 30, 1996.
Subject to the supervision of the Board of Trustees, Hawaiian Trust will
provide a continuous investment program for the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. Hawaiian Trust will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Funds. Hawaiian Trust will provide the services under
the Advisory Agreement in accordance with each of the Fund's investment
objectives, policies, and restrictions.
For its services under the Advisory Agreement, Hawaiian Trust is entitled
to monthly advisory fees at the annual rate of 0.80% of each Fund's average
daily net assets. For the fiscal year ended July 31, 1996, the advisory fees
paid by the Funds to Hawaiian Trust under the Advisory Agreement, as a
percentage of average daily net assets, were: Growth Stock Fund--0.80% and
Growth and Income Fund--0.80%.
PROSPECTUS
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<PAGE> 21
THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund, and also acts as the Trust's
principal underwriter and distributor. BISYS generally assists in all aspects of
the administration and operation of the Funds. For expenses assumed and services
provided as administrator pursuant to its Administration Agreement with the
Trust, BISYS is entitled to receive a fee from the Funds, computed daily and
paid monthly, at an annual rate equal to 0.20% of the average daily net assets
of each Fund.
For the fiscal year ended July 31, 1996, the ratio of total expenses to
average net assets for the Growth Stock Fund was 1.88% (excluding waivers). For
the fiscal year ended July 31, 1996, the ratio of total expenses to average net
assets for Growth and Income Fund was 1.91% (excluding waivers).
In addition, BISYS, as the principal underwriter of the Funds within the
meaning of the 1940 Act has entered into a Distribution Agreement with the Trust
pursuant to which BISYS has the responsibility for distributing shares of the
Funds. The Distribution Agreement provides that BISYS shall act as agent for the
Funds for the sale of their shares and may enter into selling agreements with
banks, broker/dealers or other financial institutions to market and make
available shares to their respective customers. For its services, BISYS is
entitled to a fee, as set forth in the Distribution and Shareholder Servicing
Plan (the "Distribution Plan"). The Distribution Plan provides that with respect
to the Retail Class Shares, BISYS is entitled to receive from each Fund a fee in
an amount not to exceed on an annual basis 0.75% of the average daily net asset
value of each Fund attributable to the Retail Class Shares of such Fund (the
"Distribution Fee") to compensate it for the following: (a) payments BISYS makes
to banks and other institutions and industry professionals, broker/dealers,
including Hawaiian Trust, BISYS and their affiliates or subsidiaries, pursuant
to an agreement in connection with providing administrative support services to
the holders of a Fund's Retail Class Shares; or (b) payments to financial
institutions and industry professionals (such as insurance companies, investment
counselors, and BISYS' affiliates and subsidiaries) in consideration for the
sales support services provided and expenses assumed in connection with
distribution assistance, including but not limited to, printing and distributing
Prospectuses to persons other than current shareholders of a Fund, printing and
distributing advertising and sales literature and reports to shareholders used
in connection with the sale of a Fund's Shares, and personnel and communication
equipment used in servicing shareholder accounts and prospective shareholder
inquiries.
The Distribution Fee shall be paid to BISYS only to compensate or to
reimburse it for actual payments or expenses incurred as described above. The
actual Distribution Fee payable to BISYS is determined, within such limit, from
time to time by mutual agreement between the Trust and BISYS, and may not exceed
the maximum fee payable under the Rules of Fair Practice of the NASD. Until
further notice, BISYS voluntarily intends to waive a portion of its Distribution
Fee for the current fiscal year such that the Distribution Fee payable by each
Fund will not exceed 0.25% of the average daily net asset value attributable to
the Fund's Retail Class Shares on an annual basis.
BISYS may enter into selling agreements with one or more selling agents
under which such agents may receive compensation from BISYS for sales support
services, including, but not limited to, commissions or other payments to such
agents based on the average daily net assets of the Retail Class of each Fund's
shares attributable to it. Since the Distribution Agreement provides for fees
that are used by BISYS to pay for distribution-related and sales support
services, the Distribution Plan and the Distribution Agreement are approved and
reviewed in accordance with Rule 12b-1 under the 1940 Act, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expense of distributing its shares. As noted above, each Fund also offers an
Institutional Class, which is made available only to certain investors. The
PROSPECTUS
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<PAGE> 22
Institutional Classes are not subject to any Distribution Fees or entitled to
benefits under the Distribution Plan. No Fund's Retail Class will be liable for
distribution expenditures made by BISYS in any given year in excess of the
maximum amount payable under the Distribution Plan for that Fund in that year.
BISYS is a broker-dealer registered with the Commission, and is a member of the
NASD.
OTHER SERVICE ARRANGEMENTS
Administrative Data Management Corporation ("ADM" or the "Transfer Agent"),
581 Main Street, Woodbridge, New Jersey 07095, serves as the Trust's transfer
agent and dividend disbursing agent. Ernst & Young LLP, One Columbus, Suite
2300, 10 West Broad Street, Columbus, Ohio 43215, serves as independent auditors
for the Trust.
VALUATION OF RETAIL CLASS SHARES
The net asset value of the Retail Class Shares for each Fund is determined
and its shares are priced as of the close of the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., Eastern Time) (the "Valuation Time") each
Business Day. As used herein, a "Business Day" is a day on which the Exchange is
open for trading and any other day (other than a day on which no shares of that
Fund are tendered for redemption and no order to purchase Shares received)
during which there is sufficient trading in the Fund's portfolio securities that
the Fund's net asset value per share might be materially affected. The Exchange
will not be open in observance of the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per Retail Class Share is
calculated by determining the value of the Retail Class's proportional interest
in the securities and other assets of each Fund, less (i) such class's
proportional share of general liabilities and (ii) liabilities allocable only to
such class, and dividing such amount by the number of Retail Class Shares
outstanding. The net asset value per Share for each Fund will fluctuate as the
value of its investment portfolio changes.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in good
faith by the Board of Trustees. Prices used for such valuations may be provided
by independent pricing services. For further information about valuation of
investments in the Funds, see the SAI.
HOW TO PURCHASE RETAIL CLASS SHARES
PURCHASE OF SHARES
Retail Class Shares in each Fund are sold on a continuous basis. Investors
may purchase Retail Class Shares of a Fund by completing and signing an account
registration form ("Account Registration Form") and mailing it, together with a
check (or other negotiable bank draft or money order) payable to the Trust, in
at least the minimum initial purchase amount, to your Participating Organization
or to the Trust's Transfer Agent, Administrative Data Management Corporation,
581 Main Street, Woodbridge, NJ 07095. Subsequent purchases of shares of a Fund
may be made at any time by mailing a check (or other negotiable bank draft or
money order) payable to the Trust, to ADM at the above address or to your
Participating Organization.
Retail Class Shares of the Funds may be purchased through procedures
established by BISYS in connection with requirements of qualified accounts
maintained by or on behalf of certain persons ("Customers") by banks,
institutions or industry professionals, such as broker/dealers, who have entered
into an agreement with BISYS ("Participat-
PROSPECTUS
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<PAGE> 23
ing Organizations") under the Distribution Plan. See "Management, Advisory and
Other Service Arrangements." BISYS' principal office is located at 3435 Stelzer
Road, Columbus, Ohio 43219-3035.
Retail Class Shares of a Fund sold to Participating Organizations acting in
a fiduciary, advisory, custodial or other similar capacity on behalf of a
Customer will normally be held of record by the Participating Organization. With
respect to shares so sold, it is the responsibility of the Participating
Organization to transmit purchase or redemption orders to ADM and to deliver
federal funds for purchase on a timely basis. Beneficial ownership of shares of
a Fund will be recorded by the Participating Organization and reflected in the
account statements provided by the Participating Organization to the Customer.
If an Account Registration Form has been previously received by ADM,
investors may also purchase Retail Class Shares by telephoning ADM at
800-258-9232. Payment for Retail Class Shares ordered by telephone may be made
by check or by electronic transfer and must be received by the Trust's Custodian
within seven days of the telephone order. If payment is not received within
seven days or a check timely received does not clear, the purchase may be
cancelled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Retail Class Shares effected by wiring funds to the
Trust's Custodian, investors must call ADM at 800-258-9232 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information. If you have opened an account through a
Participating Organization, you should telephone the Participating Organization
to make further investments.
Retail Class Shares of each Fund are purchased at the public offering price
per Retail Class Share, which is the net asset value per Retail Class Share (see
"Valuation of Retail Class Shares") next determined after receipt by the
Transfer Agent of an order to purchase Retail Class Shares in good form plus the
applicable sales charge as described below. The Participating Organizations are
responsible for the prompt transmission of purchase orders to the Transfer
Agent. Purchases of Retail Class Shares of a Fund will be effected only on a
Business Day of such Fund. An order received by the Transfer Agent prior to the
Valuation Time on any Business Day will be executed based on the net asset value
determined as of the Valuation Time on the date of receipt. An order received by
the Transfer Agent after the Valuation Time on any Business Day will be executed
based on the net asset value determined as of the next Business Day.
The minimum investment for an investor's initial purchase of Retail Class
Shares of a Fund is $1,000. The minimum investment for subsequent purchases is
$50. The minimum initial investment amount for IRAs is $250. As discussed below,
the minimum initial investment amount for Auto Invest Plan participants is $100;
the minimum investment for subsequent purchases is $50.
Depending upon the terms of a particular Customer account, a Participating
Organization may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in the
Funds. Information concerning these services and any charges will be provided by
the relevant Participating Organization. This Prospectus should be read in
conjunction with any such information received from the Participating
Organization.
The Trust reserves the right to reject any order for the purchase of its
Retail Class Shares in whole or in part.
Every Shareholder will receive a confirmation of each new transaction in
the Shareholder's account. In the case of Retail Class Shares held of record by
a Participating Organization but beneficially owned by a Customer, confirmations
of purchases, exchanges and redemptions of Retail Class Shares by a
Participating Organization will be sent to the Customer by the Participating
Organization. Certificates representing Shares will not be issued.
PROSPECTUS
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<PAGE> 24
SALES CHARGES
The public offering price of a Retail Class Share of a Fund equals its net
asset value plus a sales charge. BISYS receives this sales charge as principal
underwriter and will reallow a portion of it to broker/dealers or other
financial institutions as dealer discounts and brokerage commissions. From time
to time dealers who receive dealer discounts and broker commissions from BISYS
may reallow a portion of such dealer discounts and broker commissions to other
dealers or brokers. BISYS may elect to reallow a higher percentage of the sales
charge stated below to selected brokers and dealers for all sales with respect
to which orders are placed with BISYS during a particular period. At BISYS'
discretion, the entire sales charge may at times be re-allowed as dealer
discounts and brokerage commissions. If any sales charge is reallowed to a
broker/dealer or financial institution, it may be deemed an "underwriter" under
the Securities Act of 1933, as amended.
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS ALLOWANCE
SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE
A PERCENTAGE OF NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE INVESTED PRICE
- ------------------------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $25,000............................... 4.00% 4.17% 3.60%
$25,000 or more but less than $50,000........... 3.75% 3.90% 3.38%
$50,000 or more but less than $100,000.......... 3.50% 3.63% 3.15%
$100,000 or more but less than $250,000......... 3.25% 3.36% 2.93%
$250,000 or more but less than $500,000......... 3.00% 3.09% 2.70%
$500,000 or more but less than $1,000,000 ...... 2.50% 2.56% 2.25%
$1,000,000 or more.............................. 0.00% 0.00% 0.00%
</TABLE>
While there are no sales charges on single transactions of $1 million or
more, BISYS will make payments to securities dealers, from its own resources,
related to these transactions as shown in the table below. The first payment
will be applied to the total purchase price and made payable upon settlement of
the purchase. Subsequent payments will be made at the end of each full calendar
quarter following the original purchase. The amount of each subsequent payment
will be based on the number of shares originally purchased and remaining in the
account at the time of the payment multiplied by the net asset value per share
at the purchase date. The payment schedule will be as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF TOTAL OF ALL
AMOUNT OF PURCHASE PAYMENTS EACH PAYMENT PAYMENTS
- -------------------------------------------------------- --------- ------------ ------------
<S> <C> <C> <C>
$1,000,000 or more but less than $2,000,000............. 6 0.083% 0.50%
$2,000,000 or more but less than $4,000,000............. 5 0.070% 0.35%
$4,000,000 or more...................................... 4 0.063% 0.25%
</TABLE>
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which term shall mean: (i) an
individual, his or her spouse and children under the age of 21, if any; (ii) a
trustee or other fiduciary of a single trust estate or single fiduciary account;
or (iii) any other organized group of persons, whether incorporated or not,
provided that such organization has been in existence for at least six months
and has some bona fide business purpose other than the purchase of redeemable
securities of a registered investment company. In order to qualify for a reduced
sales charge, all orders from a Purchaser will have to be placed through a
single investment dealer and identified at the time of purchase as originating
from the same Purchaser, although such orders may be placed into more than one
discrete account which identifies the Purchasers.
PROSPECTUS
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<PAGE> 25
BISYS, at its expense, will also provide additional compensation to dealers
in connection with sales of Shares of the Trust. Such compensation will include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public advertising
campaigns regarding one or more Funds, and/or other dealer-sponsored special
events. In some instances, this compensation will be made available only to
certain dealers whose representatives have sold a significant amount of such
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) vacation trips, including the provision of travel
arrangements and lodging, (2) tickets for entertainment events (such as
concerts, cruises and sporting events), and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of the Trust's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the NASD. None of the
aforementioned compensation is paid for by the Funds or their shareholders.
REDUCED SALES CHARGES
SALES CHARGE WAIVERS--The following classes of investors may purchase
Retail Class Shares of a Fund with no sales charge in the manner described below
(any of which may be changed or eliminated at any time by BISYS):
(1) Existing shareholders of a Fund, upon the reinvestment of dividend and
capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, Bancorp and its affiliates, and of BISYS and its affiliates (and spouses
and children of each of the foregoing);
(3) With the exception of investors for whom Bancorp Investment Group
provides custodial services, investors for whom Bancorp or one of its affiliates
acts in a fiduciary, advisory, custodial, agency or similar capacity;
(4) Investors who purchase shares of a Fund through a retirement related
payroll deduction plan, a 401(k) plan, a 403(b) plan, or a similar plan which by
its terms permits purchases of shares; and
(5) Orders placed on behalf of other investment companies distributed by
the Distributor.
The Trust permits the sale of its Retail Class 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); (ii) satisfies uniform criteria which enable the
Distributor to realize economies of scale in its costs of distributing shares;
(iii) if it is a group or association, 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 and the group, representative or
broker or dealer. At the time of purchase the investor, either directly or
through a broker or dealer, must furnish the Transfer Agent with information
sufficient to permit verification that the purchase qualifies for a reduced
sales charge.
The Distributor may waive the sales charge for an investor who purchases a
Fund's Retail Class Shares with the proceeds from the recent redemption of
shares of any non-money market front-end or back-end load mutual fund. To the
extent the sales load of the Fund in which such investor seeks to invest is
higher than that of the fund with respect to which the redemption proceeds
relate, the Distributor will waive only that portion of the Fund's sales load
which equals the prior sales load paid. Any portion of the sales load which is
not waived in
PROSPECTUS
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<PAGE> 26
accordance with the foregoing must be paid by the investor at the time of
purchase. Purchases of Fund shares using redemption proceeds as described above
must be made within 60 days of redemption from funds which are not a series of
Pacific Capital Funds and within 120 days of redemption from funds which are
series of Pacific Capital Funds. The Transfer Agent must be notified in writing
by the investor, or by his or her financial institution, at the time the
purchase is made. A copy of the investor's account statement showing such
redemption must accompany such notice. BISYS also, from time to time, may waive
the sales charge for all investors with respect to any Fund.
LETTERS OF INTENT--Any Purchaser may obtain a reduced sales charge by means
of a written Letter of Intent which expresses the intention of such Purchaser to
purchase a certain amount of a Fund's Retail Class shares within a period of 13
months. Each purchase of shares under a Letter of Intent will be made at the
public offering price plus the sales charge applicable at the time of such
purchase to a single transaction of the total dollar amount indicated in the
Letter of Intent. A Letter of Intent may include purchases of shares made not
more than 90 days prior to the date such Purchaser signs a Letter of Intent;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earlier purchase to be included. The terms of the
Letter of Intent and the escrow account associated therewith are described in
the Account Registration Form. For further information, interested investors
should contact ADM or their Participating Organization. Letter of Intent
privileges may be amended or terminated without notice at any time by the Trust.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION--A Purchaser may qualify for
a reduced sales charge by (i) combining concurrent purchases of shares of a Fund
with purchases of one or more of the other Funds sold with a sales charge or
(ii) combining a current purchase of shares of a Fund with prior purchases of
shares of any of the other Funds sold subject to a sales charge. The applicable
sales charge is based on the sum of (a) the Purchaser's current purchase of
shares of any Fund sold with a sales charge plus (b) the then-current net asset
value of all shares held by the Purchaser in any Fund sold with a sales charge.
To receive the applicable public offering price pursuant to the right of
accumulation, shareholders must at the time of purchase provide ADM or the
Participating Organization with sufficient information to permit confirmation of
qualification. Accumulation privileges may be amended or terminated without
notice at any time by the Trust. Shares of other series of the Trust sold
subject to a sales charge which are not offered through this Prospectus may be
counted for purposes of the accumulation privileges.
AUTO INVEST PLAN--The Auto Invest Plan enables shareholders of any of the
Funds to make regular monthly or quarterly purchases of shares through automatic
deductions from their bank accounts. With shareholder authorization, the
Transfer Agent will deduct the amount specified from the shareholder's bank
account which will automatically be invested in shares at the public offering
price on the dates of the deduction. The required minimum initial investment
when opening an account using the Auto Invest Plan is $100; the minimum amount
for subsequent investments is $50. To participate in the Auto Invest Plan,
shareholders should complete the appropriate section of the Account Registration
Form which can be obtained by calling ADM at 800-258-9232. For a shareholder to
change the Auto Invest Plan instructions, the request must be made in writing to
ADM or your Participating Organization. Depending upon the terms of a particular
Customer account, a Participating Organization may charge a Customer's account
fees for services provided in connection with investment in a Fund. Information
concerning these services and any charges will be provided by the Participating
Organizations. This Prospectus should be read in conjunction with any such
information received from the Participating Organizations.
PROSPECTUS
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<PAGE> 27
EXCHANGE PRIVILEGES
Except as described below, Retail Class Shareholders may exchange shares of
any Fund on the basis of the relative net asset value of the shares exchanged,
without payment of a sales charge, for Retail Class Shares of any other Fund,
Retail Class Shares of any other series of the Trust or for service class shares
of the Cash Assets Trust, the Tax-Free Cash Assets Trust, or the U.S. Treasuries
Cash Assets Trust so long as they maintain the respective minimum account
balance in each Fund in which they own shares. To the extent that a shareholder
exchanges into a Fund having a higher sales charge than that of the Fund from
which the shareholder is exchanging, the shareholder will pay the sales charge
differential at the time of the exchange.
For federal income tax purposes, an exchange of shares is deemed a sale on
which a shareholder may realize capital gain or loss. Before an exchange can be
effected, a shareholder must receive a prospectus of the fund into which the
subject shares are to be exchanged. If you have previously elected the telephone
exchange option on your Account Registration Form, an exchange can be made by
calling ADM at 800-258-9232 or telephoning your Participating Organization.
Otherwise, exchanges may be made by forwarding a written request for exchange to
ADM or your Participating Organization. Exchange privileges may be exercised
only in those states where Retail Class Shares of such other Fund or series may
be legally sold, and may be amended or terminated at any time upon 60 days'
notice.
HOW TO REDEEM RETAIL CLASS SHARES
Shareholders may redeem their Retail Class Shares without charge on any day
that net asset value is calculated (see "Valuation of Retail Class Shares") and
Retail Class Shares may ordinarily be redeemed by mail or by telephone. However,
if you purchase shares through a Participating Organization which serves as the
shareholder of record, you must redeem through such institution. In all other
cases, a completed Account Registration Form must have been received by the
Transfer Agent before redemption requests may be honored. All or part of a
Customer's Retail Class Shares may be subject to redemption in accordance with
instructions and limitations pertaining to his or her account held by a
Participating Organization. For example, if a Customer has agreed to maintain a
minimum balance in his or her account, and the balance in that account falls
below that minimum due to redemptions, the Customer may be obliged to redeem, or
the Participating Organization may be authorized to redeem for and on behalf of
the Customer, the Customer's Retail Class Shares.
REDEMPTION BY MAIL
A written request for redemption must be received by ADM or your
Participating Organization in order to constitute a valid tender for redemption.
Participating Organizations are responsible for the prompt transmission of
redemption requests to the Transfer Agent. The Transfer Agent will require a
signature guarantee by an eligible guarantor institution if (a) the redemption
check is to be payable to anyone other than the Retail Class Shareholder(s) of
record or (b) a redemption check is to be mailed or proceeds are to be wired to
the Retail Class Shareholder(s) at an address other than the address of record
or other than a commercial bank account designated on the Account Registration
Form of such Retail Class Shareholder(s) or (c) the redemption proceeds exceed
$50,000. For purposes of this policy, the term "eligible guarantor institution"
shall mean members of the STAMP (Securities Transfer Agents Medallion Program),
MSP (New York Stock Exchange Medallion Signature Program) or SEMP (Stock
Exchanges Medallion Program). Participants of STAMP, MSP, and SEMP are subject
to dollar value limitations which must be considered when requesting their
authorization. The Transfer Agent reserves the right to reject any signature
guarantee if it has reason to believe that the transaction would otherwise be
improper.
PROSPECTUS
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<PAGE> 28
REDEMPTION BY TELEPHONE
A shareholder may have the proceeds of redemption requests electronically
transferred or mailed directly to a domestic commercial bank account previously
designated by the shareholder on the Account Registration Form. Under most
circumstances, such proceeds will be transmitted on the next Business Day
following receipt of a valid request for redemption. If you authorize the
telephone redemption option in your Account Registration Form such electronic
redemption request may be made by the shareholder by telephone to ADM or your
Participating Organization. The Transfer Agent will reduce the amount of a wire
redemption payment by its then-current wire redemption charge. As of the date of
this Prospectus, there is no charge for wire redemptions. While this policy is
subject to change at any time, it is not anticipated that such charge would
exceed $7 per wire redemption. There is no charge for having proceeds of
redemption requests mailed to a designated bank account. The Trust will not
permit shareholders to change their accounts by telephone. For telephone
redemptions through ADM, call ADM at 800-258-9232. Neither the Distributor, the
Transfer Agent, Hawaiian Trust nor the Trust will be liable for any losses,
damages, expenses or cost arising out of any telephone transaction (including
exchanges and redemptions) effected in accordance with the Funds' telephone
transaction procedures, upon instructions reasonably believed to be genuine. The
Trust will employ procedures designed to provide reasonable assurance that
instructions by telephone are genuine. A description of the procedures employed
by the Trust to confirm instructions communicated by telephone is contained in
the Statement of Additional Information. This policy places the entire risk of
loss for unauthorized or fraudulent transactions on the shareholder, except that
if the Distributor, the Transfer Agent, Hawaiian Trust, the Trust or their
affiliates do not follow reasonable procedures, some or all of them may be
liable for any such losses.
During times of drastic economic or market changes, telephone exchanges or
redemptions may be difficult to implement. If you experience difficulty in
making a telephone exchange or redemption, your exchange or redemption request
may be made by regular or express mail, and it will be implemented at the next
determined net asset value following receipt by the Transfer Agent.
PAYMENTS TO RETAIL CLASS SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Retail Class Shares are properly tendered for redemption,
as described above. The proceeds paid upon redemption of shares in a Fund may be
more or less than the amount invested. Payment to shareholders for shares
redeemed will be made within seven days after receipt by the Transfer Agent of
the request for redemption. However, to the greatest extent possible, the Trust
will attempt to honor requests from shareholders for next Business Day payments
upon redemption of Retail Class Shares if the request for redemption is received
by the Transfer Agent before 4:00 p.m., Eastern Time, on a Business Day or, if
the request for redemption is received after 4:00 p.m., Eastern Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Trust or the shareholders of the particular Fund to sell
or liquidate portfolio securities in an amount sufficient to satisfy requests
for payments in such manner.
If the Trust is requested to redeem Retail Class Shares for which it has
not yet received good payment, it may delay the forwarding of proceeds only
until payment has been collected for the purchase of such Retail Class Shares.
Such collection may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Retail Class Shares, investors should
purchase shares by certified or bank check or by wire transfer. The Trust
intends to pay cash for all Retail Class Shares redeemed, but under abnormal
conditions which make payment in cash inadvisable, the Trust may make payment
wholly or partly in portfolio securities at their then-current market value
equal to the redemption price. In such cases, an investor
PROSPECTUS
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<PAGE> 29
may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small accounts, the Trust
reserves the right to redeem, at net asset value, the Retail Class Shares of any
shareholder if, because of redemptions of Retail Class Shares by or on behalf of
the shareholder, the account of such shareholder in any Fund has a value of less
than $250 due to redemptions. Accordingly, an investor purchasing Retail Class
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her Retail
Class Shares. Before the Trust exercises its right to redeem such Retail Class
Shares and to send the proceeds to the shareholder, the shareholder will be
given notice that the value of the Retail Class Shares of a Fund in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $1,000.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables shareholders of any of the Funds to make
regular monthly or quarterly redemptions of Retail Class Shares. With
shareholder authorization, the Transfer Agent will automatically redeem Retail
Class Shares at the net asset value on the dates of the withdrawal and have a
check in the amount specified mailed to the shareholder. The required minimum
withdrawal is $100. To participate in the Auto Withdrawal Plan, shareholders
should call ADM for more information. Purchases of additional Retail Class
Shares concurrent with withdrawals may be disadvantageous to certain
shareholders because of tax liabilities and sales charges. To change the Auto
Withdrawal Instructions or to discontinue the feature, a shareholder must submit
a written request to ADM or their Participating Organization.
DIVIDEND AND TAX INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The Funds will declare and pay dividends of substantially all of their net
income monthly. Distributable net realized capital gains are distributed at
least annually to shareholders of record. A shareholder will automatically
receive all income dividends and capital gains distributions in additional full
and fractional shares unless the shareholder elects to receive such dividends or
distributions in cash. Dividends elected to be received in cash may be deposited
directly into a shareholder's financial institution account, provided the
shareholder has completed the appropriate section of the Account Registration
Form. Dividends and distributions are reinvested without a sales charge as of
the ex-dividend date using the net asset value determined on that date and are
credited to a shareholder's account on the payment date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash. Dividends are generally taxable when received. However, dividends
declared in October, November or December to shareholders of record during those
months and paid during the following January are treated for tax purposes as if
they were received by each shareholder on December 31 of the prior year.
Elections to receive dividends or distributions in cash, or any revocation
thereof, must be made in writing to ADM at 581 Main Street, Woodbridge, New
Jersey 07095 or to your Participating Organization and will become effective
with respect to dividends and distributions having record dates after its
receipt by the Transfer Agent.
TAX INFORMATION
Each Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
PROSPECTUS
25
<PAGE> 30
If a Fund does so qualify, it will not be liable for federal income taxes to the
extent it distributes its income to shareholders as dividends and capital gain
distributions. However, the Code contains a number of complex tests relating to
such qualification and it is possible, although not likely, that a Fund 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 distributions made to shareholders and would be
unable to pay dividends or distributions which would qualify as "capital gains
dividends," as discussed below.
Corporate shareholders may be entitled to a dividends received deduction
with respect to dividends paid by a Fund to the extent that they relate to
dividends received from domestic corporations. Capital gains dividends (net
long-term gains over net short-term losses which a Fund distributes) are
reportable by shareholders as long-term capital gains. This is the case whether
the shareholder takes his distribution in cash or elects to have the
distribution reinvested in Fund shares and regardless of the length of time the
shareholder has held his or her shares.
Short-term gains, when distributed, are taxed to shareholders as ordinary
income. Capital losses of a Fund are not distributed but carried forward by the
Fund to offset gains in later years and thereby lessen the later-year capital
gains distributions and amounts taxed to shareholders.
A Fund's gains or losses on sales of securities will be long-term or
short-term depending upon the length of time the Fund has held such securities.
Capital gains and losses of the Fund 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 a Fund 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 Section 1256 futures and options
contracts will be reportable by the Fund 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.
The Trust will be required to withhold, subject to certain exemptions, at a
rate of 31% on dividends paid and redemption proceeds (including proceeds from
exchanges) paid or credited to individual shareholders of the Funds if a correct
Taxpayer Identification Number, certified when required, is not on file with the
Trust or the Transfer Agent. Under the Code, dividends paid to a non-resident
alien or other foreign shareholder may be subject to U.S. withholding tax (at a
rate of up to 30%).
Information as to the federal tax status of the Trust's dividends and
distributions will be mailed to shareholders annually.
TAX EFFECTS OF REDEMPTIONS
A shareholder who redeems his or her shares or exchanges his or her shares
for shares of another Fund will usually have a short or long-term (depending on
how long the shares have been held) capital gain or loss (depending on whether
the proceeds of the redemption are more or less than their tax basis, which is
usually cost). However, if the shares redeemed or sold were held for six months
or less, any capital loss is treated as long-term to the extent of capital gains
distributions received on such shares.
HAWAIIAN TAX INFORMATION
The Funds, and dividends and distributions made by the Funds 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.
Persons or entities who are not Hawaii residents should not be subject to
Hawaii income taxation on dividends and distributions made by the
PROSPECTUS
26
<PAGE> 31
Trust but will be subject to other state and local taxes.
------------------------
For further information regarding taxation, see "Tax Information" in the
SAI.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, and state
taxation.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in a
Fund.
GENERAL INFORMATION
PERFORMANCE
From time to time performance for the Retail Class Shares of the Funds
showing each Fund's average annual total return, aggregate total return and
yield may be presented in advertisements, sales literature and in reports to
Retail Class Shareholders. Such performance figures are based on historical
earnings and are not intended to indicate future performance. Average annual
total return will be calculated for the period since the establishment of the
Funds, and will, unless otherwise noted, reflect the imposition of the maximum
sales charge. Average annual total return is measured by comparing the value of
an investment in Retail Class Shares of a Fund at the beginning of the relevant
period to the redemption value of the investment, after reflecting the
reinvestment of any dividends or capital gains distributions and annualizing the
difference. Aggregate total return is calculated similarly to average annual
total return except that the return figure is aggregated over the relevant
period instead of annualized. Yield will be computed by dividing such Fund's net
investment income per Retail Class Share earned during a recent 30-day period by
such Fund's per Retail Class Share maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
day of the period and annualizing the result. From time to time, average annual
total return, aggregate total return and yield for the Retail Class Shares of
the Funds may also be calculated and advertised on the basis of an investment in
a Fund at the net asset value per share or at net asset value per share plus a
reduced sales charge, rather than the public offering price per share. In this
case, the figure would not reflect the effect of a maximum sales charge that a
Retail Class Shareholder may have paid.
Retail Class Shareholders may also be provided with information comparing
the performance of the Retail Class Shares of the Funds to the performance of
other mutual funds or mutual fund portfolios with comparable investment
objectives and policies. This information may be based on data relating to
various mutual fund or market indices such as those prepared by Dow Jones & Co.,
Inc. and Standard & Poor's Corporation or data prepared by Lipper Analytical
Services, Inc. Comparisons may also be made to indices or data published in
Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Institutional Investor, Pensions and
Investments, USA Today, Fortune, CDA/Wiesenberger, Ibbotson Associates, Inc.,
Morningstar, IBC/Donoghue's Money Fund Reports and regional periodicals and
newspapers. In addition to yield information, general information about the
Funds that appears in a publication such as those mentioned above may also be
quoted or reproduced in advertisements or in reports to shareholders. Reports to
Retail Class Shareholders may contain performance information on any Fund.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future
PROSPECTUS
27
<PAGE> 32
results. Any fees charged by an affiliate of Hawaiian
Trust or a Participating Organization with respect to customer accounts for
investing in shares of the Funds will not be included in performance
calculations; such fees, if charged, would reduce the actual yield and total
return from that quoted.
Because of differences in the fees and/or expenses borne by the Retail
Class Shares of the Funds, the average annual total return, aggregate total
return, and yield can be expected, at any given time, to be lower than the
average annual total return, aggregate total return, and yield of Institutional
Class Shares. Standardized yield and total return quotations will be computed
separately for Retail Class Shares and Institutional Class Shares.
DESCRIPTION OF THE TRUST AND ITS SHARES
CAPITALIZATION--The Trust was organized as a Massachusetts business trust
on October 30, 1992, and currently consists of nine separately managed series.
The Board of Trustees may establish additional series in the future. The series
of the Trust are: the Balanced Fund, Diversified Fixed Income Fund, Growth and
Income Fund, Growth Stock Fund, New Asia Growth Fund, Short Intermediate U.S.
Treasury Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
Securities Fund and the U.S. Treasury Securities Fund, each with unlimited
transferable shares of beneficial interest, no par value. When issued in
accordance with the terms and procedures described in their respective
Prospectuses, shares of the Funds are fully paid, non-assessable and freely
transferable.
Each series is comprised of two classes of shares--the Institutional Class
and the Retail Class. The classes have identical rights with respect to the
series of which they are a part, provided that there are certain matters which
affect one class but not another. Currently, the only such matters are the
existence of the Distribution Plan with respect to each Retail Class but not any
Institutional Class, the absence of any sales load with regard to the purchase
of shares of the Institutional Class, and the fact that a sales person or other
person entitled to receive compensation for selling or servicing Retail Class
Shares or Institutional Class Shares may receive different compensation with
respect to one such Class over the other Class in the same Fund. On all such
matters, shareholders vote as a class, and not by series. Shares of the
Institutional Class have different expenses, and are subject to no sales charge,
which may affect performance. A separate Prospectus applies to the Institutional
Class of each series. Prospectuses relating to the Institutional Class of shares
of each series may be obtained by calling the telephone number listed on the
first page of this Prospectus.
VOTING--Shareholders have the right to vote on the election of Trustees and
on any and all matters as to which, by law or the provisions of the Declaration
of Trust of the Trust, they may be entitled to vote. All shares of the Trust
have equal voting rights and will be voted in the aggregate, and not by class or
series, except where voting by class or series is required by law or where the
matter involved affects only one class or series. The Trust is not required to
hold annual meetings of the Funds' shareholders, and does not intend to do so,
in any fiscal year in which it is not required by law to elect Trustees. The
Trustees are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee, if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
SHAREHOLDER LIABILITY--Under Massachusetts law, shareholders of the Funds
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Trust's Declaration of Trust disclaims
Shareholder liability for acts or obligations of the Trust. The Declaration of
Trust provides for indemnification out of a Fund's property for all loss and
expense of any shareholder of such Fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which a
Fund would be unable to meet its obligations.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to a Fund at the address or
telephone number set forth on the cover page of this Prospectus.
PROSPECTUS
28
<PAGE> 33
APPLICATION FOR PACIFIC CAPITAL FUNDS
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: OUTSIDE FUNDS TRANSFER AGENT OPERATIONS [PACIFIC] CAPITAL FUNDS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
1-800-258-9232 LOGO
- --------------------------------------------------------------------------------
STEP 1 ACCOUNT REGISTRATION PLEASE TYPE OR PRINT NAME EXACTLY AS ACCOUNT IS
TO BE REGISTERED
A. REGISTRATION
<TABLE>
<S> <C> <C> <C>
[ ] Individual 1. ----------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security
Number
[ ]
Joint Account* 2. ----------------------------------------------------------------------------------------------
(Use lines 1 First Name Middle Initial Last Name Social Security
and 2) Number
*JOINT ACCOUNTS WILL BE TENANTS WITH RIGHTS OF SURVIVORSHIP UNLESS OTHERWISE SPECIFIED.
[ ]
For a Minor 3. --------------------------------------------- Under the ------------ Uniform Gifts/Transfers to
Minors Act
(Only one Custodian's First Name Middle Initial Last
custodian Name State
and one minor Custodian For
are ------------------------------------------------------------------------------------
permitted.) Minor's First Name Middle Initial Last Name Minor's Social Security
No.
[ ]
For Trust, 4. ----------------------------------------------------------------------------------------------
Corporation, (Name of Corporation or Partnership; PLEASE INDICATE TYPE OF ORGANIZATION. If a Trust, include
Partnership or the name and date of the Trust Instrument. The name(s) of the Trustees in which account will be
other Entity registered should be listed below. 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 Trustee(s) or Authorized Individual Title
</TABLE>
- --------------------------------------------------------------------------------
B. MAILING ADDRESS AND TELEPHONE NUMBER
- --------------------------------------------------------------------------------
Street or P.O. Box City State Zip Code
( )
- --------------------------------------------------------------------------------
Area Code Daytime Telephone Number Occupation Employer's Name/Employer's
- --------------------------------------------------------------------------------
Address City State
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.
- --------------------------------------------------------------------------------
C. INVESTMENT DEALER OR BROKER: (Important -- to be competed by Dealer or
Broker)
- --------------------------------------------------------------------------------
Dealer Name Branch Office Address Branch Office City/State Branch #
( )
- --------------------------------------------------------------------------------
Representative's Name Rep # Area Code Telephone # [Agent User Dealer # /
Branch #]
- --------------------------------------------------------------------------------
STEP 2 PURCHASE OF SHARES
A. INITIAL INVESTMENT
Make check payable to: Pacific Capital Funds Minimum Initial Investment
in any Fund is $1,000. Subsequent Investments, $50.
<TABLE>
<S> <C> <C>
U.S. Treasury Securities Fund $ --------- Tax-Free Short Intermediate Securities $ ---------
Fund
Short Intermediate U.S. Treasury Securities Fund $ --------- Growth Stock Fund $ ---------
Diversified Fixed Income Fund $ --------- Balanced Fund $ ---------
Tax-Free Securities Fund $ --------- Growth and Income Fund $ ---------
New Asia Growth Fund $ --------- Total Investment $ ---------
</TABLE>
- --------------------------------------------------------------------------------
B. DISTRIBUTIONS: All income dividends and capital gains distributions will be
REINVESTED in additional shares at net asset value unless otherwise indicated
below.
Dividends are to be: [ ] Reinvested [ ] Paid in cash* Capital Gains are
to be: [ ] Reinvested [ ] Paid in cash*
*FOR CASH DIVIDENDS, PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS:
[ ] Wire directly into my financial institutional account. ATTACHED IS A
VOIDED CHECK showing the account information where I would like the
dividend deposited.
[ ] Mail check to my address listed in Step 1B.
[ ] Mail check as requested in Step 3F.
<PAGE> 34
- --------------------------------------------------------------------------------
C. LETTER OF INTENT
(See Terms of Escrow
for Letter
of Intent at the end of
this
application).
I/we intend to invest in shares of one or more of the Pacific Capital Funds
during the 13-month period from the date of my 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 present holdings of
Pacific Capital Fund shares (at public offering price on date of this Letter),
will equal or exceed the minimum amount checked below:*
- -----------------------
Check appropriate box
[ ] YES [ ] NO
[ ] $ 25,000 [ ] $ 50,000 [ ] $ 100,000
[ ] $250,000 [ ] $500,000 [ ] $1,000,000
*Accumulated investments must aggregate at least $100,000 for
reduced sales charges to apply to purchases of shares of the
Short-Intermediate U.S. Treasury Securities Fund or the
Tax-Free Short Intermediate Securities Fund.
- --------------------------------------------------------------------------------
STEP 3 SPECIAL FEATURES
This option provides you with a convenient way to have amounts automatically
drawn on your financial institution account and invested in your Pacific Capital
Fund account. To establish this program, please complete Step 4, Sections A & B
of this Application. I wish to make regular monthly investments. The minimum
initial purchase is reduced to $100 per Fund when you use this service.
Subsequent minimum purchase is $50 for each Fund. YOU MUST ATTACH A PRE-PRINTED
DEPOSIT SLIP OR VOIDED CHECK.
A. AUTOMATIC INVEST PROGRAM
- -----------------------
Check appropriate box
[ ] YES [ ] NO
<TABLE>
<S> <C> <C>
Amount
Please select how often you
would like to have the
------------- Fund $ --------- amount(s) shown above
withdrawn from your checking
------------- Fund $ ---------
account and invested into the
above selected Fund(s).
------------- Fund $ --------- [ ] Once each month -- on the
1st
Total $ --------- [ ] Once each month -- on the
16th
<CAPTION>
<S> <C>
------------- Fund
------------- Fund
------------- Fund [ ] Twice each month on the 1st
and the 16th
Total [ ] Once each quarter on the 1st
beginning in the month of
-----------------.
</TABLE>
- --------------------------------------------------------------------------------
B. TELEPHONE INVESTMENT
This option provides you with a convenient way to add to your account at any
time you wish by simply calling Administrative Data Management Corp. toll-free
at 1-800-258-9232. 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.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
C. AUTOMATIC WITHDRAWAL PLAN
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: The minimum Automatic
Withdrawal amount is $100 per Fund.
Application must be
received in good order
at least two weeks
prior to 1st actual
liquidation date.
- -----------------------
Check appropriate box
<TABLE>
<S> <C>
[ ] YES [ ] NO
$ ---------------------------
------------------------- Fund
$ ---------------------------
------------------------- Fund
Total $ ---------------------------
</TABLE>
Please select how often you would like to have payments made
from your account under the Automatic Withdrawal Plan.
<TABLE>
<S> <C>
[ ] Once each month -- on the [ ] Twice each month on the 1st and 16th
1st
[ ] Once each month -- on the [ ] Once each quarter on the 1st beginning in
16th the month of .
--------------------
</TABLE>
Please choose one of the following options:
[ ] Mail check to my address listed in Step 1a.
[ ] Mail check as requested in Step 3f.
<PAGE> 35
- --------------------------------------------------------------------------------
D. 1. TELEPHONE EXCHANGE
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute the exchange of shares of one Pacific Capital
Fund for one of the funds into which exchange is permitted, as designated in the
Prospectus, with identical shareholder registration. The exchange will be
executed at the relative net asset values of the two funds as next determined
following receipt of such instructions.
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 Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
This option allows you
to effect exchanges
among accounts in your
name within the Pacific
Capital group of Funds,
as described in the
Prospectus, by
telephone.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-258-9232.
2. TELEPHONE REDEMPTION
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute a redemption of shares of one or more Pacific
Capital Funds. The redemption will be executed at net asset value next
determined following receipt of such instructions.
Except for gross negligence in acting upon such telephone instructions to
execute a redemption and subject to the conditions set forth herein, I (we)
understand and agree to hold harmless the Agent, each of the Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
This option allows you
to effect telephone
redemptions, as
described in the
Prospectus.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE A TELEPHONE REDEMPTION, CALL THE AGENT AT 1-800-258-9232.
- --------------------------------------------------------------------------------
E. EXPEDITED REDEMPTION
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 Pacific Capital Fund account is registered.
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
The proceeds will be
deposited to your
financial institution
account listed.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE AN EXPEDITED
REDEMPTION, CALL THE
AGENT AT
1-800-258-9232.
<TABLE>
<S> <C>
-------------------------------------------- ---------------------------------------
Financial Institution Account Registration Financial Institution Account Number
-------------------------------------------- ---------------------------------------
Name of Financial Institution Financial Institution Transit/Routing Number
-------------------------------------------- ---------------------------------------
Street City State Zip Code
</TABLE>
- --------------------------------------------------------------------------------
F. SECONDARY ADDRESS
Checks should be made payable as indicated below. If check is payable to a
financial institution, i.e., a commercial bank, savings bank or credit union,
for your account, indicate financial institution name, address and your account
number.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
<TABLE>
<S> <C>
-------------------------------------------- ---------------------------------------
First Name Middle Last Name Name of Financial Institution
Initial
-------------------------------------------- ---------------------------------------
First Name Middle Last Name Street
Initial
-------------------------------------------- ---------------------------------------
Street City State Zip Code
-------------------------------------------- ---------------------------------------
City State Zip Code Financial Institution Account Number
</TABLE>
<PAGE> 36
- --------------------------------------------------------------------------------
STEP 4 DEPOSITORS AUTHORIZATION TO HONOR DEBITS
SECTION A 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 my/our account
for 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
<TABLE>
<S> <C>
NAME AND ADDRESS ------------------------------------------------------------------------
WHERE MY/OUR NAME OF FINANCIAL INSTITUTION
ACCOUNT IS
MAINTAINED ------------------------------------------------------------------------
STREET ADDRESS
------------------------------------------------------------------------
CITY STATE ZIP
CODE
NAME(S) AND ---------------------------------------------------- ------------------
SIGNATURE(S) OF PLEASE PRINT DATE
DEPOSITOR(S) AS
THEY APPEAR WHERE ---------------------------------------------------- ------------------
ACCOUNT IS SIGNATURE DATE
REGISTERED
----------------------------------------------------
PLEASE PRINT
----------------------------------------------------
SIGNATURE
</TABLE>
- --------------------------------------------------------------------------------
SECTION B SHAREHOLDER AUTHORIZATION / SIGNATURE(S) REQUIRED
- I/We authorize the Pacific Capital Funds 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, Pacific Capital Funds and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Pacific Capital Fund 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 understand that in
the event of such deficiency, Pacific Capital Funds and its agents will
first liquidate shares of the Pacific Capital Fund to which the purchase
transaction relates, and then, in the discretion of Pacific Capital Funds
and its agents, shares of any other Pacific Capital Fund in my/our account
at the Financial Institution. I/We authorize Pacific Capital Funds and its
agents to correct any transfer error by a debit or credit to my/our
financial Institution account and/or Fund 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 undersigned warrants that he/she has full authority and is of legal age
to purchase shares of the Pacific Capital Fund(s) designated above and has
received and read a current Prospectus of such Fund(s) and agrees to its
terms. Pacific Capital Funds, 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 resident of the U.S.; and either does not expect to be in the U.S.
for more than 182 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Fund, 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*
<TABLE>
<S> <C> <C>
- ------------------------------------------ ------------------------------------------ ------------------
INDIVIDUAL (OR CUSTODIAN) JOINT REGISTRANT, IF ANY DATE
- ------------------------------------------ ------------------------------------------ ------------------
CORPORATE OFFICER, PARTNER, TRUSTEE(S), TITLE DATE
ETC.
*FOR A TRUST, CORPORATION OR ASSOCIATION, 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.
</TABLE>
SPECIAL INFORMATION
<PAGE> 37
- 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 Fund's Agent.
- You may cancel any feature at any time, effective 3 days after the Agent
receives notice from you.
- Either the Fund 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 Fund 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 the Agent at 1-800-258-9232
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 Fund'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 shall be held in
escrow in shares of the Fund 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 purchase, the investor
must remit to the Agent 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 Agent or the
dealer, the Agent will, within sixty days after the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Any shares 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
Fund.
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 Fund purchased for and
held under the Plan, but the Agent will credit all such shares to the
Planholder on the records of the Fund. 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 Fund at
the Net Asset Value.
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 first 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 Fund) 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 Fund'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 Fund. 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
Fund, 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
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as his Agent in administering the Plan.
<PAGE> 38
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> 39
INVESTMENT ADVISER
Hawaiian Trust Company
111 S. King Street
Honolulu, Hawaii 96813
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
Ernst & Young LLP
One Columbus, Suite 2300
10 West Broad Street
Columbus, Ohio 43215
TRANSFER AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095
[LOGO]
PACIFIC CAPITAL FUNDS
--------------------------------------------
GROWTH AND INCOME FUND
GROWTH STOCK FUND
--------------------------------------------
RETAIL CLASS
<PAGE> 40
PACIFIC CAPITAL FUNDS
U.S. TREASURY SECURITIES FUND
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
3435 Stelzer Road
Columbus, Ohio 43219-3035
Pacific Capital Funds (the "Trust") is a professionally managed, open-end,
management investment company with multiple funds available for investment. This
Prospectus contains information about five of the funds of the Trust--the
Diversified Fixed Income Fund, the Short Intermediate U.S. Treasury Securities
Fund, the Tax-Free Securities Fund, the Tax-Free Short Intermediate Securities
Fund and the U.S. Treasury Securities Fund (each a "Fund" and collectively, the
"Funds"). The Funds are advised by Hawaiian Trust Company, Limited ("Hawaiian
Trust") and sponsored, administered and distributed by BISYS Fund Services
("BISYS" or the "Distributor").
This Prospectus relates only to the "Retail Class" of each Fund's shares;
certain investors may qualify to invest in a Fund's "Institutional Class," which
is not offered hereby. See "General Information--Description of the Trust and
its Shares." This Prospectus sets forth concisely the information a prospective
investor should know before investing in any of the Funds. Investors should read
this Prospectus carefully and retain it for future reference. A Statement of
Additional Information ("SAI") dated November 29, 1996 containing additional and
more detailed information about the Funds has been filed with the Securities and
Exchange Commission (the "Commission") and is hereby incorporated by reference
into this Prospectus. The SAI is available without charge and can be obtained by
writing to the Funds at the address printed above or by calling 800-258-9232.
FOR PURCHASE, REDEMPTION, ACCOUNT OR GENERAL INQUIRIES CONTACT THE TRUST'S
TRANSFER AGENT: ADMINISTRATIVE DATA MANAGEMENT CORPORATION, 581 MAIN STREET,
WOODBRIDGE, NEW JERSEY 07095
800-258-9232
THIS PROSPECTUS SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE
------------------------
SHARES OF PACIFIC CAPITAL FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, HAWAIIAN TRUST OR ANY OF ITS AFFILIATES. SUCH SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. AN INVESTMENT IN THE
FUND INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
HAWAIIAN TRUST IS THE INVESTMENT ADVISER TO PACIFIC CAPITAL FUNDS. BISYS FUND
SERVICES, WHICH IS NOT AFFILIATED WITH HAWAIIAN TRUST, IS
THE SPONSOR AND DISTRIBUTOR FOR PACIFIC CAPITAL
FUNDS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PROSPECTUS DATED NOVEMBER 29, 1996.
<PAGE> 41
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Highlights......................................................................... 1
Fund Expenses...................................................................... 4
Financial Highlights............................................................... 6
Investment Objectives and Policies of the Funds.................................... 8
Additional Discussion Regarding Permitted Investment Activities.................... 9
Additional Investment Restrictions................................................. 18
Management, Advisory and Other Service Arrangements................................ 19
Valuation of Retail Class Shares................................................... 22
How to Purchase Retail Class Shares................................................ 22
How to Redeem Retail Class Shares.................................................. 27
Dividend and Tax Information....................................................... 30
General Information................................................................ 32
</TABLE>
<PAGE> 42
HIGHLIGHTS
This Prospectus describes the Funds, each of which has its own distinct
investment objectives and policies, which are described and summarized here.
U.S. TREASURY SECURITIES FUND--The primary investment objective of the U.S.
Treasury Securities Fund, a diversified portfolio, is to provide investors with
a high level of current income consistent with prudent risk of capital. Capital
appreciation is a secondary investment objective of the U.S. Treasury Securities
Fund. The U.S. Treasury Securities Fund seeks to achieve these objectives by (i)
investing primarily in U.S. Treasury bonds, notes, bills ("U.S. Treasury
Securities") and repurchase agreements that are collateralized by U.S. Treasury
Securities; and (ii) varying the dollar-weighted average remaining maturity of
its portfolio to take advantage of changes in interest rates.
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND--The primary investment
objective of the Short Intermediate U.S. Treasury Securities Fund, a diversified
portfolio, is to provide investors with a high level of current income
consistent with prudent risk of capital. Capital appreciation is a secondary
objective of the Short Intermediate U.S. Treasury Securities Fund. The Short
Intermediate U.S. Treasury Securities Fund seeks to achieve these objectives by
investing primarily in U.S. Treasury Securities and repurchase agreements that
are collateralized by U.S. Treasury Securities. Under normal market conditions,
the dollar-weighted average remaining maturity of the Short Intermediate U.S.
Treasury Securities Fund's portfolio will be from two to five years.
DIVERSIFIED FIXED INCOME FUND--The investment objective of the Diversified
Fixed Income Fund, a diversified portfolio, is to seek a high level of current
income. The Diversified Fixed Income Fund seeks to achieve this objective by
investing primarily in obligations issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities ("U.S. Government Obligations") and in
investment grade debt securities. Hawaiian Trust will monitor the Diversified
Fixed Income Fund's portfolio performance on an ongoing basis and reallocate
assets in response to actual and anticipated market and economic changes. This
approach may result in significant variations in the dollar-weighted average
remaining maturity of the Diversified Fixed Income Fund's portfolio.
TAX-FREE SECURITIES FUND--The investment objective of the Tax-Free
Securities Fund, a non-diversified portfolio, is to provide investors with a
high level of current income exempt from federal income tax and Hawaii income
tax. The Tax-Free Securities Fund pursues this objective by investing, under
normal market conditions, at least 80% of the Fund's net assets in debt
obligations of issuers that pay interest that, in the opinion of counsel to the
issuer, is exempt from federal income tax and is not subject to the federal
alternative minimum tax ("Municipal Obligations"). In addition, the Tax-Free
Securities Fund intends to invest at least 50%, and no more than 60%, of the
market value of its securities in debt obligations issued by or on behalf of the
State of Hawaii and its political subdivisions, agencies and instrumentalities
and other issuers which pay interest that is exempt from Hawaii personal income
tax and exempt from federal income tax, but which, subject to the guidelines
discussed above, may be subject to the federal alternative minimum tax
("Hawaiian Municipal Obligations"). Hawaiian Trust will monitor the Tax-Free
Securities Fund's portfolio performance on an ongoing basis and will reallocate
assets in response to actual and anticipated market and economic changes. This
approach may result in significant variations in the dollar-weighted average
remaining maturity of the Tax-Free Securities Fund's portfolio.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND--The investment objectives of
the Tax-Free Short Intermediate Securities Fund, a non-diversified portfolio,
are to provide investors with a high level of current income, exempt from
federal income tax and Hawaii income tax, and to provide greater price stability
than a
PROSPECTUS
1
<PAGE> 43
long-term bond fund. The Tax-Free Short Intermediate Securities Fund pursues
these objectives by investing, under normal market conditions, at least 80% of
its net assets in Municipal Obligations. In addition, the Tax-Free Short
Intermediate Securities Fund intends to invest at least 50%, and no more than
60%, of the market value of its securities in Hawaiian Municipal Obligations.
Under normal market conditions, the dollar-weighted average remaining maturity
of the Tax-Free Short Intermediate Securities Fund's portfolio will be from two
to five years.
CERTAIN RISKS
Investments in all of the Funds are subject to default risk (i.e., the risk
that the issuers of securities in which a Fund invests may default in the
payment of principal and/or interest), although the U.S. Treasury Securities
held by the U.S. Treasury Securities Fund and the Short Intermediate U.S.
Treasury Fund are direct obligations of the U.S. Government. The Funds are also
subject to interest rate risk (i.e., the risk that increases in market interest
rates may adversely affect the value of the debt securities in which a Fund
invests and hence the value of an investment in such Fund). There can, of
course, be no assurance that any mutual fund will achieve its investment
objective. In addition, unlike insured bank deposits, no investment in any Fund
is insured against loss of principal. See "Additional Discussion Regarding
Permitted Investment Activities--Additional Risk Disclosure."
------------------------
For additional information concerning the investment policies and practices
of the Funds, see "Investment Objectives and Policies of the Funds," "Additional
Discussion Regarding Permitted Investment Activities" and "Additional Investment
Restrictions" in this Prospectus. Further information also is provided in the
SAI.
PURCHASE OF RETAIL CLASS SHARES
Retail Class Shares of each Fund are sold on a continuous basis and may be
purchased by mail or by electronic transfer. See "How to Purchase Retail Class
Shares." Initial purchases may only be made with a minimum investment of $1,000
(the $1,000 minimum may be waived or reduced for certain accounts; the minimum
initial purchase is $250 for Individual Retirement Accounts ("IRAs") and $100
for Auto Invest Plan participants). Subsequent investments may be made with as
little as $50. For more information about purchasing Fund shares call ADM at
1-800-258-9232 or contact your Participating Organization.
Shares of the Retail Class of the Funds are offered at net asset value plus
a sales load. See "Valuation of Retail Class Shares." Only institutions
(including Bank of Hawaii and its affiliated and correspondents banks)
("Institutions") acting on behalf of customers having a qualified trust account,
employee benefit account or other qualifying relationship at such Institution
are eligible to invest in the Institutional Class of each Fund's shares, which
are not offered hereby. See "General Information."
DIVIDENDS AND DISTRIBUTIONS
The Funds will declare dividends of substantially all of their net income
daily and will pay such dividends monthly. Any net capital gains of a Fund will
be distributed at least annually. At an investor's choice, dividends are paid by
mail, directly deposited into a financial institution account, or automatically
reinvested, without sales charges, in additional shares at the then-current net
asset value. If no election is made, dividends will be automatically reinvested.
See "Dividend and Tax Information."
PROSPECTUS
2
<PAGE> 44
HAWAIIAN TRUST AND BISYS
For its services as investment adviser to the Funds, Hawaiian Trust
receives a fee from each Fund at annual rates that are based on the Fund's
average daily net assets. See "Fund Expenses" and "Management, Advisory and
Other Service Arrangements." A subsidiary of Bank of Hawaii, Hawaiian Trust (a
non-deposit taking institution) was founded in 1898 and is the oldest and
largest trust company in Hawaii. It has investment authority over approximately
$6.3 billion in client financial assets, including having investment authority
over approximately $1.7 billion in municipal obligations. Hawaiian Trust is not
authorized to and does not carry on a banking business.
BISYS provides certain administrative services to the Funds, for which each
Fund pays it a fee at an annual rate based on the Fund's average daily net
assets. BISYS also distributes the Funds' shares, for which it may receive
certain additional fees. See "Management, Advisory and Other Service
Arrangements."
REDEMPTION OF RETAIL CLASS SHARES
Retail Class Shares may ordinarily be redeemed by mail or by telephone.
However, all or part of a customer's Retail Class Shares may be subject to
redemption in accordance with instructions and limitations pertaining to his or
her account held by a Participating Organization. See "How to Redeem Retail
Class Shares."
PROSPECTUS
3
<PAGE> 45
FUND EXPENSES
The following Table of Expenses lists the costs and expenses that a
shareholder can expect to incur as an investor in the Retail Class of a Fund.
Certain investors may qualify to invest in a Fund's Institutional Class, which
is not offered hereby. Long-term Retail Class shareholders could pay more in
distribution related charges than the economic equivalent of the maximum
front-end sales charges applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD").
TABLE OF EXPENSES*
<TABLE>
<CAPTION>
SHORT TAX-FREE
U.S. INTERMEDIATE SHORT
TREASURY U.S. TREASURY DIVERSIFIED INTERMEDIATE TAX-FREE
SECURITIES SECURITIES FIXED SECURITIES SECURITIES
FUND FUND INCOME FUND FUND FUND
---------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........ 4.00% 2.25% 4.00% 2.25% 4.00%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)..................................... None None None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable)................... None None None None None
Redemption Fees**............................ None None None None None
Exchange Fee................................. None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.............................. 0.60% 0.30%+ 0.60% 0.50% 0.60%
12b-1 Fees (after waivers)................... 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after waivers
and reimbursements)........................ 0.35% 0.37% 0.30% 0.33% 0.29%
Total Fund Operating Expenses
(after waivers and reimbursements)......... 1.20% 0.92% 1.15% 1.08% 1.14%
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in
Retail Class Shares assuming (1) 5% annual return*** and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
SHORT TAX-FREE
U.S. INTERMEDIATE SHORT
TREASURY U.S. TREASURY DIVERSIFIED INTERMEDIATE TAX-FREE
SECURITIES SECURITIES FIXED SECURITIES SECURITIES
FUND FUND INCOME FUND FUND FUND
---------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Time Period
1 year............................ $ 52 $ 32 $ 51 $ 33 $ 51
3 years........................... $ 77 $ 51 $ 75 $ 56 $ 75
5 years........................... $103 $ 72 $ 101 $ 81 $100
10 years.......................... $180 $ 133 $ 174 $151 $173
</TABLE>
- ------------
+ Reflects waiver. See "Explanation of Table" below.
(Footnotes continued on next page)
PROSPECTUS
4
<PAGE> 46
* Investors who purchase shares through a Participating Organization,
including an affiliate of Hawaiian Trust or an Institution (as defined
above), may be charged account-level fees for additional services provided
to them by such Participating Organization in connection with investment in
a Fund.
** The Transfer Agent will reduce the amount of a wire redemption payment by
its then current wire redemption charge. As of the date of this Prospectus,
there is no charge for wire redemptions. While this policy is subject to
change at any time, it is not anticipated that such charge would exceed $7
per wire redemption.
*** The assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return. The actual rate of return
may be greater or lesser than the assumed rate. The Example should not be
considered a representation of past or future expenses, and actual expenses
may be greater or lesser than those shown.
EXPLANATION OF TABLE
The purpose of the foregoing table is to assist shareholders in
understanding the various costs and expenses that an investor in the Retail
Class of the Funds will bear. The amounts set forth under "Annual Fund Operating
Expenses," as well as expense amounts used in the Example, are based on actual
amounts incurred during the most recent fiscal year, restated to reflect fee
waivers and expense reimbursements in effect as of the date of this Prospectus.
In addition, "Rule 12b-1 Fees" have been adjusted to reflect the current fee
payable (after voluntary waiver) as of the date of this Prospectus. See
"Management, Advisory and Other Service Arrangements--The Sponsor, Administrator
and Distributor." The Example set forth above assumes reinvestment of dividends
and distributions and utilizes a 5% annual rate of return as mandated by the
Securities and Exchange Commission.
Hawaiian Trust and BISYS each may elect, in its sole discretion, to
otherwise waive or reimburse its respective fees. Any such waivers or
reimbursements will reduce the total expenses of the Fund to which they apply,
thereby increasing yield or total return. As described above, the percentages
shown above under "12b-1 Fees," "Other Expenses" and "Total Fund Operating
Expenses" reflect voluntary fee waivers and reimbursements. Absent such waivers
and reimbursements, these percentages would be (i) 0.75%, 0.39%, and 1.74% for
the U.S. Treasury Securities Fund; (ii) 0.75%, 0.42%, and 1.67% for the Short
Intermediate U.S. Treasury Securities Fund; (iii) 0.75%, 0.34%, and 1.69% for
the Diversified Fixed Income Fund; (iv) 0.75%, 0.38%, and 1.63% for the Tax-Free
Short Intermediate Securities Fund; and (v) 0.75%, 0.33%, and 1.68% for the Tax-
Free Securities Fund. In addition, the percentage shown above under "Management
Fees" for Short Intermediate U.S. Treasury Securities Fund reflects a voluntary
fee waiver. Absent such waiver, this percentage would be 0.50%. There can be no
assurance that the foregoing waivers and expense reimbursements will continue to
apply.
PROSPECTUS
5
<PAGE> 47
FINANCIAL HIGHLIGHTS
The Financial Highlights in the table below set forth certain financial
data and investment results of the Funds since their inception, expressed in one
share outstanding throughout the relevant period. The Financial Highlights are
derived from the financial statements of Pacific Capital Funds which have been
audited by Ernst & Young LLP, independent auditors. The Financial Highlights
should be read in conjunction with the financial statements, related notes, and
other financial information included in the Statement of Additional Information.
The Trust's annual report contains additional performance information relating
to the Funds and is available upon request, without charge.
<TABLE>
<CAPTION>
SHORT INTERMEDIATE U.S. TREASURY
U.S. TREASURY SECURITIES FUND SECURITIES FUND
------------------------------------- --------------------------------------
NOVEMBER 1, DECEMBER 13,
YEAR ENDED YEAR ENDED 1993 TO YEAR ENDED YEAR ENDED 1993 TO
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995(d) 1994(a) 1996 1995(d) 1994(a)
---------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 9.42 $ 9.04 $ 10.00 $ 9.60 $ 9.52 $10.00
---------- ---------- ----------- ---------- ---------- ------
Investment Activities
Net investment income............ 0.53 0.50 0.31 0.48 0.52 0.24
Net realized and unrealized gain
(loss) on investments.......... (0.20) 0.38 (1.00) (0.11) 0.05 (0.52)
---------- ---------- ----------- ---------- ---------- ------
Total from Investment
Activities................. 0.33 0.88 (0.69) 0.37 0.57 (0.28)
---------- ---------- ----------- ---------- ---------- ------
Distributions
Net investment income............ (0.53) (0.50) (0.27) (0.50) (0.49) (0.20)
In excess of net investment
income......................... (0.09) -- -- (0.04) -- --
In excess of net realized
gains.......................... -- -- -- (0.02) -- --
---------- ---------- ----------- ---------- ---------- ------
Total Distributions.......... (0.62) (0.50) (0.27) (0.56) (0.49) (0.20)
---------- ---------- ----------- ---------- ---------- ------
NET ASSET VALUE, END OF PERIOD....... $ 9.13 $ 9.42 $ 9.04 $ 9.41 $ 9.60 $ 9.52
========== ========== =========== ========== ========== ============
Total Return (excludes sales
charges)........................... 3.43%(c) 10.18% (6.95%)(c) 3.90%(c) 6.28% (2.76%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000).......................... $979 $1,035 $60,125 $1,156 $489 $3,419
Ratio of expenses to average net
assets......................... 1.20%(b) 1.19% 1.15%(b) 0.92%(b) 0.99% 1.00%(b)
Ratio of net investment income to
average net assets............. 5.55%(b) 5.57% 4.62%(b) 5.14%(b) 5.51% 3.96%(b)
Ratio of expenses to average net
assets*........................ 1.74%(b) 1.81% 2.09%(b) 1.67%(b) 1.78% 5.39%(b)
Ratio of net investment income to
average net assets*............ 5.01%(b) 4.96% 3.68%(b) 4.39%(b) 4.72% (0.43%)(b)
Portfolio Turnover(e)................ 15.75% 80.98% 11.36% 47.17% 62.73% 0.00%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. In addition, the
investment adviser reimbursed expenses. If such voluntary fee reductions and
expense reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
(d) The Financial Highlights presented for the Retail Class reflects operations
and distributions for the Fund, as a whole, for the period from August 1,
1994 through October 13, 1994 combined with the operations and distributions
of the Retail Class only for the period from October 14, 1994 through July
31, 1995.
(e) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
PROSPECTUS
6
<PAGE> 48
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE SHORT INTERMEDIATE
DIVERSIFIED FIXED INCOME FUND SECURITIES FUND TAX-FREE SECURITIES FUND
------------------------------- ------------------------------- -------------------------------
OCTOBER 14, 1994 OCTOBER 14, 1994 OCTOBER 14, 1994
YEAR ENDED TO JULY 31, YEAR ENDED TO JULY 31, YEAR ENDED TO JULY 31,
JULY 31, 1996 1995(a) JULY 31, 1996 1995(a) JULY 31, 1996 1995(a)
------------- ---------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.75 $10.00 $ 10.11 $10.00 $ 10.53 $10.00
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income.... 0.59 0.49 0.37 0.30 0.50 0.39
Net realized and
unrealized gain (loss)
on investments......... (0.19) 0.74 (0.03) 0.08 0.07 0.50
------ ------ ------ ------ ------ ------
Total from Investment
Activities......... 0.40 1.23 0.34 0.38 0.57 0.89
------ ------ ------ ------ ------ ------
Distributions
Net investment income.... (0.58) (0.48) (0.37) (0.27) (0.49) (0.36)
In excess of net
investment income...... (0.02) -- (0.03) -- (0.04) --
In excess of net realized
gains.................. (0.10) -- -- -- (0.04) --
Net realized gains....... -- -- -- -- (0.09) --
------ ------ ------ ------ ------ ------
Total
Distributions...... (0.70) (0.48) (0.40) (0.27) (0.66) (0.36)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD..................... $ 10.45 $10.75 $ 10.05 $10.11 $ 10.44 $10.53
============ =============== ============ =============== ============ ===============
Total Return (excludes sales
charges)(b)................ 3.69% 12.66% 3.41% 3.90% 5.54% 9.06%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000)........... $1,093 $27 $451 $308 $569 $563
Ratio of expenses to
average net
assets(c).............. 1.15% 1.18% 1.08% 1.05% 1.14% 1.15%
Ratio of net investment
income to average net
assets(c).............. 5.31% 6.25% 3.64% 3.82% 4.66% 4.93%
Ratio of expenses to
average net
assets(c)*............. 1.69% 1.77% 1.63% 1.64% 1.68% 1.74%
Ratio of net investment
income to average net
assets(c)*............. 4.77% 5.66% 3.09% 3.23% 4.12% 4.34%
Portfolio Turnover(d)........ 58.86% 60.47% 54.70% 89.98% 24.78% 49.17%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each Fund has its own investment objectives, as described earlier in this
Prospectus. Each Fund also follows its own investment policies and practices,
subject to certain investment restrictions, all described further below and in
"Additional Discussion Regarding Permitted Investment Activities." The SAI also
contains more specific descriptions of investment restrictions which govern the
investments of each of the Funds.
U.S. TREASURY SECURITIES FUND
The U.S. Treasury Securities Fund invests primarily in U.S. Treasury
Securities and in repurchase agreements collateralized by U.S. Treasury
Securities. The U.S. Treasury Securities Fund seeks to enhance its total return
by shortening the average maturity of portfolio securities when interest rates
are anticipated to increase and lengthening the maturity of such portfolio
securities to take advantage of anticipated interest rate declines. Under normal
market conditions, at least 65% of the value of the total assets of the U.S.
Treasury Securities Fund will be invested in U.S. Treasury Securities.
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
The Short Intermediate U.S. Treasury Securities Fund invests primarily in
U.S. Treasury Securities and in repurchase agreements collateralized by U.S.
Treasury Securities. The Short Intermediate U.S. Treasury Securities Fund seeks
to enhance its total return by shortening the average maturity of portfolio
securities when interest rates are anticipated to increase and lengthening the
maturity of such portfolio securities to take advantage of anticipated interest
rate declines. Due to the dollar-weighted average maturity of the Short
Intermediate U.S. Treasury Securities Fund, it is expected to be less volatile
than the U.S. Treasury Securities Fund. Under normal market conditions, at least
65% of the value of the total assets of the Short Intermediate U.S. Treasury
Securities Fund will be invested in U.S. Treasury Securities.
DIVERSIFIED FIXED INCOME FUND
The Diversified Fixed Income Fund invests in U.S. Government Obligations
and in investment grade debt obligations. Most obligations acquired by the
Diversified Fixed Income Fund will be issued by companies or governmental
entities located within the United States. Up to 25% of the total assets of the
Diversified Fixed Income Fund may, however, be invested in dollar-denominated
debt obligations of foreign issuers. Under normal market conditions, at least
65% of the value of the total assets of the Diversified Fixed Income Fund will
be invested in fixed income securities.
TAX-FREE SECURITIES FUND
The Tax-Free Securities Fund purchases primarily Hawaiian Municipal
Obligations and Municipal Obligations. As a matter of fundamental policy, the
Tax-Free Securities Fund will have, under normal market conditions, at least 80%
of its net assets invested in Municipal Obligations. As a matter of operating
policy, under normal market conditions, at least 50%, and no more than 60%, of
the market value of the Tax-Free Securities Fund's securities will be invested
in Hawaiian Municipal Obligations. For temporary defensive purposes, Hawaiian
Trust may invest more than 20% of the Tax-Free Securities Fund's net assets in
securities that are subject to federal income tax or the federal alternative
minimum tax.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
The Tax-Free Short Intermediate Securities Fund purchases primarily
Hawaiian Municipal Obligations and Municipal Obligations. As a matter of
fundamental policy, the Tax-Free Short Intermediate Securities Fund will have,
under normal market conditions, at least 80% of its net assets invested in
Municipal Obligations. As a matter of operating policy, under normal market
conditions at least 50%, and no more than 60%, of the market value of the
Tax-Free Short Intermediate Securities Fund's
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securities will be invested in Hawaiian Municipal Obligations. For temporary
defensive purposes, Hawaiian Trust may invest more than 20% of the Tax-Free
Short Intermediate Securities Fund's net assets in securities that are subject
to federal income tax or the federal alternative minimum tax.
------------------------
Debt obligations acquired by the Funds will, at the time of purchase, be
rated investment grade or better-that is, obligations rated in one of the top
four rating categories assigned by a nationally recognized statistical rating
organization (an "NRSRO") or unrated obligations determined by Hawaiian Trust to
be of comparable quality. See the SAI, "Appendix A."
ADDITIONAL DISCUSSION REGARDING PERMITTED INVESTMENT ACTIVITIES
MUNICIPAL OBLIGATIONS
MUNICIPAL BONDS--Municipal bonds generally have a maturity at the time of
issuance of up to thirty years. They are principally classified either as
"general obligation" bonds, which are secured by the pledge of the
municipality's faith, credit and taxing power for the payment of principal and
interest, or as "revenue" bonds, which are payable only from the revenues
derived from a particular project or facility and generally are dependent solely
on a specific revenue source.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund may invest in municipal bonds which are covered by insurance guaranteeing
the scheduled payment of principal and interest until their maturity ("Insured
Municipal Bonds"). The insurance can be purchased either by the issuing
government entity or by the Fund purchasing the bond. This insurance is
primarily written by two organizations: Ambac Indemnity Corporation (formerly
called American Municipal Bond Assurance Corporation), a unit of Citicorp, and
Municipal Bond Insurance Association, a pool of private insurers, but may be
written by certain other large insurance companies. This insurance feature
minimizes the risks to the Tax-Free Securities Fund and the Tax-Free Short
Intermediate Securities Fund and its shareholders associated with payment delays
or defaults in these portfolio securities, but does not guarantee the market
value of these portfolio securities or the value of the shares of the Tax-Free
Securities Fund and the Tax-Free Short Intermediate Securities Fund. An issuer
would likely purchase insurance in order to obtain a higher rating by an NRSRO
than it would receive without the insurance thereby reducing the issuer's
borrowing costs. The price paid or received for an Insured Municipal Bond may be
higher than the price that would otherwise be paid or received for the municipal
bond absent the insurance.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund may invest in moral obligation bonds ("Moral Obligation Bonds") which are
tax-exempt bonds issued by a municipality or a state financial intermediary and
backed by the moral obligation pledge of a state government. Under a moral
obligation pledge, a state government indicates its intent to appropriate funds
in the future if the primary obligor, the municipality or intermediary,
defaults. The state's obligation to honor the pledge is moral rather than legal
because future legislatures cannot be legally obligated to appropriate the funds
required.
MUNICIPAL NOTES--Municipal notes generally have maturities at the time of
issuance of three years or less. Subject to its respective investment objective
and policies, the Tax-Free Securities Fund and the Tax-Free Short Intermediate
Securities Fund may invest in municipal notes that are rated at the date of
purchase in the two highest rating categories assigned by an NRSRO, or not rated
but considered by Hawaiian Trust to be of comparable quality. Municipal notes
generally are issued in anticipation of the receipt of tax funds, of the
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proceeds of bond placements or of other revenues. The ability of an issuer to
make payments is, therefore, dependent on such tax receipts, proceeds from bond
sales or other revenues, as the case may be.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund also may invest in certain "private activity" bonds or notes. Such Funds
may not be an appropriate investment for entities which are "substantial users,"
or certain "related persons" of substantial users, of facilities financed by
private activity bonds. "Substantial users" are defined under U.S. Treasury
Regulations to include a non-exempt person who regularly uses a part of such
facilities in his trade or business and whose gross revenues derived with
respect to the facilities financed by the issuance of bonds are more than 5% of
the total revenues derived by all users of such facilities, or who occupies more
than 5% of the usable area of such facilities or for whom such facilities, or a
part thereof, were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations,
partnerships and their partners and S corporations and their shareholders.
MUNICIPAL COMMERCIAL PAPER--Municipal commercial paper is a debt obligation
with a stated maturity of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Subject to its respective investment objective and policies, the Tax-Free
Securities Fund and the Tax-Free Short Intermediate Securities Fund may invest
in municipal commercial paper that is rated at the date of purchase in one of
the two highest rating categories by an NRSRO or not rated but is considered by
Hawaiian Trust to be of comparable quality.
U.S. GOVERNMENT OBLIGATIONS
Each of the Funds may invest in U.S. Government Obligations which include,
in addition to U.S. Treasury Securities, the obligations of Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Student Loan Marketing
Association ("SLMA"), Resolution Trust Corporation and Federal Home Loan
Mortgage Corporation ("FHLMC"). U.S. Treasury Securities and certain other
obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of FNMA, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the SLMA, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored instrumentalities if it
is not obligated to do so by law. Some of these instruments may be variable or
floating rate instruments. The Funds will invest in the obligations of such
instrumentalities only when Hawaiian Trust believes that the credit risk with
respect to the instrumentality is minimal.
BANK AND SAVINGS AND LOAN OBLIGATIONS
Each of the Funds may invest in Bank and Savings and Loan obligations.
These obligations include negotiable certificates of deposit, fixed time
deposits, bankers' acceptances, and interest bearing demand accounts. The Funds
limit their bank investments to dollar-denominated obligations of U.S.,
Canadian, Asian, Australian or European banks which have more than $500 million
in total assets at the time of investment or of United States savings and loan
associations which have more than $1 billion in total assets at the time of
investment and, in the case of U.S. banks, are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the Federal Deposit Insurance Corporation.
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COMMERCIAL PAPER
Each of the Funds may invest in commercial paper that is rated at the time
of purchase in the highest short-term rating category by an NRSRO or unrated if
considered by Hawaiian Trust to be of comparable quality. Commercial paper
includes short-term unsecured promissory notes, and variable floating rate
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions as well as similar taxable and tax-exempt instruments
issued by government agencies and instrumentalities.
CORPORATE SECURITIES
Each of the Funds may invest in debt securities issued by domestic
corporations, U.S. dollar-denominated debt securities issued by Canadian
corporations, Yankee bonds and supra-national obligations. Yankee bonds are U.S.
dollar-denominated obligations issued by foreign governments or companies.
Supra-national obligations are U.S. dollar-denominated obligations issued by
international entities such as the World Bank and the Inter-American Development
Bank.
PREFERRED STOCK
Each of the Funds may invest in preferred stock which is a class of capital
stock that pays dividends at a specified rate and that has preference over
common stock in the payment of dividends and the liquidation of assets.
Preferred stock does not ordinarily carry voting rights.
ILLIQUID SECURITIES
Each of the Funds may invest in illiquid securities. The Funds will not
knowingly invest more than 15% of the value of their respective net assets in
securities that are illiquid. Repurchase agreements with a duration of more than
seven days, time deposits that do not provide for payment to a Fund within seven
days after notice, Guaranteed Investment Contracts ("GICs") and most commercial
paper issued in reliance upon the exemption in Section 4(2) of the Securities
Act of 1933 (the "1933 Act") (other than variable amount master demand notes
with maturities of nine months or less) are subject to this 15% limit.
If otherwise consistent with its investment objective and policies, any of
the Funds may purchase securities which are not registered under the 1933 Act
but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as it is determined by Hawaiian Trust, acting under guidelines and
procedures that are developed, established and monitored by the Board of
Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities. The ability to sell to
qualified institutional buyers under Rule 144A is a recent development, and it
is not possible to predict how this market will develop.
BORROWINGS
Each Fund may borrow from banks up to 20% of the current value of its net
assets for temporary purposes in order to meet redemptions. Each Fund may borrow
funds for temporary purposes by entering into reverse repurchase agreements
which are considered to be borrowings under the Investment Company Act of 1940
(the "1940 Act"). At the time a Fund enters into a reverse repurchase agreement
(an agreement under which the Fund sells portfolio securities and agrees to
repurchase them at an agreed-upon date and price), it will place in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high grade debt securities having a value equal to or greater than the
repurchase price (including accrued interest) and will subsequently monitor the
account so that such value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the price of the securities it is obligated to repurchase. The Funds would
pay interest
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<PAGE> 53
on amounts obtained pursuant to a reverse repurchase agreement.
LOANS OF PORTFOLIO SECURITIES
Each of the Funds may lend securities from its portfolio to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government securities or other high grade debt obligations equal to the current
market value of the securities loaned (including accrued interest thereon) plus
the interest payable to the Fund with respect to the loan is maintained with the
Fund. In determining whether to lend a security to a particular broker, dealer
or financial institution, Hawaiian Trust will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily by Hawaiian Trust. No Fund will
enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that a Fund may receive as collateral will
not become part of such Fund's portfolio at the time of the loan and, in the
event of a default by the borrower, the Fund will, if permitted by law, dispose
of such collateral except for such part thereof that is a security in which such
Fund may invest. During the time securities are on loan, the borrower will pay
the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn additional income or receive an agreed-upon fee from a
borrower that had delivered cash-equivalent collateral. No Fund will lend
securities having a value that exceeds 30% of the current value of its total
assets. Loans of securities by a Fund will be subject to termination at the
Fund's or the borrower's option. The Funds may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Trust, Hawaiian Trust, or BISYS.
FUTURES CONTRACTS AND RELATED OPTIONS
Each of the Funds may enter into contracts for the future delivery of
securities and futures contracts based on a specific security, class of
securities, or an index, purchase or sell options on any such futures contracts
and engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index.
The Funds may engage in such futures contracts in an effort to hedge
against market risks and/ or manage cash flow into the Funds. For example, when
interest rates are expected to rise or market values of portfolio securities are
expected to fall, the Funds can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, the Funds, through
the purchase of such contracts, can attempt to secure better rates or prices for
the Funds than might later be available in the market when it effects
anticipated purchases. Alternatively, futures may be used to manage cash flows
into and out of the Funds. For example, the investment manager may wish to be
fully invested in a particular asset class. Through the use of futures, the
manager can achieve this objective immediately while temporarily deferring
industry and security selection, in the interest of timeliness.
The acquisition of put and call options on futures contracts will,
respectively, give the Funds the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums paid
for related options, may not exceed five percent of each Fund's total assets,
and the value of securities that are the
PROSPECTUS
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<PAGE> 54
subject of such futures and options (both for receipt and delivery) may not
exceed one-third of the market value of each Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain each Fund's
qualification as a regulated investment company.
Futures transactions involve brokerage costs and require the Funds to
segregate assets to cover contracts that would require it to purchase securities
or currencies. The Funds may lose the expected benefit of futures transactions
if interest rates, exchange rates or securities prices move in an unanticipated
manner. Such losses are potentially significant and unanticipated changes may
result in poorer overall performance than if the Funds had not entered into any
futures transactions. In addition, the value of each Fund's futures positions
may not prove to be perfectly or even highly correlated with the value of its
portfolio securities, limiting each Fund's ability to hedge effectively against
interest rate, exchange rate and/or market risk and giving rise to additional
risks. There is no assurance of liquidity in the secondary market for purposes
of closing out futures positions. Where a liquid secondary market does not
exist, a Fund is unlikely to be able to control losses by closing out futures
positions. Finally, gains and losses on investments in options and futures
depend on Hawaiian Trust's ability to predict correctly the direction of
interest rates and other economic factors.
ASSET BACKED SECURITIES
Each of the Funds may invest in Asset Backed Securities. Asset Backed
Securities arise through the grouping by governmental, government-related, and
private organizations of loans, receivables, and other assets originated by
various lenders. Asset Backed Securities acquired by a Fund consist of both
mortgage and non-mortgage backed securities. Interest in pools of these assets
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal paid at maturity or
specified call dates. Instead, Asset Backed Securities provide periodic payments
which generally consist of both interest and principal payments.
The life of an Asset Backed Security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of an Asset Backed Security, will be primarily a function of
current market interest rates, although other economic and demographic factors
may be involved. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, Asset Backed Securities
are not as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
One such type of mortgage-backed security is a GNMA Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a FNMA
Certificate, the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. Government. Another type is
a FHLMC Participation Certificate. This type of obligation is guaranteed by
FHLMC as to timely payment of principal and interest. However, like a FNMA
security, it is not guaranteed by the full faith and credit of the U.S.
Government. Mortgage-backed securities issued by private issuers, whether or not
such obligations are subject to guarantees by the private issuer, may entail
greater risk than obligations directly or indirectly guaranteed by the U.S.
Government. Such securities will be purchased for the Funds only when Hawaiian
Trust determines
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that they are readily marketable at the time of purchase.
The average life of mortgage-backed securities varies with the maturities
of the underlying mortgage instruments, which have maximum maturities of 40
years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
mortgage prepayments, mortgage refinancings, or foreclosures. The rate of
mortgage prepayments, and hence the average life of the certificates, will be a
function of the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
Such prepayments are passed through to the registered holder with the regular
monthly payments of principal and interest and have the effect of reducing
future payments. Estimated average life will be determined by Hawaiian Trust and
used for the purpose of determining, respectively, the average weighted maturity
of the Funds. Various independent mortgage-backed securities dealers publish
average remaining life data using proprietary models and, in making such
determinations for the Funds, Hawaiian Trust might deem such data unreasonable
if such data appeared to present a significantly different average remaining
expected life for a security when compared to data relating to the average
remaining life of comparable securities as provided by other independent
mortgage-backed securities dealers.
The Funds also may invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pool of assets. Such securities also may be debt
instruments, which also are known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt.
Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. Non-mortgage-backed securities will be purchased
by the Funds only when such securities are readily marketable and rated at the
time of purchase in one of the two highest rating categories assigned by an
NRSRO or, if unrated, considered by Hawaiian Trust to be of comparable quality.
In addition, such securities generally will have remaining estimated lives at
the time of purchase of five years or less. See the SAI, "Additional Information
of Fund Investments."
REAL ESTATE MORTGAGE INVESTMENT CONDUITS
Each of the Funds may invest in Real Estate Mortgage Investment Conduits
("REMICs"). REMICs are a pass-through vehicle created to issue multiclass
mortgage-backed securities. REMICs may be organized as corporations,
partnerships, or trusts and those meeting certain qualifications are not subject
to double taxation. Interests in REMICs may be senior or junior, regular (debt
instruments) or residual (equity interests).
FLOATING AND VARIABLE RATE DEBT INSTRUMENTS
Each of the Funds may invest in floating and variable rate debt
instruments. Floating and variable rate debt instruments bear interest at rates
that are not fixed, but vary with changes in specified market rates or indices
or at specified intervals. Certain of these instruments may carry a demand
feature that would permit the holder to tender them back to the issuer at a par
value prior to maturity. The floating and variable rate instruments that the
Funds may purchase include certificates of participation in such obligations
purchased from banks. Hawaiian Trust will monitor on an ongoing basis the
ability of an issuer of a demand instrument to make payment when due, which
could be affected by events occurring between the date the Funds elect to demand
PROSPECTUS
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<PAGE> 56
payment and the date payment is due, except when such demand instruments permit
same-day settlement. In this regard, Hawaiian Trust, pursuant to direction of
the Board of Trustees, will determine the liquidity of those instruments with
demand features that cannot be exercised within seven days.
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS
Each of the Funds may purchase securities on a "when-issued" basis and may
also purchase or sell securities on a "forward commitment" basis. These
transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit a Fund to lock-in a price or yield on
a security it owns or intends to purchase, regardless of future changes in
interest rates. When-issued and forward commitment transactions involve the
risk, however, that the yield obtained in a transaction may be less favorable
than the yield available in the market when the securities delivery takes place.
The Funds do not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of their investment
objectives. The forward commitments and when-issued purchases are not expected
to exceed 25% of the value of any of the Funds' total assets absent unusual
market conditions.
The Funds will not start earning interest or dividends on when-issued
securities until they are received. The value of the securities underlying a
when-issued purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their value, is taken into account when determining
the net asset value of a Fund starting on the date such Fund agrees to purchase
the securities. Each Fund will establish a segregated account in which it will
maintain liquid assets in an amount at least equal in value to such Fund's
commitment to purchase securities on a when-issued or forward commitment basis.
If the value of these assets declines, the Fund will replace additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments.
LETTERS OF CREDIT AND LIQUIDITY AGREEMENTS
Each of the Funds may purchase debt obligations that are backed by an
irrevocable letter of credit or liquidity agreement of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Hawaiian Trust, are of investment quality comparable to other permitted
investments of such Fund, may be used for letter of credit and liquidity
agreement backed investments.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements wherein the seller
of a security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. A Fund may enter into repurchase agreements only with respect to
obligations that could otherwise be purchased by the Fund. All repurchase
agreements will be fully collateralized based on values that are marked to
market daily by Hawaiian Trust. If the seller defaults and the value of the
underlying securities has declined, the Fund may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
the Fund's disposition of the security may be delayed or limited.
OTHER INVESTMENT COMPANIES
In connection with the management of its daily cash position, each of the
Funds may invest in securities issued by other investment companies, including
other investment companies managed by Hawaiian Trust. Securities of other
investment companies will be acquired by a Fund within the limits prescribed by
the 1940 Act. Each of the Funds
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intends to limit its investments so that, as determined immediately after a
securities purchase is made: (a) not more than 5% of the value of its total
assets will be invested in the securities of any one investment company; (b) not
more than 10% of the value of its total assets will be invested in the aggregate
in securities of investment companies as a group; (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Fund; and (d) the Fund, together with other investment companies having the same
investment adviser and companies controlled by such companies, owns not more
than 10% of the total stock of any one closed-end company. As a shareholder of
another investment company, a Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that a Fund bears directly in connection with its own operations;
however, Hawaiian Trust has undertaken to waive or reimburse the Funds its
advisory fees with respect to Fund assets so invested (except when such purchase
is part of a plan of merger, consolidation, reorganization or acquisition).
FOREIGN SECURITIES
Each of the Funds may invest in securities of foreign governmental and
private issuers that are denominated in and pay interest in U.S. dollars.
Investments in foreign securities involve certain considerations that are not
typically associated with investing in domestic securities. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, tax on
interest, gains and/or dividends may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries.
OPTIONS
Each of the Funds may purchase put and call options and write covered put
and call options on securities in which such Fund may invest directly and that
are traded on registered domestic securities exchanges or that result from
separate, privately negotiated transactions with primary U.S. Government
securities dealers recognized by the Board of Governors of the Federal Reserve
System in an amount not exceeding 5% of the Fund's net assets. Options may be
entered into in an attempt to hedge a Fund's portfolio against market risk or to
enhance income (e.g., to attempt to realize through the receipt of premiums a
greater current return than would be realized on the underlying securities
alone). See SAI, "Additional Information on Fund Investments."
INTEREST ONLY OR PRINCIPAL ONLY OBLIGATIONS
Each of the Funds may make limited investments (not exceeding 5% of the
relevant Fund's net assets) in separately traded principal and interest
components of securities issued by the United States Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPs"). Under the STRIPs program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
GUARANTEED INVESTMENT CONTRACTS
Each of the Funds may invest up to 5% of its net assets in Guaranteed
Investment Contracts ("GICs") issued by highly rated U.S. insurance companies.
GICs are considered to be illiquid, and accordingly, are subject to each Fund's
15% limitation on investment in illiquid securities. See SAI, "Additional
Information on Fund Investments."
------------------------
PROSPECTUS
16
<PAGE> 58
ADDITIONAL RISK DISCLOSURE
Obligations rated in the lowest of the top four rating categories by an
NRSRO have speculative characteristics, and 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 with higher grade bonds.
Subsequent to its purchase by a Fund, an issue of securities may cease to be
rated or its rating category may be reduced below the minimum rating required
for purchase by the respective Fund. Hawaiian Trust will consider such an event
in determining whether the relevant Fund should continue to hold the obligation.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund are nondiversified, which means that their assets may be invested among
fewer issuers and therefore the value of their assets may be subject to greater
impact by events affecting one of their investments.
Since the Tax-Free Securities Fund and the Tax-Free Short Intermediate
Securities Fund invest significantly in obligations of issuers located in
Hawaii, the marketability and market value of these obligations may be affected
by certain Hawaiian constitutional provisions, legislative measures, executive
orders, administrative regulations and vote initiatives.
The Hawaiian economy is concentrated in tourism, agriculture and military
operations. Tourism is the strongest factor with tourists from a variety of
nations cushioning any adverse economic situations in a single country. Hawaiian
agriculture is diversifying into an expanded range of agricultural products,
away from the dominant pineapple and sugar production that has been subject to
increased foreign competition.
Governmental activities, including activities usually administered on a
municipal or county level such as public education, are the responsibility of
the state. This concentration aggravates an otherwise high level of state debt
obligations. The state General Fund has operated either within planned deficits
or with ending fund balances since December 1962. Revenue is derived primarily
from general excise taxes and individual and corporate income tax.
There can, of course, be no assurance that any mutual fund will achieve its
investment objective. In addition, unlike insured bank deposits, an investment
in the Funds is not insured against loss of principal.
PORTFOLIO TURNOVER
Generally, the Funds will purchase portfolio securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. However, a Fund may sell a portfolio investment soon after its
acquisition if Hawaiian Trust believes that such a disposition is consistent
with attaining the investment objective of the particular Fund. Portfolio
investments may be sold for a variety of reasons, such as a more favorable
investment opportunity or other circumstances bearing on the desirability of
continuing to hold such investments. The annual portfolio turnover rate is not
expected to exceed 100% for any Fund. For the fiscal years ended July 31, 1996
and July 31, 1995, the portfolio turnover rate for the Funds were as follows:
PROSPECTUS
17
<PAGE> 59
PORTFOLIO TURNOVER RATE FOR FISCAL YEARS
ENDED JULY 31, 1996 AND JULY 31, 1995
<TABLE>
<CAPTION>
FUND 1996 1995
----------------------------------------------------------------- ----- -----
<S> <C> <C>
Diversified Fixed Income Fund.................................... 58.86% 60.47%*
Short Intermediate U.S. Treasury Securities Fund................. 47.17% 62.73%
Tax-Free Securities Fund......................................... 24.78% 49.17%*
Tax-Free Short Intermediate Securities Fund...................... 54.70% 89.98%*
U.S. Treasury Securities Fund.................................... 15.75% 80.98%
<FN>
----------------------
* Fiscal period from October 14, 1994 (commencement of operations) to
July 31, 1995.
</TABLE>
See "Portfolio Transactions" in the SAI for additional information relating
to portfolio turnover.
INVESTMENT POLICIES
Each Fund's investment objectives, as set forth in the first paragraph of
the description of each Fund in the "Highlights" section are fundamental; that
is, they may not be changed without approval by vote of the holders of a
majority of the relevant Fund's outstanding voting securities, as described
under "Capital Stock" in the SAI. If the Trust's Board of Trustees determines,
however, that a Fund's investment objective can best be achieved by a
substantive change in a non-fundamental investment policy or strategy, the
Trust's Board may make such change without shareholder approval and will
disclose any such material changes in the then current prospectus. Any policy
that is not specified in a Fund's Prospectus, or in the SAI, as being
fundamental, is non-fundamental.
ADDITIONAL INVESTMENT RESTRICTIONS
As matters of fundamental policy, each of the Funds may not:
1. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to these limitations, and except that this restriction does not apply to
the Tax-Free Securities Fund or the Tax-Free Short Intermediate Securities Fund,
which are non-diversified funds.
2. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
U.S. Government Obligations and repurchase agreements secured by such
obligations; (b) with respect to the Tax-Free Securities Fund and the Tax-Free
Short Intermediate Securities Fund, there is no limitation with respect to
Municipal Obligations (for purposes of this limitation, private activity bonds
that are backed only by the assets and revenues of a non-governmental user shall
not be deemed to be Municipal Obligations); (c) wholly owned finance companies
will be considered to be in the industries of their parents if their activities
are primarily related to financing the activities of the parents; and (d)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry.
PROSPECTUS
18
<PAGE> 60
3. Make loans, borrow money or issue senior securities, except under
certain circumstances, and subject to certain percentage limitations, specified
above and in the SAI.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's portfolio securities will not constitute a violation of such
limitation.
MANAGEMENT, ADVISORY AND OTHER SERVICE 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 names and principal occupations of the
Trustees of the Trust are listed below. Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION
- ------------------------- ---------------------- ---------------------------------------------
<S> <C> <C>
Deborah G. Patterson* Trustee and Senior Vice President of Bank of
Chairperson Hawaii--Asset Management and Private Client
Group (1994-present); Director of KPMG Peat
Marwick (1993-1994); Senior Vice President
and Manager of Wells Fargo Bank (1987-1992)
Irimga McKay* Trustee and President Senior Vice President of BISYS Fund Services
(1994-present); Senior Vice President of
Concord Financial Group (1986-1994)
Douglas Philpotts* Trustee Chairman of the Board of Directors
(1992-1994), President (1986-1992), and
Director (1984-present) of Hawaiian Trust
Company Limited
Richard W. Gushman, II Trustee President and Chief Executive Officer of
OKOA, Inc. (1985-present); Adviser to RAMPAC,
Inc.
Stanley W. Hong Trustee President and Chief Executive Officer of the
Chamber of Commerce of Hawaii (1996-present);
Business Consultant (1994-present)
Russell K. Okata Trustee Executive Director of Hawaii Government
Employees Association (1981-present)
Oswald K. Stender Trustee Trustee of Bernice Pauahi Bishop Estate
(1990-present); Director of Hawaiian Electric
Industries, Inc. (1993-present)
</TABLE>
Trustees of the Trust who are not officers or employees of the Trust, BISYS
or Hawaiian Trust are entitled to receive from the Trust a quarterly retainer
and a fee for each Board of Trustees meeting attended. All Trustees are
reimbursed for all reasonable out-of-pocket expenses relating to attendance at
meetings.
PROSPECTUS
19
<PAGE> 61
THE ADVISER
Pursuant to an Advisory Agreement, the Funds are advised by Hawaiian Trust,
whose address is Financial Plaza of the Pacific, 111 S. King Street, Honolulu,
Hawaii 96813. Hawaiian Trust is a Hawaii corporation organized in 1898 and is
the largest trust company in the State of Hawaii, both in terms of assets under
administration and assets under management. As of June 30, 1996, Hawaiian Trust
had approximately $6.3 billion of client financial assets under management.
Hawaiian Trust is a wholly owned subsidiary of Bank of Hawaii, the largest
banking organization headquartered in the State of Hawaii, with approximately
$13 billion of assets as of June 30, 1996, and branches and offices throughout
the Pacific Basin, including Guam, Singapore, Tokyo, Seoul and Taiwan. All
shares of Bank of Hawaii are owned by Bancorp Hawaii, Inc. ("Bancorp") and Bank
of Hawaii's Directors (each of whom owns qualifying shares as required by Hawaii
law). Bancorp is a bank holding company, registered under the Bank Holding
Company Act of 1956, as amended, and its common stock is listed and traded on
the New York Stock Exchange (the "Exchange"). Bancorp files annual and periodic
reports with the Commission and the Exchange, which are available for public
inspection. Hawaiian Trust is not authorized to and does not carry on a banking
business.
The actual management of the portfolios of the Trust is coordinated by
Hawaiian Trust's investment unit, which is staffed with more than 30 people,
including six Chartered Financial Analysts and seven M.B.A.'s. All investment
decisions of the Funds are made by a committee, and no person is primarily
responsible for making recommendations to the committee. Hawaiian Trust has
served as investment adviser to other investment companies since 1984. These
include the Hawaiian Tax-Free Trust, with assets exceeding $650 million as of
June 30, 1996, and the Cash Assets Trust, with assets of approximately $670
million as of June 30, 1996.
Subject to the supervision of the Board of Trustees, Hawaiian Trust will
provide a continuous investment program for the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. Hawaiian Trust will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Funds. Hawaiian Trust will provide the services under
the Advisory Agreement in accordance with each of the Fund's investment
objectives, policies, and restrictions.
For its services under the Advisory Agreement, Hawaiian Trust is entitled
to monthly advisory fees at the annual rates of each Fund's average daily net
asset value equal to 0.50% for the Short Intermediate U.S. Treasury Securities
Fund and the Tax-Free Short Intermediate Securities Fund, and 0.60% for the
Diversified Fixed Income Fund, the U.S. Treasury Securities Fund and the
Tax-Free Securities Fund. For the fiscal year ended July 31, 1996, the fees paid
by the Funds to Hawaiian Trust under the Advisory Agreement, as a percentage of
average daily net assets, were as follows: Diversified Fixed Income Fund--0.60%;
Short-Intermediate U.S. Treasury Securities Fund--0.30% (after advisory fee
waiver); Tax-Free Securities Fund--0.60%; Tax-Free Short Intermediate Securities
Fund-- 0.50%; and U.S. Treasury Securities Fund--0.60%.
THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund, and also acts as the Trust's
principal underwriter and distributor. BISYS generally assists in all aspects of
the administration and operation of the Funds. For expenses assumed and services
provided as administrator pursuant to its Administration Agreement with the
Trust, BISYS is entitled to receive a fee from the Funds, computed daily and
paid monthly, at an annual rate equal to 0.20% of the average daily net assets
of each Fund.
PROSPECTUS
20
<PAGE> 62
For the fiscal year ended July 31, 1996, the ratios of total expenses to
average net assets (excluding waivers) for the Funds were as follows:
Diversified Fixed Income Fund--1.69%; Short Intermediate U.S. Treasury
Securities Fund--1.67%; Tax-Free Securities Fund--1.68%; Tax-Free Short
Intermediate Securities Fund--1.63%; and U.S. Treasury Securities Fund--1.74%.
In addition, BISYS, as the principal underwriter of the Funds within the
meaning of the 1940 Act, has entered into a Distribution Agreement with the
Trust pursuant to which BISYS has the responsibility for distributing shares of
the Funds. The Distribution Agreement provides that BISYS shall act as agent for
the Funds for the sale of their shares and may enter into selling agreements
with banks, broker/dealers or other financial institutions to market and make
available shares to their respective customers. For its services, BISYS is
entitled to a Distribution Fee as set forth in the Distribution and Shareholder
Servicing Plan (the "Distribution Plan"). The Distribution Plan provides that
with respect to the Retail Class Shares, BISYS is entitled to receive from each
Fund a fee in an amount not to exceed on an annual basis 0.75% of the average
daily net asset value of each Fund attributable to the Retail Class Shares of
such Fund to compensate it for the following: (a) payments BISYS makes to banks
and other institutions and industry professionals, broker/dealers, including
Hawaiian Trust, BISYS and their affiliates or subsidiaries, pursuant to an
agreement in connection with providing administrative support services to the
holders of a Fund's Retail Class Shares; or (b) payments to financial
institutions and industry professionals (such as insurance companies, investment
counselors, and BISYS' affiliates and subsidiaries) in consideration for the
sales support services provided and expenses assumed in connection with
distribution assistance, including but not limited to, printing and distributing
Prospectuses to persons other than current shareholders of a Fund, printing and
distributing advertising and sales literature and reports to shareholders used
in connection with the sale of a Fund's Shares, and personnel and communication
equipment used in servicing shareholder accounts and prospective shareholder
inquiries.
The Distribution Fee shall be paid to BISYS only to compensate or to
reimburse it for actual payments or expenses incurred as described above. The
Distribution Fee payable to BISYS is determined, within such limit, from time to
time by mutual agreement between the Trust and BISYS, and may not exceed the
maximum fee payable under the Rules of Fair Practice of the NASD. Until further
notice, BISYS voluntarily intends to waive a portion of its Distribution Fee for
the current fiscal year such that the Distribution Fee payable by each Fund will
not exceed 0.25% of the average daily net asset value attributable to the Fund's
Retail Class Shares on an annual basis.
BISYS may enter into selling agreements with one or more selling agents
under which such agents may receive compensation from BISYS for sales support
services, including, but not limited to, commissions or other payments to such
agents based on the average daily net assets of the Retail Class of each Fund's
shares attributable to it. Since the Distribution Agreement provides for fees
that are used by BISYS to pay for distribution-related and sales support
services, the Distribution Plan and the Distribution Agreement are approved and
reviewed in accordance with Rule 12b-1 under the 1940 Act, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expense of distributing its shares. As noted above, each Fund also offers an
Institutional Class, which is made available only to certain investors. The
Institutional Classes are not subject to any Distribution Fees or entitled to
benefits under the Distribution Plan. No Fund's Retail Class will be liable for
distribution expenditures made by BISYS in any given year in excess of the
maximum amount payable under the Distribution Plan for that Fund in that year.
BISYS is a broker/dealer registered with the Commission, and is a member of
the NASD.
PROSPECTUS
21
<PAGE> 63
OTHER SERVICE ARRANGEMENTS
Administrative Data Management Corporation ("ADM" or the "Transfer Agent"),
581 Main Street, Woodbridge, New Jersey 07095, serves as the Trust's transfer
agent and dividend disbursing agent. Ernst & Young LLP, One Columbus, Suite
2300, 10 West Broad Street, Columbus, Ohio 43215, serves as independent auditors
for the Trust.
VALUATION OF RETAIL CLASS SHARES
The net asset value of the Retail Class Shares for each Fund is determined
and its shares are priced as of the close of the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., Eastern Time) (the "Valuation Time") each
Business Day. As used herein, a "Business Day" is a day on which the Exchange is
open for trading and any other day (other than a day on which no shares of that
Fund are tendered for redemption and no order to purchase shares is received)
during which there is sufficient trading in the Fund's portfolio securities that
the Fund's net asset value per share might be materially affected. The Exchange
will not be open in observance of the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per Retail Class Share is
calculated by determining the value of the Retail Class's proportional interest
in the securities and other assets of each Fund, less (i) such class's
proportional share of general liabilities and (ii) liabilities allocable only to
such class, and dividing such amount by the number of Retail Class Shares
outstanding. The net asset value per Share for each Fund will fluctuate as the
value of its investment portfolio changes.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in good
faith by the Board of Trustees. Prices used for such valuations may be provided
by independent pricing services. For further information about valuation of
investments in the Funds, see the SAI.
HOW TO PURCHASE RETAIL CLASS SHARES
PURCHASE OF SHARES
Retail Class Shares in each Fund are sold on a continuous basis. Investors
may purchase Retail Class Shares of a Fund by completing and signing an account
registration form ("Account Registration Form") and mailing it, together with a
check (or other negotiable bank draft or money order) payable to the Trust, in
at least the minimum initial purchase amount, to your Participating Organization
or to the Trust's Transfer Agent, Administrative Data Management Corporation,
581 Main Street, Woodbridge, New Jersey 07095. Subsequent purchases of shares of
a Fund may be made at any time by mailing a check (or other negotiable bank
draft or money order) payable to the Trust, to ADM at the above address or to
your Participating Organization.
Retail Class Shares of the Funds may be purchased through procedures
established by BISYS in connection with requirements of qualified accounts
maintained by or on behalf of certain persons ("Customers") by banks,
institutions or industry professionals, such as broker/dealers, who have entered
into an agreement with BISYS ("Participating Organizations") under the
Distribution Plan. See "Management, Advisory and Other Service Arrangements."
BISYS' principal office is located at 3435 Stelzer Road, Columbus, Ohio
43219-3035.
PROSPECTUS
22
<PAGE> 64
Retail Class Shares of a Fund sold to Participating Organizations acting in
a fiduciary, advisory, custodial or other similar capacity on behalf of a
Customer will normally be held of record by the Participating Organizations.
With respect to shares so sold, it is the responsibility of the Participating
Organizations to transmit purchase or redemption orders to ADM and to deliver
federal funds for purchase on a timely basis. Beneficial ownership of shares of
a Fund will be recorded by the Participating Organizations and reflected in the
account statements provided by the Participating Organization to the Customer.
If an Account Registration Form has been previously received by ADM,
investors may also purchase Retail Class Shares by telephoning ADM at
800-258-9232. Payment for Retail Class Shares ordered by telephone may be made
by check or by electronic transfer and must be received by the Trust's Custodian
within seven days of the telephone order. If payment is not received within
seven days or a check timely received does not clear, the purchase may be
cancelled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Retail Class Shares effected by wiring funds to the
Trust's Custodian, investors must call ADM at 800-258-9232 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information. If you have opened an account through a
Participating Organization, you should telephone the Participating Organization
to make further investments.
Retail Class Shares of each Fund are purchased at the public offering price
per Retail Class Share, which is the net asset value per Retail Class Share (see
"Valuation of Retail Class Shares") next determined after receipt by the
Transfer Agent of an order to purchase Retail Class Shares in good form plus the
applicable sales charge as described below. The Participating Organizations are
responsible for the prompt transmission of purchase orders to the Transfer
Agent. Purchases of Retail Class Shares of a Fund will be effected only on a
Business Day of such Fund. An order received by the Transfer Agent prior to the
Valuation Time on any Business Day will be executed based on the net asset value
determined as of the Valuation Time on the date of receipt. An order received by
the Transfer Agent after the Valuation Time on any Business Day will be executed
based on the net asset value determined as of the next Business Day.
The minimum investment for an investor's initial purchase of Retail Class
Shares of a Fund is $1,000. The minimum investment for subsequent purchases is
$50. The minimum initial investment amount for IRAs is $250. As discussed below,
the minimum initial investment amount for Auto Invest Plan participants is $100.
Depending upon the terms of a particular Customer account, a Participating
Organization may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in the
Funds. Information concerning these services and any charges will be provided by
the relevant Participating Organization. This Prospectus should be read in
conjunction with any such information received from the Participating
Organization.
The Trust reserves the right to reject any order for the purchase of its
Retail Class Shares in whole or in part.
Every Shareholder will receive a confirmation of each new transaction in
the Shareholder's account. In the case of Retail Class Shares held of record by
a Participating Organization but beneficially owned by a Customer, confirmations
of purchases, exchanges and redemptions of Retail Class Shares by a
Participating Organization will be sent to the Customer by the Participating
Organization. Certificates representing shares will not be issued.
SALES CHARGES
The public offering price of a Retail Class Share of a Fund equals its net
asset value plus a sales charge. BISYS receives this sales charge as principal
underwriter and will reallow a portion of it
PROSPECTUS
23
<PAGE> 65
to broker/dealers or other financial institutions as dealer discounts and
brokerage commissions. From time to time dealers who receive dealer discounts
and broker commissions from BISYS may reallow a portion of such dealer discounts
and broker commissions to other dealers or brokers. BISYS may elect to reallow a
higher percentage of the sales charge stated below to selected brokers and
dealers for all sales with respect to which orders are placed with BISYS during
a particular period. At BISYS' discretion, the entire sales charge may at times
be reallowed as dealer discounts and brokerage commissions. If any sales charge
is reallowed to a broker/dealer or financial institution, it may be deemed an
"underwriter" under the Securities Act of 1933, as amended.
The following sales charge schedule applies to all Funds except the Short
Intermediate U.S. Treasury Securities Fund and the Tax-Free Short Intermediate
Securities Fund:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS ALLOWANCE
SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE
A PERCENTAGE OF NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE INVESTED PRICE
- ------------------------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $25,000............................... 4.00% 4.17% 3.60%
$25,000 or more but less than $50,000........... 3.75% 3.90% 3.38%
$50,000 or more but less than $100,000.......... 3.50% 3.63% 3.15%
$100,000 or more but less than $250,000......... 3.25% 3.36% 2.93%
$250,000 or more but less than $500,000......... 3.00% 3.09% 2.70%
$500,000 or more but less than $1,000,000....... 2.50% 2.56% 2.25%
$1,000,000 or more.............................. 0.00% 0.00% 0.00%
</TABLE>
The following sales charge schedule applies to the Short Intermediate U.S.
Treasury Securities Fund and Tax-Free Short Intermediate Securities Fund:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS SALES CHARGE AS ALLOWANCE AS A
A PERCENTAGE OF A PERCENTAGE OF PERCENTAGE OF
PUBLIC OFFERING NET AMOUNT PUBLIC OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $100,000............................... 2.25% 2.30% 2.03%
$100,000 or more but less than $250,000.......... 1.75% 1.78% 1.58%
$250,000 or more but less than $500,000.......... 1.25% 1.27% 1.13%
$500,000 or more but less than $1,000,000........ 1.00% 1.01% 0.90%
$1,000,000 or more............................... 0.00% 0.00% 0.00%
</TABLE>
While there are no sales charges on single transactions of $1 million or
more, BISYS will make payments to securities dealers, from its own resources,
related to these transactions as shown in the table below. The first payment
will be applied to the total purchase price and made payable upon settlement of
the purchase. Subsequent payments will be made at the end of each full calendar
quarter following the original purchase. The amount of each subsequent payment
will be based on the number of
PROSPECTUS
24
<PAGE> 66
shares originally purchased and remaining in the account at the time of the
payment multiplied by the net asset value per share at the purchase date. The
payment schedule will be as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF TOTAL OF ALL
AMOUNT OF PURCHASE PAYMENTS EACH PAYMENT PAYMENTS
- -------------------------------------------------------- --------- ------------ ------------
<S> <C> <C> <C>
$1,000,000 or more but less than $2,000,000............. 6 0.083% 0.50%
$2,000,000 or more but less than $4,000,000............. 5 0.070% 0.35%
$4,000,000 or more...................................... 4 0.063% 0.25%
</TABLE>
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which term shall mean: (i) an
individual, his or her spouse and children under the age of 21, if any; (ii) a
trustee or other fiduciary of a single trust estate or single fiduciary account;
or (iii) any other organized group of persons, whether incorporated or not,
provided that such organization has been in existence for at least six months
and has some bona fide business purpose other than the purchase of redeemable
securities of a registered investment company. In order to qualify for a reduced
sales charge, all orders from a Purchaser will have to be placed through a
single investment dealer and identified at the time of purchase as originating
from the same Purchaser, although such orders may be placed into more than one
discrete account which identifies the Purchasers.
BISYS, at its expense, will also provide additional compensation to dealers
in connection with sales of Shares of the Trust. Such compensation will include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public advertising
campaigns regarding one or more Funds, and/or other dealer-sponsored special
events. In some instances, this compensation will be made available only to
certain dealers whose representatives have sold a significant amount of such
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) vacation trips, including the provision of travel
arrangements and lodging, (2) tickets for entertainment events (such as
concerts, cruises and sporting events), and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of the Trust's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the NASD. None of the
aforementioned compensation is paid for by the Funds or their shareholders.
REDUCED SALES CHARGES
SALES CHARGE WAIVERS--The following classes of investors may purchase
Retail Class Shares of a Fund with no sales charge in the manner described below
(any of which may be changed or eliminated at any time by BISYS):
(1) Existing shareholders of a Fund, upon the reinvestment of dividend and
capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, Bancorp and its affiliates, and of BISYS and its affiliates (and spouses
and children of each of the foregoing);
(3) With the exception of investors for whom Bancorp Investment Group
provides custodial services, investors for whom Bancorp or one of its affiliates
acts in a fiduciary, advisory, custodial, agency or similar capacity;
(4) Investors who purchase shares of a Fund through a retirement related
payroll deduction plan,
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a 401(k) plan, a 403(b) plan, or a similar plan which by its terms permits
purchases of shares; and
(5) Orders placed on behalf of other investment companies distributed by
the Distributor.
The Trust permits the sale of its Retail Class 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); (ii) satisfies uniform criteria which enable the
Distributor to realize economies of scale in its costs of distributing shares;
(iii) if it is a group or association, 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 and the group, representative or
broker or dealer. At the time of purchase the investor, either directly or
through a broker or dealer, must furnish the Transfer Agent with information
sufficient to permit verification that the purchase qualifies for a reduced
sales charge.
The Distributor may waive the sales charge for an investor who purchases a
Fund's Retail Class Shares with the proceeds from the recent redemption of
shares of any non-money market front-end or back-end load mutual fund. To the
extent the sales load of the Fund in which such investor seeks to invest is
higher than that of the fund with respect to which the redemption proceeds
relate, the Distributor will waive only that portion of the Fund's sales load
which equals the prior sales load paid. Any portion of the sales load which is
not waived in accordance with the foregoing must be paid by the investor at the
time of purchase. Purchases of Fund shares using redemption proceeds as
described above must be made within 60 days of redemption from funds which are
not a series of Pacific Capital Funds and within 120 days of redemption from
funds which are series of Pacific Capital Funds. The Transfer Agent must be
notified in writing by the investor, or by his or her financial institution, at
the time the purchase is made. A copy of the investor's account statement
showing such redemption must accompany such notice. BISYS also, from time to
time, may waive the sales charge for all investors with respect to any Fund.
LETTERS OF INTENT--Any Purchaser may obtain a reduced sales charge by means
of a written Letter of Intent which expresses the intention of such Purchaser to
purchase a certain amount of a Fund's Retail Class shares within a period of 13
months. Each purchase of shares under a Letter of Intent will be made at the
public offering price plus the sales charge applicable at the time of such
purchase to a single transaction of the total dollar amount indicated in the
Letter of Intent. A Letter of Intent may include purchases of shares made not
more than 90 days prior to the date such Purchaser signs a Letter of Intent;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earlier purchase to be included. The terms of the
Letter of Intent and the escrow account associated therewith are described in
the Account Registration Form. For further information, interested investors
should contact ADM or their Participating Organization. Letter of Intent
privileges may be amended or terminated without notice at any time by the Trust.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION--A Purchaser may qualify for
a reduced sales charge by (i) combining concurrent purchases of shares of a Fund
with purchases of one or more of the other Funds sold with a sales charge or
(ii) combining a current purchase of shares of a Fund with prior purchases of
shares of any of the other Funds sold subject to a sales charge. The applicable
sales charge is based on the sum of (a) the Purchaser's current purchase of
shares of any Fund sold with a sales charge plus (b) the then-current net asset
value of all shares held by the Purchaser in any Fund sold with a sales charge.
To receive the applicable public offering price pursuant to the right of
accumulation, shareholders must at the time of purchase provide ADM or their
Partici-
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pating Organization with sufficient information to permit confirmation of
qualification. Accumulation privileges may be amended or terminated without
notice at any time by the Trust. Shares of other series of the Trust sold
subject to a sales charge which are not offered through this Prospectus may be
counted for purposes of the accumulation privileges.
AUTO INVEST PLAN--The Auto Invest Plan enables shareholders of any of the
Funds to make regular monthly or quarterly purchases of shares through automatic
deductions from their bank accounts. With shareholder authorization, the
Transfer Agent will deduct the amount specified from the shareholder's bank
account which will automatically be invested in shares at the public offering
price on the dates of the deduction. The required minimum initial investment
when opening an account using the Auto Invest Plan is $100; the minimum amount
for subsequent investments is $50. To participate in the Auto Invest Plan,
shareholders should complete the appropriate section of the Account Registration
Form which can be obtained by calling ADM at 800-258-9232. For a shareholder to
change the Auto Invest Plan instructions, the request must be made in writing to
ADM or your Participating Organization. Depending upon the terms of a particular
Customer account, a Participating Organization may charge a Customer's account
fees for services provided in connection with investment in the Funds.
Information concerning these services and any charges will be provided by the
Participating Organizations. This Prospectus should be read in conjunction with
any such information received from the Participating Organizations.
EXCHANGE PRIVILEGES
Except as described below, Retail Class shareholders may exchange shares of
any Fund on the basis of the relative net asset value of the shares exchanged,
without payment of a sales charge, for Retail Class Shares of any other Fund,
Retail Class Shares of any other series of the Trust or for service class shares
of the Cash Assets Trust, the Tax-Free Cash Assets Trust or the U.S. Treasuries
Cash Assets Trust, so long as they maintain the respective minimum account
balance in each Fund in which they own shares. To the extent that a shareholder
exchanges into a Fund having a higher sales charge than that of the Fund from
which the shareholder is exchanging, the shareholder will pay the sales charge
differential at the time of the exchange.
For federal income tax purposes, an exchange of shares is deemed a sale on
which a shareholder may realize capital gain or loss. Before an exchange can be
effected, a shareholder must receive a prospectus of the fund into which the
subject shares are to be exchanged. If you have previously elected the telephone
exchange option on your Account Registration Form, an exchange can be made by
calling ADM at 800-258-9232 or your Participating Organization. Otherwise,
exchanges may be made by forwarding a written request for exchange to ADM or
your Participating Organization. Exchange privileges may be exercised only in
those states where Retail Class Shares of such other Fund or series may be
legally sold, and may be amended or terminated at any time upon 60 days' notice.
HOW TO REDEEM RETAIL CLASS SHARES
Shareholders may redeem their Retail Class Shares without charge on any day
that net asset value is calculated (see "Valuation of Retail Class Shares") and
Retail Class Shares may ordinarily be redeemed by mail or by telephone. However,
if you purchase shares through a Participating Organization which serves as the
shareholder of record, you must redeem through such institution. In all other
cases, a completed Account Registration Form must have been received by the
Transfer Agent before redemption requests may be honored. All or part of a
Customer's Retail Class Shares may be subject to redemption in accordance with
instructions and limitations pertaining to his or her account
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held by a Participating Organization. For example, if a Customer has agreed to
maintain a minimum balance in his or her account, and the balance in that
account falls below that minimum due to redemptions, the Customer may be obliged
to redeem, or the Participating Organization may be authorized to redeem for and
on behalf of the Customer, the Customer's Retail Class Shares.
REDEMPTION BY MAIL
A written request for redemption must be received by ADM or your
Participating Organization in order to constitute a valid tender for redemption.
The Participating Organizations are responsible for the prompt transmission of
redemption requests to the Transfer Agent. The Transfer Agent will require a
signature guarantee by an eligible guarantor institution if (a) the redemption
check is to be payable to anyone other than the Retail Class Shareholder(s) of
record or (b) a redemption check is to be mailed or proceeds are to be wired to
the Retail Class Shareholder(s) at an address other than the address of record
or other than a commercial bank account designated on the Account Registration
Form of such Retail Class Shareholder(s) or (c) the redemption proceeds exceed
$50,000. For purposes of this policy, the term "eligible guarantor institution"
shall mean members of the STAMP (Securities Transfer Agents Medallion Program),
MSP (New York Stock Exchange Medallion Signature Program) or SEMP (Stock
Exchanges Medallion Program). Participants of STAMP, MSP, and SEMP are subject
to dollar value limitations which must be considered when requesting their
authorization. The Transfer Agent reserves the right to reject any signature
guarantee if it has reason to believe that the transaction would otherwise be
improper.
REDEMPTION BY TELEPHONE
A shareholder may have the proceeds of redemption requests electronically
transferred or mailed directly to a domestic commercial bank account previously
designated by the shareholder on the Account Registration Form. Under most
circumstances, such proceeds will be transmitted on the next Business Day
following receipt of a valid request for redemption. If you authorize the
telephone redemption option in your Account Registration Form, such electronic
redemption request may be made by the shareholder by telephone to ADM or your
Participating Organization. The Transfer Agent will reduce the amount of a wire
redemption payment by its then-current wire redemption charge. As of the date of
this Prospectus, there is no charge for wire redemptions. While this policy is
subject to change at any time, it is not anticipated that such charge would
exceed $7 per wire redemption. There is no charge for having proceeds of
redemption requests mailed to a designated bank account. The Trust will not
permit shareholders to change their accounts by telephone. For telephone
redemptions, call ADM at 800-258-9232. Neither the Distributor, the Transfer
Agent, Hawaiian Trust nor the Trust will be liable for any losses, damages,
expense or cost arising out of any telephone transaction (including exchanges
and redemptions) effected in accordance with the Fund's telephone transaction
procedures, upon instructions reasonably believed to be genuine. The Trust will
employ procedures designed to provide reasonable assurance that instructions by
telephone are genuine. A description of the procedures employed by the Trust to
confirm instructions communicated by telephone is contained in the Statement of
Additional Information. This policy places the entire risk of loss for
unauthorized or fraudulent transactions on the Shareholder, except that if the
Distributor, the Transfer Agent, Hawaiian Trust, the Trust or their affiliates
do not follow reasonable procedures, some or all of them may be liable for any
such losses.
During times of drastic economic or market changes, telephone exchanges or
redemptions may be difficult to implement. If you experience difficulty in
making a telephone exchange or redemption, your exchange or redemption request
may be made by regular or express mail, and it will be implemented at the next
determined net asset value following receipt by the Transfer Agent.
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PAYMENTS TO RETAIL CLASS SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Retail Class Shares are properly tendered for redemption,
as described above. The proceeds paid upon redemption of shares in a Fund may be
more or less than the amount invested. Payment to shareholders for shares
redeemed will be made within seven days after receipt by the Transfer Agent of
the request for redemption. However, to the greatest extent possible, the Trust
will attempt to honor requests from shareholders for next Business Day payments
upon redemption of Retail Class Shares if the request for redemption is received
by the Transfer Agent before 4:00 p.m., Eastern Time, on a Business Day or, if
the request for redemption is received after 4:00 p.m., Eastern Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Trust or the shareholders of the particular Fund to sell
or liquidate portfolio securities in an amount sufficient to satisfy requests
for payments in such manner.
If the Trust is requested to redeem Retail Class Shares for which it has
not yet received good payment, it may delay the forwarding of proceeds only
until payment has been collected for the purchase of such Retail Class Shares.
Such collection may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Retail Class Shares, investors should
purchase shares by certified or bank check or by wire transfer. The Trust
intends to pay cash for all Retail Class Shares redeemed, but under abnormal
conditions which make payment in cash inadvisable, the Trust may make payment
wholly or partly in portfolio securities at their then-current market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
Due to the relatively high cost of handling small accounts, the Trust
reserves the right to redeem, at net asset value, the Retail Class Shares of any
shareholder if, because of redemptions of Retail Class Shares by or on behalf of
the shareholder, the account of such shareholder in any Fund has a value of less
than $250 due to redemptions. Accordingly, an investor purchasing Retail Class
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her Retail
Class Shares. Before the Trust exercises its right to redeem such Retail Class
Shares and to send the proceeds to the shareholder, the shareholder will be
given notice that the value of the Retail Class Shares of a Fund in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $1,000.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables shareholders of any of the Funds to make
regular monthly or quarterly redemptions of Retail Class Shares. With
shareholder authorization, the Transfer Agent will automatically redeem Retail
Class Shares at the net asset value on the dates of the withdrawal and have a
check in the amount specified mailed to the shareholder. The required minimum
withdrawal is $100. To participate in the Auto Withdrawal Plan, shareholders
should call ADM for more information. Purchases of additional Retail Class
Shares concurrent with withdrawals may be disadvantageous to certain
shareholders because of tax liabilities and sales charges. To change the Auto
Withdrawal Instructions, or to discontinue the feature, a shareholder must
submit a written request to ADM or their Participating Organization.
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DIVIDEND AND TAX INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The Funds will declare dividends of substantially all of their net income
daily and will pay such dividends monthly. Distributable net realized capital
gains are distributed at least annually to shareholders of record. A shareholder
will automatically receive all income dividends and capital gains distributions
in additional full and fractional shares unless the shareholder elects to
receive such dividends or distributions in cash. Dividends elected to be
received in cash may be deposited directly into a shareholder's financial
institution account, provided the shareholder has completed the appropriate
section of the Account Registration Form. Dividends and distributions are
reinvested without a sales charge as of the ex-dividend date using the net asset
value determined on that date and are credited to a shareholder's account on the
payment date. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash. Dividends are generally
taxable when received. However, dividends declared in October, November or
December to shareholders of record during those months and paid during the
following January are treated for tax purposes as if they were received by each
shareholder on December 31 of the prior year. Elections to receive dividends or
distributions in cash, or any revocation thereof, must be made in writing to ADM
at 581 Main Street, Woodbridge, New Jersey 07095 or to your Participating
Organization, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.
TAX INFORMATION
Each Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). If a
Fund does so qualify, it will not be liable for federal income taxes on amounts
paid by it as dividends and capital gain distributions. However, the Code
contains a number of complex tests relating to such qualification and it is
possible, although not likely, that a Fund 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
distributions 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 Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund each intends to qualify during each fiscal year under the Code to pay
exempt-interest dividends to shareholders. Exempt-interest dividends which are
derived from net interest income earned by a Fund on tax-exempt securities will
be excludable from gross income of the shareholders of the Tax-Free Securities
Fund and the Tax-Free Short Intermediate Securities Fund for regular federal
income tax purposes. Distributions of short-term capital gains, long-term
capital gains and accrued market discount on taxable securities or municipal
securities are taxable and are not included in exempt-interest dividends.
Dividends from interest on taxable short-term obligations, and income from
repurchase agreements and securities loans, are reportable by shareholders of
the Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities Fund
as ordinary income. Although tax-exempt dividends are not taxed, each taxpayer
must report the total amount of tax-exempt interest (including exempt-interest
dividends from a Fund) received or acquired during the year.
Capital gains dividends (net long-term gains over net short-term losses
which a Fund distributes) are reportable by shareholders as long-term capital
gains. This is the case whether the shareholder takes his or her distribution in
cash or elects to have the distribution reinvested in Fund shares and regardless
of the length of time the shareholder has held his or her shares.
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Short-term gains, when distributed, are taxed to shareholders as ordinary
income. Capital losses of the Funds are not distributed but carried forward by
the Fund to offset gains in later years and thereby lessen the later-year
capital gains distributions and amounts taxed to shareholders.
A Fund's gains or losses on sales of securities will be long-term or
short-term depending upon the length of time the Fund has held such securities.
Capital gains and losses of the Fund 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 a Fund 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 Section 1256 futures and options
contracts will be reportable by the Fund 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.
Corporate shareholders are not expected to be entitled to any dividends
received deduction with respect to dividends paid by the Funds.
Information as to the tax status of a Fund's dividends and distributions
will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders to enable them
to purchase shares of the Tax-Free Securities Fund and the Tax-Free Short
Intermediate Securities Fund may not be deducted for federal or Hawaii tax
purposes to the extent the shareholders receive tax-exempt dividends from such
Fund. 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 such a Fund may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares.
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 of either the
Tax-Free Securities Fund or the Tax-Free Short Intermediate Securities Fund.
While interest from Municipal Obligations held by the Tax-Free Securities
Fund and the Tax Free Short Intermediate Securities Fund 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, and all tax-exempt interest will be a component of
the corporate alternative minimum tax. Whether or not that computation will
result in a tax will depend on many factors, and shareholders should consult
their tax advisers as to the possible alternative minimum tax, if any, they may
incur.
The Trust will be required to withhold, subject to certain exemptions, at a
rate of 31% on dividends paid and redemption proceeds (including proceeds from
exchanges) paid or credited to individual shareholders of the Funds if a correct
Taxpayer Identification Number, certified when required, is not on file with the
Trust or the Transfer Agent. Under the Code, dividends paid to a non-resident
alien or other foreign shareholder may be subject to U.S. withholding tax (at a
rate of up to 30%).
TAX EFFECTS OF REDEMPTIONS
A shareholder who redeems his or her shares or exchanges his or her shares
for shares of another Fund will usually have a short- or long-term (depending on
how long the shares have been held) capital gain or loss (depending on whether
the proceeds of the redemption are more or less than their tax basis, which is
usually cost). However, if the shares redeemed or sold were held for six months
or less, any capital loss is disallowed to the extent of any exempt interest
dividends on these shares and is otherwise treated as long-term to the
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extent of capital gains distributions received on such shares.
HAWAIIAN TAX INFORMATION
If at the close of each quarter of the Tax-Free Short Intermediate
Securities Fund's and the Tax-Free Securities Fund's taxable year at least 50%
of the value of its total assets consists of obligations the interest on which,
if such obligations were held by an individual, would be exempt from Hawaii
personal income tax (under either the laws of Hawaii or of the United States),
the Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities Fund
will be entitled to pay dividends to its shareholders which will be exempt from
Hawaii personal income tax to the extent derived from such obligations. Similar
exemptions may be available in other states with regard to the portion of
tax-exempt dividends attributable to interest exempt from state taxation under
federal law.
Dividends and distributions made by the Tax-Free Securities Fund or the
Tax-Free Short Intermediate Securities Fund to Hawaii residents, to the extent
attributable to Hawaiian Municipal Obligations, will generally be treated for
Hawaii personal income tax purposes in the same manner as they are treated under
the Code for federal income tax purposes. Under Hawaii law, interest derived
from obligations of states (and their political subdivisions) other than Hawaii
will not be exempt from Hawaii income taxation.
Persons or entities who are not Hawaii residents should not be subject to
Hawaii income taxation on dividends and distributions made by the Trust but will
be subject to other state and local taxes.
------------------------
For further information regarding taxation, see "Tax Information" in the
SAI.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, and state
taxation.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in a
Fund.
GENERAL INFORMATION
PERFORMANCE
From time to time, performance for the Retail Class Shares of the Funds
showing each Fund's average annual total return, aggregate total return, yield,
and tax-equivalent yield where appropriate may be presented in advertisements,
sales literature and in reports to Retail Class Shareholders. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated for the period since
the establishment of the Funds, and will, unless otherwise noted, reflect the
imposition of the maximum sales charge. Average annual return is measured by
comparing the value of an investment in Retail Class Shares of a Fund at the
beginning of the relevant period to the redemption value of the investment,
after reflecting the reinvestment of any dividends or capital gains
distributions and annualizing the difference. Aggregate total return is
calculated similarly to average annual total return except that the return
figure is aggregated over the relevant period instead of annualized. Yield will
be computed by dividing such Fund's net investment income per Retail Class Share
earned during a recent 30-day period by such Fund's per Retail Class Share
maximum offering price (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last day of the period and annualizing the
result. From time to time, average annual total return, aggregate total return
and yield for the Retail Class Shares of the
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Funds may also be calculated and advertised on the basis of an investment in a
Fund at the net asset value per share or at net asset value per share plus a
reduced sales charge, rather than the public offering price per share. In this
case, the figure would not reflect the effect of a maximum sales charge that a
Retail Class Shareholder may have paid. Tax-equivalent yield for the Tax-Free
Securities Fund and the Short Intermediate Tax-Free Securities Fund will be
computed assuming a stated income tax rate has been applied to non-exempt income
to derive the tax-exempt portion of the Funds' yield.
Retail Class Shareholders may also be provided with information comparing
the performance of the Retail Class Shares of the Funds to the performance of
other mutual funds with comparable investment objectives and policies. This
information may be based on data relating to various mutual fund or market
indices such as those prepared by Dow Jones & Co., Inc. and Standard & Poor's
Corporation or data prepared by Lipper Analytical Services, Inc. Comparisons may
also be made to indices or data published in Money Magazine, Forbes, Barron's,
The Wall Street Journal, The New York Times, Business Week, American Banker,
Institutional Investor, Pensions and Investments, USA Today, Fortune,
CDA/Wiesenberger, Ibbotson Associates, Inc., Morningstar, IBC/Donoghue's Money
Fund Reports and regional periodicals and newspapers. In addition to yield
information, general information about the Funds that appears in a publication
such as those mentioned above may also be quoted or reproduced in advertisements
or in reports to shareholders. Reports to Retail Class Shareholders may contain
performance information on any Fund.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by an affiliate of Hawaiian
Trust or an Institution with respect to customer accounts for investing in
shares of the Funds will not be included in performance calculations; such fees,
if charged, would reduce the actual yield and total return from that quoted.
Because of differences in the fees and/or expenses borne by the Retail
Class Shares of the Funds, the average annual total return, aggregate total
return, yield, and tax-equivalent yield, as the case may be, can be expected, at
any given time, to be lower than the average annual total return, aggregate
total return, yield, and tax-equivalent yield, respectively, on Institutional
Class Shares. Standardized yield and total return quotations will be computed
separately for Retail Class Shares and Institutional Class Shares.
DESCRIPTION OF THE TRUST AND ITS SHARES
CAPITALIZATION--The Trust was organized as a Massachusetts business trust
on October 30, 1992, and currently consists of nine separately managed series.
The Board of Trustees may establish additional series in the future. The series
of the Trust are: the Balanced Fund, Diversified Fixed Income Fund, Growth and
Income Fund, Growth Stock Fund, New Asia Growth Fund, Short Intermediate U.S.
Treasury Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
U.S. Treasury Securities Fund and the U.S. Treasury Securities Fund, each with
unlimited transferable shares of beneficial interest, no par value. When issued
in accordance with the terms and procedures described in their respective
Prospectuses, shares of the Funds are fully paid, non-assessable and freely
transferable.
Each series is comprised of two classes of shares--the Institutional Class
and the Retail Class. The classes have identical rights with respect to the
series of which they are a part, provided that there are certain matters which
affect one class but not another. Currently, the only such matters are the
existence of a Distribution Plan with respect to each Retail Class but not any
Institutional Class, the absence of any sales load with regard to the purchase
of shares of the Institutional Class, and the fact that a salesperson or other
person entitled to receive compensation for selling or servicing Retail
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Class Shares or Institutional Class Shares may receive different compensation
with respect to one such class over the other class in the same Fund. On all
such matters, shareholders vote as a class, and not by series. Shares of the
Institutional Class have different expenses, and are subject to no sales charge,
which may affect performance. A separate Prospectus applies to the Institutional
Class of each series. Prospectuses relating to the Institutional Class of Shares
of each series may be obtained by calling the telephone number listed on the
first page of this Prospectus.
VOTING--Shareholders have the right to vote on the election of Trustees and
on any and all matters as to which, by law or the provisions of the Declaration
of Trust of the Trust, they may be entitled to vote. All shares of the Trust
have equal voting rights and will be voted in the aggregate, and not by class or
series, except where voting by class or series is required by law or where the
matter involved affects only one class or series. The Trust is not required to
hold annual meetings of the Funds' shareholders, and does not intend to do so,
in any fiscal year in which it is not required by law to elect Trustees. The
Trustees are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee, if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
SHAREHOLDER LIABILITY--Under Massachusetts law, shareholders of the Funds
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Trust's Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust. The Declaration of
Trust provides for indemnification out of a Fund's property for any losses and
expenses of any shareholder of such Fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which a
Fund would be unable to meet its obligations.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to a Fund at the address or
telephone number set forth on the cover page of this Prospectus.
PROSPECTUS
34
<PAGE> 76
APPLICATION FOR PACIFIC CAPITAL FUNDS
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: OUTSIDE FUNDS TRANSFER AGENT OPERATIONS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
1-800-258-9232 LOGO
- --------------------------------------------------------------------------------
STEP 1 ACCOUNT REGISTRATION
PLEASE TYPE OR PRINT NAME EXACTLY AS ACCOUNT IS TO BE REGISTERED
A. REGISTRATION
<TABLE>
<S> <C> <C> <C>
[ ] Individual 1. ______________________________________________________________________________________________
First Name Middle Initial Last Name Social Security Number
[ ] Joint Account* 2. ______________________________________________________________________________________________
(Use lines 1 First Name Middle Initial Last Name Social Security Number
and 2) *JOINT ACCOUNTS WILL BE TENANTS WITH RIGHTS OF SURVIVORSHIP UNLESS OTHERWISE SPECIFIED.
[ ] For a Minor 3. ______________________________________________________ Under the ______________ Uniform Gifts/
(Only one Custodian's First Name Middle Initial Last Name State Transfers to
custodian and Minors Act
one minor are Custodian For ________________________________________________________________________________
permitted.) Minor's First Name Middle Initial Last Name Minor's Social Security No.
[ ] For Trust, 4. ______________________________________________________________________________________________
Corporation, (Name of Corporation or Partnership; PLEASE INDICATE TYPE OF ORGANIZATION. If a Trust, include
Partnership or the name and date of the Trust Instrument. The name(s) of the Trustees in which account will be
other Entity registered should be listed below. 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 Trustee(s) or Authorized Individual Title
</TABLE>
===============================================================================
B. MAILING ADDRESS AND TELEPHONE NUMBER
_______________________________________________________________________________
Street or P.O. Box City State Zip Code
(_________) ____________________________________________________________________
Area Code Daytime Telephone Number Occupation
_______________________________________________________________________________
Employer's Name/Employer's Address City State
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.
================================================================================
C. INVESTMENT DEALER OR BROKER:
(Important -- to be competed by Dealer or Broker)
________________________________________________________________________________
Dealer Name Branch Office Address Branch Office City/State Branch#
______________________________(______)__________________________________________
Representative's Name Rep# Area Code Telephone# [Agent User Dealer#/Branch#]
================================================================================
STEP 2 PURCHASE OF SHARES
A. INITIAL INVESTMENT
Make check payable to:
Pacific Capital Funds Minimum Initial Investment in any Fund
is $1,000. Subsequent Investments, $50.
<TABLE>
<S> <C> <C>
U.S. Treasury Securities Fund $__________ Tax-Free Short Intermediate Securities Fund $_________
Short Intermediate U.S. Treasury Securities Fund $__________ Growth Stock Fund $_________
Diversified Fixed Income Fund $__________ Balanced Fund $_________
Tax-Free Securities Fund $__________ Growth and Income Fund $_________
New Asia Growth Fund $__________ Total Investment $_________
</TABLE>
================================================================================
B. DISTRIBUTIONS: All income dividends and capital gains distributions will be
REINVESTED in additional shares at net asset value unless otherwise
indicated below.
Dividends are to be: [ ] Reinvested [ ] Paid in cash*
Capital Gains are to be: [ ] Reinvested [ ] Paid in cash*
*FOR CASH DIVIDENDS, PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS:
[ ] Wire directly into my financial institutional account. ATTACHED IS A
VOIDED CHECK showing the account information where I would like the
dividend deposited.
[ ] Mail check to my address listed in Step 1B.
[ ] Mail check as requested in Step 3F.
<PAGE> 77
===============================================================================
C. LETTER OF INTENT I/we intend to invest in shares of one or more of the
(See Terms of Escrow Pacific Capital Funds during the 13-month period from
for Letter the date of my first purchase pursuant to this Letter
of Intent at the end (which purchase cannot be more than 90 days prior to
of this the date of this Letter), an aggregate amount
application). (excluding any reinvestment of dividends or
distributions) of at least $25,000 which, together with
- ----------------------- my present holdings of Pacific Capital Fund shares (at
Check appropriate box public offering price on date of this Letter), will
[ ] YES [ ] NO equal or exceed the minimum amount checked below:*
[ ] $25,000 [ ] $50,000 [ ] $100,000 [ ] $250,000
[ ] $500,000 [ ] $1,000,000
*Accumulated investments must aggregate at least $100,000 for
reduced sales charges to apply to purchases of shares of the
Short-Intermediate U.S. Treasury Securities Fund or the
Tax-Free Short Intermediate Securities Fund.
- --------------------------------------------------------------------------------
STEP 3 SPECIAL FEATURES
A. AUTOMATIC INVEST PROGRAM
- ----------------------- This option provides you with a convenient way to have
Check appropriate box amounts automatically drawn on your financial
[ ] YES [ ] NO institution account and invested in your Pacific
Capital Fund account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I wish to make regular monthly investments. The minimum
initial purchase is reduced to $100 per Fund when you
use this service. Subsequent minimum purchase is $50
for each Fund. YOU MUST ATTACH A PRE-PRINTED DEPOSIT
SLIP OR VOIDED CHECK.
<TABLE>
<S> <C> <C> <C>
Amount
Please select how often you would
like to have the amount(s) shown
_____________ Fund $__________ above withdrawn from your checking
account and invested into the
_____________ Fund $__________ above selected Fund(s).
Fund $__________ [ ] Once each month -- on the [ ] Twice each month on the 1st
1st and the 16th
Total $__________ [ ] Once each month -- on the [ ] Once each quarter on the 1st
16th beginning in the month of
_____________________.
</TABLE>
- --------------------------------------------------------------------------------
B. TELEPHONE INVESTMENT
This option provides you with a convenient way to add to
- ----------------------- your account at any time you wish by simply calling
Administrative Data Management Corp. toll-free at
Check appropriate box 1-800-258-9232. To establish this program, please
[ ] YES [ ] NO complete Step 4, Sections A & B of this Application. YOU
MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
- --------------------------------------------------------------------------------
C. AUTOMATIC WITHDRAWAL PLAN
Application must be Please establish an Automatic Withdrawal Plan for this
received in good order account, subject to the terms of the Automatic
at least two weeks Withdrawal Plan Provisions set forth below. To realize
prior to 1st actual the amount stated below, Administrative Data Management
liquidation date. 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:
Check appropriate box
[ ] YES [ ] NO The minimum Automatic Withdrawal amount is $100 per
Fund.
<TABLE>
<S> <C>
_____________ Fund $__________
_____________ Fund $__________
Total $__________
</TABLE>
Please select how often you would like to have payments made
from your account under the Automatic Withdrawal Plan.
<TABLE>
<S> <C>
[ ] Once each month -- on the [ ] Twice each month on the 1st and 16th
1st
[ ] Once each month -- on the [ ] Once each quarter on the 1st beginning in
16th the month of ____________________________.
</TABLE>
Please choose one of the following options:
[ ] Mail check to my address listed in Step 1a.
[ ] Mail check as requested in Step 3f.
<PAGE> 78
- --------------------------------------------------------------------------------
D. 1. TELEPHONE EXCHANGE
This option allows you
to effect exchanges
among accounts in your
name within the Pacific
Capital group of Funds,
as described in the
Prospectus, by
telephone.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute the exchange of shares of one Pacific Capital
Fund for one of the funds into which exchange is permitted, as designated in
the Prospectus, with identical shareholder registration. The exchange will be
executed at the relative net asset values of the two funds as next determined
following receipt of such instructions.
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 Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-258-9232.
2. TELEPHONE REDEMPTION
This option allows you
to effect telephone
redemptions, as
described in the
Prospectus.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute a redemption of shares of one or more Pacific
Capital Funds. The redemption will be executed at net asset value next
determined following receipt of such instructions.
Except for gross negligence in acting upon such telephone instructions to
execute a redemption and subject to the conditions set forth herein, I (we)
understand and agree to hold harmless the Agent, each of the Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
TO MAKE A TELEPHONE REDEMPTION, CALL THE AGENT AT 1-800-258-9232.
- --------------------------------------------------------------------------------
E. EXPEDITED REDEMPTION
The proceeds will be
deposited to your
financial institution
account listed.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE AN EXPEDITED
REDEMPTION, CALL THE
AGENT AT
1-800-258-9232.
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 Pacific Capital Fund account is registered.
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------- --------------------------------------------
Financial Institution Account Registration Financial Institution Account Number
- -------------------------------------------- --------------------------------------------
Name of Financial Institution Financial Institution Transit/Routing Number
- -------------------------------------------- --------------------------------------------
Street City State Zip Code
</TABLE>
- --------------------------------------------------------------------------------
F. SECONDARY ADDRESS
Check appropriate box
[ ] YES [ ] NO
Checks should be made payable as indicated below. If check is payable to a
financial institution, i.e., a commercial bank, savings bank or credit union,
for your account, indicate financial institution name, address and your account
number.
- -----------------------
<TABLE>
<S> <C>
-------------------------------------------- ---------------------------------------
First Name Middle Last Name Name of Financial Institution
Initial
-------------------------------------------- ---------------------------------------
First Name Middle Last Name Street
Initial
-------------------------------------------- ---------------------------------------
Street City State Zip Code
-------------------------------------------- ---------------------------------------
City State Zip Code Financial Institution Account Number
</TABLE>
<PAGE> 79
- --------------------------------------------------------------------------------
STEP 4 DEPOSITORS AUTHORIZATION TO HONOR DEBITS
SECTION A 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 my/our account
for 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
-------------------------------------------
<TABLE>
<S> <C>
NAME AND ADDRESS ------------------------------------------------------------------------
WHERE MY/OUR NAME OF FINANCIAL INSTITUTION
ACCOUNT IS
MAINTAINED ------------------------------------------------------------------------
STREET ADDRESS
------------------------------------------------------------------------
CITY STATE ZIP CODE
NAME(S) AND ---------------------------------------------------- ------------------
SIGNATURE(S) OF PLEASE PRINT DATE
DEPOSITOR(S) AS
THEY APPEAR WHERE ---------------------------------------------------- ------------------
ACCOUNT IS SIGNATURE DATE
REGISTERED
----------------------------------------------------
PLEASE PRINT
----------------------------------------------------
SIGNATURE
</TABLE>
- --------------------------------------------------------------------------------
SECTION B SHAREHOLDER AUTHORIZATION / SIGNATURE(S) REQUIRED
- I/We authorize the Pacific Capital Funds 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, Pacific Capital Funds and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Pacific Capital Fund 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 understand that in
the event of such deficiency, Pacific Capital Funds and its agents will
first liquidate shares of the Pacific Capital Fund to which the purchase
transaction relates, and then, in the discretion of Pacific Capital Funds
and its agents, shares of any other Pacific Capital Fund in my/our account
at the Financial Institution. I/We authorize Pacific Capital Funds and its
agents to correct any transfer error by a debit or credit to my/our
financial Institution account and/or Fund 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 undersigned warrants that he/she has full authority and is of legal age
to purchase shares of the Pacific Capital Fund(s) designated above and has
received and read a current Prospectus of such Fund(s) and agrees to its
terms. Pacific Capital Funds, 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 resident of the U.S.; and either does not expect to be in the U.S.
for more than 182 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Fund, 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*
<TABLE>
<S> <C> <C>
- ------------------------------------------ ------------------------------------------ ------------------
INDIVIDUAL (OR CUSTODIAN) JOINT REGISTRANT, IF ANY DATE
- ------------------------------------------ ------------------------------------------ ------------------
CORPORATE OFFICER, PARTNER, TRUSTEE(S), TITLE DATE
ETC.
*FOR A TRUST, CORPORATION OR ASSOCIATION, 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.
</TABLE>
SPECIAL INFORMATION
<PAGE> 80
- 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 Fund's Agent.
- You may cancel any feature at any time, effective 3 days after the Agent
receives notice from you.
- Either the Fund 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 Fund 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 the Agent at 1-800-258-9232
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 Fund'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 shall be held in
escrow in shares of the Fund 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 purchase, the investor
must remit to the Agent 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 Agent or the
dealer, the Agent will, within sixty days after the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Any shares 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
Fund.
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 Fund purchased for and
held under the Plan, but the Agent will credit all such shares to the
Planholder on the records of the Fund. 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 Fund at
the Net Asset Value.
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 first 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 Fund) 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 Fund'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 Fund. 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
Fund, 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
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as his Agent in administering the Plan.
<PAGE> 81
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> 82
INVESTMENT ADVISER
Hawaiian Trust Company
111 S. King Street
Honolulu, Hawaii 96813
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
Ernst & Young LLP
One Columbus, Suite 2300
10 West Broad Street
Columbus, Ohio 43215
TRANSFER AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095
[LOGO]
PACIFIC CAPITAL FUNDS
--------------------------------------------
U.S. TREASURY SECURITIES FUND
SHORT INTERMEDIATE U.S. TREASURY
SECURITIES FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE
SECURITIES FUND
--------------------------------------------
RETAIL CLASS
<PAGE> 83
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
3435 Stelzer Road
Columbus, Ohio 43219-3035
New Asia Growth Fund (the "Fund") is one series of Pacific Capital Funds
(the "Trust"), a professionally managed, open-end, management investment company
with multiple portfolios or series available for investment. The Fund seeks to
achieve long-term growth of capital, primarily through direct or indirect
investments in equity securities of companies located in the developing
countries of Asia. For purposes of its investment objective, the Fund considers
such developing countries to be all countries in Asia other than Japan. The Fund
is advised by Hawaiian Trust Company, Limited ("Hawaiian Trust") and sponsored,
administered and distributed by BISYS Fund Services ("BISYS" or the
"Distributor"). Credit Lyonnais International Asset Management (HK) Limited
serves as sub-adviser (the "Sub-Adviser") to the Fund. (Hawaiian Trust and the
Sub-Adviser may hereafter be referred to collectively as the "investment
adviser.")
This Prospectus relates only to the "Retail Class" of the Fund's shares;
certain investors may qualify to invest in the Fund's Institutional Class, which
is not offered hereby. Retail and Institutional Class shares of the other eight
series of the Trust--the U.S. Treasury Securities Fund, the Short Intermediate
U.S. Treasury Securities Fund, the Diversified Fixed Income Fund, the Tax-Free
Short Intermediate Securities Fund, the Tax-Free Securities Fund, the Growth
Stock Fund, the Balanced Fund and the Growth and Income Fund--each of which has
its own investment objectives and policies, are offered by separate
Prospectuses, which can be obtained from the Trust at the above address and
telephone number. See, "General Information--Description of the Trust and its
Shares."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read this Prospectus
carefully and retain it for future reference. A Statement of Additional
Information ("SAI") dated November 29, 1996 containing additional and more
detailed information about the Fund has been filed with the Securities and
Exchange Commission (the "Commission") and is hereby incorporated by reference
into this Prospectus. The SAI is available without charge and can be obtained by
writing to the Fund at the address printed above or by calling 800-258-9232.
FOR PURCHASE, REDEMPTION, ACCOUNT OR GENERAL INQUIRIES CONTACT THE TRUST'S
TRANSFER AGENT: ADMINISTRATIVE DATA MANAGEMENT CORPORATION, 581 MAIN STREET,
WOODBRIDGE, NEW JERSEY 07095
800-258-9232
THIS PROSPECTUS SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE
------------------------
SHARES OF PACIFIC CAPITAL FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, HAWAIIAN TRUST OR ANY OF ITS AFFILIATES. SUCH SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
HAWAIIAN TRUST IS THE INVESTMENT ADVISER TO PACIFIC CAPITAL FUNDS. BISYS FUND
SERVICES, WHICH IS NOT AFFILIATED WITH HAWAIIAN TRUST, IS
THE SPONSOR AND DISTRIBUTOR FOR PACIFIC CAPITAL
FUNDS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PROSPECTUS DATED NOVEMBER 29, 1996
<PAGE> 84
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights............................................................................ 1
Fund Expenses......................................................................... 3
Financial Highlights.................................................................. 5
Investment Objective and Policies of the Fund......................................... 6
Additional Discussion Regarding Permitted Investment Activities....................... 7
Additional Risk Disclosure............................................................ 17
Additional Investment Restrictions.................................................... 21
Management, Advisory and Other Service Arrangements................................... 22
Valuation of Retail Class Shares...................................................... 25
How to Purchase Retail Class Shares................................................... 25
How to Redeem Retail Class Shares..................................................... 30
Dividend and Tax Information.......................................................... 32
General Information................................................................... 34
</TABLE>
<PAGE> 85
HIGHLIGHTS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. The Fund
seeks to achieve this objective primarily through direct or indirect investments
in equity securities of companies located in the developing countries of Asia.
The Fund invests indirectly in the equity securities of companies located in
developing Asian countries by purchasing interests in other foreign investment
companies or trusts which themselves invest in the developing countries of Asia.
The Fund may invest to a lesser degree in debt securities and other instruments
(i.e., warrants and securities convertible into equity or debt securities) if
the investment adviser believes that such investments would help achieve the
Fund's investment objective. Current income from dividends and interest will not
be an important consideration in selecting portfolio securities. Because of its
emphasis on the economies of the developing countries of Asia, the Funds should
be considered a vehicle for diversification of an individual's portfolio and not
a balanced investment program. For additional information concerning the
investment policies and practices of the Fund, see "Investment Objective and
Policies of the Fund," "Additional Discussion Regarding Permitted Investment
Activities" and "Additional Investment Restrictions" in this Prospectus. Further
information also is provided in the SAI.
CERTAIN RISKS
Investments in securities of companies located in the developing countries
of Asia involve special considerations and risks not typically associated with
investments in securities of United States issuers, including: the risks
associated with international investing generally, such as currency
fluctuations; the risks of investing in countries with smaller capital markets,
such as limited liquidity, price volatility and restrictions on foreign
investment; and the risks associated with the undeveloped economies of the
developing countries of Asia, including significant political and social
uncertainties, government involvement in the economies, overburdened
infrastructures, archaic legal systems, environmental problems, and obsolete
financial systems.
Equity securities held in the Fund's portfolio are subject to market risk
(i.e., the possibility that common stock prices will decline over short or even
extended periods of time). Debt securities held in the Fund's portfolio are
subject to default risk (i.e., the risk that the issuers of securities in which
the Fund invests may default in the payment of principal and interest). The
operating expense ratio of the Fund can be expected to be higher than that of an
investment company investing exclusively in United States securities because the
expenses of the Fund, such as custodial and brokerage costs, are higher.
Investors are reminded that in certain circumstances, their right to redeem
shares in the Fund may be suspended. There can be no assurance that the Fund
will achieve its investment objective. In addition, unlike insured bank
deposits, an investment in the Fund is not insured against loss of principal.
Therefore, investors should be prepared to accept some risk with money invested
in the Fund. The Fund may also engage in various hedging strategies and invest
in derivative securities.
For additional discussion of certain risks involved in investing in the
Fund, see "Additional Risk Disclosure" below.
PURCHASE OF RETAIL CLASS SHARES
Retail Class Shares of each Fund are sold on a continuous basis and may be
purchased by mail or by electronic transfer. See "How to Purchase Retail Class
Shares." Initial purchases may be made with a minimum investment of $1,000 (the
$1,000 minimum may be waived or reduced for certain accounts; the
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minimum initial purchase is $250 for Individual Retirement Accounts ("IRAs") and
$100 for Auto Invest Plan participants). Subsequent investments may be made with
as little as $50. For more information about purchasing Fund shares call
1-800-258-9232 or contact your Participating Organization.
Shares of the Retail Class of the Fund are offered at net asset value plus
a sales load. See "Valuation of Retail Class Shares." Only institutions
(including Bank of Hawaii and its affiliated and correspondent banks)
("Institutions") acting on behalf of customers having a qualified trust account,
employee benefit account or other qualifying relationship at such Institution
are eligible to invest in the Institutional Class of the Fund's shares, which
are not offered hereby. See "General Information."
DETERMINATION OF NET ASSET VALUE
The net asset value of the Retail Class Shares for the Fund is determined
and its shares are priced as of the close of the New York Stock Exchange (the
"Exchange"), currently 4:00 p.m. Eastern Time (the "Valuation Time"), each
Business Day (defined below). See "Valuation of Retail Class Shares."
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare and pay dividends of substantially all of its net
income quarterly. Any net capital gains of the Fund will be distributed at least
annually. At an investor's choice, dividends are paid by mail, directly
deposited into a financial institution account, or automatically reinvested,
without sales charges in additional shares at the then-current net asset value.
If no election is made, dividends will be automatically reinvested. See
"Dividend and Tax Information."
HAWAIIAN TRUST, THE SUB-ADVISER AND BISYS
For its services as investment adviser to the Fund, Hawaiian Trust receives
a fee from the Fund at an annual rate based on the Fund's average daily net
assets. A subsidiary of Bank of Hawaii, Hawaiian Trust (a non-deposit taking
institution) was founded in 1898 and is the oldest and largest trust company in
Hawaii. It has investment management authority over approximately $6.3 billion
in client financial assets. Hawaiian Trust is not authorized to and does not
carry on a banking business.
Hawaiian Trust has retained the Sub-Adviser to provide investment advisory
services with respect to management of the foreign component of the Fund's
portfolio. For its services, Hawaiian Trust pays the Sub-Adviser a fee at an
annual rate based on the Fund's average daily net assets.
BISYS provides certain administrative services to the Fund, for which the
Fund pays it a fee at an annual rate based on the Fund's average daily net
assets. BISYS also distributes the Fund's shares.
For additional information concerning these arrangements, see "Fund
Expenses" and "Management, Advisory and Other Service Arrangements."
REDEMPTION OF RETAIL CLASS SHARES
Retail Class Shares may ordinarily be redeemed by mail or by telephone.
However, all or part of a customer's Retail Class Shares may be subject to
redemption in accordance with instructions and limitations pertaining to his or
her account held by a Participating Organization (defined below). See "How to
Redeem Retail Class Shares."
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FUND EXPENSES
The following Table of Expenses lists the costs and expenses that a
shareholder can expect to incur as an investor in the Retail Class of the Fund.
Certain investors may qualify to invest in the Fund's Institutional Class, which
is not offered hereby. Long-term Retail Class shareholders could pay more in
distribution-related charges than the economic equivalent of the maximum
front-end sales charges applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD").
TABLE OF EXPENSES*
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................... 5.25%
Maximum Sales Load Imposed on Reinvested Dividends.................... None
Deferred Sales Load................................................... None
Redemption Fees (as a percentage of amount redeemed, if
applicable)**........................................................ None
Exchange Fee.......................................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.90%
12b-1 Fee (after waivers)............................................. 0.25%
Other Expenses (after waivers and reimbursements)..................... 1.07%
Total Fund Operating Expenses (after waivers and reimbursements)...... 2.22%
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in
Retail Class Shares assuming (1) 5% annual return*** and (2) redemption at the
end of each time period.
<TABLE>
<S> <C>
Time Period
1 year................................................................ $ 74
3 years............................................................... $118
5 years............................................................... $165
10 years............................................................... $295
<FN>
- ------------
* Investors who purchase shares through a Participating Organization (as
defined below), including an affiliate of Hawaiian Trust or an Institution
(as defined above), may be charged account-level fees for additional
services provided to them by such Participating Organization in connection
with investment in the Fund.
** The Transfer Agent will reduce the amount of a wire redemption payment by
its then current wire redemption charge. As of the date of this Prospectus,
there is no charge for wire redemptions. While this policy is subject to
change at any time, it is not anticipated that such charge would exceed $7
per wire redemption.
*** The assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return; the actual rate of return
may be greater or lesser than the assumed rate. The example should not be
considered a representation of past or future expenses, and actual expenses
may be greater or lesser than those shown.
</TABLE>
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EXPLANATION OF TABLE
The purpose of the foregoing table is to assist shareholders in
understanding the various costs and expenses that an investor in the Retail
Class of the Fund will bear. The amounts set forth under "Annual Fund Operating
Expenses--Other Expenses," as well as the expense amounts used in the example,
are based on actual amounts for the most recent fiscal year, restated to reflect
fee waivers and expense reimbursements in effect as of the date of this
Prospectus. In addition, "Rule 12b-1 Fees" have been adjusted to reflect the
current fee payable (after voluntary waiver) as of the date of this Prospectus.
The example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Commission
regulations.
Hawaiian Trust, the Sub-Adviser and BISYS each may elect, in its sole
discretion, to otherwise waive or reimburse its respective fees. Any such
waivers or reimbursements will reduce the total expenses of the Fund, thereby
increasing total return. As described above, the percentages shown above under
"12b-1 Fees", "Other Expenses" and "Total Fund Operating Expenses" reflect
voluntary fee waivers and reimbursements. Absent such waivers and
reimbursements, these percentages would be 0.75%, 1.94% and 3.58%, respectively.
There can be no assurance that the foregoing waivers and expense reimbursements
will continue to apply.
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FINANCIAL HIGHLIGHTS
The Financial Highlights in the table below set forth certain financial
data and investment results of the Fund since its inception, expressed in one
share outstanding throughout the period. The Financial Highlights are derived
from the financial statements of Pacific Capital Funds which have been audited
by Ernst & Young LLP, independent auditors. The Financial Highlights should be
read in conjunction with the financial statements, related notes, and other
financial information included in the Statement of Additional Information. The
Trust's annual report contains additional performance information relating to
the Fund and is available upon request, without charge.
<TABLE>
<CAPTION>
YEAR FEBRUARY 15,
ENDED 1995 TO
JULY 31, 1996 JULY 31, 1995(A)
------------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................... $ 11.21 $10.00
------------- -------
Investment Activities
Net investment income (loss).................................. (0.02) .02
Net realized and unrealized gain on investments............... 0.20 1.19
------------- -------
Total from Investment Activities......................... 0.18 1.21
------------- -------
Distributions
In excess of net investment income............................ (0.02) --
Net realized gains............................................ (0.26) --
------------- -------
Total Distributions...................................... (0.28) --
------------- -------
NET ASSET VALUE, END OF PERIOD..................................... $ 11.11 $11.21
========= ============
Total Return (excludes sales charges)(b)........................... 1.71% 12.10%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............................. $ 1,990 $ 330
Ratio of expenses to average net assets(c).................... 2.22% 2.24%
Ratio of net investment income (loss) to average net
assets(c).................................................... (0.28%) .80%
Ratio of expenses to average net assets*(c)................... 3.58% 3.51%
Ratio of net investment income (loss) to average net
assets*(c)................................................... (1.64%) (0.47%)
Portfolio Turnover(d).............................................. 86.53% 55.62%
Average Commission Rate paid(e).................................... $0.0069 --
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
</TABLE>
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INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund is designed for U.S. investors seeking diversification of their
respective investment portfolios by participating in the economies of developing
Asian countries. The Fund's investment objective is to seek long-term growth of
capital. The Fund seeks to achieve this objective primarily through direct or
indirect investments in equity securities of companies located in the developing
countries of Asia. The Fund invests indirectly in the equity securities of
companies located in developing Asian countries by purchasing interests in other
foreign investment companies or trusts which themselves invest in the developing
countries of Asia. For purposes of its investment objective, the Fund considers
such developing countries to be all countries in Asia other than Japan. The Fund
may invest to a lesser degree in debt securities and other instruments (i.e.,
warrants and securities convertible into equity or debt securities) if the
investment adviser believes they would help achieve the Fund's objective.
Current income from dividends and interest will not be an important
consideration in selecting portfolio securities.
It is anticipated that under normal market conditions the Fund will invest
at least 70% of its total assets directly or indirectly in common stock, common
stock equivalents (such as preferred or debt securities convertible into common
stocks) and preferred stocks of companies located in the developing countries of
Asia which the investment adviser believes have potential for capital
appreciation. The Fund will consider an issuer of securities to be located in a
developing country of Asia if it is organized under the laws of a developing
Asian country, if it derives 50% or more of its total revenues from business in
a developing Asian country, or if its equity securities are traded principally
on a securities exchange in a developing Asian country.
Developing countries in which the Fund may invest include, but are not
limited to: Hong Kong, China, India, Indonesia, South Korea, Malaysia, the
Philippines, Singapore, Taiwan, Pakistan, Bangladesh, Sri Lanka and Thailand.
The criteria which the investment adviser uses to select and maintain a
portfolio of investments in any country depends on its view as to the upside
potential of the stock markets in such country and, more specifically, the
investment instruments therein. In determining the upside potential for each
market, the investment adviser will consider the economic, political and social
factors affecting each country and the prospects for improvements in these
factors in the short, medium and long term.
The Fund will not limit its investments to any particular type of company.
The Fund may invest in companies, large or small, whose earnings are believed to
be in a relatively strong growth trend, or in companies in which significant
further growth is not anticipated but whose market value per share is thought to
be undervalued. The Fund may invest in small and relatively less well-known
companies. Investing in small and relatively less well-known companies generally
involves greater risks than investing in larger, more established issuers. For
example, such companies may have limited product lines, markets or financial
resources and may lack management depth. In addition, the securities of such
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established companies.
Subject to the Fund's investment objective, up to 35% of the Fund's total
assets may be invested in any combination of equity, debt and convertible
securities of issuers located outside Asia, including money market instruments
of the United States, should opportunities in these markets occur. In addition,
this portion of the Fund's portfolio will consist of various other financial
instruments such as forward foreign exchange contracts, futures contracts and
options. See "Additional Discussion Regarding Permitted Investment Activities."
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ADDITIONAL DISCUSSION REGARDING PERMITTED INVESTMENT ACTIVITIES
FOREIGN SECURITIES AND DEPOSITARY RECEIPTS
As described above, the Fund will invest substantially all of its assets in
the securities of foreign issuers. The Fund may invest in the securities of
foreign issuers directly or in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs") or other Depositary Receipts (which, together with ADRs, GDRs and EDRs,
are hereinafter collectively referred to as "Depositary Receipts") to the extent
such Depositary Receipts become available. ADRs (which include American
Depositary Shares and New York Shares) are publicly traded on exchanges or
over-the-counter ("OTC") in the United States. GDRs, EDRs and other types of
Depositary Receipts are typically issued by foreign depositaries, although they
may also be issued by U.S. depositaries, and evidence ownership interests in a
security or pool of securities issued by either a U.S. or foreign corporation.
Depositary Receipts may be "sponsored" or "unsponsored." In a sponsored
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas in an unsponsored arrangement, the
foreign issuer assumes no obligation and the depositary's transaction fees are
paid by the holders of the Depositary Receipts. Foreign issuers in respect of
whose securities unsponsored Depositary Receipts have been issued are not
necessarily obligated to disclose material information in the markets in which
the unsponsored Depositary Receipts are traded, and therefore, there may not be
correlation between such information and the market value of such securities.
The Fund may hold foreign currency in connection with the purchase and sale
of foreign securities. To the extent the foreign currency is so held, there may
be a risk due to foreign currency exchange rate fluctuations. Such foreign
currency will be held with the Fund's custodian bank or by an approved foreign
subcustodian.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in the United States. See
"Additional Risk Disclosure--Risk Factors and Special Considerations of
Investing Primarily in Developing Asian Countries" below. For additional
discussion concerning investment in foreign debt securities, see "Debt
Securities" below.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities that provide current income
and are issued by companies with the characteristics described above. The Fund
may purchase convertible securities that are fixed-income debt securities or
preferred stocks, and which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or other issuers. Convertible securities, while usually subordinated to
nonconvertible debt securities of the same issuer, are senior to common stocks
in an issuer's capital structure. Convertible securities may offer more
flexibility by providing the investor with a steady income stream (generally
yielding a lower amount than nonconvertible securities of the same issuer and a
higher amount than common stocks) as well as the opportunity to take advantage
of increases in the price of the issuer's common stock through the conversion
feature. Convertible security prices tend to be influenced by changes in the
market value of the common stock as well as changes in interest rates.
Convertible securities in which the Fund may invest are subject to the rating
criteria and limitations discussed below under "Debt Securities."
DEBT SECURITIES
The Fund may invest in debt securities issued by foreign and domestic
corporations or financial institutions, and Yankee bonds. Foreign debt
securities in which the Fund may invest include, but are not limited to, fixed
income securities of developing Asian countries and global fixed income
securities. Developing Asian fixed income securities are debt
PROSPECTUS
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securities or obligations issued or guaranteed by governments in such countries
(including their agencies, instrumentalities or political subdivisions)
("sovereign debt"), debt securities or obligations of entities organized to
restructure outstanding debt of such issuers, and debt securities of issuers
located in such developing countries. Global fixed-income securities include
government obligations issued or guaranteed by U.S. and foreign governments and
their political subdivisions, authorities, agencies or instrumentalities and by
supranational entities (such as the World Bank, The European Economic Community,
the Asian Development Bank and the European Coal and Steel Community), Eurobonds
and corporate bonds with varying maturities denominated in various currencies.
Yankee bonds are U.S. dollar-denominated obligations issued by foreign
governments or companies.
The debt securities in which the Fund will invest (including convertible
securities) will be of investment grade (i.e., rated in the top four rating
categories by a nationally recognized statistical rating organization (an
"NRSRO") or, if unrated, determined to be of comparable quality by the Fund's
investment adviser); provided, that up to 10% of the Fund's net assets may be
invested in securities rated below investment grade by an NRSRO or determined to
be of comparable quality by the investment adviser. Debt securities rated below
investment grade or of comparable quality are commonly referred to as "junk
bonds." For a description of the risks associated with investment in debt
securities, including lower-rated debt securities and sovereign debt, see
"Additional Risk Disclosure--Risk Factors Associated with Investment in Certain
Debt Securities."
PREFERRED STOCK
The Fund may invest in preferred stock which is a class of capital stock
that pays dividends at a specified rate and that has preference over common
stock in the payment of dividends and the liquidation of assets. Preferred stock
does not ordinarily carry voting rights.
ILLIQUID SECURITIES
The Fund may invest in illiquid securities. The Fund will not knowingly
invest more than 15% of the value of its respective net assets in securities
that are illiquid. Repurchase agreements with a duration of more than seven
days, time deposits that do not provide for payment to the Fund within seven
days after notice, Guaranteed Investment Contracts ("GICs"), most commercial
paper issued in reliance upon the exemption in Section 4(2) of the Securities
Act of 1933, as amended (the "1933 Act") (other than variable amount master
demand notes with maturities of nine months or less), and foreign assets subject
to material legal restrictions on repatriation are subject to this 15% limit.
If otherwise consistent with its investment objectives and policies, the
Fund may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by the investment adviser, acting under guidelines and
procedures that are developed, established and monitored by the Board of
Trustees, that an adequate trading market exists for that security either within
or outside the United States. This investment practice could have the effect of
increasing the level of illiquidity in the Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities. The ability to sell to qualified institutional buyers under Rule
144A is a recent development, and it is not possible to predict how this market
will develop.
The staff of the Commission has taken the position that OTC options that
are purchased and the assets used as cover for written OTC options should
generally be treated as illiquid securities. However, if a dealer recognized by
the Federal Reserve Bank as a primary dealer in U.S. Government securities is
the other party to an option contract written by the Fund and the Fund has the
absolute right to repurchase the option from the dealer at a formula price
established in a contract
PROSPECTUS
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<PAGE> 93
with the dealer, the Commission staff has agreed that the Fund needs to treat as
illiquid only that amount of the cover assets equal to the formula price less
the amount by which the market value of the security subject to the option
exceeds the exercise price of the option (the amounts by which the option is
in-the-money). Although the investment adviser does not believe that OTC options
are generally illiquid, pending resolution of this issue, the Fund will conduct
their operations in conformity with the views of the Commission staff.
BORROWINGS
The Fund may borrow an amount equal to no more than 33 1/3% of the value of
its total assets (calculated at the time of the borrowing) from banks for
temporary, extraordinary or emergency purposes, for the clearance of
transactions, to hedge against currency movements or for investment purposes.
The Fund may pledge up to 33 1/3% of its total assets to secure these
borrowings. If the Fund's asset coverage for borrowings falls below 300%, the
Fund will take prompt action to reduce its borrowings. If the 300% asset
coverage should decline as a result of market fluctuations or other reasons, the
Fund may be required to sell portfolio securities to reduce the debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time.
Borrowing for investment purposes is generally known as "leveraging."
Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Fund's portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased. In addition, the Fund may be
required to maintain minimum average balances in connection with such borrowing
or pay a commitment fee to maintain a line of credit, which would increase the
cost of borrowing over the stated interest rate.
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements which are considered to be borrowings under the Investment
Company Act of 1940, as amended (the "1940 Act"). At the time the Fund enters
into a reverse repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an agreed upon date and
price), it will place in a segregated custodial account liquid assets such as
U.S. Government securities or other liquid high-grade debt securities having a
value equal to or greater than the repurchase price (including accrued interest)
and will subsequently monitor the account so that such value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the price of the securities it is
obligated to repurchase. The Fund would pay interest on amounts obtained
pursuant to a reverse repurchase agreement.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government securities
or other high-grade debt obligations equal to the current market value of the
securities loaned (including accrued interest thereon) plus the interest payable
to the Fund with respect to the loan is maintained with the Fund. In determining
whether to lend a security to a particular broker, dealer or financial
institution, the investment adviser will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily by the investment adviser. The
Fund will not enter into any portfolio security lending arrangement having a
duration of longer than one year. Any securities that the Fund may receive as
collateral will not become part of the Fund's portfolio at the time of the loan
and, in the event of a default by the borrower, the Fund will, if permitted by
law, dispose of such collateral except for such part thereof that is a security
in which the Fund may invest. During the time securities are on loan, the
borrower will pay the Fund any accrued income on those securities, and the Fund
may invest
PROSPECTUS
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<PAGE> 94
the cash collateral and earn additional income or receive an agreed-upon fee
from a borrower that had delivered cash-equivalent collateral. The Fund will not
lend securities having a value that exceeds 33 1/3% of the current value of its
total assets. Loans of securities by the Fund will be subject to termination at
the Fund's or the borrower's option. The Fund may pay reasonable administrative
and custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers may not be
affiliated, directly or indirectly, with the Trust, Hawaiian Trust, the
Sub-Adviser or BISYS.
HEDGING STRATEGIES
The Fund may engage in various portfolio strategies including derivative
transactions to reduce certain risks of its investments. These strategies
currently include the use of options, forward currency exchange contracts and
futures contracts and options thereon. The Fund's ability to use these
strategies may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that any of these strategies will
succeed. See "Additional Information on Fund Investments" and "Tax Information"
in the SAI. New financial products and risk management techniques continue to be
developed and the Fund may use these new investments and techniques to the
extent consistent with its investment objective and policies.
Options. The Fund may purchase put and call options and write (i.e., sell)
covered put and call options on securities, securities indexes (e.g., S&P 500)
and currencies that are traded on U.S. or foreign securities exchanges or in the
OTC market to hedge the Fund's portfolio. In addition, the Fund may purchase put
and call options and write covered put and call options on securities that
result from separate, privately negotiated transactions with primary U.S.
Government securities dealers recognized by the Board of Governors of the
Federal Reserve System. The Fund may purchase put options in an effort to
protect the value of securities (or currencies) that it owns against a decline
in market value and purchase call options in an effort to protect against an
increase in the price of securities (or currencies) it intends to purchase. The
Fund may also purchase put and call options to offset previously written put and
call options of the same series. See SAI, "Additional Information on Fund
Investments."
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase securities or currency subject
to the option at a specified price (the exercise price or strike price). A put
option gives the purchaser in return for a premium, the right for a specified
time, to sell the securities or currency subject to the option of the writer of
the put at the exercise price.
The aggregate value of the exercise price or strike price of call options
written by the Fund may not exceed 25% of the Fund's net asset value.
Forward Currency Exchange Contracts. The Fund may enter into forward
foreign currency exchange contracts to protect the value of its assets against
future changes in the level of currency exchange rates. The Fund may enter into
such contracts on a spot, i.e., cash, basis at the rate then prevailing in the
currency exchange market or on a forward basis, by entering into a forward
contract to purchase or sell currency. A forward contract on foreign currency is
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days agreed upon by the parties from the date of the
contract at a price set on the date of the contract.
The Fund's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities, accruals of interest or dividends
receivable and Fund expenses. Position hedging is the sale of a foreign currency
with respect to portfolio security positions denominated or quoted in that
currency or in a different currency (cross hedge). Although there
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are no limits on the number of forward contracts which the Fund may enter into,
the Fund may not position hedge (including cross hedges) with respect to a
particular currency for an amount greater than the aggregate market value
(determined at the time of making any sale of forward currency) of the
securities being hedged. See SAI, "Additional Information on Fund Investments."
Futures Contracts and Related Options. The Fund may enter into contracts
for the future delivery of specific securities, classes of securities, financial
indices or currencies, may purchase or sell exchange-listed or OTC options on
any such futures contracts and may engage in related closing transactions. A
financial futures contract is an agreement to purchase or sell an agreed amount
of securities or currency at a set price for delivery in the future. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give the Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
The Fund may engage in futures contracts and related options in an effort
to hedge against market or currency risks. For example, with respect to market
risk, when interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, the
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund than might later be available in the market when it
effects anticipated purchases. With respect to currency risk, by entering into
currency futures and options thereon on U.S. and foreign exchanges, the Fund can
seek to establish the rate at which it will be entitled to exchange U.S. dollars
for another currency at a future time. By selling currency futures, the Fund can
seek to establish the number of dollars it will receive at delivery for a
certain amount of a foreign currency. In this way, whenever the Fund anticipates
a decline in the value of a foreign currency against the U.S. dollar, the Fund
can attempt to "lock in" the U.S. dollar value of some or all of the securities
held in its portfolio that are denominated in that currency. By purchasing
currency futures, the Fund can establish the number of dollars it will be
required to pay for a specified amount of a foreign currency in a future month.
Thus if the Fund intends to buy securities in the future and expects the U.S.
dollar to decline against the relevant foreign currency during the period before
the purchase is effected, the Fund can attempt to "lock in" the price in U.S.
dollars of the securities it intends to acquire.
The Fund may not purchase and sell futures contracts and related options
for other than bona fide hedging purposes (as defined in Commodity Futures
Trading Commission ("CFTC") regulations) if, immediately thereafter, aggregate
initial margin deposits for futures contracts, and premiums paid for related
options, would exceed five percent (5%) of the liquidation value of the Fund's
total assets. The Fund may purchase and sell futures contracts and related
options, without limitation, for bona fide hedging purposes. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase securities
or currencies. The Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such losses are potentially significant and unanticipated changes may
result in poorer overall performance than if the Fund had not entered into any
futures transactions. In addition, the value of the Fund's futures positions may
not prove to be perfectly or even highly correlated with the value of its
portfolio securities, limiting the Fund's ability to hedge effectively against
interest
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rate, exchange rate and/or market risk and giving rise to additional risks.
There is no assurance of liquidity in the secondary market for purposes of
closing out future positions. Where a liquid secondary market does not exist,
the Fund is unlikely to be able to control losses by closing out futures
positions. Gains and losses on investments in options and futures depend on the
investment adviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors. Certain futures exchanges or boards
of trade have established daily limits on the amount that the price of futures
contracts or related options may vary, either up or down, from the previous
day's settlement price. These daily limits may restrict the Fund's ability to
purchase or sell certain futures contracts or related options on any particular
day. For additional discussion of certain risks associated with the use of
futures contracts and options thereon, see "Additional Risk Disclosure--Risks of
Hedging Strategies."
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Fund may enter into repurchase agreements only with respect to
obligations that could otherwise be purchased by the Fund. All repurchase
agreements will be fully collateralized based on values that are marked to
market daily by the investment adviser. If the seller defaults and the value of
the underlying securities has declined, the Fund may incur a loss. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
security, the Fund's disposition of the security may be delayed or limited.
OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other investment companies,
including other investment companies managed by Hawaiian Trust. In this regard,
the Fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies, which have been the only or
primary way to invest in certain developing countries of Asia. Securities of
other investment companies will be acquired by the Fund within the limits
prescribed by the 1940 Act. The Fund intends to limit its investments so that as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
(c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund; and (d) the Fund, together with other
investment companies having the same investment adviser and companies controlled
by such companies, owns not more than 10% of the total stock of any one
closed-end company.
As a shareholder of another investment company, the Fund would bear, along
with other shareholders, its pro rata portion of the other investment company's
expenses. Accordingly, in addition to bearing their proportionate share of the
Fund's expenses (i.e., management fees and operating expenses) shareholders will
also indirectly bear similar expenses of such other investment companies or
trusts. However, Hawaiian Trust has undertaken to waive or reimburse the Fund
its advisory fees with respect to assets invested in other investment companies
or trusts (except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition).
Investments by the Fund in wholly-owned investment entities created under
the laws of certain countries will not be deemed the making of an investment in
other investment companies.
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS
The Fund may purchase securities on a "when-issued" basis and may also
purchase or sell securities on a "forward commitment" basis. These transac-
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tions, which involve a commitment by the Fund to purchase or sell particular
securities with payment and delivery taking place at a future date (perhaps one
or two months later), permit the Fund to lock-in a price or yield on a security
it owns or intends to purchase, regardless of future changes in interest rates.
When-issued and forward commitment transactions involve the risk, however, that
the yield obtained in a transaction may be less favorable than the yield
available in the market when the securities delivery takes place. The Fund does
not intend to engage in when-issued purchases and forward commitments for
speculative purposes but only in furtherance of its investment objective. The
forward commitments and when-issued purchases are not expected to exceed 25% of
the value of the Fund's total assets absent unusual market conditions.
The Fund will not start earning interest or dividends on when-issued
securities until they are received. The value of the securities underlying a
when-issued purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their value, is taken into account when determining
the net asset value of the Fund starting on the date the Fund agrees to purchase
the securities. The Fund will establish a segregated account in which it will
maintain liquid high-grade debt securities in an amount at least equal in value
to the Fund's commitment to purchase securities on a when-issued or forward
commitment basis. If the value of these assets declines, the Fund will replace
additional liquid assets in the account on a daily basis so that the value of
the assets in the account is equal to the amount of such commitments.
WARRANTS
The Fund may invest in warrants. A warrant gives the holder thereof the
right to subscribe by a specified date to a stated number of shares of stock of
the issuer at a fixed price. Warrants tend to be more volatile than the
underlying stock, and if at a warrant's expiration date the stock is trading at
a price below the price set in the warrant, the warrant will expire worthless.
Conversely, if at the expiration date the stock is trading at a price higher
than the price set in the warrant, the Fund can acquire the stock at a price
below its market value. The Fund may not invest more than 10% of its net assets
in warrants.
DEFENSIVE STRATEGY
At times the investment adviser may judge that conditions in the securities
markets make pursuing the Fund's basic investment strategy inconsistent with the
best interests of its shareholders. At such times, the investment adviser may
temporarily use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing these
"defensive" strategies, the Fund may invest without limit in cash (foreign
currency or U.S. dollars) and in domestic, Eurodollar and foreign short-term
money market instruments. It is impossible to predict when, or for how long, the
Fund will use such alternative strategies.
U.S. GOVERNMENT OBLIGATIONS
The Fund may invest in U.S. Government Obligations which include, in
addition to U.S. Treasury Securities, the obligations of Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Student Loan Marketing
Association ("SLMA"), Resolution Trust Corporation and Federal Home Loan
Mortgage Corporation ("FHLMC"). U.S. Treasury Securities and certain other
obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of FNMA, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the SLMA, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide
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financial support to sponsored instrumentalities if it is not obligated to do so
by law. Some of these instruments may be variable or floating rate instruments.
The Fund will invest in the obligations of such instrumentalities only when the
investment adviser believes that the credit risk with respect to the
instrumentality is minimal.
COMMERCIAL PAPER
The Fund may invest in commercial paper that is rated at the time of
purchase in the two highest short-term rating categories by an NRSRO or unrated
if considered by the investment adviser to be of comparable quality. Commercial
paper includes short-term unsecured promissory notes, and variable floating rate
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions as well as similar taxable and tax-exempt instruments
issued by government agencies and instrumentalities.
BANK AND SAVINGS AND LOAN OBLIGATIONS
The Fund may invest in Bank and Savings and Loan Obligations. These
obligations include negotiable certificates of deposit, fixed time deposits,
bankers' acceptances, and interest bearing demand accounts. The Fund limits its
bank investments to dollar-denominated obligations of U.S., Canadian, Asian or
European banks which have more than $500 million in total assets at the time of
investment or of United States savings and loan associations which have more
than $1 billion in total assets at the time of investment and, in the case of
U.S. banks, are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the Federal Deposit
Insurance Corporation.
ASSET BACKED SECURITIES
The Fund may invest in Asset Backed Securities. Asset Backed Securities
arise through the grouping by governmental, government-related, and private
organizations of loans and receivables originated by various lenders. Asset
Backed Securities acquired by the Fund consist of both mortgage and non-mortgage
backed securities. Interest in pools of these assets differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal paid at maturity or specified call dates. Instead,
Asset Backed Securities provide periodic payments which generally consist of
both interest and principal payments.
The life of an Asset Backed Security varies with the prepayment experience
of the underlying debt instruments. The rate of such prepayments, and hence the
life of an Asset Backed Security, will be primarily a function of current market
interest rates, although other economic and demographic factors may be involved.
For example, falling interest rates generally result in an increase in the rate
of prepayments of mortgage loans while rising interest rates generally decrease
the rate of prepayments. An acceleration in prepayments in response to sharply
falling interest rates will shorten the security's average maturity and limit
the potential appreciation in the security's value relative to a conventional
debt security. Consequently, Asset Backed Securities are not as effective in
locking in high, long-term yields. Conversely, in periods of sharply rising
rates, prepayments are generally slow, increasing the security's average life
and its potential for price depreciation.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
One such type of mortgage backed security is a GNMA Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a FNMA
Certificate, the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. Government. Another type is
a FHLMC Participation Certificate. This type of obligation is
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guaranteed by FHLMC as to timely payment of principal and interest. However,
like a FNMA security, it is not guaranteed by the full faith and credit of the
U.S. Government. Mortgage backed securities issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government. Such securities will be purchased for the Fund only when the
investment adviser determines that they are readily marketable at the time of
purchase.
The average life of mortgage backed securities varies with the maturities
of the underlying mortgage instruments, which have maximum maturities of up to
40 years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
mortgage prepayments, mortgage refinancings, or foreclosures. The rate of
mortgage prepayments, and hence the average life of the certificates, will be a
function of the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
Such prepayments are passed through to the registered holder with the regular
monthly payments of principal and interest and have the effect of reducing
future payments. As a result of the pass-through of prepayments of principal on
the underlying securities, mortgage backed securities are often subject to more
rapid prepayments of principal than their stated maturity would indicate.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the realized yield or the average life of a
particular issue of pass-through certificates. As a result of these principal
payment features, mortgage backed securities are generally more volatile than
other U.S. Government securities.
Estimated average life of the mortgage backed security will be determined
by the investment adviser and used for the purpose of determining the average
weighted maturity of the Fund. Various independent mortgage backed securities
dealers publish average remaining life data using proprietary models and, in
making such determinations for the Fund, the investment adviser might deem such
data unreasonable if such data appeared to present a significantly different
average remaining expected life for a security when compared to data relating to
the average remaining life of comparable securities as provided by other
independent mortgage backed securities dealers.
The Fund also may invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pool of assets. Such securities also may be debt
instruments, which also are known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. Non-mortgage backed securities will be purchased
by the Fund only when such securities are readily marketable and rated at the
time of purchase in one of the two highest rating categories by an NRSRO or, if
unrated, considered by the investment adviser to be of comparable quality. In
addition, such securities generally will have remaining estimated lives at the
time of purchase of five years or less. See the SAI, "Additional Information on
Fund Investments."
REAL ESTATE MORTGAGE INVESTMENT CONDUITS
The Fund may invest in Real Estate Mortgage Investment Conduits ("REMICs").
REMICs are a pass-through vehicle created to issue multiclass mortgage-backed
securities. REMICs may be organized as corporations, partnerships, or trusts and
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those meeting certain qualifications are not subject to double taxation.
Interests in REMICs may be senior or junior, regular (debt instruments) or
residual (equity interests).
FLOATING AND VARIABLE RATE DEBT INSTRUMENTS
The Fund may invest in floating and variable rate debt instruments.
Floating and variable rate debt instruments bear interest at rates that are not
fixed, but vary with changes in specified market rates or indices or at
specified intervals. Certain of these instruments may carry a demand feature
that would permit the holder to tender them back to the issuer at a par value
prior to maturity. The floating and variable rate instruments that the Fund may
purchase include certificates of participation in such obligations purchased
from banks. The investment adviser will monitor on an ongoing basis the ability
of an issuer of a demand instrument to make payment when due, which could be
affected by events occurring between the date the Fund elects to demand payment
and the date payment is due, except when such demand instruments permit same-day
settlement. In this regard, the investment adviser, pursuant to direction of the
Board of Trustees, will determine the liquidity of those instruments with demand
features that cannot be exercised within seven days.
LETTERS OF CREDIT AND LIQUIDITY AGREEMENTS
The Fund may purchase debt obligations that are backed by an irrevocable
letter of credit or liquidity agreement of a bank, savings and loan association
or insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of the investment
adviser, are of investment quality comparable to other permitted investments of
the Fund, may be used for letter of credit and liquidity agreement backed
investments.
INTEREST ONLY OR PRINCIPAL ONLY OBLIGATIONS
The Fund may make limited investments (not exceeding 5% of the Fund's net
assets) in separately traded principal and interest components of securities
issued by the United States Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program ("STRIPs"). Under the
STRIPs program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
GUARANTEED INVESTMENT CONTRACTS
The Fund may invest up to 5% of its net assets in Guaranteed Investment
Contracts ("GICs") issued by highly rated U.S. insurance companies. GICs are
considered to be illiquid, and accordingly, are subject to the Fund's 15%
limitation on investment in illiquid securities. See SAI, "Additional
Information on Fund Investments."
PORTFOLIO TURNOVER
Generally, the Fund will purchase portfolio securities for capital
appreciation and not for short-term trading profits. However, the Fund may sell
a portfolio investment soon after its acquisition if the investment adviser
believes that such a disposition is consistent with attaining the investment
objective of the Fund. Portfolio investments may be sold for a variety of
reasons, such as a more favorable investment opportunity or other circumstances
bearing on the desirability of continuing to hold such investments. As a result,
the Fund may engage in a substantial number of portfolio transactions.
Accordingly, while the Fund anticipates that its annual portfolio turnover rate
should not exceed 100% under normal conditions, it is impossible to predict
portfolio turnover rates. For the fiscal year ended July 31, 1996 and the period
February 15, 1995 (commencement of operations) to July 31, 1995, the Fund's
portfolio turnover rate was 86.53% and 55.62%, respectively. See "Portfolio
Transactions" in the SAI for additional information relating to portfolio
turnover.
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INVESTMENT POLICIES
The Fund's investment objective, as set forth in the first paragraph of the
description of the Fund in the "Highlights" section is fundamental; that is, it
may not be changed without approval by vote of the holders of a majority of the
Fund's outstanding voting securities, as described under "Capital Stock" in the
SAI. If the Trust's Board of Trustees determines, however, that the Fund's
investment objective can best be achieved by a substantive change in a
nonfundamental investment policy or strategy, the Trust's Board may make such
change without shareholder approval and will disclose any such material changes
in the then current prospectus. Any policy that is not specified in the Fund's
Prospectus, or in the SAI, as being fundamental is nonfundamental.
ADDITIONAL RISK DISCLOSURE
RISK FACTORS AND SPECIAL CONSIDERATIONS OF
INVESTING PRIMARILY IN DEVELOPING ASIAN COUNTRIES
General. Because the Fund intends to invest primarily in securities of
companies located in developing Asian countries, an investor in the Fund should
be aware of certain risk factors and special considerations relating to
investing in these developing economies. More generally, the investor should
also be aware of risks and considerations related to international investing and
investing in smaller capital markets, each of which may involve risks which are
not typically associated with investments in securities of U.S. issuers.
Consequently, the Fund should be considered as a means of diversifying an
investment portfolio and not in itself a balanced investment program.
Investing on an International Basis and in Countries with Smaller Capital
Markets. Investing on an international basis and in countries with smaller
capital markets involves certain risks not involved in domestic investments,
including fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. Since the Fund will invest heavily in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
in the portfolio and the unrealized appreciation or depreciation of investments
insofar as U.S. investors are concerned. In addition, with respect to certain
foreign countries, there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability or diplomatic
developments which could affect investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain foreign investments may also be subject to foreign
withholding taxes. These risks are often heightened for investments in smaller
capital markets and developing countries of Asia.
Most of the securities held by the Fund will not be registered with the
Commission, nor will the issuers thereof be subject to the reporting
requirements of such agency. Accordingly, there may be less publicly available
information about a foreign company than about a U.S. company, and such foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which U.S. companies are
subject. As a result, traditional investment measurements, such as
price/earnings ratios, as used in the United States, may not be applicable to
certain smaller capital markets. Foreign companies, and companies in smaller
capital markets in particular, are not generally subject to uniform accounting,
auditing and financial reporting standards or to practices and requirements
comparable to those applicable to domestic companies. Foreign markets also have
different clearance and
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settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. Brokerage commissions and
other transaction costs on foreign securities exchanges are generally higher
than in the United States. There is generally less government supervision and
regulation of exchanges, brokers and issuers in foreign countries than there is
in the United States.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in U.S. securities since the
expenses of the Fund, such as management and advisory fees and custodial costs,
are higher.
Investing in Developing Asian Securities Markets and Economies. The
securities markets of developing Asian countries are not as large as the U.S.
securities markets and have substantially less trading volume, resulting in a
lack of liquidity and high price volatility. Certain markets, such as those of
China, are in only the earliest stages of development. There is also a high
concentration of market capitalization and trading volume in a small number of
issuers representing a limited number of industries, as well as a high
concentration of investors and financial intermediaries. Many of such markets
also may be affected by developments with respect to more established markets in
the region, such as in Japan. Developing Asian brokers typically are fewer in
number and less capitalized than brokers in the United States. These factors,
combined with the U.S. regulatory requirements for open-end investment companies
and the restrictions on foreign investments discussed below, result in
potentially fewer investment opportunities for the Fund and may have an adverse
impact on the investment performance of the Fund.
The investment objective of the Fund reflects the belief that the economies
of the developing Asian countries will continue to grow in such a fashion as to
provide attractive investment opportunities. At the same time, emerging
economies present certain risks that do not exist in more established economies.
Especially significant is that political and social uncertainties exist for some
of these developing Asian countries. In addition, the governments of many of
such countries have a heavy role in regulating and supervising the economy.
Another risk common to most such countries is that the economy is heavily export
oriented and, accordingly, is dependent upon international trade. The existence
of overburdened infrastructure and obsolete financial systems also presents
risks in certain countries, as do environmental problems. Certain economies also
depend to a significant degree upon exports of primary commodities and,
therefore, are vulnerable to changes in commodity prices which, in turn, may be
affected by a variety of factors.
Archaic legal systems in certain developing Asian countries also may have
an adverse impact on the Fund. For example, while the potential liability of a
shareholder in a U.S. corporation with respect to the acts of the corporation is
generally limited to the amount of the shareholder's investment, the notion of
limited liability is less clear in certain developing Asian countries.
Similarly, the rights of investors in developing Asian companies may be more
limited than those of shareholders of U.S. corporations.
Certain of the risks associated with international investments and
investing in smaller capital markets are heightened for investments in
developing Asian countries. For example, some of the currencies of developing
Asian countries have experienced devaluations relative to the U.S. dollar, and
major adjustments have been made periodically in certain of such currencies.
Certain countries, such as India, face serious exchange constraints.
Inflation accounting rules in some developing Asian countries require, for
companies that keep accounting records in the local currency, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting
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may indirectly generate losses or profits for certain developing Asian
companies.
Satisfactory custodial services for investment securities may not be
available in some developing Asian countries, which may result in the Fund
incurring additional costs and delays in providing transportation and custody
services for such securities outside such countries.
Certain developing Asian countries, such as the Philippines and India, are
especially large debtors to commercial banks and foreign governments. In
addition, trading in sovereign debt issued or guaranteed by governmental
entities in developing Asian countries involves a high degree of risk. These
risks are discussed below in "Risk Factors Associated with Investment in Certain
Debt Securities."
Restrictions on Foreign Investments. Some developing Asian countries
prohibit or impose substantial restrictions on investments in their capital
markets, particularly their equity markets, by foreign entities such as the
Fund. As illustrations, certain countries may require governmental approval
prior to investments by foreign persons or limit the amount of investment by
foreign persons in a particular company or limit the investment by foreign
persons to only a specific class of securities of a company which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.
The manner in which foreign investors may invest in companies in certain
developing Asian countries, as well as limitations on such investments, also may
have an adverse impact on the operations of the Fund. For example, the Fund may
be required in certain of such countries to invest initially through a local
broker or other entity and then have the shares that were purchased
re-registered in the name of the Fund. Re-registration may in some instances not
be able to occur on a timely basis, resulting in a delay during which the Fund
may be denied certain of its rights as an investor, including rights as to
dividends or to be made aware of certain corporate actions. There also may be
instances where the Fund places a purchase order but is subsequently informed,
at the time of re-registration, that the permissible allocation of the
investment to foreign investors has been filled, depriving the Fund of the
ability to make its desired investment at that time.
Substantial limitations may exist in certain countries with respect to the
Fund's ability to repatriate investment income, capital or the proceeds of sales
of securities by foreign investors. The Fund could be adversely affected by
delays in, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as by the application to the Fund of any
restrictions on investments. In addition, even where there is no outright
restriction on repatriation of capital, the mechanics of repatriation may affect
certain aspects of the operations of the Fund. For example, funds may be
withdrawn from China only in U.S. or Hong Kong dollars and only at an exchange
rate established by the government once each week.
A number of publicly traded closed-end investment companies have been
organized to facilitate indirect foreign investment in developing Asian
countries, and certain of such countries, such as Thailand and South Korea, have
specifically authorized such funds. There also are investment opportunities in
certain of such countries in pooled vehicles that resemble open-end investment
companies. As discussed above, the Fund's investment in these companies will be
subject to certain percentage limitations of the 1940 Act. See "Additional
Discussion Regarding Permitted Investment Activities--Other Investment
Companies." This restriction on investments in securities of investment
companies may limit opportunities for the Fund to invest indirectly in certain
developing Asian countries. Shares of certain investment companies may at times
be acquired only at market prices representing premiums to their net asset
values.
In certain countries, banks or other financial institutions may be among
the leading companies or
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have actively traded securities. The 1940 Act restricts the Fund's investments
in any equity securities of an issuer which, in its most recent fiscal year,
derived more than 15% of its revenues from "securities related activities," as
defined by the rules thereunder. These provisions may restrict the Fund's
investments in certain foreign banks and other financial institutions.
Limitations on Share Transactions. To permit the Fund to invest the net
proceeds from the sale of its shares in an orderly manner, the Fund may, from
time to time, suspend the sale of its shares, except for dividend reinvestment.
The Fund also reserves the right to limit the number of its shares that may be
purchased by a person during a specified period of time or in the aggregate.
RISKS OF HEDGING STRATEGIES
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which the Fund
would not be subject absent the use of these strategies. If the investment
adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such strategies were not
used. Risks inherent in the use of options, foreign currency and futures
contracts and options on futures contracts include (1) dependence on the
investment adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; (5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences; and (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable for it to do so,
or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions. See "Additional
Information on Fund Investments" and "Tax Information" in the SAI.
The Fund will generally purchase options and futures on an exchange only if
there appears to be a liquid secondary market for such options or futures; the
Fund will generally purchase over-the-counter options only if management
believes that the other party to the options will continue to make a market for
such options. However, there can be no assurance that a liquid secondary market
will continue to exist or that the other party will continue to make a market.
Thus, it may not be possible to close an options or futures transaction. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or related option.
RISK FACTORS ASSOCIATED WITH INVESTMENT IN CERTAIN DEBT SECURITIES
Lower Rated Debt Securities. Securities rated in the medium to low rating
categories of NRSROs such as Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and unrated securities of comparable quality
(referred to herein as "high yield/high risk securities") are predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with the terms of the security, generally involve a greater
volatility of price than securities in higher rating categories, may have call
or redemption features which would permit the issuer to repurchase securities
from the Fund, are less liquid than higher rated securities, and may have their
value and liquidity negatively impacted by adverse publicity and investor
perceptions. See "Appendix" in the SAI. These securities are commonly referred
to as "junk bonds". In purchasing such securities,
PROSPECTUS
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<PAGE> 105
the Fund will rely on the investment adviser's judgment, analysis and experience
in evaluating the creditworthiness of an issuer of such securities. The
investment adviser will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and trends,
its operating history, the quality of the issuer's management and regulatory
matters. The Fund is not authorized to purchase debt securities that are in
default, except that the Fund may invest in sovereign debt which is in default,
provided that not more than 5% of its total assets is invested in sovereign debt
(including sovereign debt which is in default). For a further discussion of the
risks associated with investment in high yield/high risk securities, see
"Additional Information Fund Investments" in the SAI.
Sovereign Debt. The sovereign debt instruments in which the Fund may
invest involve great risk and are deemed to be the equivalent in terms of
quality to high yield-high risk securities. The Fund may have difficulty
disposing of certain sovereign debt obligations because there may be no liquid
secondary trading market for such securities. The Fund may invest up to 5% of
its total assets in sovereign debt, including sovereign debt which is in
default.
ADDITIONAL INVESTMENT RESTRICTIONS
As matters of fundamental policy, the Fund may not:
1. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to these limitations.
2. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to U.S.
Government Obligations and repurchase agreements secured by such obligations;
(b) wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.
3. Make loans, borrow money or issue senior securities, except under
certain circumstances, and subject to certain percentage limitations, specified
above and in the SAI.
PROSPECTUS
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<PAGE> 106
MANAGEMENT, ADVISORY AND OTHER SERVICE 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 names and principal occupations of the
Trustees of the Trust are listed below. Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
POSITION(S)HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL ORGANIZATION
- --------------------------------------------- ----------------------------------------------
<S> <C> <C>
Deborah G. Patterson* Trustee and Senior Vice President of Bank of Hawaii--Asset
Chairperson Management and Private Client Group (1994-
present); Director of KPMG Peat Marwick (1993-
1994); Senior Vice President and Manager of
Wells Fargo Bank (1987-1992)
Irimga McKay* Trustee and President Senior Vice President of BISYS Fund Services
(1994-present); Senior Vice President of
Concord Financial Group (1986-1994)
Douglas Philpotts* Trustee Chairman of the Board of Directors
(1992-1994), President (1986-1992), and
Director (1984-present) of Hawaiian Trust
Company Limited
Richard W. Gushman, II Trustee President and Chief Executive Officer of OKOA,
Inc. (1985-present); Adviser to RAMPAC, Inc.
Stanley W. Hong Trustee President and Chief Executive Officer of the
Chamber of Commerce of Hawaii (1996-present);
Business Consultant (1994-present)
Russell K. Okata Trustee Executive Director of Hawaii Government
Employees Association (1981-present)
Oswald K. Stender Trustee Trustee of Bernice Pauahi Bishop Estate (1990-
present); Director of Hawaiian Electric
Industries, Inc. (1993-present)
</TABLE>
Trustees of the Trust who are not officers or employees of the Trust,
BISYS, or Hawaiian Trust are entitled to receive from the Trust a quarterly
retainer and a fee for each Board of Trustees meeting attended. All Trustees are
reimbursed for all reasonable out-of-pocket expenses relating to attendance at
meetings.
THE ADVISER
Pursuant to an Advisory Agreement, the Fund is advised by Hawaiian Trust,
whose address is Financial Plaza of the Pacific, 111 S. King Street, Honolulu,
Hawaii 96813. Hawaiian Trust is a Hawaii corporation organized in 1898 and is
the largest trust company in the State of Hawaii, both in terms of assets under
administration and assets under management. As of June 30, 1996, Hawaiian Trust
had approximately $6.3 billion of client financial assets under management.
Hawaiian Trust is a wholly owned subsidiary of Bank of Hawaii, the largest
banking organization headquartered in the State of Hawaii, with approximately
$13 billion of assets as of June 30, 1996, and branches and offices throughout
the Pacific Basin, including Guam, Singapore, Tokyo, Seoul and Taiwan. All
shares of Bank of Hawaii are owned by Bancorp Hawaii, Inc.
PROSPECTUS
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<PAGE> 107
("Bancorp") and Bank of Hawaii's Directors (each of whom owns qualifying shares
as required by Hawaii law). Bancorp is a bank holding company, registered under
the Bank Holding Company Act of 1956, as amended, and its common stock is listed
and traded on the New York Stock Exchange (the "Exchange"). Bancorp files annual
and periodic reports with the Commission and the Exchange, which are available
for public inspection. Hawaiian Trust is not authorized to and does not carry on
a banking business.
The actual management of each series of the Trust, including the Fund, is
coordinated by Hawaiian Trust's investment unit, which is staffed with more than
30 people, including six Chartered Financial Analysts and seven M.B.A.'s. All
investment decisions of Hawaiian Trust with respect to the Fund's portfolio are
made by a committee, and no person is primarily responsible for making
recommendations to the committee. Hawaiian Trust has served as investment
adviser to other investment companies since 1984. These include the Hawaiian
Tax-Free Trust, with assets exceeding $650 million as of June 30, 1996, and the
Cash Assets Trust, with assets of approximately $670 million as of June 30,
1996.
Subject to the supervision of the Board of Trustees, Hawaiian Trust will
provide a continuous investment program for the domestic portion of the Fund's
portfolio, including investment research and management with respect to all
domestic securities and investments and cash equivalents in the Fund. Hawaiian
Trust will determine from time to time what domestic securities and other
investments will be purchased, retained or sold by the Trust with respect to the
Fund. Hawaiian Trust will provide the services under the Advisory Agreement in
accordance with each of the Fund's investment objectives, policies, and
restrictions. In addition, Hawaiian Trust will provide oversight of the Fund's
Sub-Adviser.
For its services, Hawaiian Trust is entitled to monthly advisory fees at
the annual rate of 0.90% of the Fund's average daily net asset value. The Fund's
advisory fee is higher than that paid by most other investment companies;
however, it is comparable if not lower than that paid by many other funds that
invest primarily in the Asian markets. For the fiscal year ended July 31, 1996,
the advisory fee paid by the Fund to Hawaiian Trust as a percentage of average
daily net assets for services provided under the Advisory Agreement was 0.90%.
THE SUB-ADVISER
Credit Lyonnais International Asset Management (HK) Limited has been
retained as Sub-Adviser to the Fund. Pursuant to a separate sub-advisory
agreement with Hawaiian Trust (the "Sub-Advisory Agreement"), the Sub-Adviser
provides investment advisory services with respect to management of the foreign
component of the Fund's portfolio, including investment research with respect to
all foreign securities, currencies and cash equivalents in the Fund.
The Sub-Adviser is a Hong Kong company which is a wholly owned indirect
subsidiary of Credit Lyonnais S.A., the world's sixteenth largest banking group
in terms of assets, which exceeded $340 billion as of December 31, 1995. Credit
Lyonnais manages or advises in excess of $82 billion world-wide as of December
31, 1995. The Sub-Adviser is registered as an investment adviser with the
Commission under the Investment Advisers Act of 1940. The Sub-Adviser
specializes in the management of equities in Asia.
For its services under the Sub-Advisory Agreement, Hawaiian Trust pays the
Sub-Adviser a fee at an annual rate based on the Fund's average daily net
assets, computed daily and payable monthly. The fee paid by Hawaiian Trust to
the Sub-Adviser represents a portion of the 0.90% investment advisory fee paid
to Hawaiian Trust. The Fund does not pay any incremental fee for the services of
the Sub-Adviser.
All investment decisions of the Sub-Adviser with respect to the Fund are
made by a committee,
PROSPECTUS
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<PAGE> 108
and no person is primarily responsible for making recommendations to the
committee.
THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for the Fund, and also acts as the Trust's
principal underwriter and distributor. BISYS generally assists in all aspects of
the administration and operation of the Fund. For expenses assumed and services
provided as administrator pursuant to its Administration Agreement with the
Trust, BISYS is entitled to receive a fee from the Fund, computed daily and paid
monthly, at an annual rate equal to 0.20% of the average daily net assets of the
Fund.
For the fiscal year ended July 31, 1996, the ratio of total expenses of the
Fund to average net assets was 3.58% (excluding waivers).
In addition, BISYS, as the principal underwriter of the Fund within the
meaning of the 1940 Act, has entered into a Distribution Agreement with the
Trust pursuant to which BISYS has the responsibility for distributing shares of
the Fund. The Distribution Agreement provides that BISYS shall act as agent for
the Fund for the sale of its shares and may enter into selling agreements with
banks, broker/dealers or other financial institutions to market and make
available shares to their respective customers. For its services, BISYS is
entitled to a fee, as set forth in the Distribution and Shareholder Servicing
Plan (the "Distribution Plan") between BISYS and the Trust on behalf of the
Fund. The Distribution Plan provides that, with respect to the Retail Class
Shares, BISYS is entitled to receive from the Fund a fee in an amount not to
exceed on an annual basis 0.75% of the average daily net asset value of each
Fund attributable to the Retail Class Shares of the Fund (the "Distribution
Fee") to compensate it for the following: (a) payments BISYS makes to banks and
other prospectus institutions and industry professionals, broker/dealers,
including Hawaiian Trust, BISYS and their affiliates or subsidiaries, pursuant
to an agreement in connection with providing administrative support services to
the holders of the Fund's Retail Class Shares; or (b) payments to financial
institutions and industry professionals (such as insurance companies, investment
counselors, and BISYS' affiliates and subsidiaries) in consideration for the
sales support services provided and expenses assumed in connection with
distribution assistance, including but not limited to printing and distributing
Prospectuses to persons other than current shareholders of the Fund, printing
and distributing advertising and sales literature and reports to shareholders
used in connection with the sale of the Fund's Shares, and personnel and
communication equipment used in servicing shareholder accounts and prospective
shareholder inquiries. Until further notice, BISYS voluntarily intends to waive
a portion of the Distribution Fee for the current fiscal year such that the
Distribution Fee payable by the Fund will not exceed 0.25% of the average daily
net asset value attributable to the Fund's Retail Class Shares on an annual
basis.
The Distribution Fee shall be paid to BISYS only to compensate or to
reimburse it for actual payments or expenses incurred as described above. The
actual Distribution Fee payable to BISYS is determined, within such limit, from
time to time by mutual agreement between the Trust and BISYS, and may not exceed
the maximum fee payable under the Rules of Fair Practice of the NASD.
BISYS may enter into selling agreements with one or more selling agents
under which such agents may receive compensation from BISYS for sales support
services, including, but not limited to, commissions or other payments to such
agents based on the average daily net assets of the Retail Class of each Fund's
shares attributable to it. Since the Distribution Agreement provides for fees
that are used by BISYS to pay for distribution-related and sales support
services, the Distribution Plan and the Distribution Agreement are approved and
reviewed in accordance with Rule 12b-1 under the 1940 Act, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expense of distributing its shares. As noted above, the Fund also offers an
Institutional Class, which is made available only to certain investors. The
Insti-
PROSPECTUS
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<PAGE> 109
tutional Class is not subject to any Distribution Fees or entitled to benefits
under the Distribution Plan. The Fund's Retail Class will not be liable for
distribution expenditures made by BISYS in any given year in excess of the
maximum amount payable under the Distribution Plan for the Fund in that year.
BISYS is a broker-dealer registered with the Commission, and is a member of
the NASD.
OTHER SERVICE ARRANGEMENTS
Administrative Data Management Corporation ("ADM" or the "Transfer Agent"),
581 Main Street, Woodbridge, New Jersey 07095, serves as the Trust's transfer
agent and dividend disbursing agent. Ernst & Young LLP, One Columbus, Suite
2300, 10 West Broad Street, Columbus, Ohio 43215, serves as independent auditors
for the Trust.
VALUATION OF RETAIL CLASS SHARES
The net asset value of the Retail Class Shares of the Fund is determined
and its shares are priced as of the close of the Exchange (currently 4:00 p.m.,
Eastern Time) (the "Valuation Time") each Business Day. As used herein, a
"Business Day" is a day on which the Exchange is open for trading and any other
day (other than a day on which no shares of the Fund are tendered for redemption
and no order to purchase shares is received) during which there is sufficient
trading in the Fund's portfolio securities that the Fund's net asset value per
share might be materially affected. The Exchange will not be open in observance
of the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value per Retail Class Share is calculated by determining the value of
the Retail Class's proportional interest in the securities and other assets of
the Fund, less (i) such class's proportional share of general liabilities and
(ii) liabilities allocable only to such class, and dividing such amount by the
number of Retail Class Shares outstanding. The net asset value per Share of the
Fund will fluctuate as the value of its investment portfolio changes.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in good
faith by the investment adviser in accordance with the procedures adopted by the
Trustees. If the adviser is unable to make such determination in accordance with
the procedures, the securities and assets will be valued at fair value as
determined by the Board of Trustees. Prices used for such valuations may be
provided by independent pricing services. For further information about
valuation of investments in the Fund, see the SAI.
HOW TO PURCHASE RETAIL CLASS SHARES
PURCHASE OF SHARES
Retail Class Shares in the Fund are sold on a continuous basis. Investors
may purchase Retail Class Shares of the Fund by completing and signing an
account registration form ("Account Registration Form") and mailing it, together
with a check (or other negotiable bank draft or money order) payable to the
Trust, in at least the minimum initial purchase amount, to your Participating
Organization or to the Trust's Transfer Agent, Administrative Data Management
Corporation, 581 Main Street, Woodbridge, NJ 07095. Subsequent purchases of
shares of the Fund may be made at any time by mailing a check (or other
negotiable bank draft or money order) payable to the Trust, to ADM at the above
address or to your Participating Organization.
PROSPECTUS
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<PAGE> 110
Retail Class Shares of the Fund may be purchased through procedures
established by BISYS in connection with requirements of qualified accounts
maintained by or on behalf of certain persons ("Customers") by banks,
institutions or industry professionals, such as broker/dealers, who have entered
into an agreement with BISYS ("Participating Organizations") under the
Distribution Plan. See, "Management, Advisory and Other Service Arrangements."
BISYS' principal office is located at 3435 Stelzer Road, Columbus, Ohio
43219-3035.
Retail Class Shares of the Fund sold to Participating Organizations acting
in a fiduciary, advisory, custodial or other similar capacity on behalf of a
Customer will normally be held of record by the Participating Organization. With
respect to shares so sold, it is the responsibility of the Participating
Organization to transmit purchase or redemption orders to ADM and to deliver
federal funds for purchase on a timely basis. Beneficial ownership of shares of
the Fund will be recorded by the Participating Organization and reflected in the
account statements provided by the Participating Organization to the Customer.
If an Account Registration Form has been previously received by ADM,
investors may also purchase Retail Class Shares by telephoning ADM at
800-258-9232. Payment for Retail Class Shares ordered by telephone may be made
by check or by electronic transfer and must be received by the Trust's Custodian
within seven days of the telephone order. If payment is not received within
seven days or a check timely received does not clear, the purchase may be
canceled and the investor could be liable for any losses or fees incurred. In
the case of purchases of Retail Class Shares effected by wiring funds to the
Trust's Custodian, investors must call ADM at 800-258-9232 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information. If you have opened an account through a
Participating Organization, you should telephone the Participating Organization
to make further investments.
Retail Class Shares of the Fund are purchased at the public offering price
per Retail Class Share, which is the net asset value per Retail Class Share
(see, "Valuation of Retail Class Shares") next determined after receipt by the
Transfer Agent of an order to purchase Retail Shares in good form plus the
applicable sales charge as described below. The Participating Organizations are
responsible for the prompt transmission of purchase orders to the Transfer
Agent. Purchases of Retail Class Shares of the Fund will be effected only on a
Business Day of the Fund. An order received by the Transfer Agent prior to the
Valuation Time on any Business Day will be executed based on the net asset value
determined as of the Valuation Time on the date of receipt. An order received by
the Transfer Agent after the Valuation Time on any Business Day will be executed
based on the net asset value determined as of the next Business Day.
The minimum investment for an investor's initial purchase of Retail Class
Shares of the Fund is $1,000. The minimum investment for subsequent purchases is
$50. The minimum initial investment amount for IRAs is $250. As discussed below,
the minimum initial investment amount for Auto Invest Plan participants is $100.
Depending upon the terms of a particular Customer account, a Participating
Organization may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in the
Fund. Information concerning these services and any charges will be provided by
the relevant Participating Organization. This Prospectus should be read in
conjunction with any such information received from the Participating
Organization.
The Trust reserves the right to reject any order for the purchase of its
Retail Class Shares in whole or in part.
Every Shareholder will receive a confirmation of each new transaction in
the Shareholder's account. In the case of Retail Class Shares held of record by
a Participating Organization but beneficially owned by a Customer, confirmations
of
PROSPECTUS
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<PAGE> 111
purchases, exchanges and redemptions of Retail Class Shares by a Participating
Organization will be sent to the Customer by the Participating Organization.
Certificates representing Shares will not be issued.
SALES CHARGES
The public offering price of a Retail Class Share of the Fund equals its
net asset value plus a sales charge. BISYS receives this sales charge as
principal underwriter and will reallow a portion of it to broker/dealers or
other financial institutions as dealer discounts and brokerage commissions. From
time to time dealers who receive dealer discounts and broker commissions from
BISYS may reallow a portion of such dealer discounts and broker commissions to
other dealers or brokers. BISYS may elect to reallow a higher percentage of the
sales charge stated below to selected brokers and dealers for all sales with
respect to which orders are placed with BISYS during a particular period. At
BISYS' discretion, the entire sales charge may at times be re-allowed as dealer
discounts and brokerage commissions. If any sales charge is reallowed to a
broker/dealer or financial institution, it may be deemed an "underwriter" under
the Securities Act of 1933, as amended.
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS ALLOWANCE
SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE
A PERCENTAGE OF NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE INVESTED PRICE
- ------------------------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $25,000............................... 5.25% 5.54% 4.73%
$25,000 or more but less than $50,000........... 4.75% 4.99% 4.28%
$50,000 or more but less than $100,000.......... 4.25% 4.44% 3.83%
$100,000 or more but less than $250,000......... 3.75% 3.90% 3.38%
$250,000 or more but less than $500,000......... 3.25% 3.36% 2.93%
$500,000 or more but less than $1,000,000....... 2.75% 2.83% 2.48%
$1,000,000 or more.............................. 0.00% 0.00% 0.00%
</TABLE>
While there are no sales charges on single transactions of $1 million or
more, BISYS will make payments to securities dealers, from its own resources,
related to these transactions as shown in the table below. The first payment
will be applied to the total purchase price and made payable upon settlement of
the purchase. Subsequent payments will be made at the end of each full calendar
quarter following the original purchase. The amount of each subsequent payment
will be based on the number of shares originally purchased and remaining in the
account at the time of the payment multiplied by the net asset value per share
at the purchase date. The payment schedule will be as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF TOTAL OF ALL
AMOUNT OF PURCHASE PAYMENTS EACH PAYMENT PAYMENTS
- -------------------------------------------------------- --------- ------------ ------------
<S> <C> <C> <C>
$1,000,000 or more but less than $2,000,000............. 6 0.083% 0.50%
$2,000,000 or more but less than $4,000,000............. 5 0.070% 0.35%
$4,000,000 or more...................................... 4 0.063% 0.25%
</TABLE>
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which term shall mean: (i) an
individual, his or her spouse and children under the age of 21, if any; (ii) a
trustee or other fiduciary of a single trust estate or single fiduciary account;
or (iii) any other organized group of persons, whether incorporated or not,
provided that such organization has been in existence for at least six months
and has some bona fide business purpose
PROSPECTUS
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<PAGE> 112
other than the purchase of redeemable securities of a registered investment
company. In order to qualify for a reduced sales charge, all orders from a
Purchaser will have to be placed through a single investment dealer and
identified at the time of purchase as originating from the same Purchaser,
although such orders may be placed into more than one discrete account which
identifies the Purchasers.
BISYS, at its expense, will also provide additional compensation to dealers
in connection with sales of Shares of the Trust. Such compensation will include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public advertising
campaigns regarding one or more Funds, and/or other dealer-sponsored special
events. In some instances, this compensation will be made available only to
certain dealers whose representatives have sold a significant amount of such
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) vacation trips, including the provision of travel
arrangements and lodging, (2) tickets for entertainment events (such as
concerts, cruises and sporting events), and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of the Trust's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the NASD. None of the
aforementioned compensation is paid for by the Funds or their shareholders.
REDUCED SALES CHARGES
SALES CHARGE WAIVERS--The following classes of investors may purchase
Retail Class Shares of the Fund with no sales charge in the manner described
below (any of which may be changed or eliminated at any time by BISYS):
(1) Existing shareholders of the Fund, upon the reinvestment of dividend
and capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, Bancorp and its affiliates, and of BISYS and its affiliates (and spouses
and children of each of the foregoing);
(3) With the exception of investors for whom Bancorp Investment Group
provides custodial services, investors for whom Bancorp or one of its affiliates
acts in a fiduciary, advisory, custodial, agency or similar capacity;
(4) Investors who purchase shares of the Fund through a retirement related
payroll deduction plan, a 401(k) plan, a 403(b) plan, or a similar plan which by
its terms permits purchases of shares; and
(5) Orders placed on behalf of other investment companies distributed by
the Distributor.
The Trust permits the sale of its Retail Class 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); (ii) satisfies uniform criteria which enable the
Distributor to realize economies of scale in its costs of distributing shares;
(iii) if it is a group or association, 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 and the group, representative or
broker or dealer. At the time of purchase the investor, either directly or
through a broker or dealer, must furnish the Transfer Agent with information
sufficient to permit verification that the purchase qualifies for a reduced
sales charge.
PROSPECTUS
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<PAGE> 113
The Distributor may waive the sales charge for an investor who purchases a
Fund's Retail Class Shares with the proceeds from the recent redemption of
shares of any non-money market front-end or back-end load mutual fund. To the
extent the sales load of the Fund in which such investor seeks to invest is
higher than that of the fund with respect to which the redemption proceeds
relate, the Distributor will waive only that portion of the Fund's sales load
which equals the prior sales load paid. Any portion of the sales load which is
not waived in accordance with the foregoing must be paid by the investor at the
time of purchase. Purchases of Fund shares using redemption proceeds as
described above must be made within 60 days of redemption from funds which are
not a series of Pacific Capital Funds and within 120 days of redemption from
funds which are series of Pacific Capital Funds. The Transfer Agent must be
notified in writing by the investor, or by his or her financial institution, at
the time the purchase is made. A copy of the investor's account statement
showing such redemption must accompany such notice. BISYS also, from time to
time, may waive the sales charge for all investors with respect to any Fund. The
Transfer Agent must be notified in writing by the investor, or by his or her
financial institution, at the time the purchase is made. A copy of the
investor's account statement showing such redemption must accompany such notice.
BISYS also, from time to time, may waive the sales charge for all investors with
respect to the Fund.
LETTERS OF INTENT--Any Purchaser may obtain a reduced sales charge by means
of a written Letter of Intent which expresses the intention of such Purchaser to
purchase a certain amount of the Fund's Retail Class shares within a period of
13 months. Each purchase of shares under a Letter of Intent will be made at the
public offering price plus the sales charge applicable at the time of such
purchase to a single transaction of the total dollar amount indicated in the
Letter of Intent. A Letter of Intent may include purchases of shares made not
more than 90 days prior to the date such Purchaser signs a Letter of Intent;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earlier purchase to be included. The terms of the
Letter of Intent and the escrow account associated therewith are described in
the Account Registration Form. For further information, interested investors
should contact ADM or their Participating Organization. Letter of Intent
privileges may be amended or terminated without notice at any time by the Trust.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION--A Purchaser may qualify for
a reduced sales charge by (i) combining concurrent purchases of shares of the
Fund with purchases of one or more of the other series of the Trust sold with a
sales charge or (ii) combining a current purchase of shares of the Fund with
prior purchases of shares of any of the other series of the Trust sold subject
to a sales charge. The applicable sales charge is based on the sum of (a) the
Purchaser's current purchase of shares of the Fund sold with a sales charge plus
(b) the then-current net asset value of all shares held by the Purchaser in any
series of the Trust sold with a sales charge. To receive the applicable public
offering price pursuant to the right of accumulation, shareholders must at the
time of purchase provide ADM or the Participating Organization with sufficient
information to permit confirmation of qualification. Accumulation privileges may
be amended or terminated without notice at any time by the Trust.
AUTO INVEST PLAN--The Auto Invest Plan enables shareholders of the Fund to
make regular monthly or quarterly purchases of shares through automatic
deductions from their bank accounts. With shareholder authorization, the
Transfer Agent will deduct the amount specified from the shareholder's bank
account which will automatically be invested in shares at the public offering
price on the dates of the deduction. The required minimum initial investment
when opening an account using the Auto Invest Plan is $100; the minimum amount
for subsequent investments is $50. To participate in the Auto Invest Plan,
shareholders should complete the appropriate section of the Account Registration
Form which can be obtained by calling ADM at 800-258-9232. For a shareholder to
change the
PROSPECTUS
29
<PAGE> 114
Auto Invest Plan instructions the request must be made in writing to ADM or your
Participating Organization. Depending upon the terms of a particular Customer
account, a Participating Organization may charge a Customer's account fees for
services provided in connection with investment in the Fund. Information
concerning these services and any charges will be provided by the Participating
Organizations. This Prospectus should be read in conjunction with any such
information received from the Participating Organizations.
The Trust reserves the right to reject any order for the purchase of its
Retail Class Shares in whole or in part.
EXCHANGE PRIVILEGES
Except as described below, Retail Class shareholders may exchange shares of
the Fund on the basis of the relative net asset value of the shares exchanged,
for Retail Class Shares of any other series of the Trust or for service class
shares of the Cash Assets Trust, the Tax-Free Cash Assets Trust, or the U.S.
Treasuries Cash Assets Trust so long as they maintain the respective minimum
account balance in the Fund. To the extent that a shareholder exchanges into a
Fund having a higher sales charge than that of the Fund from which the
shareholder is exchanging, the shareholder will pay the sales charge
differential at the time of the exchange.
For federal income tax purposes, an exchange of shares is deemed a sale on
which a shareholder may realize capital gain or loss. Before an exchange can be
effected, a shareholder must receive a prospectus of the series or fund into
which the subject shares are to be exchanged. If you have previously elected the
telephone exchange option on your Account Application, an exchange can be made
by calling ADM at 800-258-9232 or your Participating Organization. Otherwise,
exchanges may be made by forwarding a written request for exchange to ADM or
your Participating Organization. Exchange privileges may be exercised only in
those states where Retail Class Shares of such series or fund may be legally
sold, and may be amended or terminated at any time upon 60 days' notice.
HOW TO REDEEM RETAIL CLASS SHARES
Shareholders may redeem their Retail Class Shares without charge on any day
that net asset value is calculated (see, "Valuation of Retail Class Shares") and
Retail Class Shares may ordinarily be redeemed by mail or by telephone. However,
if you purchase shares through a Participating Organization which serves as the
shareholder of record, you must redeem through such institution. In all other
cases, a completed Account Registration Form must have been received by the
Transfer Agent before redemption requests may be honored. All or part of a
Customer's Retail Class Shares may be subject to redemption in accordance with
instructions and limitations pertaining to his or her account held by a
Participating Organization. For example, if a Customer has agreed to maintain a
minimum balance in his or her account, and the balance in that account falls
below that minimum due to redemptions, the Customer may be obliged to redeem, or
the Participating Organization may be authorized to redeem for and on behalf of
the Customer, the Customer's Retail Class Shares.
REDEMPTION BY MAIL
A written request for redemption must be received by ADM or your
Participating Organization in order to constitute a valid tender for redemption.
ADM and the Participating Organizations are responsible for the prompt
transmission of redemption requests to the Transfer Agent. The Transfer Agent
will require a signature guarantee by an eligible guarantor institution if (a)
the redemption check is to be payable to anyone other than the Retail Class
Shareholder(s) of record or (b) a redemption check is to be mailed or proceeds
are to be wired to the Retail Class Shareholder(s) at an address other than the
address of record or other than a commercial bank account designated on the
Account Regis-
PROSPECTUS
30
<PAGE> 115
tration Form of such Retail Class Shareholder(s) or (c) the redemption proceeds
exceed $50,000. For purposes of this policy, the term "eligible guarantor
institution" shall mean members of the STAMP (Securities Transfer Agents
Medallion Program), MSP (New York Stock Exchange Medallion Signature Program) or
SEMP (Stock Exchanges Medallion Program). Participants of STAMP, MSP, and SEMP
are subject to dollar value limitations which must be considered when requesting
their authorization. The Transfer Agent reserves the right to reject any
signature guarantee if it has reason to believe that the transaction would
otherwise be improper.
REDEMPTION BY TELEPHONE
A shareholder may have the proceeds of redemption requests electronically
transferred or mailed directly to a domestic commercial bank account previously
designated by the shareholder on the Account Registration Form. Under most
circumstances, such proceeds will be transmitted on the next Business Day
following receipt of a valid request for redemption. If you authorize the
telephone redemption option in your Account Registration Form such electronic
redemption request may be made by the shareholder by telephone to ADM or your
Participating Organization. The Transfer Agent will reduce the amount of a wire
redemption payment by its then-current wire redemption charge. As of the date of
this Prospectus, there is no charge for wire redemptions. While this policy is
subject to change at any time, it is not anticipated that such charge would
exceed $7 per wire redemption. There is no charge for having proceeds of
redemption requests mailed to a designated bank account. The Trust will not
permit shareholders to change their accounts by telephone. For telephone
redemptions, call ADM at 800-258-9232.
Neither the Trust, the Fund, Hawaiian Trust, the Distributor nor the
Transfer Agent are liable for damages resulting from following instructions
communicated by telephone that any of them reasonably believed to be genuine.
The Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. A description of the procedures employed
by the Trust to confirm instructions communicated by telephone is contained in
the Statement of Additional Information. This policy places the entire risk of
loss for unauthorized or fraudulent transactions on the shareholder, except that
if the Trust and BISYS do not follow reasonable procedures, some or all of them
may be liable for any such losses.
During times of drastic economic or market changes, telephone exchanges or
redemptions may be difficult to implement. If you experience difficulty in
making a telephone exchange or redemption, your exchange or redemption request
may be made by regular or express mail, and it will be implemented at the next
determined net asset value following receipt by the Transfer Agent.
PAYMENTS TO RETAIL CLASS SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Retail Class Shares are properly tendered for redemption,
as described above. The proceeds paid upon redemption of shares in the Fund may
be more or less than the amount invested. Payment to shareholders for shares
redeemed will be made within seven days after receipt by the Transfer Agent of
the request for redemption. However, to the greatest extent possible, the Trust
will attempt to honor requests from shareholders for next Business Day payments
upon redemption of Retail Class Shares if the request for redemption is received
by the Transfer Agent before 4:00 p.m., Eastern Time, on a Business Day or, if
the request for redemption is received after 4:00 p.m., Eastern Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Trust or the shareholders of the Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payments in such manner.
If the Trust is requested to redeem Retail Class Shares for which it has
not yet received good payment, it may delay the forwarding of proceeds only
until payment has been collected for the
PROSPECTUS
31
<PAGE> 116
purchase of such Retail Class Shares. Such collection may take up to 15 days. To
avoid delay in payment upon redemption shortly after purchasing Retail Class
Shares, investors should purchase shares by certified or bank check or by wire
transfer. The Trust intends to pay cash for all Retail Class Shares redeemed,
but under abnormal conditions which make payment in cash inadvisable, the Trust
may make payment wholly or partly in portfolio securities at their then-current
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small accounts, the Trust
reserves the right to redeem, at net asset value, the Retail Class Shares of any
shareholder if, because of redemptions of Retail Class Shares by or on behalf of
the shareholder, the account of such shareholder in the Fund has a value of less
than $250 due to redemptions. Accordingly, an investor purchasing Retail Class
Shares of the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems some of his or her Retail
Class Shares. Before the Trust exercises its right to redeem such Retail Class
Shares and to send the proceeds to the shareholder, the shareholder will be
given notice that the value of the Retail Class Shares of the Fund in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $1,000.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables shareholders of the Fund to make regular
monthly or quarterly redemptions of Retail Class Shares. With shareholder
authorization, the Transfer Agent will automatically redeem Retail Class Shares
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the shareholder. The required minimum withdrawal is
$100. To participate in the Auto Withdrawal Plan, shareholders should call ADM
for more information. Purchases of additional Retail Class Shares concurrent
with withdrawals may be disadvantageous to certain shareholders because of tax
liabilities and sales charges. To change the Auto Withdrawal Instructions or to
discontinue the feature, a shareholder must submit a written request to ADM or
their Participating Organization.
DIVIDEND AND TAX INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare and pay dividends of substantially all of its net
income quarterly. Distributable net realized capital gains are distributed at
least annually to shareholders of record. A shareholder will automatically
receive all income dividends and capital gains distributions in additional full
and fractional shares unless the shareholder elects to receive such dividends or
distributions in cash. Dividends elected to be received in cash may be deposited
directly into a shareholder's financial institution account, provided the
shareholder has completed the appropriate section of the Account Registration
Form. Dividends and distributions are reinvested without a sales charge as of
the ex-dividend date using the net asset value determined on that date and are
credited to a shareholder's account on the payment date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash. Dividends are generally taxable when received. However, dividends
declared in October, November or December to shareholders of record during those
months and paid during the following January are treated for tax purposes as if
they were received by each shareholder on December 31 of the prior year.
Elections to receive dividends or distributions in cash, or any revocation
thereof, must be made in writing to ADM at 581 Main Street, Woodbridge, New
Jersey 07095, or to your Participating Organization and will become effective
with respect to dividends and
PROSPECTUS
32
<PAGE> 117
distributions having record dates after its receipt by the Transfer Agent.
TAX INFORMATION
The Fund intends to continue to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). If it does so
qualify, it will not be liable for federal income taxes to the extent it
distributes its income in the form of dividends and capital gains distributions.
However, the Code contains a number of complex tests relating to such
qualification and it is possible, although not likely, that the Fund 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 pass through foreign tax credits or pay dividends or distributions which
would qualify as "capital gains dividends," as discussed below.
Capital gains dividends (net long-term gains over net short-term losses
which the Fund distributes) are reportable by shareholders as long-term capital
gains. This is the case whether the shareholder takes his distribution in cash
or elects to have the distribution reinvested in Fund shares and regardless of
the length of time the shareholder has held his or her shares. The maximum
long-term capital gains rate for corporate shareholders is currently the same as
the maximum tax rate for ordinary income. The maximum long-term capital gains
rate for individual shareholders is currently 28% and the maximum tax rate for
ordinary income is 39.6%. Corporate shareholders are not expected to be entitled
to the dividends received deduction with respect to dividends paid by the Fund.
Short-term gains, when distributed, are taxed to shareholders as ordinary
income. Capital losses of the Fund are not distributed but carried forward by
the Fund to offset gains in later years and thereby reduce the later-year
capital gains distributions and amounts taxed to shareholders.
The Fund's gains or losses on sales of securities will be long-term or
short-term depending upon the length of time the Fund has held such securities.
Capital gains and losses of the Fund 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 Fund at year-end, which are
"marked to the market," that is, deemed sold for the fair market value. Net
gains or losses realized and deemed realized on Section 1256 futures and options
contracts will be reportable by the Fund 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.
The Fund may, from time to time, invest in passive foreign investment
companies ("PFICs"). PFICs are foreign corporations which derive a majority of
their income from passive sources. For tax purposes, the Fund's investments in
PFICs are subject to special tax provisions that may result in the taxation of
certain gains realized by the Fund as ordinary income, plus an interest
liability on such gains or on distributions from the PFIC. See "Tax Information"
in the SAI.
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition are treated
as ordinary gain or loss. These gains or losses increase or decrease the amount
of the Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. If currency fluctuation losses exceed other
investment company taxable income during a taxable year, distributions made by
the Fund during the year would be characterized as a return of capital to
shareholders, reducing the shareholder's basis in his or her Fund shares.
PROSPECTUS
33
<PAGE> 118
The Fund may incur foreign income taxes in connection with some of its
foreign investments. Certain of these taxes may be credited to shareholders. See
"Tax Information" in the SAI.
The Trust will be required to withhold, subject to certain exemptions, at a
rate of 31% on dividends paid and redemption proceeds (including proceeds from
exchanges) paid or credited to individual shareholders of the Fund, if a correct
Taxpayer Identification Number, certified when required, is not on file with the
Trust or the Transfer Agent. Under the Code, dividends paid to a non-resident
alien or other foreign shareholder may be subject to U.S. withholding tax (at a
rate of up to 30%).
Information as to the federal tax status of the Trust's dividends and
distributions will be mailed to shareholders annually.
TAX EFFECTS OF REDEMPTIONS
A shareholder who redeems his or her shares or exchanges his or her shares
for shares of another Fund will usually have a short or long-term (depending on
how long the shares have been held) capital gain or loss (depending on whether
the proceeds of the redemption are more or less than their tax basis, which is
usually cost). However, if the shares redeemed or sold were held for six months
or less, any capital loss is treated as long-term to the extent of capital gains
distributions received on such shares.
HAWAIIAN TAX INFORMATION
The Fund, and dividends and distributions made by the Fund to Hawaii
residents, will generally be treated for Hawaii income tax purposes in the same
manner as they are treated under the Code for federal income tax purposes.
Persons or entities who are not Hawaii residents should not be subject to
Hawaii income taxation on dividends and distributions made by the Trust but may
be subject to other state and local taxes.
------------------------
For further information regarding taxation, see "Tax Information" in the
SAI. The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, and state
taxation.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
GENERAL INFORMATION
PERFORMANCE
From time to time performance for the Retail Class Shares of the Fund
showing the Fund's average annual total return and aggregate total return may be
presented in advertisements, sales literature and in reports to Retail Class
Shareholders. Such performance figures are based on historical earnings and are
not intended to indicate future performance. Average annual total return will be
calculated for the period since the establishment of the Fund, and will, unless
otherwise noted, reflect the imposition of maximum sales charge. Average annual
total return is measured by comparing the value of an investment in the Retail
Class Shares of the Fund at the beginning of the relevant period to the
redemption value of the investment, after reflecting the reinvestment of any
dividends or capital gains distributions, and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. From time to time, average annual total return and aggregate total
return for the Retail Class Shares of the Funds may also be calculated and
advertised on the basis of an investment in a Fund at the net asset value per
share or at net asset value per share plus a
PROSPECTUS
34
<PAGE> 119
reduced sales charge, rather than the public offering price per share. In this
case, the figure would not reflect the effect of a maximum sales charge that a
Retail Class Shareholder may have paid.
Retail Class Shareholders may also be provided with information comparing
the performance of the Retail Class Shares of the Fund to the performance of
other mutual funds or mutual fund portfolios with comparable investment
objectives and policies. This information may be based on data relating to
various mutual fund or market indices such as those prepared by Dow Jones & Co.,
Inc. and Standard & Poor's Corporation or data prepared by Lipper Analytical
Services, Inc. Comparisons may also be made to indices or data published in
Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Institutional Investor, Pensions and
Investments, USA Today, Fortune, CDA/Weisenberger, Ibbotson Associates, Inc.,
Morningstar, IBC/Donaghue's Money Fund Reports and regional periodicals and
newspapers. General information about the Fund that appears in a publication
such as those mentioned above may also be quoted or reproduced in advertisements
or in reports to shareholders. Reports to Retail Class Shareholders may contain
performance information on other series of the Trust.
Total return is a function of the type and quality of instruments held in
the portfolio, operating expenses, and market conditions. Consequently, current
total return will fluctuate and is not necessarily representative of future
results. Any fees charged by an affiliate of Hawaiian Trust or a Participating
Organization with respect to customer accounts for investing in shares of the
Fund will not be included in performance calculations; such fees, if charged,
would reduce the actual total return from that quoted.
Because of differences in the fees and/or expenses borne by the Retail
Class Shares of the Fund, the average annual total return and aggregate total
return can be expected, at any given time, to be lower than the average annual
total return and aggregate total return on Institutional Class Shares.
Standardized total return quotations will be computed separately for Retail
Class Shares and Institutional Class Shares.
DESCRIPTION OF THE TRUST AND ITS SHARES
CAPITALIZATION--The Trust was organized as a Massachusetts business trust
on October 30, 1992, and currently consists of nine separately managed series.
The Board of Trustees may establish additional series in the future. The series
of the Trust are: the Balanced Fund, Diversified Fixed Income Fund, Growth and
Income Fund, Growth Stock Fund, New Asia Growth Fund, Short-Intermediate U.S.
Treasury Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
Securities Fund and the U.S. Treasury Securities Fund, each with unlimited
transferable shares of beneficial interest, no par value. When issued in
accordance with the terms and procedures described in their respective
Prospectuses, shares of each separately managed series are fully paid,
non-assessable and freely transferable.
Each series is comprised of two classes of shares--the Institutional Class
and the Retail Class. The classes have identical rights with respect to the
series of which they are a part, provided that there are certain matters which
affect one class but not another. Currently, the only such matters are the
existence of a Distribution Plan with respect to each Retail Class but not any
Institutional Class, the absence of any sales load with regard to the purchase
of shares of the Institutional Class, and the fact that a salesperson or other
person entitled to receive compensation for selling or servicing Retail Class
Shares or Institutional Class Shares may receive different compensation with
respect to one such Class over the other Class in the same Fund. On all such
matters, shareholders vote as a class, and not by series. Shares of the
Institutional Class have different expenses, and are subject to no sales charge,
which may effect performance. A separate Prospectus applies to the Retail Class
of each series. Prospectuses relating to the Retail Class of shares of each
series may be obtained by calling the tele-
PROSPECTUS
35
<PAGE> 120
phone number listed on the first page of this
Prospectus.
VOTING--Shareholders have the right to vote on the election of Trustees and
on any and all matters as to which, by law or the provisions of the Declaration
of Trust of the Trust, they may be entitled to vote. All shares of the Trust
have equal voting rights and will be voted in the aggregate, and not by class or
series, except where voting by class or series is required by law or where the
matter involved affects only one class or series. The Trust is not required to
hold annual meetings of the Fund's shareholders, and does not intend to do so,
in any fiscal year in which it is not required by law to elect Trustees. The
Trustees are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee, if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
SHAREHOLDER LIABILITY--Under Massachusetts law, shareholders of the Fund
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Trust's Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust. The Declaration of
Trust provides for indemnification out of the Fund's property for all loss and
expense of any shareholder of the Fund held liable on account of being or having
been a shareholder. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Fund
would be unable to meet its obligations.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
PROSPECTUS
36
<PAGE> 121
APPLICATION FOR PACIFIC CAPITAL FUNDS
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: OUTSIDE FUNDS TRANSFER AGENT OPERATIONS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
1-800-258-9232 LOGO
- --------------------------------------------------------------------------------
STEP 1 ACCOUNT REGISTRATION PLEASE TYPE OR PRINT NAME EXACTLY AS ACCOUNT IS
TO BE REGISTERED
A. REGISTRATION
<TABLE>
<S> <C> <C> <C>
[ ] Individual 1. ----------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security
Number
[ ]
Joint Account* 2. ----------------------------------------------------------------------------------------------
(Use lines 1 First Name Middle Initial Last Name Social Security
and 2) Number
*JOINT ACCOUNTS WILL BE TENANTS WITH RIGHTS OF SURVIVORSHIP UNLESS OTHERWISE SPECIFIED.
[ ]
For a Minor 3. Under the Uniform Gifts/Transfers to
--------------------------------------------- ------------ Minors Act
(Only one Custodian's First Name Middle Last State
custodian Initial Name
and one minor Custodian For
are
permitted.) ------------------------------------------------------------------------------------
Minor's First Name Middle Initial Last Name Minor's Social Security
No.
[ ]
For Trust, 4. ----------------------------------------------------------------------------------------------
Corporation, (Name of Corporation or Partnership; PLEASE INDICATE TYPE OF ORGANIZATION. If a Trust, include
Partnership or the name and date of the Trust Instrument. The name(s) of the Trustees in which account will be
other Entity registered should be listed below. 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 Trustee(s) or Authorized Individual Title
</TABLE>
- --------------------------------------------------------------------------------
B. MAILING ADDRESS AND TELEPHONE NUMBER
- --------------------------------------------------------------------------------
Street or P.O. Box City State Zip Code
( )
- --------------------------------------------------------------------------------
Area Code Daytime Telephone Number Occupation Employer's Name/Employer's
- --------------------------------------------------------------------------------
Address City State
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.
- --------------------------------------------------------------------------------
C. INVESTMENT DEALER OR BROKER: (Important -- to be competed by Dealer or
Broker)
- --------------------------------------------------------------------------------
Dealer Name Branch Office Address Branch Office City/State Branch #
( )
- --------------------------------------------------------------------------------
Representative's Name Rep # Area Code Telephone # [Agent User Dealer # /
Branch #]
- --------------------------------------------------------------------------------
STEP 2 PURCHASE OF SHARES
A. INITIAL INVESTMENT
Make check payable to: Pacific Capital Funds Minimum Initial Investment
in any Fund is $1,000. Subsequent Investments, $50.
<TABLE>
<S> <C> <C>
U.S. Treasury Securities Fund $ --------- Tax-Free Short Intermediate Securities $ ---------
Fund
Short Intermediate U.S. Treasury Securities Fund $ --------- Growth Stock Fund $ ---------
Diversified Fixed Income Fund $ --------- Balanced Fund $ ---------
Tax-Free Securities Fund $ --------- Growth and Income Fund $ ---------
New Asia Growth Fund $ --------- Total Investment $ ---------
</TABLE>
- --------------------------------------------------------------------------------
B. DISTRIBUTIONS: All income dividends and capital gains distributions will be
REINVESTED in additional shares at net asset value unless otherwise indicated
below.
Dividends are to be: [ ] Reinvested [ ] Paid in cash*
Capital Gains are to be: [ ] Reinvested [ ] Paid in cash*
*FOR CASH DIVIDENDS, PLEASE CHOOSE ONE OF THE FOLLOWING OPTIONS:
[ ] Wire directly into my financial institutional account. ATTACHED IS A
VOIDED CHECK showing the account information where I would like the
dividend deposited.
[ ] Mail check to my address listed in Step 1B.
[ ] Mail check as requested in Step 3F.
<PAGE> 122
- --------------------------------------------------------------------------------
C. LETTER OF INTENT
(See Terms of Escrow
for Letter
of Intent at the end of
this
application).
I/we intend to invest in shares of one or more of the Pacific Capital Funds
during the 13-month period from the date of my 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 present holdings of
Pacific Capital Fund shares (at public offering price on date of this Letter),
will equal or exceed the minimum amount checked below:*
- -----------------------
Check appropriate box
[ ] YES [ ] NO
[ ] $ 25,000 [ ] $ 50,000 [ ] $ 100,000
[ ] $250,000 [ ] $500,000 [ ] $1,000,000
*Accumulated investments must aggregate at least $100,000 for
reduced sales charges to apply to purchases of shares of the
Short-Intermediate U.S. Treasury Securities Fund or the
Tax-Free Short Intermediate Securities Fund.
- --------------------------------------------------------------------------------
STEP 3 SPECIAL FEATURES
A. AUTOMATIC INVEST PROGRAM
This option provides you with a convenient way to have amounts automatically
drawn on your financial institution account and invested in your Pacific
Capital Fund account. To establish this program, please complete Step 4,
Sections A & B of this Application. I wish to make regular monthly investments.
The minimum initial purchase is reduced to $100 per Fund when you use this
service. Subsequent minimum purchase is $50 for each Fund. YOU MUST ATTACH A
PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
<TABLE>
<S> <C> <C>
Amount
Please select how often you
would like to have the
------------- Fund $ --------- amount(s) shown above
withdrawn from your checking
------------- Fund $ ---------
account and invested into the
above selected Fund(s).
------------- Fund $ --------- [ ] Once each month -- on the
1st
Total $ --------- [ ] Once each month -- on the
16th
[ ] Twice each month on the 1st
and the 16th
[ ] Once each quarter on the 1st
beginning in the month of
-----------------.
</TABLE>
- --------------------------------------------------------------------------------
B. TELEPHONE INVESTMENT
This option provides you with a convenient way to add to your account at any
time you wish by simply calling Administrative Data Management Corp. toll-free
at 1-800-258-9232. 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.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
- --------------------------------------------------------------------------------
C. AUTOMATIC WITHDRAWAL PLAN
Application must be
received in good order
at least two weeks
prior to 1st actual
liquidation date.
- -----------------------
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:
The minimum Automatic Withdrawal amount is $100 per Fund.
Check appropriate box
<TABLE>
<S> <C>
[ ] YES [ ] NO
$ ---------------------------
------------------------- Fund
$ ---------------------------
------------------------- Fund
Total $ ---------------------------
</TABLE>
Please select how often you would like to have payments made
from your account under the Automatic Withdrawal Plan.
<TABLE>
<S> <C>
[ ] Once each month -- on the [ ] Twice each month on the 1st and 16th
1st
[ ] Once each month -- on the [ ] Once each quarter on the 1st beginning in
16th the month of
-------------------- .
</TABLE>
Please choose one of the following options:
[ ] Mail check to my address listed in Step 1a.
[ ] Mail check as requested in Step 3f.
<PAGE> 123
- --------------------------------------------------------------------------------
D. 1. TELEPHONE EXCHANGE
This option allows you
to effect exchanges
among accounts in your
name within the Pacific
Capital group of Funds,
as described in the
Prospectus, by
telephone.
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute the exchange of shares of one Pacific Capital
Fund for one of the funds into which exchange is permitted, as designated in the
Prospectus, with identical shareholder registration. The exchange will be
executed at the relative net asset values of the two funds as next determined
following receipt of such instructions.
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 Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-258-9232.
2. TELEPHONE REDEMPTION
This option allows you
to effect telephone
redemptions, as
described in the
Prospectus.
The Agent is authorized to accept and act upon my/our or any other person's
telephone instructions to execute a redemption of shares of one or more Pacific
Capital Funds. The redemption will be executed at net asset value next
determined following receipt of such instructions.
Except for gross negligence in acting upon such telephone instructions to
execute a redemption and subject to the conditions set forth herein, I (we)
understand and agree to hold harmless the Agent, each of the Pacific Capital
Funds, and their respective officers, directors, trustees, employees, agents
and affiliates against any liability, damage, expense, claim or loss, including
reasonable costs and attorney's fees resulting from acceptance of or acting or
failure to act upon this Authorization.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE A TELEPHONE REDEMPTION, CALL THE AGENT AT 1-800-258-9232.
- --------------------------------------------------------------------------------
E. EXPEDITED REDEMPTION
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 Pacific Capital Fund account is registered.
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
TO MAKE AN EXPEDITED
REDEMPTION, CALL THE
AGENT AT
1-800-258-9232.
<TABLE>
<S> <C>
-------------------------------------------- ---------------------------------------
Financial Institution Account Registration Financial Institution Account Number
-------------------------------------------- ---------------------------------------
Name of Financial Institution Financial Institution Transit/Routing Number
-------------------------------------------- ---------------------------------------
Street City State Zip Code
</TABLE>
- --------------------------------------------------------------------------------
F. SECONDARY ADDRESS
Checks should be made payable as indicated below. If check is payable to a
financial institution, i.e., a commercial bank, savings bank or credit union,
for your account, indicate financial institution name, address and your account
number.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
<TABLE>
<S> <C>
-------------------------------------------- ---------------------------------------
First Name Middle Name of Financial Institution
Initial Last Name
-------------------------------------------- ---------------------------------------
First Name Middle Street
Initial Last Name
-------------------------------------------- ---------------------------------------
Street City State Zip Code
-------------------------------------------- ---------------------------------------
City State Zip Code Financial Institution Account Number
</TABLE>
<PAGE> 124
- --------------------------------------------------------------------------------
STEP 4 DEPOSITORS AUTHORIZATION TO HONOR DEBITS
SECTION A 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 my/our account
for 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
<TABLE>
<S> <C>
NAME AND ADDRESS ------------------------------------------------------------------------
WHERE MY/OUR NAME OF FINANCIAL INSTITUTION
ACCOUNT IS
MAINTAINED ------------------------------------------------------------------------
STREET ADDRESS
------------------------------------------------------------------------
CITY STATE ZIP CODE
NAME(S) AND ---------------------------------------------------- ------------------
SIGNATURE(S) OF PLEASE PRINT DATE
DEPOSITOR(S) AS
THEY APPEAR WHERE ---------------------------------------------------- ------------------
ACCOUNT IS SIGNATURE DATE
REGISTERED
----------------------------------------------------
PLEASE PRINT
----------------------------------------------------
SIGNATURE
</TABLE>
- --------------------------------------------------------------------------------
SECTION B SHAREHOLDER AUTHORIZATION / SIGNATURE(S) REQUIRED
- I/We authorize the Pacific Capital Funds 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, Pacific Capital Funds and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Pacific Capital Fund 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 understand that in
the event of such deficiency, Pacific Capital Funds and its agents will
first liquidate shares of the Pacific Capital Fund to which the purchase
transaction relates, and then, in the discretion of Pacific Capital Funds
and its agents, shares of any other Pacific Capital Fund in my/our account
at the Financial Institution. I/We authorize Pacific Capital Funds and its
agents to correct any transfer error by a debit or credit to my/our
financial Institution account and/or Fund 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 undersigned warrants that he/she has full authority and is of legal age
to purchase shares of the Pacific Capital Fund(s) designated above and has
received and read a current Prospectus of such Fund(s) and agrees to its
terms. Pacific Capital Funds, 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 resident of the U.S.; and either does not expect to be in the U.S.
for more than 182 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Fund, 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*
<TABLE>
<S> <C> <C>
- ------------------------------------------ ------------------------------------------ ------------------
INDIVIDUAL (OR CUSTODIAN) JOINT REGISTRANT, IF ANY DATE
- ------------------------------------------ ------------------------------------------ ------------------
CORPORATE OFFICER, PARTNER, TRUSTEE(S), TITLE DATE
ETC.
*FOR A TRUST, CORPORATION OR ASSOCIATION, 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.
</TABLE>
SPECIAL INFORMATION
<PAGE> 125
- 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 Fund's Agent.
- You may cancel any feature at any time, effective 3 days after the Agent
receives notice from you.
- Either the Fund 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 Fund 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 the Agent at 1-800-258-9232
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 Fund'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 shall be held in
escrow in shares of the Fund 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 purchase, the investor
must remit to the Agent 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 Agent or the
dealer, the Agent will, within sixty days after the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Any shares 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
Fund.
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 Fund purchased for and
held under the Plan, but the Agent will credit all such shares to the
Planholder on the records of the Fund. 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 Fund at
the Net Asset Value.
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 first 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 Fund) 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 Fund'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 Fund. 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
Fund, 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
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as his Agent in administering the Plan.
<PAGE> 126
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> 127
INVESTMENT ADVISER
Hawaiian Trust Company
111 S. King Street
Honolulu, Hawaii 96813
SUB-ADVISOR
Credit Lyonnais International Asset
Management (HK) Limited
8 Connaught Place
Hong Kong
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
AUDITORS
Ernst & Young LLP
One Columbus, Suite 2300
10 West Broad Street
Columbus, Ohio 43215
TRANSFER AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095
[LOGO]
PACIFIC CAPITAL FUNDS
--------------------------------------------
NEW ASIA GROWTH FUND
--------------------------------------------
RETAIL CLASS
<PAGE> 128
PACIFIC CAPITAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
Pacific Capital Funds (the "Trust") is a professionally managed, open-end,
management investment company with multiple funds available for investment. This
Prospectus contains information about each of the nine funds comprising the
Trust (each a "Fund" and collectively, the "Funds"):
<TABLE>
<S> <C>
Short Intermediate U.S. Treasury
Balanced Fund Securities Fund
Diversified Fixed Income Fund Tax-Free Securities Fund
Growth and Income Fund Tax-Free Short Intermediate Securities
Growth Stock Fund Fund
New Asia Growth Fund U.S. Treasury Securities Fund
</TABLE>
The Funds are advised by Hawaiian Trust Company, Limited ("Hawaiian Trust")
and sponsored, administered and distributed by BISYS Fund Services ("BISYS" or
the "Distributor"). Credit Lyonnais International Asset Management (HK) Limited
serves as sub-adviser (the "Sub-Adviser") to the New Asia Growth Fund. (Hawaiian
Trust and the Sub-Adviser may each be referred to herein as the "investment
adviser.") The Balanced Fund has not yet commenced operations.
This Prospectus relates only to the "Institutional Class" of each Fund's
shares; certain investors may not qualify to invest in a Fund's Institutional
Class, but may invest in a Fund's "Retail Class" which is not offered hereby.
See, "General Information--Description of the Trust and its Shares." This
Prospectus sets forth concisely the information a prospective investor should
know before investing in any of the Funds. Investors should read this Prospectus
carefully and retain it for future reference. A Statement of Additional
Information ("SAI") dated November 29, 1996, containing additional and more
detailed information about the Funds has been filed with the Securities and
Exchange Commission (the "Commission") and is hereby incorporated by reference
into this Prospectus. The SAI is available without charge and can be obtained by
writing to the Funds at the address printed above or calling 800-258-9232.
FOR PURCHASE, REDEMPTION, ACCOUNT OR GENERAL INQUIRIES, CONTACT THE TRUST'S
TRANSFER AGENT: ADMINISTRATIVE DATA MANAGEMENT CORPORATION, 581 MAIN STREET,
WOODBRIDGE, NEW JERSEY 07095
800-258-9232
THIS PROSPECTUS SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE
------------------------
SHARES OF PACIFIC CAPITAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, HAWAIIAN TRUST OR ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
HAWAIIAN TRUST IS THE INVESTMENT ADVISER TO PACIFIC CAPITAL FUNDS. BISYS FUND
SERVICES, WHICH IS NOT AFFILIATED WITH HAWAIIAN TRUST, IS
THE SPONSOR AND DISTRIBUTOR FOR PACIFIC CAPITAL
FUNDS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PROSPECTUS DATED NOVEMBER 29, 1996
<PAGE> 129
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights............................................................................ 1
Fund Expenses......................................................................... 5
Financial Highlights.................................................................. 7
Investment Objectives and Policies of the Funds....................................... 10
Additional Discussion Regarding Permitted Investment Activities....................... 13
Additional Risk Disclosure............................................................ 26
Additional Investment Restrictions.................................................... 31
Management, Advisory and Other Service Arrangements................................... 31
Valuation of Institutional Class Shares............................................... 34
How to Purchase Institutional Class Shares............................................ 35
How to Redeem Institutional Class Shares.............................................. 36
Dividend and Tax Information.......................................................... 37
General Information................................................................... 40
</TABLE>
<PAGE> 130
HIGHLIGHTS
This Prospectus describes the Funds, each of which has its own distinct
investment objectives and policies, which are described and summarized here.
BALANCED FUND--The primary investment objective of Balanced Fund, a
diversified portfolio, is to seek current income. A secondary objective of
Balanced Fund is long-term capital appreciation. Balanced Fund pursues these
objectives by investing in a diversified portfolio of common stocks, preferred
stocks, bonds and securities that are convertible into common stocks. Common
stocks will be selected on the basis of strong earnings, growth trends,
above-average prospects for future earnings growth, and diversification among
industries and companies. Preferred stocks, bonds and convertible securities
will be selected on the basis of strong earnings and credit record, the ability
to provide current income, and the other characteristics described above with
respect to common stocks.
DIVERSIFIED FIXED INCOME FUND--The investment objective of Diversified
Fixed Income Fund, a diversified portfolio, is to seek a high level of current
income. Diversified Fixed Income Fund seeks to achieve this objective by
investing primarily in obligations issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities ("U.S. Government Obligations") and in
investment grade debt securities. Hawaiian Trust will monitor Diversified Fixed
Income Fund's portfolio performance on an ongoing basis and reallocate assets in
response to actual and anticipated market and economic changes. This approach
may result in significant variations in the dollar-weighted average remaining
maturity of Diversified Fixed Income Fund's portfolio.
GROWTH AND INCOME FUND--The primary investment objective of Growth and
Income Fund, a diversified portfolio, is to seek current income. A secondary
objective of Growth and Income Fund is long-term capital appreciation. Growth
and Income Fund pursues these objectives by investing primarily in a diversified
portfolio of high quality, dividend paying common stocks and securities that are
convertible into common stocks.
GROWTH STOCK FUND--The primary investment objective of Growth Stock Fund, a
diversified portfolio, is to provide investors with long-term capital
appreciation. Income generation is a secondary objective of Growth Stock Fund.
Growth Stock Fund pursues these objectives by investing primarily in common
stocks and securities that are convertible into common stocks of both domestic
and foreign companies. Growth Stock Fund may invest in securities issued by
large, well-established companies, as well as those issued by smaller companies,
subject to a minimum market capitalization of $50 million. There may be some
additional risks associated with investments in smaller companies. See "Certain
Risks" below.
NEW ASIA GROWTH FUND--New Asia Growth Fund's investment objective is
long-term growth of capital. New Asia Growth Fund seeks to achieve this
objective primarily through direct or indirect investments in equity securities
of companies located in the developing countries of Asia. New Asia Growth Fund
invests indirectly in the equity securities of companies located in developing
Asian countries by purchasing interests in other foreign investment companies or
trusts which themselves invest in the developing countries of Asia. New Asia
Growth Fund may invest to a lesser degree in debt securities and other
instruments (i.e., warrants and securities convertible into equity or debt
securities) if the investment adviser believes that such investments would help
achieve New Asia Growth Fund's investment objective. Current income from
dividends and interest will not be an important consideration in selecting
portfolio securities. Because of its emphasis on the economies of the developing
countries of Asia, New Asia Growth Fund should be considered a vehicle for
diversification of an individual's portfolio and not a balanced investment
program.
PROSPECTUS
1
<PAGE> 131
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND--The primary investment
objective of Short Intermediate U.S. Treasury Securities Fund, a diversified
portfolio, is to provide investors with a high level of current income
consistent with prudent risk of capital. Capital appreciation is a secondary
objective of Short Intermediate U.S. Treasury Securities Fund. Short
Intermediate U.S. Treasury Securities Fund seeks to achieve these objectives by
investing primarily in U.S. Treasury bonds, notes and bills ("U.S. Treasury
Securities") and repurchase agreements that are collateralized by U.S. Treasury
Securities. Under normal market conditions, the dollar-weighted average
remaining maturity of Short Intermediate U.S. Treasury Securities Fund's
portfolio will be from two to five years.
TAX-FREE SECURITIES FUND--The investment objective of Tax-Free Securities
Fund, a non-diversified portfolio, is to provide investors with a high level of
current income exempt from federal income tax and Hawaii income Tax. Tax-Free
Securities Fund pursues this objective by investing, under normal market
conditions, at least 80% of the Fund's net assets in debt obligations of issuers
that pay interest that, in the opinion of counsel to the issuer, is exempt from
federal income tax and is not subject to the federal alternative minimum tax
("Municipal Obligations"). In addition, Tax-Free Securities Fund intends to
invest at least 50%, and no more than 60%, of the market value of its securities
in debt obligations issued by or on behalf of the State of Hawaii and its
political subdivisions, agencies and instrumentalities and other issuers which
pay interest that is exempt from Hawaii personal income tax and exempt from
federal income tax, but which, subject to the guidelines discussed above, may be
subject to the federal alternative minimum tax ("Hawaiian Municipal
Obligations"). Hawaiian Trust will monitor Tax-Free Securities Fund's portfolio
performance on an ongoing basis and will reallocate assets in response to actual
and anticipated market and economic changes. This approach may result in
significant variations in the dollar-weighted average remaining maturity of Tax-
Free Securities Fund's portfolio.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND--The investment objectives of
Tax-Free Short Intermediate Securities Fund, a non-diversified portfolio, are to
provide investors with a high level of current income, exempt from federal
income tax and Hawaii income tax, and to provide greater price stability than a
long-term bond fund. Tax-Free Short Intermediate Securities Fund pursues these
objectives by investing, under normal market conditions, at least 80% of its net
assets in Municipal Obligations. In addition, Tax-Free Short Intermediate
Securities Fund intends to invest at least 50%, and no more than 60%, of the
market value of its securities in Hawaiian Municipal Obligations. Under normal
market conditions, the dollar-weighted average remaining maturity of Tax-Free
Short Intermediate Securities Fund's portfolio will be from two to five years.
U.S. TREASURY SECURITIES FUND--The primary investment objective of U.S.
Treasury Securities Fund, a diversified portfolio, is to provide investors with
a high level of current income consistent with prudent risk of capital. Capital
appreciation is a secondary investment objective of U.S. Treasury Securities
Fund. U.S. Treasury Securities Fund seeks to achieve these objectives by (i)
investing primarily in U.S. Treasury Securities and repurchase agreements that
are collateralized by U.S. Treasury Securities; and (ii) varying the
dollar-weighted average remaining maturity of its portfolio to take advantage of
changes in interest rates.
CERTAIN RISKS
To the extent a Fund invests in fixed income securities, the Fund is
subject to default risk (i.e., the risk that the issuers of securities in which
the Fund invests may default in the payment of principal and/or interest). A
fund investing in fixed income securities is also subject to interest rate risk
(i.e., the risk that increases in market interest rates may adversely affect the
value of the debt securities in which a Fund invests and hence the value of an
investment in such Fund).
PROSPECTUS
2
<PAGE> 132
To the extent a Fund invests in equity securities, its portfolio is subject
to market risk (i.e., the possibility that common stock prices will decline over
short or even extended periods). Equity securities are more volatile and carry
more risk than some other forms of investment, such as short-term high-grade
fixed income securities.
Investments in the securities of smaller and newer companies may present
greater opportunities for capital appreciation because of high potential
earnings growth, but they may also involve greater risk. Such companies,
relative to larger concerns, may have limited product lines, markets or
financial resources, or may depend on a small group of key managers. Their
securities may trade less frequently or in limited volume, or only in the
over-the-counter market or on a regional securities exchange. As a result, these
securities may fluctuate in value more than those of larger, more established
companies and, as a group, may suffer more severe price declines during periods
of generally declining equity prices.
New Asia Growth Fund invests primarily in equity securities located in
developing countries of Asia. Investments in securities of companies located in
the developing countries of Asia involve special considerations and risks not
typically associated with investments in securities of United States issuers,
including: the risks associated with international investing generally, such as
currency fluctuations; the risks of investing in countries with smaller capital
markets, such as limited liquidity, price volatility and restrictions on foreign
investment; and the risks associated with the undeveloped economies of the
developing countries of Asia, including significant political and social
uncertainties, government involvement in the economies, overburdened
infrastructures, archaic legal systems, environmental problems, and obsolete
financial systems. The operating expense ratio of New Asia Growth Fund can be
expected to be higher than that of an investment company investing exclusively
in United States securities because the expenses of the Fund, such as custodial
and brokerage costs, are higher. Investors are reminded that in certain
circumstances, their right to redeem shares in New Asia Growth Fund may be
suspended.
There can, of course, be no assurance that any Fund will achieve its
investment objective. In addition, unlike insured bank deposits, no investment
in a Fund is insured against loss of principal. Furthermore, depending upon the
performance of a Fund's investments, the net asset value per share of that Fund
may decrease instead of increase.
------------------------
For additional information concerning the investment policies and practices
of the Funds, see "Investment Objectives and Policies of the Funds," "Additional
Discussion Regarding Permitted Investment Activities," "Additional Risk
Disclosure" and "Additional Investment Restrictions" in this Prospectus.
Further information also is provided in the SAI.
PURCHASE OF SHARES
Shares of the Institutional Class of the Funds are offered at net asset
value. See "Valuation of Institutional Class Shares" and "How to Purchase
Institutional Class Shares." Only institutions (including Bank of Hawaii and its
affiliated and correspondent banks) ("Institutions") acting on behalf of
customers having a qualified trust account, employee benefit account or other
qualifying account at such Institution are eligible to invest in the
Institutional Class of each Fund's shares. Direct purchases of Fund shares by
individual investors, including purchases through SIPC insured brokerage
accounts, are not permitted. Investors not eligible to invest in a Fund's
Institutional Class may invest in such Fund's Retail Class, which shares are not
offered hereby. See "General Information." Institutional Class Shares of each
Fund are sold on a continuous basis and purchases may be made by mail or by
wire.
PROSPECTUS
3
<PAGE> 133
DIVIDENDS AND DISTRIBUTIONS
Diversified Fixed Income Fund, Short Intermediate U.S. Treasury Securities
Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and
U.S. Treasury Securities Fund will declare dividends of substantially all of
their net income daily and will pay such dividends monthly. Balanced Fund,
Growth and Income Fund and Growth Stock Fund will declare and pay dividends of
substantially all of their net income monthly. New Asia Growth Fund will declare
and pay dividends of substantially all of its net income quarterly. Any net
capital gains of a Fund will be distributed at least annually. At an investor's
choice, dividends are paid by mail, directly deposited into a bank account, or
automatically reinvested in additional shares at the then-current net asset
value. If no election is made, dividends will be automatically reinvested. See
"Dividend and Tax Information."
HAWAIIAN TRUST, THE SUB-ADVISER AND BISYS
For its services as investment adviser to the Funds, Hawaiian Trust
receives a fee from each Fund at annual rates that are based on the Fund's
average daily net assets. See, "Fund Expenses" and "Management, Advisory and
Other Service Arrangements." A subsidiary of Bank of Hawaii, Hawaiian Trust (a
non-deposit taking institution) was founded in 1898 and is the oldest and
largest trust company in Hawaii. It has investment authority over approximately
$6.3 billion in client financial assets, including having investment authority
over approximately $1.7 billion in municipal obligations. Hawaiian Trust is not
authorized to and does not carry on a banking business.
Hawaiian Trust has retained the Sub-Adviser to provide investment advisory
services with respect to management of the foreign component of New Asia Growth
Fund's portfolio. For its services, Hawaiian Trust pays the Sub-Adviser a fee at
an annual rate based on New Asia Growth Fund's average daily net assets.
BISYS provides certain administrative services to the Funds, for which each
Fund pays it a fee at an annual rate based on the Fund's average daily net
assets. BISYS also distributes the Funds' shares. See "Management, Advisory and
Other Service Arrangements."
REDEMPTION OF INSTITUTIONAL CLASS SHARES
An Institution may redeem Institutional Class Shares on behalf of its
customers without charge on any day that the net asset value of the relevant
Fund is calculated (see, "Valuation of Institutional Class Shares") and
Institutional Class Shares may ordinarily be redeemed by mail or by telephone.
PROSPECTUS
4
<PAGE> 134
FUND EXPENSES
The following Table of Expenses lists the costs and expenses that a
shareholder can expect to incur as an investor in the Institutional Class of a
Fund. Certain investors may not qualify to invest in a Fund's Institutional
Class, but may invest in a Fund's Retail Class, which is not offered hereby.
TABLE OF EXPENSES*
<TABLE>
<CAPTION>
SHORT
INTERMEDIATE
DIVERSIFIED GROWTH NEW U.S.
FIXED AND GROWTH ASIA TREASURY TAX-FREE
BALANCED INCOME INCOME STOCK GROWTH SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND FUND
-------- ----------- ------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................ 0.80% 0.60% 0.80% 0.80% 0.90% 0.30%+ 0.60%
Other Expenses (after waivers and
reimbursements)...................... 0.32% 0.30% 0.32% 0.29% 1.08% 0.37% 0.29%
Total Fund Operating Expenses (after
waivers and reimbursements).......... 1.12% 0.90% 1.12% 1.09% 1.98% 0.67% 0.89%
<CAPTION>
TAX-FREE
SHORT U.S.
INTERMEDIATE TREASURY
SECURITIES SECURITIES
FUND FUND
------------ ----------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................ 0.50% 0.60%
Other Expenses (after waivers and
reimbursements)...................... 0.33% 0.35%
Total Fund Operating Expenses (after
waivers and reimbursements).......... 0.83% 0.95%
<FN>
- ---------------
+Reflects waiver. See "Explanation of Table" below.
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment in
Institutional Class Shares assuming (1) 5% annual return** and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
SHORT
INTERMEDIATE
DIVERSIFIED GROWTH NEW U.S.
FIXED AND GROWTH ASIA TREASURY TAX-FREE
BALANCED INCOME INCOME STOCK GROWTH SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND FUND
-------- ----------- ------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Time Period
- -----------------------------------------
1 year.............................. $ 11 $ 9 $ 11 $ 11 $ 20 $ 7 $ 9
3 years............................. $ 36 $ 29 $ 36 $ 35 $ 62 $ 21 $ 28
5 years............................. $ 62 $ 50 $ 62 $ 60 $107 $ 37 $ 49
10 years............................. $136 $ 111 $136 $133 $231 $ 83 $110
<CAPTION>
TAX-FREE
SHORT U.S.
INTERMEDIATE TREASURY
SECURITIES SECURITIES
FUND FUND
------------ ----------
<S> <C> <C>
Time Period
- -----------------------------------------
1 year.............................. $ 8 $ 10
3 years............................. $ 26 $ 30
5 years............................. $ 46 $ 53
10 years............................. $103 $117
<FN>
- ------------
* Investors who purchase shares through an Institution (as defined above) may
be charged account-level fees for additional services provided to them by
such Institution in connection with an investment in a Fund.
** The assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual return. The actual rate of return may
be greater or less than the assumed rate. The Example should not be
considered a representation of past or future expenses, and actual expenses
may be greater or lesser than those shown.
</TABLE>
PROSPECTUS
5
<PAGE> 135
EXPLANATION OF TABLE
The purpose of the foregoing table is to assist shareholders in
understanding the various costs and expenses that an investor in the
Institutional Class of a Fund will bear. The amounts set forth under "Annual
Fund Operating Expenses--Other Expenses," as well as the expense amounts used in
the Example, are based on actual amounts for the most recent fiscal year,
restated to reflect fee waivers and expense reimbursements in effect as of the
date of this Prospectus. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations.
Hawaiian Trust, the Sub-Adviser and BISYS each may elect, in its sole
discretion, to otherwise waive or reimburse its respective fees. Any such
waivers or reimbursements will reduce the total expenses of the Fund to which
they apply, thereby increasing yield or total return. As described above, the
percentages shown above under "Management Fees" (Short Intermediate U.S.
Treasury Securities Fund only), "Other Expenses" and "Total Fund Operating
Expenses" for the Funds reflect certain estimated voluntary fee waivers and
expense reimbursements. Absent such waivers and reimbursements, the percentages
under "Other Expenses" and "Total Fund Operating Expenses" would be (i) 0.34%
and 0.94% for Diversified Fixed Income Fund; (ii) 0.36% and 1.16% for Growth and
Income Fund; (iii) 0.33% and 1.13% for Growth Stock Fund; and (iv) 1.94% and
2.84% for New Asia Growth Fund; (v) 0.42% and 0.92% for Short Intermediate U.S.
Treasury Securities Fund; (vi) 0.38% and 0.88% for Tax-Free Short Intermediate
Securities Fund; (vii) 0.33% and 0.93% for Tax-Free Securities Fund; (viii)
0.39% and 0.99% for U.S. Treasury Securities Fund; and (ix) 0.36% and 1.16% for
Balanced Fund. With respect to Short Intermediate U.S. Treasury Fund, absent
waivers and reimbursements, the percentage under "Management Fees" would be
0.50%. There can be no assurance that the foregoing waivers and expense
reimbursements will continue to apply.
PROSPECTUS
6
<PAGE> 136
FINANCIAL HIGHLIGHTS
The Financial Highlights in the table below set forth certain financial
data and investment results of the Institutional Class Shares of the Funds since
inception, expressed in one share outstanding throughout the period. The
Financial Highlights are derived from the financial statements of Pacific
Capital Funds which have been audited by Ernst & Young LLP, independent
auditors. The Financial Highlights should be read in conjunction with the
financial statements, related notes, and other financial information included in
the Statement of Additional Information. Further information about the
performance of the Funds is contained in the Funds' most recent report to
shareholders which may be obtained without charge by calling or writing the
Funds at the telephone number or address on the front cover of this Prospectus.
<TABLE>
<CAPTION>
DIVERSIFIED FIXED GROWTH AND
INCOME FUND INCOME FUND GROWTH STOCK FUND
----------------------- ----------------------- -----------------------
YEAR OCTOBER 14, YEAR OCTOBER 14, YEAR OCTOBER 14,
ENDED 1994 TO ENDED 1994 TO ENDED 1994 TO
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995(a) 1996 1995(a) 1996 1995(f)
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $10.84 $10.00 $11.43 $10.00 $11.71 $ 9.89
----- ------- ----- ------- ----- ------
Investment Activities
Net investment income
(loss)................... 0.58 0.55 0.17 0.20 0.10 0.11
Net realized and unrealized
gain (loss) on
investments.............. (0.16) 0.78 1.21 1.42 0.89 1.83
----- ------- ----- ------- ----- ------
Total from Investment
Activities........... 0.42 1.33 1.38 1.62 0.99 1.94
----- ------- ----- ------- ----- ------
Distributions
Net investment income...... (0.61) (0.49) (0.17) (0.19) (0.10) (0.12)
In excess of net investment
income................... (0.02) -- (0.01) -- -- --
In excess of net realized
gains.................... (0.10) -- -- -- (0.49) --
Net realized gains......... -- -- (0.31) -- (0.22) --
----- ------- ----- ------- ----- ------
Total Distributions.... (0.73) (0.49) (0.49) (0.19) (0.81) (0.12)
----- ------- ----- ------- ----- ------
NET ASSET VALUE, END OF
PERIOD....................... $10.53 $10.84 $12.32 $11.43 $11.89 $11.71
===== ======= ===== ======= ===== ======
TOTAL RETURN (EXCLUDES SALES
CHARGE)...................... 3.85%(b) 13.70%(b) 12.29%(b) 16.41%(b) 8.53%(b) 20.64%(g)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000).................... $161,742 $54,827 $74,427 $41,771 $172,565 $136,837
Ratio of expenses to
average net assets(c).... 0.88% 0.93% 1.11% 1.14% 1.09% 1.13%
Ratio of net investment
income (loss) to average
net assets(c)............ 5.56% 6.71% 1.43% 2.47% 0.86% 1.30%
Ratio of expenses to
average net assets(c)*... 0.92% 1.01% 1.15% 1.22% 1.13% 1.21%
Ratio of net investment
income (loss) to average
net assets(c)*........... 5.52% 6.63% 1.39% 2.39% 0.82% 1.23%
Portfolio Turnover(d).......... 58.86% 60.47% 80.83% 12.78% 61.30% 32.40%
Average Commission Rate
paid(e)...................... -- -- $0.0921 -- $0.0895 --
</TABLE>
- ------------
See footnotes on next page.
PROSPECTUS
7
<PAGE> 137
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
SHORT INTERMEDIATE
NEW ASIA U.S. TREASURY TAX-FREE SECURITIES
GROWTH FUND SECURITIES FUND FUND
-------------------- ----------------------- -----------------------
YEAR FEB. 15, YEAR OCTOBER 14, YEAR OCTOBER 14,
ENDED 1995 TO ENDED 1994 TO ENDED 1994 TO
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995(a) 1996 1995(f) 1996 1995(a)
-------- -------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $11.22 $10.00 $ 9.61 $ 9.30 $10.56 $10.00
----- ------ ----- ------- ----- ------
Investment Activities
Net investment income (loss)... (0.01) 0.04 0.53 0.44 0.52 0.42
Net realized and unrealized
gain (loss) on investments... 0.22 1.18 (0.13) 0.31 0.07 0.51
----- ------ ----- ------- ----- ------
Total from Investment
Activities............... 0.21 1.22 0.40 0.75 0.59 0.93
----- ------ ----- ------- ----- ------
Distributions
Net investment income.......... -- -- (0.53) (0.44) (0.52) (0.37)
In excess of net investment
income....................... (0.03) -- (0.04) -- (0.04) --
In excess of net realized
gains........................ -- -- (0.02) -- (0.04) --
Net realized gains............. (0.26) -- -- -- (0.09) --
----- ------ ----- ------- ----- ------
Total Distributions........ (0.29) -- (0.59) (0.44) (0.69) (0.37)
----- ------ ---- ------- ----- ------
NET ASSET VALUE, END OF PERIOD..... $11.14 $11.22 $ 9.42 $ 9.61 $10.46 $10.56
===== ====== ===== ======= ===== ======
TOTAL RETURN (EXCLUDES SALES
CHARGE).......................... 1.99%(b) 12.20%(b) 4.18%(b) 6.57%(g) 5.73%(b) 9.54%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)........................ $8,469 $2,861 $23,545 $16,214 $288,934 $281,646
Ratio of expenses to average
net assets(c)................ 1.98% 1.97% 0.67% 0.75% 0.89% 0.89%
Ratio of net investment income
(loss) to average net
assets(c).................... (0.02%) 1.18% 5.40% 5.84% 4.92% 5.16%
Ratio of expenses to average
net assets(c)*............... 2.84% 2.74% 0.92% 0.99% 0.93% 0.98%
Ratio of net investment income
(loss) to average net
assets(c)*................... (0.88%) 0.42% 5.15% 5.61% 4.88% 5.07%
Portfolio Turnover(d).............. 86.53% 55.62% 47.17% 62.73% 24.78% 49.17%
Average Commission Rate paid(e).... $0.0069 -- -- -- -- --
</TABLE>
- ------------
See footnotes on next page.
PROSPECTUS
8
<PAGE> 138
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE SHORT
INTERMEDIATE U.S. TREASURY
SECURITIES FUND SECURITIES FUND
----------------------- -----------------------
YEAR OCTOBER 14, YEAR OCTOBER 14,
ENDED 1994 TO ENDED 1994 TO
JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995(a) 1996 1995(f)
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................... $10.14 $10.00 $ 9.43 $ 8.66
----- ------- ----- -------
Investment Activities
Net investment income loss............................ 0.40 0.32 0.59 0.44
Net realized and unrealized gain (loss) on
investments......................................... (0.03) 0.11 (0.24) 0.76
----- ------- ----- -------
Total from Investment Activities.................. 0.37 0.43 0.35 1.20
----- ------- ----- -------
Distributions
Net investment income................................. (0.40) (0.29) (0.55) (0.43)
In excess of net investment income.................... (0.03) -- (0.09) --
In excess of net realized gains....................... -- -- -- --
Net realized gains.................................... -- -- -- --
----- ------- ----- -------
Total Distributions............................... (0.43) (0.29) (0.64) (0.43)
----- ------- ----- -------
NET ASSET VALUE, END OF PERIOD............................ $10.08 $10.14 $ 9.14 $ 9.43
----- ------- ----- -------
----- ------- ----- -------
TOTAL RETURN (EXCLUDES SALES CHARGE)...................... 3.67%(b) 4.36%(b) 3.71%(b) 10.49%(g)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)..................... $39,472 $39,993 $23,248 $51,264
Ratio of expenses to average net assets(c)............ 0.83% 0.85% 0.95% 1.02%
Ratio of net investment income (loss) to average net
assets(c)........................................... 3.90% 4.03% 5.81% 5.78%
Ratio of expenses to average net assets(c)*........... 0.88% 0.94% 0.99% 1.09%
Ratio of net investment income (loss) to average net
assets(c)*.......................................... 3.85% 3.94% 5.77% 5.71%
Portfolio Turnover(d)..................................... 54.70% 89.98% 15.75% 80.98%
Average Commission Rate paid(e)........................... -- -- -- --
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. In addition, with
respect to Growth Stock Fund, Short Intermediate U.S. Treasury Securities
Fund and U.S. Treasury Securities Fund, the investment adviser reimbursed
expenses. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.
(f) On October 13, 1994, the Trust identified those Institutional shareholders
that were part of the Retail Class and transferred these shareholders into
the Institutional Class at the prevailing net asset value effective October
14, 1994. The Financial Highlights presented for the Institutional Class
reflects operations and distributions for the period from October 14, 1994
through July 31, 1995.
(g) Represents total return for the Fund, as a whole, for the period from August
1, 1994 through October 13, 1994 plus total return for the Institutional
Class for the period from October 14, 1994 through July 31, 1995.
</TABLE>
PROSPECTUS
9
<PAGE> 139
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each Fund has its own investment objectives, as described earlier in this
Prospectus. Each Fund also follows its own investment policies and practices,
subject to certain investment restrictions, all described further below and in
"Additional Discussion Regarding Permitted Investment Activities." The SAI also
contains more specific descriptions of investment restrictions which govern the
investments of each of the Funds.
BALANCED FUND
Balanced Fund invests primarily in common stocks, preferred stocks, bonds,
and securities that are convertible into common stocks. Under normal market
conditions, Balanced Fund will invest in common stocks and securities
convertible into common stocks, fixed income securities (i.e., warrants,
convertible preferred stock, fixed rate preferred stock, convertible
fixed-income securities, options and rights). At least 25% of the value of
Balanced Fund's assets will be invested in senior fixed income securities.
Balanced Fund will invest in common stocks of issuers that exhibit strong
earnings growth trends and that are believed by the Fund to have above-average
prospects for future earnings growth. Balanced Fund will maintain a portfolio of
common stocks diversified among industries and companies. Balanced Fund may
invest in common stocks of large companies (i.e., those companies with more than
$750 million in capitalization) which the Fund believes offer the potential for
long-term earnings growth and/or above-average dividend yield. Some investments
may also be made in common stocks of medium and smaller sized companies (i.e.,
those companies with at least $250 million, but less than $750 million in
capitalization) which have the potential to generate high levels of future
revenue and earnings growth and where the investment opportunity may not be
fully reflected in the price of the securities but which may involve greater
volatility than investments in larger companies.
Balanced Fund intends to invest less than 50% of its total assets in the
securities of medium and smaller sized companies and the remainder in securities
of larger sized companies. However, the actual percentage may vary according to
changes in market conditions and the judgment of Hawaiian Trust of how best to
achieve Balanced Fund's investment objective. For risk disclosure regarding
investments in medium and smaller-sized companies see, "Highlights--Certain
Risks."
DIVERSIFIED FIXED INCOME FUND
Diversified Fixed Income Fund invests in U.S. Government Obligations and in
investment grade debt obligations. Most obligations acquired by Diversified
Fixed Income Fund will be issued by companies or governmental entities located
within the United States. Up to 25% of the total assets of Diversified Fixed
Income Fund may, however, be invested in dollar-denominated debt obligations of
foreign issuers. Under normal market conditions, at least 65% of the value of
the total assets of Diversified Fixed Income Fund will be invested in fixed
income securities.
GROWTH AND INCOME FUND
Growth and Income Fund invests primarily in a diversified portfolio of high
quality, dividend-paying common stocks and securities convertible into common
stocks. Growth and Income Fund anticipates investing in securities that
currently have in the aggregate an above average dividend yield, with the
anticipation that the dividend will remain constant or be increased in the
future. These securities generally represent the core holdings of Growth and
Income Fund. However, these holdings may be balanced with lower yielding but
higher growth-oriented securities to achieve more growth potential. Under normal
market conditions, Growth and Income Fund will invest at least 65% of the value
of its total assets in income producing common stocks and securities convertible
into common stocks.
PROSPECTUS
10
<PAGE> 140
GROWTH STOCK FUND
Growth Stock Fund invests primarily in common stocks and securities that
are convertible into common stocks of both domestic and foreign companies. Under
normal market conditions, Growth Stock Fund will invest at least 65% of its
total assets in common stocks or securities convertible into common stocks.
NEW ASIA GROWTH FUND
New Asia Growth Fund is designed for U.S. investors seeking diversification
of their respective investment portfolios by participating in the economies of
developing Asian countries. New Asia Growth Fund's investment objective is to
seek long-term growth of capital. New Asia Growth Fund seeks to achieve this
objective primarily through direct or indirect investments in equity securities
of companies located in the developing countries of Asia. New Asia Growth Fund
invests indirectly in the equity securities of companies located in developing
Asian countries by purchasing interests in other foreign investment companies or
trusts which themselves invest in the developing countries of Asia. For purposes
of its investment objective, New Asia Growth Fund considers such developing
countries to be all countries in Asia other than Japan. New Asia Growth Fund may
invest to a lesser degree in debt securities and other instruments (i.e.,
warrants and securities convertible into equity or debt securities) if the
investment adviser believes they would help achieve the Fund's objective.
Current income from dividends and interest will not be an important
consideration in selecting portfolio securities.
It is anticipated that under normal market conditions New Asia Growth Fund
will invest at least 70% of its total assets directly or indirectly in common
stock, common stock equivalents (such as preferred or debt securities
convertible into common stocks) and preferred stocks of companies located in the
developing countries of Asia which the investment adviser believes have
potential for capital appreciation. New Asia Growth Fund will consider an issuer
of securities to be located in a developing country of Asia if it is organized
under the laws of a developing Asian country, if it derives 50% or more of its
total revenues from business in a developing Asian country, or if its equity
securities are traded principally on a securities exchange in a developing Asian
country.
Developing countries in which New Asia Growth Fund may invest include, but
are not limited to: Hong Kong, China, India, Indonesia, South Korea, Malaysia,
the Philippines, Singapore, Taiwan, Pakistan, Bangladesh, Sri Lanka and
Thailand.
The criteria which the investment adviser uses to select and maintain a
portfolio of investments in any country depends on its view as to the upside
potential of the stock markets in such country and, more specifically, the
investment instruments therein. In determining the upside potential for each
market, the investment adviser will consider the economic, political and social
factors affecting each country and the prospects for improvements in these
factors in the short, medium and long term.
New Asia Growth Fund will not limit its investments to any particular type
of company. New Asia Growth Fund may invest in companies, large or small, whose
earnings are believed to be in a relatively strong growth trend, or in companies
in which significant further growth is not anticipated but whose market value
per share is thought to be undervalued. New Asia Growth Fund may invest in small
and relatively less well-known companies. Investing in small and relatively less
well-known companies involves certain risks. See, "Highlights-- Certain Risks."
Subject to New Asia Growth Fund's investment objective, up to 35% of the
Fund's total assets may be invested in any combination of equity, debt and
convertible securities of issuers located outside Asia, including money market
instruments of the United States, should opportunities in these markets occur.
In addition, this portion of New Asia Growth Fund's portfolio will consist of
various other financial instruments such as forward foreign exchange contracts,
futures contracts and options. At
PROSPECTUS
11
<PAGE> 141
times the investment adviser may judge that conditions in the securities markets
make pursuing New Asia Growth Fund's basic investment strategy inconsistent with
the best interests of its shareholders. At such times, the investment adviser
may temporarily use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing these
"defensive" strategies, New Asia Growth Fund may invest without limit in cash
(foreign currency or U.S. dollars) and in domestic, Eurodollar and foreign
short-term money market instruments. It is impossible to predict when, or for
how long, New Asia Growth Fund will use such alternative strategies.
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
Short Intermediate U.S. Treasury Securities Fund invests primarily in U.S.
Treasury Securities and in repurchase agreements collateralized by U.S. Treasury
Securities. Short Intermediate U.S. Treasury Securities Fund seeks to enhance
its total return by shortening the average maturity of portfolio securities when
interest rates are anticipated to increase and lengthening the maturity of such
portfolio securities to take advantage of anticipated interest rate declines.
Due to the dollar-weighted average maturity of Short Intermediate U.S. Treasury
Securities Fund, it is expected to be less volatile than U.S. Treasury
Securities Fund. Under normal market conditions, at least 65% of the value of
the total assets of Short Intermediate U.S. Treasury Securities Fund will be
invested in U.S. Treasury Securities.
TAX-FREE SECURITIES FUND
Tax-Free Securities Fund purchases primarily Hawaiian Municipal Obligations
and Municipal Obligations. As a matter of fundamental policy, Tax-Free
Securities Fund will have, under normal market conditions, at least 80% of its
net assets invested in Municipal Obligations. As a matter of operating policy,
under normal market conditions, at least 50%, and no more than 60%, of the
market value of Tax-Free Securities Fund's securities will be invested in
Hawaiian Municipal Obligations. For temporary defensive purposes, Hawaiian Trust
may invest more than 20% of Tax-Free Securities Fund's net assets in securities
that are subject to federal income tax or the federal alternative minimum tax.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
Tax-Free Short Intermediate Securities Fund purchases primarily Hawaiian
Municipal Obligations and Municipal Obligations. As a matter of fundamental
policy, Tax-Free Short Intermediate Securities Fund will have, under normal
market conditions, at least 80% of its net assets invested in Municipal
Obligations. As a matter of operating policy, under normal market conditions at
least 50%, and no more than 60%, of the market value of Tax-Free Short
Intermediate Securities Fund's securities will be invested in Hawaiian Municipal
Obligations. For temporary defensive purposes, Hawaiian Trust may invest more
than 20% of Tax-Free Short Intermediate Securities Fund's net assets in
securities that are subject to federal income tax or the federal alternative
minimum tax.
U.S. TREASURY SECURITIES FUND
U.S. Treasury Securities Fund invests primarily in U.S. Treasury Securities
and in repurchase agreements collateralized by U.S. Treasury Securities. U.S.
Treasury Securities Fund seeks to enhance its total return by shortening the
average maturity of portfolio securities when interest rates are anticipated to
increase and lengthening the maturity of such portfolio securities to take
advantage of anticipated interest rate declines. Under normal market conditions,
at least 65% of the value of the total assets of U.S. Treasury Securities Fund
will be invested in U.S. Treasury Securities.
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ADDITIONAL DISCUSSION REGARDING
PERMITTED INVESTMENT ACTIVITIES
MUNICIPAL OBLIGATIONS
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund invest primarily in Municipal Obligations, which includes Municipal Bonds,
Municipal Notes and Municipal Commercial Paper.
MUNICIPAL BONDS--Municipal bonds generally have a maturity at the time of
issuance of up to thirty years. They are principally classified either as
"general obligation" bonds, which are secured by the pledge of the
municipality's faith, credit and taxing power for the payment of principal and
interest, or as "revenue" bonds, which are payable only from the revenues
derived from a particular project or facility and generally are dependent solely
on a specific revenue source.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund may invest in municipal bonds which are covered by insurance guaranteeing
the scheduled payment of principal and interest until their maturity ("Insured
Municipal Bonds"). The insurance can be purchased either by the issuing
government entity or by the Fund purchasing the bond. This insurance is
primarily written by two organizations: Ambac Indemnity Corporation (formerly
called American Municipal Bond Assurance Corporation), a unit of Citicorp, and
Municipal Bond Insurance Association, a pool of private insurers, but may be
written by certain other large insurance companies. This insurance feature
minimizes the risks to the Tax-Free Securities Fund and the Tax-Free Short
Intermediate Securities Fund and its shareholders associated with payment delays
or defaults in these portfolio securities, but does not guarantee the market
value of these portfolio securities or the value of the shares of the Tax-Free
Securities Fund and the Tax-Free Short Intermediate Securities Fund. An issuer
would likely purchase insurance in order to obtain a higher rating by an NRSRO
(defined below) than it would receive without the insurance thereby reducing the
issuer's borrowing costs. The price paid or received for an Insured Municipal
Bond may be higher than the price that would otherwise be paid or received for
the municipal bond absent the insurance.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund may invest in moral obligation bonds ("Moral Obligation Bonds") which are
tax-exempt bonds issued by a municipality or a state financial intermediary and
backed by the moral obligation pledge of a state government. Under a moral
obligation pledge, a state government indicates its intent to appropriate funds
in the future if the primary obligor, the municipality or intermediary,
defaults. The state's obligation to honor the pledge is moral rather than legal
because future legislatures cannot be legally obligated to appropriate the funds
required.
MUNICIPAL NOTES--Municipal notes generally have maturities at the time of
issuance of three years or less. Subject to its respective investment objective
and policies, the Tax-Free Securities Fund and the Tax-Free Short Intermediate
Securities Fund may invest in municipal notes that are rated at the date of
purchase in one of the two highest rating categories assigned by an NRSRO, or
not rated but are considered by Hawaiian Trust to be of comparable quality.
Municipal notes generally are issued in anticipation of the receipt of tax
funds, of the proceeds of bond placements or of other revenues. The ability of
an issuer to make payments is, therefore, dependent on such tax receipts,
proceeds from bond sales or other revenues, as the case may be.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund also may invest in certain "private activity" bonds or notes. Such Funds
may not be an appropriate investment for entities which are "substantial users,"
or certain "related persons" of substantial users, of facilities financed by
private activity bonds. "Substantial users" are defined under U.S. Treasury
Regulations
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to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, or who occupies more than 5%
of the usable area of such facilities or for whom such facilities, or a part
thereof, were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations,
partnerships and their partners and S corporations and their shareholders.
MUNICIPAL COMMERCIAL PAPER--Municipal commercial paper is a debt obligation
with a stated maturity of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Subject to its respective investment objective and policies, the Tax-Free
Securities Fund and the Tax-Free Short Intermediate Securities Fund may invest
in municipal commercial paper that is rated at the date of purchase in one of
the two highest rating categories by an NRSRO or not rated but is considered by
Hawaiian Trust to be of comparable quality.
U.S. GOVERNMENT OBLIGATIONS
Each of the Funds may invest in U.S. Government Obligations which include,
in addition to U.S. Treasury Securities, the obligations of the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Student Loan Marketing Association ("SLMA"), Federal National Mortgage
Association ("FNMA"), Resolution Trust Corporation and Federal Home Loan
Mortgage Corporation ("FHLMC"). U.S. Treasury Securities and certain other
obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of FNMA, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the SLMA, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored instrumentalities if it
is not obligated to do so by law. Some of these instruments may be variable or
floating rate instruments. The Funds will invest in the obligations of such
instrumentalities only when the investment adviser believes that the credit risk
with respect to the instrumentality is minimal.
BANK AND SAVINGS AND LOAN OBLIGATIONS
Each of the Funds may invest in Bank and Savings and Loan obligations.
These obligations include negotiable certificates of deposit, fixed time
deposits, bankers' acceptances, and interest bearing demand accounts. The Funds
limit their bank investments to dollar-denominated obligations of U.S.,
Canadian, Asian, Australian or European banks which have more than $500 million
in total assets at the time of investment or of United States savings and loan
associations which have more than $1 billion in total assets at the time of
investment and, in the case of U.S. banks, are members of the Federal Reserve
System or are examined by the Comptroller of the Currency or whose deposits are
insured by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER
Balanced Fund, Diversified Fixed Income Fund, Growth and Income Fund,
Growth Stock Fund, Short Intermediate U.S. Treasury Securities Fund, Tax-Free
Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S. Treasury
Securities Fund may invest in commercial paper that is rated at the date of
purchase in the highest rating category assigned by a nationally recognized
statistical rating organization (an "NRSRO") or unrated if considered by the
investment adviser to be of comparable quality. New Asia Growth Fund may invest
in commercial paper that is rated at the
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time of purchase in the two highest short-term rating categories by an NRSRO or
unrated if considered by the investment adviser to be of comparable quality.
Commercial paper includes short-term unsecured promissory notes, and variable
floating rate demand notes issued by domestic and foreign bank holding
companies, corporations and financial institutions as well as similar taxable
and tax-exempt instruments issued by government agencies and instrumentalities.
DEBT SECURITIES
Each of the Funds may invest in debt securities issued by foreign and
domestic corporations or financial institutions, and Yankee bonds. Foreign debt
securities in which the Funds may invest include global fixed income securities,
described below. Balanced Fund, Diversified Fixed Income Fund, Growth and Income
Fund, Growth Stock Fund, Short Intermediate U.S. Treasury Securities Fund,
Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S.
Treasury Securities Fund may only invest in U.S. dollar-denominated foreign debt
securities.
Global fixed-income securities include government obligations issued or
guaranteed by U.S. and foreign governments and their political subdivisions,
authorities, agencies or instrumentalities and by supranational entities (such
as the World Bank, The European Economic Community, the Asian Development Bank
and the European Coal and Steel Community), Eurobonds and corporate bonds with
varying maturities denominated in various currencies. Yankee bonds are U.S.
dollar-denominated obligations issued by foreign governments or companies. New
Asia Growth Fund may invest in the fixed income securities of developing Asian
countries. Developing Asian fixed-income securities are debt securities or
obligations issued or guaranteed by governments in such countries (including
their agencies, instrumentalities or political subdivisions) ("sovereign debt"),
debt securities or obligations of entities organized to restructure outstanding
debt of such issuers, and debt securities of issuers located in such developing
countries.
The debt securities in which the Funds will invest (including convertible
securities, as applicable) will be of investment grade (i.e., rated in the top
four rating categories by an NRSRO, or, if unrated, determined to be of
comparable quality by the investment adviser). See SAI, "Appendix."
Notwithstanding the foregoing, up to 10% of the New Asia Growth Fund's net
assets may be invested in securities rated below investment grade by an NRSRO or
determined to be of comparable quality by the investment adviser. Debt
securities rated below investment grade or of comparable quality are commonly
referred to as "junk bonds." For a description of the risks associated with
investment in debt securities, including lower-rated debt securities and
sovereign debt, see "Additional Risk Disclosure--Risk Factors Associated with
Investment in Certain Debt Securities."
PREFERRED STOCK
Each of the Funds may invest in preferred stock which is a class of capital
stock that pays dividends at a specified rate and that has preference over
common stock in the payment of dividends and the liquidation of assets.
Preferred stock does not ordinarily carry voting rights.
ILLIQUID SECURITIES
Each of the Funds may invest in illiquid securities. The Funds will not
knowingly invest more than 15% of the value of their respective net assets in
securities that are illiquid. Repurchase agreements with a duration of seven
days or more, time deposits that do not provide for payment to a Fund within
seven days after notice and Guaranteed Investment Contracts ("GICs") and most
commercial paper issued in reliance upon the exemption in Section 4(2) of the
Securities Act of 1933 (the "1933 Act") (other than variable amount master
demand notes with maturities of nine months or less) are subject to this 15%
limit.
If otherwise consistent with its investment objective and policies, any of
the Funds may purchase securities which are not registered under the 1933
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Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as it is determined by the investment adviser, acting under guidelines
and procedures that are developed, established and monitored by the Board of
Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities. The ability to sell to
qualified institutional buyers under Rule 144A is a recent development, and it
is not possible to predict how this market will develop.
The staff of the Commission has taken the position that OTC options that
are purchased and the assets used as cover for written OTC options should
generally be treated as illiquid securities. However, if a dealer recognized by
the Federal Reserve Bank as a primary dealer in U.S. Government securities is
the other party to an option contract written by a Fund and the Fund has the
absolute right to repurchase the option from the dealer at a formula price
established in a contract with the dealer, the Commission staff has agreed that
the Fund needs to treat as illiquid only that amount of the cover assets equal
to the formula price less the amount by which the market value of the security
subject to the option exceeds the exercise price of the option (the amounts by
which the option is in-the-money). Although Hawaiian Trust does not believe that
OTC options are generally illiquid, pending resolution of this issue, each Fund
will conduct their operations in conformity with the views of the Commission
staff.
BORROWINGS
Each of Balanced Fund, Diversified Fixed Income Fund, Growth and Income
Fund, Growth Stock Fund, New Asia Fund, Short Intermediate U.S. Treasury
Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
Securities Fund, and U.S. Treasury Securities Fund may borrow from banks up to
20% of the current value of its net assets for temporary purposes only in order
to meet redemptions, and these borrowings may be secured by the pledge of up to
20% of the current value of its net assets (but investments may not be purchased
while such outstanding borrowings in excess of 5% of its net assets exists).
New Asia Growth Fund may borrow an amount equal to no more than 33 1/3% of
the value of its total assets (calculated at the time of the borrowing) from
banks for temporary, extraordinary or emergency purposes, for the clearance of
transactions, to hedge against currency movements or for investment purposes.
New Asia Growth Fund may pledge up to 33 1/3% of its total assets to secure
these borrowings. If New Asia Growth Fund's asset coverage for borrowings falls
below 300%, the Fund will take prompt action to reduce its borrowings. If the
300% asset coverage should decline as a result of market fluctuations or other
reasons, New Asia Growth Fund may be required to sell portfolio securities to
reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
Borrowing for investment purposes is generally known as "leveraging."
Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Fund's portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased. In addition, New Asia Growth Fund
may be required to maintain minimum average balances in connection with such
borrowing or pay a commitment fee to maintain a line of credit, which would
increase the cost of borrowing over the stated interest rate.
Each Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements which are considered to be borrowings under the Investment
Company Act of 1940 (the "1940 Act"). At the time a Fund enters into a reverse
repurchase agreement (an agreement under which the Fund sells portfolio
securities and agrees to repurchase them at an agreed-upon date and price),
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it will place in a segregated custodial account liquid assets such as U.S.
Government securities or other liquid high grade debt securities having a value
equal to or greater than the repurchase price (including accrued interest) and
will subsequently monitor the account so that such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the price of the securities it is obligated to
repurchase. The Funds would pay interest on amounts obtained pursuant to a
reverse repurchase agreement.
LOANS OF PORTFOLIO SECURITIES
Each of the Funds may lend securities from its portfolio to brokers,
dealers and financial institutions (but not individuals) if cash, U.S.
Government securities or other high grade debt obligations equal to the current
market value of the securities loaned (including accrued interest thereon) plus
the interest payable to the Fund with respect to the loan is maintained with the
Fund. In determining whether to lend a security to a particular broker, dealer
or financial institution, the investment adviser will consider all relevant
facts and circumstances, including the creditworthiness of the broker, dealer or
financial institution. Any loans of portfolio securities will be fully
collateralized based on values that are marked to market daily by the investment
adviser. No Fund will enter into any portfolio security lending arrangement
having a duration of longer than one year. Any securities that a Fund may
receive as collateral will not become part of such Fund's portfolio at the time
of the loan and, in the event of a default by the borrower, the Fund will, if
permitted by law, dispose of such collateral except for such part thereof that
is a security in which such Fund may invest. During the time securities are on
loan, the borrower will pay the Fund any accrued income on those securities, and
the Fund may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that had delivered cash-equivalent collateral.
No Fund will lend securities having a value that exceeds 30% (33 1/3% with
respect to New Asia Growth Fund) of the current value of its total assets. Loans
of securities by a Fund will be subject to termination at the Fund's or the
borrower's option. The Funds may pay reasonable administrative and custodial
fees in connection with a securities loan and may pay a negotiated portion of
the interest or fee earned with respect to the collateral to the borrower or the
placing broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with the Trust, Hawaiian Trust, BISYS, or, with respect to New Asia
Growth Fund, the Sub-Adviser.
HEDGING STRATEGIES
Each Fund may engage in various portfolio strategies including derivative
transactions to reduce certain risks of its investments. These strategies
currently include the use of options and futures contracts and options thereon
and, with respect to New Asia Growth Fund, the use of foreign currency exchange
contracts. Balanced Fund, Diversified Fixed Income Fund, Growth and Income Fund,
Growth Stock Fund, Short Intermediate U.S. Treasury Securities Fund, Tax-Free
Securities Fund, Tax-Free Short Intermediate Securities Fund, and U.S. Treasury
Securities Fund may also use futures and options thereon to manage cash flow
into the Funds, and may use options to enhance income. A Fund's ability to use
these strategies may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that any of these strategies will
succeed. See "Additional Information on Fund Investments" and "Tax Information"
in the SAI. New financial products and risk management techniques continue to be
developed and the Fund may use these new investments and techniques to the
extent consistent with its investment objective and policies.
Options. Each of Balanced Fund, Diversified Fixed Income Fund, Growth and
Income Fund, Growth Stock Fund, Short Intermediate U.S. Treasury Securities
Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund, and
U.S. Treasury Securities Fund may purchase put and call options and write
covered put and call
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options on securities in which such Fund may invest, provided such options do
not exceed 5% of the Fund's net assets in the aggregate and (1) are traded on
registered domestic securities exchanges or (2) result from separate privately
negotiated transactions in the OTC market with primary U.S. government
securities dealers recognized by the Board of Governors of the Federal Reserve
System. These options may be employed to hedge a Fund's portfolio against market
risk or to enhance income (e.g., to attempt to realize through the receipt of
premiums a greater current return than would be realized on the underlying
securities alone).
New Asia Growth Fund may purchase put and call options and write covered
put and call options on securities, securities indexes and on currencies that
are traded on U.S. or foreign securities exchanges or in the OTC market. Options
which New Asia Growth Fund may purchase and/or write in the OTC market include
privately negotiated transactions with primary U.S. Government securities
dealers to hedge the Fund's portfolio. New Asia Growth Fund may purchase put
options in an effort to protect the value of securities (or currencies) that it
owns against a decline in market value and purchase call options in an effort to
protect against an increase in the price of securities (or currencies) it
intends to purchase. New Asia Growth Fund may also purchase put and call options
to offset previously written put and call options of the same series. See SAI,
"Additional Information on Fund Investments."
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase securities or currency subject
to the option at a specified price (the exercise price or strike price). A put
option gives the purchaser in return for a premium, the right for a specified
time, to sell the securities or currency subject to the option of the writer of
the put at the exercise price.
The aggregate value of the exercise price or strike price of call options
written by New Asia Growth Fund may not exceed 25% of the Fund's net asset
value.
Forward Currency Exchange Contracts. New Asia Growth Fund may enter into
forward foreign currency exchange contracts to protect the value of its assets
against future changes in the level of currency exchange rates. New Asia Growth
Fund may enter into such contracts on a spot, i.e., cash, basis at the rate then
prevailing in the currency exchange market or on a forward basis, by entering
into a forward contract to purchase or sell currency. A forward contract on
foreign currency is an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days agreed upon by the parties
from the date of the contract at a price set on the date of the contract.
New Asia Growth Fund's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with respect
to specific receivables or payables of the New Asia Growth Fund generally
arising in connection with the purchase or sale of its portfolio securities,
accruals of interest or dividends receivable and Fund expenses. Position hedging
is the sale of a foreign currency with respect to portfolio security positions
denominated or quoted in that currency or in a different currency (cross hedge).
Although there are no limits on the number of forward contracts which the Fund
may enter into, the Fund may not position hedge (including cross hedges) with
respect to a particular currency for an amount greater than the aggregate market
value (determined at the time of making any sale of forward currency) of the
securities being hedged. See SAI, "Additional Information on Fund Investments."
Futures Contracts and Related Options. Each of the Funds may enter into
contracts for the future delivery of specific securities, classes of securities
and financial indices, may purchase or sell exchange-listed or OTC options on
any such futures contracts and may engage in related closing transactions. In
addition, New Asia Growth Fund may
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engage in currency futures contracts and related options. A financial futures
contract is an agreement to purchase or sell an agreed amount of securities or
currency at a set price for delivery in the future. A futures contract on a
securities index is an agreement obligating either party to pay, and entitling
the other party to receive, while the contract is outstanding, cash payments
based on the level of a specified securities index. The acquisition of put and
call options on futures contracts will, respectively, give the Fund the right
(but not the obligation), for a specified price, to sell or to purchase the
underlying futures contract, upon exercise of the option, at any time during the
option period.
Each Fund may engage in futures contracts and related options in an effort
to hedge against market (or, with respect to New Asia, currency) risks. For
example, with respect to market risk, when interest rates are expected to rise
or market values of portfolio securities are expected to fall, a Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contracts, can
attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases. With respect to
currency risk, by entering into currency futures and options thereon on U.S. and
foreign exchanges, New Asia Growth Fund can seek to establish the rate at which
it will be entitled to exchange U.S. dollars for another currency at a future
time. By selling currency futures, New Asia Growth Fund can seek to establish
the number of dollars it will receive at delivery for a certain amount of a
foreign currency. In this way, whenever New Asia Growth Fund anticipates a
decline in the value of a foreign currency against the U.S. dollar, the Fund can
attempt to "lock in" the U.S. dollar value of some or all of the securities held
in its portfolio that are denominated in that currency. By purchasing currency
futures, New Asia Growth Fund can establish the number of dollars it will be
required to pay for a specified amount of a foreign currency in a future month.
Thus if New Asia Growth Fund intends to buy securities in the future and expects
the U.S. dollar to decline against the relevant foreign currency during the
period before the purchase is effected, the Fund can attempt to "lock in" the
price in U.S. dollars of the securities it intends to acquire.
Futures may also be used to manage cash flows into and out of Balanced
Fund, Diversified Fixed Income Fund, Growth and Income Fund, Growth Stock Fund,
Short Intermediate U.S. Treasury Securities Fund, Tax-Free Securities Fund,
Tax-Free Short Intermediate Securities Fund and U.S. Treasury Securities Fund.
For example, the investment manager may wish to be fully invested in a
particular asset class. Through the use of futures, the manager can achieve this
objective immediately while temporarily deferring industry and security
selection, in the interest of timeliness.
Each Fund is subject to the limitations set forth in the Commodity Futures
Trading Commission ("CFTC") regulations with respect to the futures contracts
and related options in which it may invest. Accordingly, each Fund may not
purchase and sell futures contracts and related options for other than bona fide
hedging purposes (as defined in CFTC regulations) if, immediately thereafter,
aggregate initial margin deposits for futures contracts, and premiums paid for
related options, would exceed five percent (5%) of the liquidation value of the
Fund's total assets. Each Fund may purchase and sell futures contracts and
related options, without limitation, for bona fide hedging purposes. As a matter
of operating policy, however, aggregate initial margin deposits for futures
contracts, and premiums paid for related options, may not exceed five percent
(5%) of the total assets of Balanced Fund, Diversified Fixed Income Fund, Growth
and Income Fund, Growth Stock Fund, Short Intermediate U.S. Treasury Securities
Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and
U.S. Treasury Securities Fund, and the value of securities that are the subject
of such futures and options (both for receipt and delivery) may not exceed
one-third of the market
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value of each Fund's total assets. Futures transactions will be limited to the
extent necessary to maintain a Fund's qualification as a regulated investment
company.
Futures transactions involve brokerage costs and require a Fund to
segregate assets to cover contracts that would require it to purchase securities
or currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such losses are potentially significant and unanticipated changes may
result in poorer overall performance than if the Fund had not entered into any
futures transactions. In addition, the value of a Fund's futures positions may
not prove to be perfectly or even highly correlated with the value of its
portfolio securities, limiting the Fund's ability to hedge effectively against
interest rate, exchange rate and/or market risk and giving rise to additional
risks. There is no assurance of liquidity in the secondary market for purposes
of closing out future positions. Where a liquid secondary market does not exist,
a Fund is unlikely to be able to control losses by closing out futures
positions. Gains and losses on investments in options and futures depend on the
investment adviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors. Certain futures exchanges or boards
of trade have established daily limits on the amount that the price of futures
contracts or related options may vary, either up or down, from the previous
day's settlement price. These daily limits may restrict a Fund's ability to
purchase or sell certain futures contracts or related options on any particular
day. For additional discussion of certain risks associated with the use of
futures contracts and options thereon, see "Additional Risk Disclosure-- Risks
of Hedging Strategies."
ASSET BACKED SECURITIES
Each of the Funds may invest in Asset Backed Securities. Asset Backed
Securities arise through the grouping by governmental, government-related, and
private organizations of loans, receivables, and other assets originated by
various lenders. Asset Backed Securities acquired by a Fund consist of both
mortgage and non-mortgage backed securities. Interest in pools of these assets
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal paid at maturity or
specified call dates. Instead, Asset Backed Securities provide periodic payments
which generally consist of both interest and principal payments.
The life of an Asset Backed Security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of an Asset Backed Security, will be primarily a function of
current market interest rates, although other economic and demographic factors
may be involved. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, Asset Backed Securities
are not as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
Mortgage Backed Securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
One such type of Mortgage Backed Security is a GNMA Certificate. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. Government. Another type is a FNMA
Certificate; the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. Government. Another type is
a FHLMC Participation Certificate. This type of obligation is
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guaranteed by FHLMC as to timely payment of principal and interest. However,
like a FNMA security, it is not guaranteed by the full faith and credit of the
U.S. Government. Mortgage Backed Securities issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government. Such securities will be purchased for the Funds only when the
investment adviser determines that they are readily marketable at the time of
purchase.
The average life of Mortgage Backed Securities varies with the maturities
of the underlying mortgage instruments, which have maximum maturities of 40
years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
mortgage prepayments, mortgage refinancings, or foreclosures. The rate of
mortgage prepayments, and hence the average life of the certificates, will be a
function of the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
Such prepayments are passed through to the registered holder with the regular
monthly payments of principal and interest and have the effect of reducing
future payments. As a result of the pass-through of prepayments of principal on
the underlying securities, Mortgage Backed Securities are often subject to more
rapid prepayments of principal than their stated maturity would indicate.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the realized yield or the average life of a
particular issue of pass-through certificates. As a result of these principal
payment features, Mortgage Backed Securities are generally more volatile than
other U.S. Government securities.
Estimated average life will be determined by the investment adviser and
used for the purpose of determining, respectively, the average weighted maturity
of the Funds. Various independent mortgage backed securities dealers publish
average remaining life data using proprietary models and, in making such
determinations for the Funds, the investment adviser might deem such data
unreasonable if such data appeared to present a significantly different average
remaining expected life for a security when compared to data relating to the
average remaining life of comparable securities as provided by other independent
mortgage backed securities dealers.
The Funds also may invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pool of assets. Such securities also may be debt
instruments, which also are known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owing such assets and issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. Non-mortgage backed securities will be purchased
by the Funds only when such securities are readily marketable and rated at the
time of purchase in one of the two highest rating categories assigned by an
NRSRO or, if unrated, considered by the investment adviser to be of comparable
quality. In addition, such securities generally will have remaining estimated
lives at the time of purchase of five years or less. See SAI, "Additional
Information on Fund Investments."
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements wherein the seller
of a security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often
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overnight or a few days, although it may extend over a number of months. A Fund
may enter into repurchase agreements only with respect to obligations that could
otherwise be purchased by the Fund. All repurchase agreements will be fully
collateralized based on values that are marked to market daily by the investment
adviser. If the seller defaults and the value of the underlying securities has
declined, the Fund may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, the Fund's disposition of
the security may be delayed or limited.
OTHER INVESTMENT COMPANIES
In connection with the management of its daily cash position, Balanced
Fund, Diversified Fixed Income Fund, Growth and Income Fund, Growth Stock Fund,
New Asia Growth Fund, Short Intermediate U.S. Treasury Securities Fund, Tax-Free
Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S. Treasury
Securities Fund may also invest in securities issued by other investment
companies, including other investment companies managed by Hawaiian Trust. New
Asia Growth Fund may also invest in securities issued by other investment
companies by purchasing the securities of certain foreign investment funds or
trusts called passive foreign investment companies, which have been the only or
primary way to invest in certain developing countries of Asia.
Securities of other investment companies will be acquired by a Fund within
the limits prescribed by the 1940 Act. Each of the Funds intends to limit its
investments so that, as determined immediately after a securities purchase is
made: (a) not more than 5% of the value of its total assets will be invested in
the securities of any one investment company; (b) not more than 10% of the value
of its total assets will be invested in the aggregate in securities of
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the Fund; and (d) the Fund,
together with other investment companies having the same investment adviser and
companies controlled by such companies, owns not more than 10% of the total
stock of any one closed-end company.
As a shareholder of another investment company, a Fund would bear, along
with other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. Accordingly, in addition to bearing their
proportionate share of the relevant Fund's expenses (i.e., management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such other investment companies or trusts. However, Hawaiian Trust has
undertaken to waive or reimburse the Funds its advisory fees with respect to
Fund assets so invested (except when such purchase is part of a plan of merger,
consolidation, reorganization or acquisition).
Investments by New Asia Growth Fund in wholly-owned investment entities
created under the laws of certain countries will not be deemed the making of an
investment in other investment companies.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS
Each of the Funds may invest in Real Estate Mortgage Investment Conduits
("REMICs"). REMICs are a pass-through vehicle created to issue multiclass
Mortgage Backed Securities. REMICs may be organized as corporations,
partnerships, or trusts and those meeting certain qualifications are not subject
to double taxation. Interests in REMICs may be senior or junior, regular (debt
instruments) or residual (equity interests).
FLOATING AND VARIABLE RATE DEBT INSTRUMENTS
Each of the Funds may invest in floating and variable rate debt
instruments. Floating and variable rate debt instruments bear interest at rates
that are not fixed, but vary with changes in specified market rates or indices
or at specified intervals. Certain of these instruments may carry a demand
feature that would permit the holder to tender them back to the issuer at a par
value prior to maturity. The floating and variable rate instruments that the
Funds may purchase include certificates of participation in such
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obligations purchased from banks. The investment adviser will monitor on an
ongoing basis the ability of an issuer of a demand instrument to make payment
when due, which could be affected by events occurring between the date the Funds
elect to demand payment and the date payment is due, except when such demand
instruments permit same-day settlement. In this regard, the investment adviser,
pursuant to direction of the Board of Trustees, will determine the liquidity of
those instruments with demand features that cannot be exercised within seven
days.
WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS
Each of the Funds may purchase securities on a "when-issued" basis and may
also purchase or sell securities on a "forward commitment" basis. These
transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit a Fund to lock-in a price or yield on
a security it owns or intends to purchase, regardless of future changes in
interest rates. When-issued and forward commitment transactions involve the
risk, however, that the yield obtained in a transaction may be less favorable
than the yield available in the market when the securities delivery takes place.
The Funds do not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of their investment
objectives. The forward commitments and when-issued purchases are not expected
to exceed 25% of the value of any of the Funds' total assets absent unusual
market conditions.
The Funds will not start earning interest or dividends on when-issued
securities until they are received. The value of the securities underlying a
when-issued purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their value, is taken into account when determining
the net asset value of a Fund starting on the date such Fund agrees to purchase
the securities. Each Fund will establish a segregated account in which it will
maintain liquid assets in an amount at least equal in value to such Fund's
commitment to purchase securities on a when-issued or forward commitment basis.
If the value of these assets declines, the Fund will replace additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments.
LETTERS OF CREDIT AND LIQUIDITY AGREEMENTS
Each of the Funds may purchase debt obligations that are backed by an
irrevocable letter of credit or liquidity agreement of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
the investment adviser, are of investment quality comparable to other permitted
investments of such Fund, may be used for letter of credit and liquidity
agreement backed investments.
FOREIGN SECURITIES
Balanced Fund, Diversified Fixed Income Fund, Growth and Income Fund,
Growth Stock Fund, Short Intermediate U.S. Treasury Securities Fund, Tax-Free
Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S. Treasury
Securities Fund may invest directly in securities of foreign governmental and
private issuers that are denominated in and pay interest in U.S. dollars.
New Asia Growth Fund may invest in the securities of foreign issuers
directly or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or other
Depositary Receipts (which, together with ADRs, GDRs and EDRs, are hereinafter
collectively referred to as "Depositary Receipts") to the extent such Depositary
Receipts become available. ADRs (which include American Depositary Shares and
New York Shares) are publicly traded on exchanges or over-the-counter ("OTC") in
the United States. GDRs,
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EDRs and other types of Depositary Receipts are typically issued by foreign
depositaries, although they may also be issued by U.S. depositaries, and
evidence ownership interests in a security or pool of securities issued by
either a U.S. or foreign corporation. Depositary Receipts may be "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer assumes the
obligation to pay some or all of the depositary's transaction fees, whereas in
an unsponsored arrangement, the foreign issuer assumes no obligation and the
depositary's transaction fees are paid by the holders of the Depositary
Receipts. Foreign issuers in respect of whose securities unsponsored Depositary
Receipts have been issued are not necessarily obligated to disclose material
information in the markets in which the unsponsored Depositary Receipts are
traded, and, therefore, there may not be correlation between such information
and the market value of such securities.
New Asia Growth Fund may hold foreign currency in connection with the
purchase and sale of foreign securities. To the extent the foreign currency is
so held, there may be a risk due to foreign currency exchange rate fluctuations.
Such foreign currency will be held with the Fund's custodian bank or by an
approved foreign subcustodian.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in the United States. See
"Additional Risk Disclosure" below. For additional discussion concerning
investment in foreign debt securities, see "Debt Securities" below.
CONVERTIBLE SECURITIES
Each of Balanced Fund, Growth and Income Fund, Growth Stock Fund and New
Asia Growth Fund may invest in convertible securities that provide current
income and are issued by companies with the characteristics described above. The
Funds may purchase convertible securities that are fixed-income debt securities
or preferred stocks, and which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or other issuers. Convertible securities, while usually subordinated to
nonconvertible debt securities of the same issuer, are senior to common stocks
in an issuer's capital structure. Convertible securities may offer more
flexibility by providing the investor with a steady income stream (generally
yielding a lower amount than nonconvertible securities of the same issuer and a
higher amount than common stocks) as well as the opportunity to take advantage
of increases in the price of the issuer's common stock through the conversion
feature. Convertible security prices tend to be influenced by changes in the
market value of the common stock as well as changes in interest rates.
Convertible securities in which the Funds may invest are subject to the rating
criteria and limitations discussed below under "Debt Securities."
WARRANTS
Balanced Fund, Growth and Income Fund, Growth Stock Fund and New Asia
Growth Fund may invest in warrants. A warrant gives the holder thereof the right
to subscribe by a specified date to a stated number of shares of stock of the
issuer at a fixed price. Warrants tend to be more volatile than the underlying
stock, and if at a warrant's expiration date the stock is trading at a price
below the price set in the warrant, the warrant will expire worthless.
Conversely, if at the expiration date the stock is trading at a price higher
than the price set in the warrant, a Fund can acquire the stock at a price below
its market value. It is anticipated that the Board of Trustees will approve,
effective January 1, 1997, elimination of the requirement that the Balanced
Fund, Growth and Income Fund and Growth Stock Fund each may not invest more than
5% of its net assets at the time of purchase in warrants (other than those that
have been acquired in units or attached to other securities), or more than 2% of
its net assets in warrants which are not listed on the New York or American
Stock Exchange, and adoption of a policy that each of such Funds may not invest
more than 10% of its net assets in warrants.
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New Asia Growth Fund may not invest more than 10% of its net assets in warrants.
INTEREST ONLY OR PRINCIPAL ONLY OBLIGATIONS
Each of the Funds may make limited investments (not exceeding 5% of the
relevant Fund's net assets) in separately traded principal and interest
components of securities issued by the United States Treasury. The principal and
interest components or selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPs"). Under the STRIPs program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
GUARANTEED INVESTMENT CONTRACTS
Each of the Funds may invest up to 5% of its net assets in Guaranteed
Investment Contracts ("GICs") issued by highly rated U.S. insurance companies.
GICs are considered to be illiquid, and accordingly, are subject to the Fund's
15% limitation on investment in illiquid securities. See the SAI, "Additional
Information on Fund Investments."
PORTFOLIO TURNOVER
Generally, the Funds will purchase portfolio securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. However, a Fund may sell a portfolio investment soon after its
acquisition if the investment adviser believes that such a disposition is
consistent with attaining the investment objective of the particular Fund.
Portfolio investments may be sold for a variety of reasons, such as a more
favorable investment opportunity or other circumstances bearing on the
desirability of continuing to hold such investments. The annual portfolio
turnover rate is not expected to exceed 100% for any Fund. For the fiscal years
ended July 31, 1996 and July 31, 1995, the portfolio turnover rate for the Funds
were as follows:
PORTFOLIO TURNOVER RATE FOR FISCAL YEARS ENDED
JULY 31, 1996 AND JULY 31, 1995
<TABLE>
<CAPTION>
FUND 1996 1995
------------------------------------------------------------------- ----- -----
<S> <C> <C>
Diversified Fixed Income Fund...................................... 58.86% 60.47%*
Growth and Income Fund............................................. 80.83% 12.78%*
Growth Stock Fund.................................................. 61.30% 32.40%
New Asia Growth Fund............................................... 86.53% 55.62%**
Short Intermediate U.S. Treasury Securities Fund................... 47.17% 62.73%
Tax-Free Securities Fund........................................... 24.78% 49.17%*
Tax-Free Short Intermediate Securities Fund........................ 54.70% 89.98%*
U.S. Treasury Securities Fund...................................... 15.75% 80.98%
<FN>
-----------------
* Fiscal period from October 14, 1994 (commencement of operations) to
July 31, 1995.
** Fiscal period from February 15, 1995 (commencement of operations)
to July 31, 1995.
</TABLE>
See "Portfolio Transactions" in the Statement of Additional Information for
additional information relating to portfolio turnover rate.
INVESTMENT POLICIES
Each Fund's investment objectives, as set forth in the first paragraph of
the description of each Fund in the "Highlights" section, are fundamental; that
is, they may not be changed without approval by vote of the holders of a
majority of the relevant Fund's outstanding voting securities, as described
under "Capital Stock" in the SAI. If the Trust's Board of Trustees determines,
however, that a Fund's investment objective can best be achieved by
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a substantive change in a non-fundamental investment policy or strategy, the
Trust's Board may make such change without shareholder approval and will
disclose any such material changes in the then-current prospectus. Any policy
that is not specified in a Fund's Prospectus, or in the SAI, as being
fundamental, is nonfundamental.
ADDITIONAL RISK DISCLOSURE
RISK FACTORS AND SPECIAL CONSIDERATIONS OF INVESTING IN FOREIGN SECURITIES
GENERALLY AND IN COUNTRIES WITH SMALLER CAPITAL MARKETS
Investing on an international basis involves certain risks not involved in
domestic investments, including fluctuations in foreign exchange rates, future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain foreign countries, there is the possibility of expropriation
of assets, confiscatory taxation, political or social instability or diplomatic
developments which could affect investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respect as growth of gross national product, rates of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position. Certain foreign investments may also be subject to foreign withholding
taxes. Most of the foreign securities held by the Funds will not be registered
with the Securities and Exchange Commission, nor will the issuers thereof be
subject to the reporting requirements of such agency. Accordingly, there may be
less publicly available information about a foreign company than about a U.S.
company, and such foreign companies may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those to which
U.S. companies are subject. As a result, traditional investment measurements,
such as price/earnings ratios, as used in the United States, may not be
applicable to certain smaller capital markets. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards or to practices and requirements comparable to those applicable to
domestic companies. Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than in
the United States. There is generally less government supervision and regulation
of exchanges, brokers and issuers in foreign countries than there is in the
United States. The foregoing risks are often heightened for investments in
smaller capital markets and developing countries.
To the extent a Fund invests in foreign securities, its operating expense
ratio can be expected to be higher than that of an investment company investing
exclusively in U.S. securities since certain expenses of the Fund, such as
management and advisory fees and custodial costs, may be higher.
New Asia Growth Fund will invest heavily in securities denominated or
quoted in currencies other than the U.S. dollar. Accordingly, changes in foreign
currency exchange rates will affect the value of securities in the portfolio and
the unrealized appreciation or depreciation of investments insofar as U.S.
investors are concerned.
RISKS OF HEDGING STRATEGIES
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a Fund
would not be subject absent the use of these strategies. If the investment
adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to a
Fund may leave the
PROSPECTUS
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Fund in a worse position than if such strategies were not used. Risks inherent
in the use of options, foreign currency and futures contracts and options on
futures contracts include (1) dependence on the investment adviser's ability to
predict correctly movements in the direction of interest rates, securities
prices and currency markets; (2) imperfect correlation between the price of
options and futures contracts and options thereon and movements in the prices of
the securities or currencies being hedged; (3) the fact that skills needed to
use these strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for any
particular instrument at any time; (5) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences; and (6) the possible
inability of the Fund to purchase or sell a portfolio security at a time that
otherwise would be favorable for it to do so, or the possible need for the Fund
to sell a portfolio security at a disadvantageous time, due to the need for the
Fund to maintain "cover" or to segregate securities in connection with hedging
transactions. See SAI, "Additional Information on Fund Investments" and "Tax
Information."
A Fund will generally purchase options and futures on an exchange only if
there appears to be a liquid secondary market for such options or futures; a
Fund will generally purchase over-the-counter options only if management
believes that the other party to the options will continue to make a market for
such options. However, there can be no assurance that a liquid secondary market
will continue to exist or that the other party will continue to make a market.
Thus, it may not be possible to close an options or futures transaction. The
inability to close options and futures positions also could have an adverse
impact on a Fund's ability to effectively hedge its portfolio. There is also the
risk of loss by a Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or related option.
RISK FACTORS ASSOCIATED WITH INVESTMENT IN CERTAIN DEBT SECURITIES
Lowest Category of Investment Grade. Obligations rated in the lowest of the
top four rating categories by an NRSRO have speculative characteristics, and
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
with higher grade bonds. Subsequent to its purchase by a Fund, an issue of
securities may cease to be rated or its rating category may be reduced below the
minimum rating required for purchase by the respective Fund. The investment
adviser will consider such an event in determining whether the relevant Fund
should continue to hold the obligation.
Lower Rated Debt Securities (New Asia Growth Fund only). New Asia Growth
Fund may invest in securities rated in the medium to low rating categories of
NRSROs such as Standard & Poor's Corporation ("S&P") and Moody's Investors
Service, Inc. ("Moody's") and unrated securities of comparable quality (referred
to herein as "high yield/high risk securities"). These securities are
predominantly speculative with respect to the capacity to pay interest and repay
principal in accordance with the terms of the security, generally involve a
greater volatility of price than securities in higher rating categories, may
have call or redemption features which would permit the issuer to repurchase
securities from New Asia Growth Fund, are less liquid than higher rated
securities, and may have their value and liquidity negatively impacted by
adverse publicity and investor perceptions. See "Appendix" in the SAI. These
securities are commonly referred to as "junk bonds." In purchasing such
securities, New Asia Growth Fund will rely on the investment adviser's judgment,
analysis and experience in evaluating the creditworthiness of an issuer of such
securities. The investment adviser will take into consideration, among other
things, the issuer's financial resources, its sensitivity to economic conditions
and trends, its operating history, the quality of the issuer's management and
regulatory matters. New Asia Growth Fund is not autho-
PROSPECTUS
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<PAGE> 157
rized to purchase debt securities that are in default, except that the Fund may
invest in sovereign debt which is in default, provided that not more than 5% of
its total assets is invested in sovereign debt (including sovereign debt which
is in default). For a further discussion of the risks associated with investment
in high yield/high risk securities, see SAI, "Additional Information Fund
Investments."
Sovereign Debt (New Asia Growth Fund only). The sovereign debt instruments
in which New Asia Growth Fund may invest involve great risk and are deemed to be
the equivalent in terms of quality to high yield high risk securities. New Asia
Growth Fund may have difficulty disposing of certain sovereign debt obligations
because there may be no liquid secondary trading market for such securities. New
Asia Growth Fund may invest up to 5% of its total assets in sovereign debt,
including sovereign debt which is in default.
SPECIAL CONCERNS FOR NEW ASIA GROWTH FUND
Investing in Developing Asian Securities Markets and Economies. Because New
Asia Growth Fund intends to invest primarily in securities of companies located
in developing Asian countries, an investor in the Fund should be aware of
certain risk factors and special considerations relating to investing in these
developing economies. More generally, the investor should also be aware of risks
and considerations related to international investing and investing in smaller
capital markets, each of which may involve risks which are not typically
associated with investments in securities of U.S. issuers. Consequently, the
Fund should be considered as a means of diversifying an investment portfolio and
not in itself a balanced investment program.
New Asia Growth Fund invests primarily in the securities of companies
located in the developing countries of Asia. The securities markets of
developing Asian countries are not as large as the U.S. securities markets and
have substantially less trading volume, resulting in a lack of liquidity and
high price volatility. Certain markets, such as those of China, are in only the
earliest stages of development. There is also a high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries. Many of such markets also may be affected by
developments with respect to more established markets in the region, such as in
Japan. Developing Asian brokers typically are fewer in number and less
capitalized than brokers in the United States. These factors, combined with the
U.S. regulatory requirements for open-end investment companies and the
restrictions on foreign investments discussed below, result in potentially fewer
investment opportunities for New Asia Growth Fund and may have an adverse impact
on the investment performance of the Fund.
The investment objective of New Asia Growth Fund reflects the belief that
the economies of the developing Asian countries will continue to grow in such a
fashion as to provide attractive investment opportunities. At the same time,
emerging economies present certain risks that do not exist in more established
economies. Especially significant is that political and social uncertainties
exist for some of these developing Asian countries. In addition, the governments
of many of such countries have a heavy role in regulating and supervising the
economy. Another risk common to most such countries is that the economy is
heavily export oriented and, accordingly, is dependent upon international trade.
The existence of overburdened infrastructure and obsolete financial systems also
presents risks in certain countries, as do environmental problems. Certain
economies also depend to a significant degree upon exports of primary
commodities and, therefore, are vulnerable to changes in commodity prices which,
in turn, may be affected by a variety of factors.
Archaic legal systems in certain developing Asian countries also may have
an adverse impact on New Asia Growth Fund. For example, while the potential
liability of a shareholder in a U.S. corporation with respect to the acts of the
corporation is generally limited to the amount of the shareholder's investment,
the notion of limited liability is less
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<PAGE> 158
clear in certain developing Asian countries. Similarly, the rights of investors
in developing Asian companies may be more limited than those of shareholders of
U.S. corporations.
Certain of the risks associated with international investments and
investing in smaller capital markets are heightened for investments in
developing Asian countries. For example, some of the currencies of developing
Asian countries have experienced devaluations relative to the U.S. dollar, and
major adjustments have been made periodically in certain of such currencies.
Certain countries, such as India, face serious exchange constraints.
Inflation accounting rules in some developing Asian countries require, for
companies that keep accounting records in the local currency, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits for certain developing Asian companies.
Satisfactory custodial services for investment securities may not be
available in some developing Asian countries, which may result in the Fund
incurring additional costs and delays in providing transportation and custody
services for such securities outside such countries.
Certain developing Asian countries, such as the Philippines and India, are
especially large debtors to commercial banks and foreign governments. In
addition, trading in sovereign debt issued or guaranteed by governmental
entities in developing Asian countries involves a high degree of risk. These
risks are discussed below in "Risk Factors Associated with Investment in Certain
Debt Securities."
Restrictions on Foreign Investments. Some developing Asian countries
prohibit or impose substantial restrictions on investments in their capital
markets, particularly their equity markets, by foreign entities such as New Asia
Growth Fund. As illustrations, certain countries may require governmental
approval prior to investments by foreign persons or limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company which may
have less advantageous terms (including price) than securities of the company
available for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.
The manner in which foreign investors may invest in companies in certain
developing Asian countries, as well as limitations on such investments, also may
have an adverse impact on the operations of New Asia Growth Fund. For example,
New Asia Growth Fund may be required in certain of such countries to invest
initially through a local broker or other entity and then have the shares that
were purchased reregistered in the name of New Asia Growth Fund. Re-registration
may in some instances not be able to occur on a timely basis, resulting in a
delay during which New Asia Growth Fund may be denied certain of its rights as
an investor, including rights as to dividends or to be made aware of certain
corporate actions. There also may be instances where New Asia Growth Fund places
a purchase order but is subsequently informed, at the time of re-registration,
that the permissible allocation of the investment to foreign investors has been
filled, depriving the Fund of the ability to make its desired investment at that
time.
Substantial limitations may exist in certain countries with respect to the
Fund's ability to repatriate investment income, capital or the proceeds of sales
of securities by foreign investors. New Asia Growth Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments. In addition, even where there is no outright
restriction on repatriation of capital, the mechanics of repatriation may affect
certain aspects of the operations of the Fund. For example, funds may be
withdrawn from China only in U.S. or Hong Kong dollars and only at an exchange
rate established by the government once each week.
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A number of publicly traded closed-end investment companies have been
organized to facilitate indirect foreign investment in developing Asian
countries, and certain of such countries, such as Thailand and South Korea, have
specifically authorized such funds. There also are investment opportunities in
certain of such countries in pooled vehicles that resemble open-end investment
companies. As discussed above, the Fund's investment in these companies will be
subject to certain percentage limitations of the 1940 Act. See "Additional
Discussion Regarding Permitted Investment Activities--Other Investment
Companies." This restriction on investments in securities of investment
companies may limit opportunities for New Asia Growth Fund to invest indirectly
in certain developing Asian countries. Shares of certain investment companies
may at times be acquired only at market prices representing premiums to their
net asset values.
In certain countries, banks or other financial institutions may be among
the leading companies or have actively traded securities. The 1940 Act restricts
New Asia Growth Fund's investments in any equity securities of an issuer which,
in its most recent fiscal year, derived more than 15% of its revenues from
"securities-related activities," as defined by the rules thereunder. These
provisions may restrict the Fund's investments in certain foreign banks and
other financial institutions.
Limitations on Share Transactions. To permit New Asia Growth Fund to invest
the net proceeds from the sale of its shares in an orderly manner, the Fund may,
from time to time, suspend the sale of its shares, except for dividend
reinvestment. The Fund also reserves the right to limit the number of its shares
that may be purchased by a person during a specified period of time or in the
aggregate.
SPECIAL CONCERNS FOR THE TAX-FREE FUNDS
Tax-Free Securities Fund and Tax-Free Short Intermediate Securities Fund
are non-diversified, which means that their assets may be invested among fewer
issuers and therefore the value of their assets may be subject to greater impact
by events affecting one of their investments.
Since Tax-Free Securities Fund and Tax-Free Short Intermediate Securities
Fund invest significantly in obligations of issuers located in Hawaii, the
marketability, and market value of these obligations may be affected by certain
Hawaiian constitutional provisions, legislative measures, executive orders,
administrative regulations, and vote initiatives.
The Hawaiian economy is concentrated in tourism, agriculture and military
operations. Tourism is the strongest factor with tourists from a variety of
nations cushioning any adverse economic situations in a single country. Hawaiian
agriculture is diversifying into an expanded range of agricultural products,
away from the dominant pineapple and sugar production that has been subject to
increased foreign competition.
Governmental activities, including activities usually administered on a
municipal or county level such as public education, are the responsibility of
the state. This concentration aggravates an otherwise high level of state debt
obligations. The state General Fund has operated either within planned deficits
or with ending fund balances since December 1962. Revenue is derived primarily
from general excise taxes and individual and corporate income tax.
PROSPECTUS
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<PAGE> 160
ADDITIONAL INVESTMENT RESTRICTIONS
As matters of fundamental policy, each of the Funds may not:
1. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to these limitations, and except that this restriction does not apply to
Tax-Free Securities Fund or Tax-Free Short Intermediate Securities Fund, which
are non-diversified funds.
2. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to U.S.
Government Obligations and repurchase agreements secured by such obligations;
(b) with respect to Tax-Free Securities Fund and Tax-Free Short Intermediate
Securities Fund, there is no limitation with respect to Municipal Obligations
(for purposes of this limitation, private activity bonds that are backed only by
the assets and revenues of a non-governmental user shall not be deemed to be
Municipal Obligations); (c) wholly owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; and (d) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
3. Make loans, borrow money or issue senior securities, except under
certain circumstances, and subject to certain percentage limitations, specified
above and in the SAI.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's portfolio securities will not constitute a violation of such
limitation.
MANAGEMENT, ADVISORY AND OTHER SERVICE 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 names and principal occupations of the
Trustees of the Trust are listed below. Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION
- ----------------------------------------------- --------------------------------------------
<S> <C> <C>
Deborah G. Patterson* Trustee and Chairperson Senior Vice President of Bank of
Hawaii--Asset Management and Private Client
Group (1994-present); Director of KPMG Peat
Marwick (1993-1994); Senior Vice President
and Manager of Wells Fargo Bank (1987-1992)
Irigma McKay* Trustee and President Senior Vice President of BISYS Fund Services
(1994-present); Senior Vice President of
Concord Financial Group (1986-1994)
</TABLE>
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<PAGE> 161
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION
- ----------------------------------------------- --------------------------------------------
<S> <C> <C>
Douglas Philpotts* Trustee Chairman of the Board of Directors
(1992-1994), President (1986-1992), and
Director (1984-present) of Hawaiian Trust
Company Limited
Richard W. Gushman, II Trustee President and Chief Executive Officer of
OKOA, Inc. (1985-present); Adviser to
RAMPAC, Inc.
Stanley W. Hong Trustee President and Chief Executive Officer of the
Chamber of Commerce of Hawaii
(1996-present); Business Consultant
(1994-present)
Russell K. Okata Trustee Executive Director of Hawaii Government
Employees Association (1981-present)
Oswald K. Stender Trustee Trustee of Bernice Pauahi Bishop Estate
(1990-present); Director of Hawaiian
Electric Industries, Inc. (1993-present)
</TABLE>
Trustees of the Trust who are not officers or employees of the Trust, BISYS
or Hawaiian Trust are entitled to receive from the Trust a quarterly retainer
and a fee for each Board of Trustees meeting attended. All Trustees are
reimbursed for all reasonable out-of-pocket expenses relating to attendance at
meetings.
THE ADVISER
Pursuant to an Advisory Agreement, the Funds are advised by Hawaiian Trust,
whose address is Financial Plaza of the Pacific, 111 S. King Street, Honolulu,
Hawaii 96813. Hawaiian Trust is a Hawaii corporation organized in 1898 and is
the largest trust company in the State of Hawaii, both in terms of assets under
administration and assets under management. As of June 30, 1996, Hawaiian Trust
had approximately $6.3 billion of client financial assets under management.
Hawaiian Trust is a wholly owned subsidiary of Bank of Hawaii, the largest
banking organization headquartered in the State of Hawaii, with approximately
$13 billion of assets as of June 30, 1996, and branches and offices throughout
the Pacific Basin, including Guam, Singapore, Tokyo, Seoul and Taiwan. All
shares of Bank of Hawaii are owned by Bancorp Hawaii, Inc. ("Bancorp") and Bank
of Hawaii's Directors (each of whom owns qualifying shares as required by Hawaii
law). Bancorp is a bank holding company, registered under the Bank Holding
Company Act of 1956, as amended, and its common stock is listed and traded on
the New York Stock Exchange (the "Exchange"). Bancorp files annual and periodic
reports with the Commission and the Exchange, which are available for public
inspection. Hawaiian Trust is not authorized to and does not carry on a banking
business.
The actual management of the portfolios of the Trust is coordinated by
Hawaiian Trust's investment unit, which is staffed with more than 30 people,
including six Chartered Financial Analysts and seven M.B.A.'s. All investment
decisions of the Funds are made by a committee, and no person(s) is primarily
responsible for making recommendations to the committee. Hawaiian Trust has
served as investment adviser to other investment companies since 1984. These
include the Hawaiian Tax-Free Trust, with assets exceeding $650 million as of
June 30, 1996 and the Cash Assets Trust, with assets of approximately $670
million as of June 30, 1996.
Subject to the supervision of the Board of Trustees, Hawaiian Trust will
provide a continuous investment program for the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. Hawaiian Trust will determine from
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<PAGE> 162
time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds.
Hawaiian Trust will provide the services under the Advisory Agreement in
accordance with each of the Fund's investment objectives, policies, and
restrictions.
For its services, Hawaiian Trust is entitled to monthly advisory fees based
on a percentage of each Fund's average daily net assets. The following table
sets forth the rate of advisory fee payable by each Fund under the Advisory
Agreement as a percentage of average daily net assets.
ADVISORY FEE PAYABLE UNDER ADVISORY AGREEMENT
<TABLE>
<CAPTION>
ADVISORY FEE
(% OF AVERAGE
FUND DAILY NET ASSETS)
- ------------------------------ -----------------
<S> <C>
Diversified Fixed Income Fund 0.60%
Growth and Income Fund 0.80%
Growth Stock Fund 0.80%
New Asia Growth Fund 0.90%
Short Intermediate U.S.
Treasury
Securities Fund 0.50%
Tax-Free Securities Fund 0.60%
Tax-Free Short Intermediate
Fund 0.50%
U.S. Treasury Securities Fund 0.60%
</TABLE>
For the fiscal year ended July 31, 1996, the advisory fees paid by the
Funds to Hawaiian Trust under the Advisory Agreement as a percentage by average
daily net assets were as follows: Diversified Fixed Income Fund--0.60%; Growth
and Income Fund--0.80%; Growth Stock Fund--0.80%; New Asia Growth Fund-- 0.90%;
Tax-Free Securities Fund--0.60%; Tax-Free Short Intermediate Securities
Fund--0.50%; Short Intermediate U.S. Treasury Securities Fund--0.30% (after
advisory fee waiver); and U.S. Treasury Securities Fund--0.60%.
THE SUB-ADVISER
Credit Lyonnais International Asset Management (HK) Limited has been
retained as Sub-Adviser to New Asia Growth Fund. Pursuant to a separate
sub-advisory agreement with Hawaiian Trust (the "Sub-Advisory Agreement"), the
Sub-Adviser provides investment advisory services with respect to management of
the foreign component of New Asia Growth Fund's portfolio, including investment
research with respect to all foreign securities, currencies and cash equivalents
in New Asia Growth Fund.
The Sub-Adviser is a Hong Kong company which is a wholly owned indirect
subsidiary of Credit Lyonnais S.A., the world's sixteenth largest banking group
in terms of assets, which exceeded $340 billion as of December 31, 1995. Credit
Lyonnais manages or advises in excess of $82 billion world wide as of December
31, 1995. The Sub-Adviser is registered as an investment adviser with the
Commission under the Investment Advisers Act of 1940. The Sub-Adviser
specializes in the management of equities in Asia.
For its services to New Asia Growth Fund under the Sub-Advisory Agreement,
Hawaiian Trust pays the Sub-Adviser a fee at an annual rate based on the Fund's
average daily net assets computed daily and payable monthly. The fee payable by
Hawaiian Trust to the Sub-Adviser represents a portion of the 0.90% investment
advisory fee paid to Hawaiian Trust. New Asia Growth Fund does not pay any
incremental fee for the services of the Sub-Adviser.
All investment decisions of the Sub-Adviser with respect to New Asia Growth
Fund are made by a committee, and no person is responsible for making
recommendations to the committee.
THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund, and also acts as the Trust's
principal underwriter and
PROSPECTUS
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<PAGE> 163
distributor. BISYS generally assists in all aspects of the administration and
operation of the Funds. For expenses assumed and services provided as
administrator pursuant to its Administration Agreement with the Trust, BISYS is
entitled to receive a fee from the Funds, computed daily and paid monthly, at
an annual rate equal to 0.20% of the average daily net assets of each Fund.
In addition, BISYS, as the principal underwriter of the Funds within the
meaning of the 1940 Act, has entered into a Distribution Agreement with the
Trust pursuant to which BISYS has the responsibility for distributing shares of
the Funds. The Distribution Agreement provides that BISYS shall act as agent for
the Funds for the sale of their shares and may enter into selling agreements
with banks, broker/dealers or other financial institutions to market and make
available shares to their respective customers.
BISYS is a broker-dealer registered with the Commission, and is a member of
the National Association of Securities Dealers ("NASD").
For the fiscal year ended July 31, 1996, the ratio of total expenses to
average net assets (excluding waivers) for the Funds were as follows:
Diversified Fixed Income Fund--0.92%, Growth and Income Fund--1.15%, Growth
Stock Fund--1.13%, New Asia Growth Fund--2.84%, Short Intermediate U.S. Treasury
Securities Fund--0.92%, Tax-Free Securities Fund--0.93%, Tax-Free Short
Intermediate Securities Fund--0.88%, and U.S. Treasury Securities Fund--0.99%.
OTHER SERVICE ARRANGEMENTS
Administrative Data Management Corporation ("ADM" or the "Transfer Agent"),
581 Main Street, Woodbridge, New Jersey 07095, serves as the Trust's transfer
agent and dividend disbursing agent. Ernst & Young LLP, One Columbus, Suite
2300, 10 West Broad Street, Columbus, Ohio 43215, serves as independent auditors
for the Trust.
VALUATION OF INSTITUTIONAL CLASS SHARES
The net asset value of the Institutional Class Shares for each Fund is
determined and its shares are priced as of the close of the Exchange (currently
4:00 p.m., Eastern Time) (the "Valuation Time") each Business Day. As used
herein, a "Business Day" is a day on which the Exchange is open for trading and
any other day (other than a day on which no shares of that Fund are tendered for
redemption and no order to purchase shares is received) during which there is
sufficient trading in the Fund's portfolio securities that the Fund's net asset
value per share might be materially affected. The Exchange will not be open in
observance of the following holidays: New Year's Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and Good
Friday.
Net asset value per Institutional Class Share is calculated by determining
the value of the Institutional Class's proportional interest in the securities
and other assets of each Fund, less (i) such class's proportional share of
general liabilities and (ii) liabilities allocable only to such class, and
dividing such amount by the number of Institutional Class Shares outstanding.
The net asset value per share for each Fund will fluctuate as the value of its
investment portfolio changes.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost, assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in good
faith by the Board of Trustees. Prices used for such valuations may be provided
by independent pricing services. For further information about valuation of
investments in the Funds, see the SAI.
PROSPECTUS
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<PAGE> 164
HOW TO PURCHASE INSTITUTIONAL CLASS SHARES
PURCHASE OF SHARES
Institutional Class Shares in each Fund are sold on a continuous basis by
BISYS. The principal office of BISYS is located at 3435 Stelzer Road, Columbus,
Ohio 43219-3035. If you wish to purchase shares contact BISYS at 800-258-9232.
Only Institutions acting on behalf of customers having a qualified trust
account, employee benefit account or other qualifying account at such
Institution are eligible to invest in the Institutional Class of each Fund's
shares. Direct purchases of Fund shares by individual investors, including
purchases through SIPC insured brokerage accounts, are not permitted.
Institutional Class Shares of any Fund acquired by persons through
qualifying accounts may continue to be held in separate accounts in the name of
the person or persons so acquiring the shares, but dividends and distributions
relating to such shares may not be reinvested and no additional Institutional
Class Shares of such Fund may be purchased for such separate accounts unless the
account holder qualifies to purchase additional Institutional Class Shares.
Persons who have acquired shares of any Fund, as described above, and do not
qualify for purchasing additional Institutional Class Shares, may make an
additional investment in the Fund by purchasing Retail Class Shares, which are
not offered hereby. It is anticipated that the Board of Trustees will approve an
automatic conversion feature, effective February 15, 1997, whereby persons who
have acquired Institutional Class shares, as described above, but no longer
qualify to make an additional investment in such shares will have their holdings
converted to Retail Class Shares of the same Fund. As shareholders of the Retail
Class, such former Institutional Class shareholders will be permitted to
reinvest dividends and distributions relating to their share holdings, but will
be subject to the higher expenses associated with Retail Class Shares. See
"Exchange Privileges and Conversion Feature" below.
Institutional Class Shares of the Funds may be purchased through procedures
established by BISYS in connection with requirements of qualified accounts
maintained by or on behalf of certain persons ("Customers") by an Institution.
These procedures may include instructions under which a Customer's account is
"swept" automatically no less frequently than weekly and amounts in excess of a
minimum amount agreed upon by an Institution and its Customer are invested by
BISYS in shares of a Fund.
Institutional Class Shares of a Fund sold to an Institution acting in a
fiduciary, advisory, custodial or other similar capacity on behalf of a Customer
will normally be held of record by such Institution. With respect to shares so
sold, it is the responsibility of the particular Institution to transmit
purchase or redemption orders to BISYS and to deliver federal funds for purchase
on a timely basis. Beneficial ownership of shares of a Fund will be recorded by
such Institution and reflected in the account statements provided by the
Institution to the Customer.
Institutional Class Shares of each Fund are purchased at the public
offering price per share, which is the net asset value per Institutional Class
Share (see "Valuation of Institutional Class Shares") next determined after
receipt by the Transfer Agent of an order to purchase Institutional Class
Shares. BISYS and the Institutions are responsible for the prompt transmission
of purchase orders to the Transfer Agent. Purchases of Institutional Shares of a
Fund will be effected only on a Business Day of such Fund. An order received by
the Transfer Agent prior to the Valuation Time on any Business Day will be
executed based on the net asset value determined as of the Valuation Time on the
date of receipt. An order received by the Transfer Agent after the Valuation
Time on any Business Day will be executed based on the net asset value
determined as of the next Business Day.
PROSPECTUS
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<PAGE> 165
There is no sales charge imposed by the Trust in connection with the
purchase of Institutional Class Shares in the Funds. Sales charges may apply to
purchases of the other series or classes of the Trust's shares. Depending upon
the terms of a particular Customer account, an Institution may charge a
Customer's account fees for services provided in connection with investment in
the Funds. Information concerning these services and any charges will be
provided by the Institutions. This Prospectus should be read in conjunction with
any such information received from the Institutions.
The Trust reserves the right to reject any order for the purchase of its
shares in whole or in part.
Every shareholder will receive a confirmation of each new transaction in
the Shareholder's account. Certificates representing shares will not be issued.
EXCHANGE PRIVILEGES AND CONVERSION FEATURE
Institutional Class shareholders may exchange shares of any Fund on the
basis of the relative net asset value of the shares exchanged for Institutional
Class Shares of any other Fund, Institutional Class Shares of any other series
of the Trust or for shares of the Cash Assets Trust, the Tax-Free Cash Assets
Trust, the U.S. Treasuries Cash Asset Trust or the Hawaiian Tax-Free Trust so
long as they maintain the respective minimum account balance in each Fund in
which they own shares. For federal income tax purposes, such an exchange of
shares is deemed a sale on which a shareholder may realize capital gain or loss.
Before an exchange can be effected, a shareholder must receive a prospectus of
the fund into which the subject shares are to be exchanged. An exchange can be
made by calling the Trust at 800-258-9232. Exchange privileges may be exercised
only in those states where Institutional Class Shares of such other Fund or
series may be legally sold, and may be amended or terminated at any time upon 60
days' notice.
Institutional Class shareholders of any Fund who terminate their qualified
trust account, employee benefit account or other qualifying relationship with an
Institution are no longer eligible to make additional investments in a Fund's
Institutional Class Shares. It is anticipated that the Board of Trustees will
approve an automatic conversion feature applicable to such Institutional Class
shareholders, effective February 15, 1997, whereby their Institutional Class
Shares of a Fund will be converted to Retail Class Shares of the same Fund on
the basis of the relative net asset values of the shares of the two classes on
the conversion date, without incurring any fee, sales load or other charge. As
Retail Class shareholders of a Fund, such former Institutional Class
shareholders will be able to reinvest dividends and distributions relating to
their share holdings, but will be subject to the higher expenses associated with
Retail Class Shares. A conversion of Institutional Class Shares for Retail Class
Shares will be a tax free transaction for any Institutional Class shareholder
involved in such conversion. Institutional Class shareholders who are no longer
eligible to make additional investments in a Fund's Institutional Class Shares
and who do not wish to have their holdings converted to Retail Class Shares may
choose to redeem their shares.
HOW TO REDEEM INSTITUTIONAL CLASS SHARES
An Institution may redeem Institutional Class Shares on behalf of its
Customers without charge on any day that the net asset value is calculated (see,
"Valuation of Institutional Class Shares") and Institutional Class Shares may
ordinarily be redeemed by mail or by telephone.
REDEMPTION BY MAIL OR TELEPHONE
A written or telephone (available only if the shareholder has elected the
telephone redemption option) request for redemption must be received by BISYS in
order to constitute a valid tender for redemption. BISYS and the Institutions
are respon-
PROSPECTUS
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<PAGE> 166
sible for the prompt transmission of redemption requests to the Transfer Agent.
The Trust, the Fund, the Distributor and the Transfer Agent are not liable for
damages resulting from following instructions communicated by telephone that any
of them reasonably believed to be genuine. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Trust fails to do so, it may be liable for any losses due to unauthorized
or fraudulent instructions. A description of the procedures employed by the
Trust to confirm instructions communicated by telephone is contained in the SAI.
This policy places the entire risk of loss for unauthorized or fraudulent
transactions on the shareholder, except that if the Fund, the Transfer Agent,
BISYS or their affiliates do not follow reasonable procedures, some or all of
them may be liable for any such losses.
During times of drastic economic or market changes, telephone exchanges or
redemptions may be difficult to implement. If you experience difficulty in
making a telephone exchange or redemption, your exchange or redemption request
may be made by regular or express mail, and it will be implemented at the next
determined net asset value following receipt by the Transfer Agent.
PAYMENTS TO INSTITUTIONAL CLASS SHAREHOLDERS
Redemption orders are effected at the net asset value per Institutional
Class Share next determined after the shares are properly tendered for
redemption, as described above. The proceeds paid upon redemption of shares in a
Fund may be more or less than the amount invested. Payment to shareholders for
shares redeemed will be made within seven days after receipt by the Transfer
Agent of the request for redemption. However, to the greatest extent possible,
the Trust will attempt to honor requests from shareholders for next Business Day
payments upon redemption of Institutional Class Shares if the request for
redemption is received by the Transfer Agent before 4:00 p.m., Eastern Time, on
a Business Day or, if the request for redemption is received after 4:00 p.m.,
Eastern Time, to honor requests for payment within two Business Days, unless it
would be disadvantageous to the Trust or the shareholders of the particular Fund
to sell or liquidate portfolio securities in an amount sufficient to satisfy
requests for payments in such manner.
DIVIDEND AND TAX INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Diversified Fixed Income Fund, Short Intermediate U.S. Treasury Securities
Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and
U.S. Treasury Securities Fund will declare dividends of substantially all of
their net income daily and will pay such dividends monthly. Balanced Fund,
Growth and Income Fund and Growth Stock Fund will declare and pay dividends of
substantially all of their net income monthly. New Asia Growth Fund will declare
and pay dividends of substantially all of its net income quarterly.
Distributable net realized capital gains are distributed at least annually to
shareholders of record. A shareholder will automatically receive all income
dividends and capital gains distributions in additional full and fractional
shares unless the shareholder elects to receive such dividends or distributions
in cash. Dividends and distributions are reinvested as of the ex-dividend date
using the net asset value determined on that date and are credited to a
shareholder's account on the payment date. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash. Dividends are generally taxable when received. However, dividends
declared in October, November or December to shareholders of record during those
months and paid during the following January are treated for tax purposes as if
they were received by each shareholder on December 31 of the prior year.
Elections to receive divi-
PROSPECTUS
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<PAGE> 167
dends or distributions in cash, or any revocation thereof, must be made in
writing to BISYS at 3435 Stelzer Road, Columbus, Ohio 43219-3035, and will
become effective with respect to dividends and distributions having record dates
after receipt by the Transfer Agent.
TAX INFORMATION
Each Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). If a Fund does so
qualify, it will not be liable for federal income taxes to the extent that it
distributes its income to its shareholders as dividends and capital gain
distributions. However, the Code contains a number of complex tests relating to
such qualification and it is possible, although not likely, that a Fund 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 pass through foreign tax credits or to pay dividends or distributions which
would qualify as "exempt-interest dividends" or "capital gains dividends," as
discussed below.
The Tax-Free Securities Fund and Tax-Free Short Intermediate Securities
Fund each intends to qualify during each fiscal year under the Code to pay
exempt-interest dividends to shareholders of exempt-interest dividends. Exempt
interest dividends which are derived from net interest income earned by a Fund
on tax-exempt securities will be excludable from gross income of the
shareholders of Tax-Free Securities Fund and Tax-Free Short Intermediate
Securities Fund for regular federal income tax purposes. Capital gains dividends
and distributions of short-term capital gains and accrued market discount on
taxable securities and municipal obligations are taxable and are not included in
exempt-interest dividends. Dividends from interest on taxable short-term
obligations, and income from repurchase agreements and securities loans are
reportable by shareholders of Tax-Free Securities Fund and Tax-Free Short
Intermediate Securities Fund as ordinary income. Although tax-exempt 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.
Capital gains dividends (net long-term gains over net short-term losses
which a Fund distributes) are reportable by shareholders as long-term capital
gains. This is the case whether the shareholder takes his or her distribution in
cash or elects to have the distribution reinvested in Fund shares and regardless
of the length of time the shareholder has held his or her shares.
Short-term gains, when distributed, are taxed to shareholders as ordinary
income. Capital losses of a Fund are not distributed but carried forward by the
Fund to offset gains in later years and thereby lessen the later-year capital
gains distributions and amounts taxed to shareholders.
A Fund's gains or losses on sales of securities will be long-term or
short-term depending upon the length of time the Fund has held such securities.
Capital gains and losses of the Fund 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 a Fund 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 Section 1256 futures and options
contracts will be reportable by the Fund 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.
Corporate shareholders may be entitled to a dividends received deduction
with respect to dividends paid by a Fund to the extent they relate to dividends
received by such Fund from domestic corporations.
PROSPECTUS
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<PAGE> 168
Information as to the federal tax status of the Funds' dividends and
distributions will be mailed to shareholders annually.
The Trust will be required to withhold, subject to certain exemptions, at a
rate of 31% on dividends paid and redemption proceeds (including proceeds from
exchanges) paid or credited to individual shareholders of the Funds if a correct
Taxpayer Identification Number, certified when required, is not on file with the
Trust or the Transfer Agent. Under the Code, dividends paid to a non-resident
alien or other foreign shareholder may be subject to U.S. withholding tax (at a
rate of up to 30%).
SPECIAL TAX CONCERNS FOR NEW ASIA GROWTH FUND
New Asia Growth Fund may, from time to time, invest in passive foreign
investment companies ("PFICs"). PFICs are foreign corporations which derive a
majority of their income from passive sources. For tax purposes, New Asia Growth
Fund's investments in PFICs are subject to special tax provisions that may
result in the taxation of certain gains realized by the Fund as ordinary income,
plus an interest liability on such gains or on distributions from the PFIC. See
SAI, "Tax Information".
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition are treated
as ordinary gain or loss. These gains or losses increase or decrease the amount
of New Asia Growth Fund's investment company taxable income available to be
distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. If currency fluctuation
losses exceed other investment company taxable income during a taxable year,
distributions made by New Asia Growth Fund during the year would be
characterized as a return of capital to shareholders, reducing the shareholder's
basis in his or her Fund shares.
New Asia Growth Fund may incur foreign income taxes in connection with some
of its foreign investments. Certain of these taxes may be credited to
shareholders. See SAI, "Tax Information".
SPECIAL CONCERNS FOR THE TAX-FREE FUNDS
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 of either
Tax-Free Securities Fund or Tax-Free Short Intermediate Securities Fund.
While interest from Municipal Obligations, held by Tax-Free Securities Fund
and Tax-Free Short Intermediate Securities Fund, 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 the computation of
the alternative minimum tax. All tax-exempt income distributed to corporate
shareholders will enter into the computation of the alternative minimum tax.
Whether or not these computations will result in a tax will depend on many
factors, and shareholders should consult their tax advisers as to the possible
alternative minimum tax, if any, they may incur.
Under the Code, interest on loans incurred by shareholders to enable them
to purchase shares of a Fund may not be deducted for federal or Hawaii tax
purposes to the extent the shareholders receive tax-exempt dividends from the
Fund. 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 Fund may be considered
to have been made with borrowed funds even though the borrowed funds are not
directly traceable to the purchase of shares. The receipt of exempt-interest
dividends from a Fund 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.
PROSPECTUS
39
<PAGE> 169
TAX EFFECTS OF REDEMPTIONS
A shareholder who redeems his or her shares or exchanges his or her shares
for shares of another Fund will usually have a short or long-term (depending on
how long the shares have been held) capital gain or loss (depending on whether
the proceeds of the redemption are more or less than their tax basis, which is
usually cost). However, if the shares redeemed or sold were held for six months
or less, any capital loss is disallowed to the extent of any exempt-interest
dividends on these shares and is otherwise treated as long-term to the extent of
capital gains distributions received on such shares.
HAWAIIAN TAX INFORMATION
If at the close of each quarter of Tax-Free Short Intermediate Securities
Fund's and Tax-Free Securities Fund's taxable year at least 50% of the value of
its total assets consists of obligations the interest on which, if such
obligations were held by an individual, would be exempt from Hawaii personal
income tax (under either the laws of Hawaii or of the United States), Tax-Free
Securities Fund and Tax-Free Short Intermediate Securities Fund will be entitled
to pay dividends to its shareholders which will be exempt from Hawaii personal
income tax to the extent derived from such obligations. Similar exemptions may
be available in other states with regard to the portion of tax-exempt dividends
attributable to interest exempt from state taxation under federal law.
The Funds, and dividends and distributions made by the Funds to Hawaii
residents, will generally be treated for Hawaii income tax purposes in the same
manner as they are treated under the Code for federal income tax purposes. Under
Hawaii law, interest derived from obligations of states (and their political
subdivisions) other than Hawaii will not be exempt from Hawaii income taxation.
Persons or entities who are not Hawaii residents should not be subject to
Hawaii income taxation on dividends and distributions made by the Trust but will
be subject to other state and local taxes.
------------------------
For further information regarding taxation, see "Tax Information" in the
SAI.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, and state
taxation.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in a
Fund.
GENERAL INFORMATION
PERFORMANCE
From time to time performance for the Institutional Class Shares of the
Funds showing each Fund's average annual total return, aggregate total return,
yield, and tax-equivalent yield where appropriate may be presented in
advertisements, sales literature and in reports to Institutional Class
Shareholders. Such performance figures are based on historical earnings and are
not intended to indicate future performance. Average annual total return will be
calculated for the period since the establishment of the Funds. Average annual
total return is measured by comparing the value of an investment in the
Institutional Class Shares of a Fund at the beginning of the relevant period to
the redemption value of the investment, after reflecting the reinvestment of any
dividends or capital gains distributions and annualizing the difference.
Aggregate total return is calculated similarly to average annual return except
that the return figure is aggregated over the relevant period instead of
annualized.
PROSPECTUS
40
<PAGE> 170
Yield will be computed by dividing such Fund's net investment income per
Institutional Class Share earned during a recent 30-day period by such Fund's
per Institutional Class Share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. Tax-equivalent yield for Tax-Free Securities
Fund and Short Intermediate Tax-Free Securities Fund will be computed assuming a
stated income tax rate has been applied to non-exempt income to derive the
tax-exempt portion of the Funds' yield.
Institutional Class Shareholders may also be provided with information
comparing the performance of the Institutional Class Shares of the Funds to the
performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies. This information may be based on data
relating to various mutual fund or market indices such as those prepared by Dow
Jones & Co., Inc. and Standard & Poor's Corporation or data prepared by Lipper
Analytical Services, Inc. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, American Banker, Institutional Investor, Pensions and
Investments, USA Today, Fortune, CDA/Wiesenberger, Ibbotson Associates, Inc.,
Morningstar and local newspapers and periodicals. In addition to yield
information, general information about the Funds that appears in a publication
such as those mentioned above may also be quoted or reproduced in advertisements
or in reports to shareholders. Reports to Institutional Class Shareholders may
contain performance information on any Fund.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by an affiliate of Hawaiian
Trust or an Institution with respect to customer accounts for investing in
shares of the Funds will not be included in performance calculations; such fees,
if charged, would reduce the actual yield and total return from that quoted.
Because of differences in the fees and/or expenses borne by the Retail
Class Shares of the Funds, the average annual total return, aggregate total
return, yield, and tax-equivalent yield, as the case may be, can be expected, at
any given time, to be lower than the average annual total return, aggregate
total return, yield, and tax-equivalent yield, respectively, on Institutional
Class Shares. Standardized yield and total return quotations will be computed
separately for Retail Class Shares and Institutional Class Shares.
DESCRIPTION OF THE TRUST AND ITS SHARES
CAPITALIZATION--The Trust was organized as a Massachusetts business trust
on October 30, 1992, and currently consists of nine separately managed series.
The Board of Trustees may establish additional series in the future. The series
of the Trust are: Balanced Fund, Diversified Fixed Income Fund, Growth and
Income Fund, Growth Stock Fund, New Asia Growth Fund, Short Intermediate U.S.
Treasury Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
Securities Fund and U.S. Treasury Securities Fund, each with unlimited
transferable shares of beneficial interest, no par value. When issued in
accordance with the terms and procedures described in their respective
Prospectuses, shares of the Funds are fully paid, non-assessable and freely
transferable.
Each series is comprised of two classes of shares--the Institutional Class
and the Retail Class. The classes have identical rights with respect to the
series of which they are a part, provided that there are certain matters which
affect one class but not another. Currently, the only such matters are the
existence of a Distribution and Shareholder Service Plan with respect to each
Retail Class but not any Institutional Class, the absence of any sales load with
regard to the purchase of shares of the Institutional Class, and the fact that a
salesperson or any other person entitled to receive compensation for selling or
servicing Retail Class Shares or Institu-
PROSPECTUS
41
<PAGE> 171
tional Class Shares may receive different compensation with respect to one such
Class over the other Class in the same Fund. On all such matters, shareholders
vote as a class, and not by series. Shares of the Retail Class have different
sales charges and other expenses which may effect performance. A separate
Prospectus applies to the Retail Class of each series. Prospectuses relating to
the Retail Class of shares of each series may be obtained by calling the
telephone number listed on the first page of this Prospectus.
VOTING--Shareholders have the right to vote on the election of Trustees and
on any and all matters as to which, by law or the provisions of the Declaration
of Trust of the Trust, they may be entitled to vote. All shares of the Trust
have equal voting rights and will be voted in the aggregate, and not by class or
series, except where voting by class or series is required by law or where the
matter involved affects only one class or series. The Trust is not required to
hold annual meetings of the Funds' shareholders, and does not intend to do so,
in any fiscal year in which it is not required by law to elect Trustees. The
Trustees are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee, if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
SHAREHOLDER LIABILITY--Under Massachusetts law, shareholders of the Funds
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Trust's Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust. The Declaration of
Trust provides for indemnification out of a Fund's property for any losses and
expenses of any shareholder of such Fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which a
Fund would be unable to meet its obligations.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to a Fund at the address or
telephone number set forth on the cover page of this Prospectus.
PROSPECTUS
42
<PAGE> 172
INVESTMENT ADVISER
Hawaiian Trust Company
111 S. King Street
Honolulu, Hawaii 96813
SUB-ADVISER
Credit Lyonnais International Asset
Management (HK) Limited
8 Connaught Place
Hong Kong
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
Ernst & Young LLP
One Columbus, Suite 2300
10 West Broad Street
Columbus, Ohio 43215
TRANSFER AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095
[PACIFIC FUNDS LOGO]
------------------------
Diversified Fixed Income Fund
Growth and Income Fund
Growth Stock Fund
New Asia Growth Fund
Short Intermediate U.S. Treasury Securities Fund
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
U.S. Treasury Securities Fund
------------------------
Institutional Class
November 29, 1996
<PAGE> 173
PACIFIC CAPITAL FUNDS
Telephone: 800-258-9232
STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 29, 1996
-------------------------
BALANCED FUND
DIVERSIFIED FIXED INCOME FUND
GROWTH AND INCOME FUND
GROWTH STOCK FUND
NEW ASIA GROWTH FUND
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
TAX-FREE SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
U.S. TREASURY SECURITIES FUND
Pacific Capital Funds (the "Trust") is a professionally managed,
open-end, management investment company with multiple funds available for
investment. This Statement of Additional Information ("SAI") contains
information about both the "Retail Class" and the "Institutional Class" of all
nine of the Trust's investment portfolios -- Balanced Fund, Diversified Fixed
Income Fund, Growth and Income Fund, Growth Stock Fund (formerly the Income
Stock Fund), New Asia Growth Fund, Short Intermediate U.S. Treasury Securities
Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and
U.S. Treasury Securities Fund (each, a "Fund" and collectively, the "Funds").
The Retail and Institutional Class of shares of the Funds are offered through
separate Prospectuses. Balanced Fund has not commenced operations as of the date
of this Statement of Additional Information.
This SAI is not a prospectus and should be read in conjunction
with the applicable Prospectus, dated November 29, 1996. All terms used in this
SAI that are defined in the applicable Prospectus will have the meanings
assigned therein. Copies of the Prospectuses for the Funds may be obtained
without charge by writing to BISYS Fund Services ("BISYS") the Trust's sponsor,
administrator and distributor, at 3435 Stelzer Road, Columbus, Ohio 43219-3035
or calling the Transfer Agent at the telephone number indicated above.
----------------------------------
<PAGE> 174
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross
Reference
Page to Prospectus
---- -------------
<S> <C> <C>
Investment Restrictions........................... 3................. Additional Investment
Restrictions
Additional Information on Fund Investments........ 8................. Additional Discussion
Regarding Permitted
Investment Activities
Management........................................ 23................. Management, Advisory and
Other Service Arrangements
Distribution and Shareholder Service Plan......... 30................. Management, Advisory and
Other Service Arrangements
Calculation of Yield and Total Return............. 32................. General Information
Determination of Net Asset Value.................. 42................. Valuation of Retail Class
Shares, Valuation of
Institutional Class Shares
Redemption of Shares.............................. 42................. How to Redeem Retail Class
Shares; How to Redeem
Institutional Class Shares
Portfolio Transactions............................ 43................. Management, Advisory, and
Other Service Arrangements
Federal and Hawaiian Tax Information.............. 45................. Dividend and Tax Information
Capital Stock..................................... 50................. General Information
Custodian......................................... 53................. Management, Advisory, and
Other Service Arrangements
Other............................................. 53
Independent Auditors.............................. 54
Financial Information............................. 54
Appendix A........................................ A-1
Appendix B ....................................... B-1
</TABLE>
2
<PAGE> 175
INVESTMENT RESTRICTIONS
The Funds are subject to the following investment
restrictions, all of which are fundamental policies. As stated in each of the
Fund's Prospectuses under "Additional Discussion Regarding Permitted Investment
Activities -- Investment Policies," a fundamental investment policy may not be
changed without approval by vote of the holders of a majority of the relevant
Fund's outstanding voting securities. Also see "Capital Stock" in this SAI.
INVESTMENT RESTRICTIONS FOR ALL FUNDS EXCEPT NEW ASIA GROWTH FUND
Each of Balanced Fund, Diversified Fixed Income Fund, Growth
and Income Fund, Growth Stock Fund, Short Intermediate U.S. Treasury Fund,
Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S.
Treasury Securities Fund may not:
(1) purchase securities of any issuer (except Municipal
Obligations and securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities) if, as a result, with respect to 75% of its
total assets, more than 5% of the value of the Fund's total assets would be
invested in the securities of any one issuer or, with respect to 100% of its
total assets the Fund's ownership would be more than 10% of the outstanding
voting securities of such issuer except that this restriction does not apply to
the Tax-Free Securities Fund or the Tax-Free Short Intermediate Fund (the
"Tax-Free Funds"), which are non-diversified funds;
(2) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of any Fund's investments in that
industry would be 25% or more of the current value of such Fund's total assets,
provided that there is no limitation with respect to investments in (a) U.S.
Government Obligations and repurchase agreements secured by such obligations and
(b) with respect to the Tax-Free Funds, Municipal Obligations (for purposes of
this limitation, private activity bonds that are backed only by the assets and
revenues of a non-governmental user shall not be deemed to be Municipal
Obligations);
(3) borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") (except, with regard
to senior securities, as permitted pursuant to an order and/or a rule issued by
the Commission), except that each of the Funds, may borrow from banks up to 20%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 20%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowing in excess of 5% of its net assets exists);
(4) purchase or sell real estate or real estate limited
partnerships (other than obligations or other securities secured by real estate
or interests therein or securities issued by companies that invest in real
estate or interests therein);
3
<PAGE> 176
(5) purchase commodities or commodity contracts; except that
each Fund may enter into futures contracts and may write call options and
purchase call and put options on futures contracts in accordance with its
investment objective and policies; See "Additional Discussion Regarding
Permitted Investment Activities -- Futures Contracts and Related Options" or
"Additional Discussion Regarding Permitted and Investment Activities -- Hedging
Strategies", as applicable, in each Fund's Prospectus;
(6) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions and except for margin
payments in connection with options, futures and options on futures) or make
short sales of securities;
(7) underwrite securities of other issuers, except to the
extent that the purchase of permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting;
(8) purchase interests, leases, or limited partnership
interests in oil, gas, or other mineral exploration or development programs;
(9) make investments for the purpose of exercising control or
management; or
(10) lend money or portfolio securities, except that each of
the Funds may enter into repurchase agreements and lend portfolio securities to
certain brokers, dealers and financial institutions aggregating up to 30% of the
current value of the lending Fund's total assets.
In addition, each of Balanced Fund, Diversified Fixed Income
Fund, Growth and Income Fund, Growth Stock Fund, Short Intermediate U.S.
Treasury Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities
Fund and U.S. Treasury Securities Fund will comply with the following
non-fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval:
1. No Fund will purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the securities
of each issuer together own beneficially more than five percent of such
securities.
2. No Fund will purchase securities of unseasoned issuers,
including their predecessors, that have been in operation for less than three
years, if by reason thereof the value of such Fund's investment in such classes
of securities would exceed 5% of such Fund's total assets.
3. No Fund will invest in warrants, valued at the lower of
cost or market, in excess of 5% of the value of such Fund's assets, and no more
than 2% of the value of the Fund's net assets may be invested in warrants that
are not listed on the
4
<PAGE> 177
New York or American Stock Exchange (for purposes of this undertaking, warrants
acquired by a Fund in units or attached to securities will be deemed to have no
value).
4. Each Fund reserves the right to invest up to 15% of the
current value of its net assets in repurchase agreements having maturities of
more than seven days and other illiquid securities. For purposes of this
restriction, illiquid securities shall not include securities which may be
resold under Rule 144A under the Securities Act that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading markets for the
specific security.
5. Each Fund may purchase put and call options and write
covered put and call options on securities in which such Fund may invest
directly and that are traded on registered domestic securities exchanges or that
result from separate, privately negotiated transactions with primary U.S.
Government securities dealers recognized by the Board of Governors of the
Federal Reserve System in an amount not exceeding 5% of the Fund's net assets.
Anticipated Amendments to Non-Fundamental Investment Restrictions. It
is anticipated that the Board of Trustees will approve amendments to the Funds'
non- fundamental investment restrictions, effective January 1, 1997. If such
approval is obtained, non-fundamental investment restriction 1 will be
eliminated and the Funds' remaining non-fundamental investment restriction will
be as follows:
1. No Fund will purchase securities of unseasoned issuers,
including their predecessors, that have been in operation for less than three
years, if by reason thereof the value of the Fund's investment in such classes
of securities would exceed 15% of the Fund's total assets.
2. No Fund will invest more than 10% of its net assets in
warrants.
3. Each Fund reserves the right to invest up to 15% of the
current value of its net assets in repurchase agreements having maturities of
more than seven days and other illiquid securities. For purposes of this
restriction, illiquid securities shall not include securities which may be
resold under Rule 144A under the Securities Act that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading markets for the
specific security.
4. Each Fund may purchase put and call options and write
covered put and call options on securities in which such Fund may invest
directly and that are traded on registered domestic securities exchanges or that
result from separate, privately negotiated transactions with primary U.S.
Government securities dealers recognized by the Board of Governors of the
Federal Reserve System in an amount not exceeding 5% of the Fund's net assets.
5
<PAGE> 178
INVESTMENT RESTRICTIONS FOR NEW ASIA GROWTH FUND
New Asia Growth Fund is subject to the following investment
restrictions, all of which are fundamental policies. New Asia Growth Fund may
not:
(1) purchase securities of any issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies and instrumentalities)
if, as a result, with respect to 75% of its total assets, more than 5% of the
value of the Fund's total assets would be invested in the securities of any one
issuer or, with respect to 100% of its total assets, the Fund's ownership would
be more than 10% of the outstanding voting securities of such issuer;
(2) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would be 25% or more of the current value of the Fund's total assets,
provided that there is no limitation with respect to investments in U.S.
Government Obligations and repurchase agreements secured by such obligations;
(3) borrow money or issue senior securities as defined in the
1940 Act (except, with regard to senior securities, as permitted pursuant to an
order and/or a rule issued by the Commission), except that the Fund may borrow
from banks up to 33 1/3% of the current value of its net assets for temporary,
extraordinary or emergency purposes, for clearance of transactions, to hedge
against currency movements or for investment purposes, and these borrowings
may be secured by the pledge of up to 33 1/3% of the current value of its net
assets;
(4) purchase or sell real estate or real estate limited
partnerships (other than obligations or other securities secured by real estate
or interests therein or securities issued by companies that invest in real
estate or interests therein);
(5) purchase commodities or commodity contracts; except that
the Fund may deal in forward foreign exchange between currencies of the
different countries in which it may invest, may enter into futures contracts and
may write call options and purchase call and put options on futures contracts in
accordance with its investment objective and policies;
(6) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions and except for margin
payments in connection with options, futures and options on futures) or make
short sales of securities;
(7) underwrite securities of other issuers, except to the
extent that the purchase of permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting;
6
<PAGE> 179
(8) purchase interests, leases, or limited partnership
interests in oil, gas, or other mineral exploration or development programs;
(9) make investments for the purpose of exercising control or
management. Investments by the Fund in wholly-owned investment entities created
under the laws of certain countries will not be deemed the making of investments
for the purpose of exercising control of management; or
(10) lend money or portfolio securities, except that the Fund
may enter into repurchase agreements and lend portfolio securities to certain
brokers, dealers and financial institutions aggregating up to 33 1/3% of the
current value of the Fund's total assets.
In addition, New Asia Growth Fund will comply with the
following nonfundamental restrictions, which may be changed by the Board of
Trustees without shareholder approval:
a. The Fund will not purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers, or
managers owning beneficially more than one half of one percent of the securities
of each issuer together own beneficially more than five percent of such
securities.
b. The Fund will not purchase securities of unseasoned
issuers, including their predecessors, that have been in operation for less than
three years, if by reason thereof the value of the Fund's investment in such
classes of securities would exceed 15% of such Fund's total assets.
c. The Fund reserves the right to invest up to 15% of the
current value of its net assets in repurchase agreements having maturities of
more than seven days and other illiquid securities. For purposes of this
restriction, illiquid securities shall not include securities which may be
resold under Rule 144A under the Securities Act that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading markets for the
specific security.
d. To the extent required by the Commission or its staff, the
Fund will for purposes of fundamental investment restrictions (1) and (2), treat
securities issued or guaranteed by the government of any one foreign country
(including governmental agencies and instrumentalities thereof) as the
obligations of a single issuer.
e. The Fund may not invest more than 10% of its net assets in
warrants.
f. The aggregate value of the exercise price or strike price
of call options written by the Fund may not exceed 25% of the Fund's net asset
value.
Anticipated Amendments to Non-Fundamental Investment
Restrictions. It is anticipated that the Board of Trustees will approve
amendments to New Asia Growth Fund's non-fundamental investment restrictions,
effective
7
<PAGE> 180
January 1, 1997. If such approval is obtained, the Fund's non-fundamental
investment restrictions will be as follows:
a. The Fund will not purchase securities of unseasoned
issuers, including their predecessors, that have been in operation for less than
three years, if by reason thereof the value of the Fund's investment in such
classes of securities would exceed 15% of such Fund's total assets.
b. The Fund reserves the right to invest up to 15% of the
current value of its net assets in repurchase agreements having maturities of
more than seven days and other illiquid securities. For purposes of this
restriction, illiquid securities shall not include securities which may be
resold under Rule 144A under the Securities Act that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading markets for the
specific security.
c. To the extent required by the Commission or its staff, the
Fund will for purposes of fundamental investment restrictions (1) and (2), treat
securities issued or guaranteed by the government of any one foreign country
(including governmental agencies and instrumentalities thereof) as the
obligations of a single issuer.
d. The Fund may not invest more than 10% of its net assets in
warrants.
e. The aggregate value of the exercise price or strike price
of call options written by the Fund may not exceed 25% of the Fund's net asset
value.
------------------
If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's portfolio securities or resulting from
reconstructions, consolidations, payments out of assets of the Fund or
realization of units will not constitute a violation of such limitation.
ADDITIONAL INFORMATION ON FUND INVESTMENTS
CHANGES IN INVESTMENT RATINGS.
To the extent the ratings given by a nationally recognized
statistical rating organization (an "NRSRO") may change as a result of changes
in such organizations or their rating systems, each Fund will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in its Prospectus and in this Statement of
Additional Information. The ratings of the
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NRSROs currently used by the Funds are more fully described in Appendix A to
this Statement of Additional Information.
FOREIGN SECURITIES
Each of the Funds may invest in foreign securities. Investing
in foreign securities involves certain risks described in the applicable
Prospectus.
Foreign markets have different settlement and clearance
procedures, and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. For example, delays in settlement could
result in temporary periods when assets of a Fund are uninvested and no return
is earned thereon. The inability of a Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to a Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.
DEBT SECURITIES
SOVEREIGN DEBT (New Asia Growth Fund only). New Asia Growth
Fund may invest in sovereign debt. Certain developing Asian countries, such as
the Philippines, owe significant amounts of debt to commercial banks and foreign
governments. Investment in sovereign debt involves a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of such debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy towards the International Monetary Fund and the
political constraints to which a governmental entity may be subject.
Governmental entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to reduce principal
and interest arrearage on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
party's commitments to lend funds to the governmental entity, which may further
impair such debtor's ability or willingness to timely service its debts.
Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt, including New Asia Growth Fund, may
be requested to participate in the rescheduling of such debt and to extend
further loans to
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governmental entities. There is no bankruptcy proceeding by which sovereign
debt on which a governmental entity has defaulted may be collected in whole or
in part.
The sovereign debt instruments in which New Asia Growth Fund
may invest involve great risk and are deemed to be the equivalent in terms of
quality to high yield/high risk securities discussed below and are subject to
many of the same risks as such securities. Similarly, New Asia Growth Fund may
have difficulty disposing of certain sovereign debt obligations because there
may be a thin trading market for such securities. New Asia Growth Fund will not
invest more than 5% of its total assets in sovereign debt, including sovereign
debt which is in default.
LOWER RATED DEBT SECURITIES (New Asia Growth Fund only). New
Asia Growth Fund may invest in lower rated debt securities. Securities rated in
the medium to low rating categories of NRSROs such as Standard & Poor's
Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's") and unrated
securities of comparable quality (referred to herein as "high yield/high risk
securities") are predominantly speculative with respect to the capacity to pay
interest and repay principal in accordance with the terms of the security and
generally involve a greater volatility of price than securities in higher rating
categories. See "Appendix A." These securities are commonly referred to as "junk
bonds." In purchasing such securities, New Asia Growth Fund will rely on the
investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. The investment adviser will
take into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. New Asia Growth Fund
is not authorized to purchase debt securities that are in default, except that
the Fund may invest in sovereign debt (discussed above) which is in default,
provided that not more than 5% of the Fund's total assets are invested in
sovereign debt (including sovereign debt securities which are in default).
The market values of high yield/high risk securities tend to
reflect individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issues of high yield/high risk securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific issuer developments, or
the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of high yield/high risk
securities because such securities may be unsecured and may be subordinated to
the creditors of the issuer.
High yield/high risk securities may have call or redemption
features which would permit an issuer to repurchase the securities from New Asia
Growth
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Fund. If a call were exercised by the issuer during a period of declining
interest rates, New Asia Growth Fund likely would have to replace such called
securities with lower yielding securities, thus decreasing the net investment
income to the Fund and dividends to shareholders.
New Asia Growth Fund may have difficulty disposing of certain
high yield/high risk securities because there may be a thin trading market for
such securities. To the extent that a secondary trading market for high
yield/high risk securities does exist, it is generally not as liquid as the
secondary market for higher rated securities. Reduced secondary market liquidity
may have an adverse impact on market price and New Asia Growth Fund's ability to
dispose of particular issues when necessary to meet the Fund's liquidity needs
or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
high yield/high risk securities also may make it more difficult for New Asia
Growth Fund to obtain accurate market quotations for purposes of valuing the
Fund's portfolio. Market quotations are generally available on many high
yield/high risk securities only from a limited number of dealers and may not
necessarily represent firm bids of such dealers of prices for actual sales. The
Trustees, or the investment adviser, will carefully consider the factors
affecting the market for high yield/high risk, lower rated securities in
determining whether any particular security is liquid or illiquid and whether
current market quotations are readily available.
Adverse publicity and investor perceptions, which may not be
based on fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect New Asia Growth Fund's net asset value. In addition,
New Asia Growth Fund may incur additional expenses to the extent it is required
to seek recovery upon a default on a portfolio holding or participate in the
restructuring of the obligation.
MUNICIPAL BONDS
The Tax-Free Funds may invest in municipal bonds. As discussed
in the Prospectus, the two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. Municipal bonds are debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as bridges, highways, housing,
hospitals, mass transportation, schools, streets, and water and sewer works.
Other purposes for which municipal bonds may be issued include the refunding of
outstanding obligations and obtaining funds for general operating expenses or to
loan to other public institutions and facilities. Industrial development bonds
are a specific type of revenue bond backed by the credit and security of a
private user. Certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide privately- operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Assessment bonds, wherein a
specially created district or project area levies
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a tax (generally on its taxable property) to pay for an improvement or project,
may be considered a variant of either category. There are, of course, other
variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
MUNICIPAL NOTES
The Tax-Free Funds may invest in municipal notes. Municipal
notes include, but are not limited to, tax anticipation notes ("TANs"), bond
anticipation notes ("BANs"), revenue anticipation notes ("RANs") and
construction loan notes. Notes sold as interim financing in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuer.
TANs. Uncertainty in a municipal issuer's capacity to raise
taxes as a result of such events as a decline in its tax base or a rise in
delinquencies, could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix various
tax proceeds into a general fund that is used to meet obligations other than
those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its
obligations on its BANs is primarily dependent on the issuer's adequate access
to the longer term municipal bond market and the likelihood that the proceeds of
such bond sales will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a
result of changing market evaluations of the ability of their issuers to meet
the interest and principal payments (I.E., credit risk). Such values will also
change in response to changes in the interest rates payable on new issues of
municipal securities (I.E., market risk). Should such interest rates rise, the
values of outstanding securities, including those held in the Tax-Free Funds'
portfolios, will decline and (if purchased at par value) they would sell at a
discount. If interest rates fall, the values of outstanding securities will
generally increase and (if purchased at par value) they would sell at a premium.
Changes in the value of municipal securities held in the Funds' portfolios
arising from these or other factors will cause changes in the net asset value
per share of the Tax-Free Funds.
The taxable securities market is a broader and more liquid
market with a greater number of investors, issuers and market makers than the
market for municipal securities. The more limited marketability of municipal
securities may make it difficult in certain circumstances to dispose of large
investments advantageously.
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WARRANTS
Each Fund may invest in warrants. Any limitations on a Fund's
investment in warrants are set forth above in "Investment Restrictions."
Warrants represent rights to purchase securities at a specific price valid for a
specific period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. A Fund may only purchase warrants
on securities in which such Fund may invest directly.
GUARANTEED INVESTMENT CONTRACTS
Each of the Funds may make limited investments in Guaranteed
Investment Contracts ("GICs") issued by highly rated U.S. insurance companies.
Pursuant to such contracts, the Funds make cash contributions to a deposit fund
of the insurance company's general account. The insurance company then credits
to the respective Fund on a monthly basis guaranteed interest which is based on
an index. The GICs provide that this guaranteed interest will not be less than a
certain minimum rate. Generally, a GIC allows a purchaser to buy an annuity with
the monies accumulated under the contract; however, the Funds will not purchase
any such annuities. The insurance company may assess periodic charges against a
GIC for expense and service costs allocable to it, and the charges will be
deducted from the value of the deposit fund. A GIC is a general obligation of
the issuing insurance company and not a separate account. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
Each Fund will only purchase GICs from issuers which, at the
time of purchase, are rated "A" or higher by A.M. Best Company, have assets of
$1 billion or more, and meet quality and credit standards established by
Hawaiian Trust. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market in
GICs does not currently exist. Also, a Fund may not receive the principal amount
of a GIC from the insurance company on seven days' notice or less. Therefore,
GICs are considered by the Funds to be illiquid investments.
OPTIONS, FUTURES AND OTHER HEDGING STRATEGIES
As discussed in the applicable Prospectus, the Funds may use a
variety of financial instruments to hedge a Fund's investments and, in certain
limited cases, to enhance income or manage a Fund's cash flow ("Hedging
Instruments"). The particular Hedging Instruments are described in Appendix B to
this Statement of Additional Information.
Hedging strategies can be broadly categorized as short hedges
and long hedges. A short hedge is a purchase or sale of a Hedging Instrument
intended partially or fully to offset potential declines in the value of one or
more investments held by a
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Fund. Thus, in a short hedge a Fund takes a position in a Hedging Instrument
whose price is expected to move in the opposite direction of the price of the
investment being hedged. For example, a Fund might purchase a put option on a
security to hedge against a potential decline in the value of that security. If
the price of the security declines below the exercise price of the put, the Fund
could exercise the put and thus limit its loss below the exercise price to the
premium paid plus transaction costs. In the alternative, because the value of
the put option can be expected to increase as the value of the underlying
security declines, a Fund might be able to close out the put option and realize
a gain to offset the decline in the value of the security.
Conversely, a long hedge is a purchase or sale of a Hedging
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that a Fund intends to acquire.
Thus, in a long hedge a Fund takes a position in a Hedging Instrument whose
price is expected to move in the same direction as the price of the prospective
investment being hedged. For example, the Fund might purchase a call option on a
security it intends to purchase in order to hedge against an increase in the
cost of the security. If the price of the security increased above the exercise
price of the call, the Fund could exercise the call and thus limit its
acquisition cost to the exercise price plus the premium paid and transaction
costs. Alternatively, a Fund might be able to offset the price increase by
closing out an appreciated call option and realizing a gain.
Hedging Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that a
Fund owns or intends to acquire. Hedging Instruments on stock indices, in
contrast, generally are used to hedge against price movements in broad equity
market sectors in which a Fund has invested or expects to invest. Hedging
Instruments on debt securities may be used to hedge either individual securities
or broad fixed income market sectors.
The use of Hedging Instruments is subject to applicable
regulations of the Commission, the several options and futures exchanges upon
which they are traded and the Commodity Futures Trading Commission ("CFTC"). In
addition, a Fund's ability to use Hedging Instruments will be limited by tax
considerations. See "Federal and Hawaiian Tax Information."
In addition to the products, strategies and risks described
below and in the Prospectus, the investment adviser expects to discover
additional opportunities in connection with options, future contracts, foreign
currency forward contracts and other hedging techniques. These new opportunities
may become available as the investment adviser develops new techniques, as
regulatory authorities broaden the range of permitted transactions and as new
options, futures contracts, foreign currency forward contracts or other
techniques are developed. The investment adviser may utilize these opportunities
to the extent that they are consistent with a Fund's investment objectives and
permitted by the Fund's investment limitations and applicable regulatory
authorities. The applicable Prospectus and this Statement of Additional
Information will be supplemented to the extent that new products or techniques
involve materially different risks than those described below or in the
Prospectus.
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SPECIAL RISKS OF HEDGING STRATEGIES. The use of Hedging
Instruments involves special considerations and risks, as described below. Risks
pertaining to particular Hedging Instruments are described in the sections that
follow.
(1) Successful use of most Hedging Instruments depends upon
the investment adviser's ability to predict movements of the
overall securities and interest rate markets, which requires
different skills than predicting changes in the price of
individual securities. There can be no assurance that any
particular hedging strategy adopted will succeed.
(2) There might be imperfect correlation, or even no
correlation, between price movements of a Hedging Instrument
and price movements of the investments being hedged. For
example, if the value of a Hedging Instrument used in a short
hedge increased by less than the decline in value of the
hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such
as speculative or other pressures on the markets in which
Hedging Instruments are traded. The effectiveness of hedges
using Hedging Instruments on indices will depend on the degree
of correlation between price movements in the index and price
movements in the securities being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss
by wholly or partially offsetting the negative effect of
unfavorable price movements in the investments being hedged.
However, hedging strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund
entered into a short hedge because the investment adviser
projected a decline in the price of a security held by the
Fund, and the price of that security increased instead, the
gain from that increase might be wholly or partially offset by
a decline in the price of the Hedging Instrument. Moreover, if
the price of the Hedging Instrument declined by more than the
increase in the price of the security, the Fund could suffer a
loss. In either such case, the Fund would have been in a
better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain
assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in Hedging Instruments
involving obligations to third parties (i.e., Hedging
Instruments other than purchased options). If a Fund were
unable to close out its positions in such Hedging Instruments,
it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or
matured. These requirements might impair a Fund's ability to
sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the
Fund sell a portfolio security at a disadvantageous time. A
Fund's ability to close out a position in a Hedging Instrument
prior to expiration or maturity depends on the existence of a
liquid
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secondary market or, in the absence of such a market, the
ability and willingness of a contra party to enter into a
transaction closing out the position. Therefore, there is no
assurance that any hedging position can be closed out at a
time and price that is favorable to the Fund.
COVER FOR HEDGING STRATEGIES. Transactions using Hedging
Instruments, other than purchased options, expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless, to the
extent required by law, it owns either (1) an offsetting covered position in
securities or other options or futures contracts or (2) cash, receivables and
short-term debt securities, with a value sufficient at all times to cover its
potential obligations to the extent not covered as provided in (1) above. Each
Fund will comply with Commission guidelines regarding cover for hedging
transactions and will, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be
sold while the position in the corresponding Hedging Instrument is open, unless
they are replaced with similar assets. As a result, the commitment of a large
portion of a Fund's assets to cover or to segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
OPTIONS. As described in the applicable Prospectus, each Fund
may engage in options for hedging purposes, and each of Balanced Fund,
Diversified Fixed Income Fund, Growth and Income Fund, Growth Stock Fund, Short
Intermediate U.S. Treasury Fund, Tax-Free Securities Fund, Tax-Free Short
Intermediate Securities Fund and U.S. Treasury Securities Fund may engage in
options to enhance income.
The purchase of call options serves as a long hedge, and the
purchase of put options serves as a short hedge. Writing covered put or call
options can enable a Fund to enhance income by reason of the premiums paid by
the purchasers of such options. However, if the market price of the security
underlying a covered put option declines to less than the exercise price of the
option, minus the premium received, a Fund would expect to suffer a loss.
Writing covered call options serves as a limited short hedge, because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security appreciates to
a price higher than the exercise price of the call option, it can be expected
that the option will be exercised and a Fund will be obligated to sell the
security at less than its market value.
Options may be used to enhance income since the receipt of
premiums by a Fund's options positions may enable the Fund to realize a greater
return than would be realized on the underlying securities alone. In return for
the premium received for a call option, a Fund forgoes the opportunity for
profit from a price increase in the underlying security above the exercise price
so long as the option remains open, but retains the risk of loss should the
price of the security decline. In return for the premium received for a put
option, a Fund assumes the risk that the price of the underlying security will
decline below the exercise price, in which case the put would be exercised and
the Fund would suffer a loss. A Fund may purchase put
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options in an effort to protect the value of a security it owns against a
possible decline in market value.
The value of an option position will reflect, among other
things, the current market value of the underlying investment, the time
remaining until expiration, the relationship of the exercise price to the market
price of the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options normally have
expiration dates of up to nine months. Options that expire unexercised have no
value.
A Fund may effectively terminate its right or obligation under
an option by entering into a closing transaction. For example, a Fund may
terminate its obligation under a call option that it had written by purchasing
an identical call option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction.
Currently, many options on equity securities are
exchange-traded. Exchange markets for options on debt securities and foreign
currencies exist but are relatively new, and these instruments are primarily
traded on the OTC market. Exchange-traded options in the United States are
issued by a clearing organization affiliated with the exchange on which the
option is listed which, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between a Fund and its contra party (usually a securities dealer or a bank, as
required by the Fund's policies) with no clearing organization guarantee. Thus,
when a Fund purchases or writes an OTC option, it relies on the party from whom
it purchased the option or to whom it has written the option (the contra party)
to make or take delivery of the underlying investment upon exercise of the
option. Failure by the contra party to do so would result in the loss of any
premium paid by a Fund as well as the loss of any expected benefits of the
transaction.
Generally, foreign currency options (New Asia Growth Fund
only) and OTC debt options used by a Fund may be European-style options or
American style options. A European style option is only exercisable immediately
prior to its expiration. American-style options are exercisable at any time
prior to the expiration date of the option.
A Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The Fund
intends to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance that
such a market will exist at any particular time. Closing transactions can be
made for OTC options only by negotiating directly with the contra party, or by a
transaction in the secondary market if any such market exists. Although a Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
contra party, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.
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If a Fund were unable to effect a closing transaction for an
option it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a covered
call option written by a Fund could cause material losses because the Fund would
be unable to sell the investment used as cover for the written option until the
option expires or is exercised.
The staff of the Commission has taken the position that
purchased options not traded on registered domestic securities exchanges and the
assets used as cover for written options not traded on such exchanges are
generally illiquid securities. However, the staff has also opined that, to the
extent a mutual fund sells an OTC option to a primary dealer that it considers
creditworthy and contracts with such primary dealer to establish a formula price
at which the fund would have the absolute right to repurchase the option, the
fund would only be required to treat as illiquid the portion of the assets used
to cover such option equal to the formula price minus the amount by which the
option is "in-the-money." In accordance with this view, the Funds will treat
such options and, except to the extent permitted through the procedure described
in the preceding sentence, assets as subject to such Fund's limitation on
investments in securities that are not readily marketable.
FUTURES. The purchase of futures or call options thereon can
serve as a long hedge, and the sale of futures or the purchase of put options
thereon can serve as a short hedge. Writing covered call options on futures
contracts can serve as a limited short hedge, using a strategy similar to that
used for writing covered call options on securities and indices.
Futures strategies also can be used to manage the average
duration of a Fund. If the investment adviser wishes to shorten the average
duration of a Fund, the Fund may sell a futures contract or a call option
thereon, or purchase a put option on that futures contract. If the investment
adviser wishes to lengthen the average duration of a Fund, the Fund may buy a
futures contract or a call option thereon.
No price is paid upon entering into a futures contract.
Instead, at the inception of a futures contract each Fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, initial margin consisting of cash,
U.S. Government securities or other liquid, high-grade debt securities, in an
amount generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call option on a futures contract, in accordance with
applicable exchange rules. Unlike margin in securities transactions, initial
margin on futures contracts does not represent a borrowing, but rather is in the
nature of a performance bond or good-faith deposit that is returned to a Fund at
the termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
Fund may be required by an exchange to increase the level of its initial margin
payment, and initial margin requirements might be increased generally in the
future by regulatory action.
Subsequent variation margin payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as marking to
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market. Variation margin does not involve borrowing, but rather represents a
daily settlement of a Fund's obligations to or from a futures broker. When a
Fund purchases an option on a future, the premium paid plus transaction costs is
all that is at risk. In contrast, when a Fund purchases or sells a futures
contract or writes a call option thereon, it is subject to daily variation
margin calls that could be substantial in the event of adverse price movements.
If a Fund has insufficient cash to meet daily variation margin requirements, it
might need to sell securities at a time when such sales are disadvantageous.
Holders and writers of futures positions and options on
futures can enter into offsetting closing transactions, similar to closing
transactions on options, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. The Funds intend to enter into futures transactions only on
exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for a
particular contract at a particular time. Secondary markets for options on
futures are currently in the development stage, and a Fund will not trade
options on futures on any exchange or board of trade unless, in the Hawaiian
Trust's opinion, the markets for such options have developed sufficiently that
the liquidity risks for such options are not greater than the corresponding
risks for futures.
Under certain circumstances, futures exchanges may establish
daily limits on the amount that the price of a future or related option can vary
from the previous day's settlement price; once that limit is reached, no trades
may be made that day at a price beyond the limit. Daily price limits do not
limit potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Fund were unable to liquidate a futures or related
options position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or securities
in a segregated account.
Certain characteristics of the futures market might increase
the risk that movements in the prices of futures contracts or related options
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related options positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures
19
<PAGE> 192
and securities markets involving arbitrage, program trading and other investment
strategies might result in temporary price distortions.
LIMITATIONS ON THE USE OF FUTURES. In accordance with current
CFTC regulations, each Fund: (1) may use future contracts and options thereon
traded on a commodities exchange solely in bona fide hedging transactions
(without regard to percentage limitations) or, alternatively (2) may not enter
into futures contracts and options thereon for which the aggregate initial
margin and premiums exceed 5% of the Fund's total assets (calculated in
accordance with CFTC regulations). Furthermore, as a matter of operating policy,
aggregate initial margin deposits for all futures contracts and premiums paid
for related options for each of Balanced Fund, Diversified Fixed Income Fund,
Growth and Income Fund, Growth Stock Fund, Short Intermediate U.S. Treasury
Securities Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate
Securities Fund and U.S. Treasury Securities Fund may not exceed the limitations
set forth in clause (2) above and the value of the securities that are subject
to futures and options thereon (both for receipt and delivery) may not exceed
one-third of the market value of each Fund's total assets.
FOREIGN CURRENCY HEDGING STRATEGIES -- SPECIAL CONSIDERATIONS
(NEW ASIA GROWTH FUND ONLY). New Asia Growth Fund may use options and futures on
foreign currencies, and foreign currency forward contracts as described below to
hedge against movements in the values of the foreign currencies in which the
Fund's securities are denominated. Such currency hedges can protect against
price movements in a security that the New Asia Growth Fund owns or intends to
acquire that are attributable to changes in the value of the currency in which
it is denominated. Such hedges do not, however, protect against price movements
in the securities that are attributable to other causes.
New Asia Growth Fund might seek to hedge against changes in
the value of a particular currency when no Hedging Instruments on that currency
are available or such Hedging Instruments are more expensive than certain other
Hedging Instruments. In such cases, New Asia Growth Fund may hedge against price
movements in that currency by entering into transactions using Hedging
Instruments on other currencies, the values of which the investment adviser
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the Hedging
Instrument will not correlate perfectly with movements in the price of the
currency being hedged is magnified when this strategy is used.
The value of Hedging Instruments on foreign currencies depends
on the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Hedging
Instruments, the Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for
foreign currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information
20
<PAGE> 193
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Hedging Instruments until they reopen.
Settlement of hedging transactions involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the New Asia Growth Fund might be required to accept
or make delivery of the underlying foreign currency in accordance with any U.S.
or foreign regulations regarding the maintenance of foreign banking arrangements
by U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
FOREIGN CURRENCY FORWARD CONTRACTS (NEW ASIA GROWTH FUND
ONLY). New Asia Growth Fund may enter into foreign currency forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
another foreign currency. New Asia Growth Fund also may use foreign currency
forward contracts for cross-hedging. Under this strategy, New Asia Growth Fund
would increase its exposure to foreign currencies that the investment adviser
believes might rise in value relative to the U.S. dollar, or shift its exposure
to foreign currency fluctuations from one country to another. For example, if
New Asia Growth Fund owned securities denominated in a foreign currency and the
investment adviser believed that currency would decline relative to another
currency, it might enter into a forward contract to sell an appropriate amount
of the first foreign currency, with payment to be made in the second foreign
currency.
The cost to New Asia Growth Fund engaging in foreign currency
forward contracts varies with factors such as the currency involved, the length
of the contract period and the market conditions then prevailing. Because
foreign currency forward contracts are usually entered into on a principal
basis, no fees or commissions are involved. When New Asia Growth Fund enters
into a foreign currency forward contract, it relies on the contra party to make
or take delivery of the underlying currency at the maturity of the contract.
Failure by the contra party to do so would result in the loss of any expected
benefit of the transaction.
As is the case with futures contracts, holders and writers of
foreign currency forward contracts can enter into offsetting closing
transactions, similar to closing transactions on futures, by selling or
purchasing, respectively, an instrument identical to the instrument held or
written. Secondary markets generally do not exist for foreign currency forward
contracts, with the result that closing transactions generally can be made for
foreign currency forward contracts only by negotiating directly with the contra
party. Thus, there can be no assurance that New Asia Growth Fund will in fact be
able to close out a foreign currency forward contract at a favorable price prior
to maturity. In addition, in the event of insolvency of the contra party, New
Asia Growth Fund might be unable to close out a foreign currency forward
contract at any time prior to maturity. In either event, New Asia Growth Fund
would
21
<PAGE> 194
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in securities denominated in the
foreign currency or to maintain cash or securities in a segregated account.
The precise matching of foreign currency forward contract
amounts and the value of the securities involved generally will not be possible
because the value of such securities, measured in the foreign currency, will
change after the foreign currency forward contract has been established. Thus,
New Asia Growth Fund might need to purchase or sell foreign currencies in the
spot (cash) market to the extent such foreign currencies are not covered by
forward contracts. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain.
LIMITATIONS ON THE USE OF FOREIGN CURRENCY FORWARD CONTRACTS
(NEW ASIA GROWTH FUND ONLY). New Asia Growth Fund may enter into foreign
currency forward contracts or maintain a net exposure to such contracts only if
(1) the consummation of the contracts would not obligate the Fund to deliver an
amount of foreign currency in excess of the value of its portfolio securities or
other assets denominated in that currency or (2) New Asia Growth Fund maintains
cash, U.S. Government securities or liquid, high-grade debt securities in a
segregated account in an amount not less than the value of its total assets
committed to the consummation of the contract and not covered as provided in (1)
above, as marked to market daily. Under normal circumstances, consideration of
the prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the investment adviser believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of New Asia Growth Fund will be served.
ASSET BACKED SECURITIES
The purchase of non-mortgage backed securities raise
considerations peculiar to the financing of the instruments underlying such
securities. For example, most organizations that issue Asset Backed Securities
relating to motor vehicle installment purchase obligations perfect their
interest in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the Asset Backed Securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the Asset Backed Securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the Asset Backed Securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the
22
<PAGE> 195
motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related Asset Backed Securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holder the right
to set off certain amounts against balances owed on the credit card, thereby
reducing the amounts paid on such receivables. In addition, unlike most other
Asset Backed Securities, credit card receivables are unsecured obligations of
the cardholders.
MANAGEMENT
TRUSTEES AND OFFICERS. The name, age and principal occupation
during the past five years of each of the Trustees and executive officers of the
Trust are listed below. The address of each, unless otherwise indicated, is 3435
Stelzer Road, Columbus, Ohio 43219-3035. Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act are indicated by an asterisk
(*).
Deborah G. Patterson* (42), Trustee and Chairperson - Senior
Vice President of Bank of Hawaii - Asset Management and Private Client Group
(1994- present); Director of KPMG Peat Marwick (1993-1994); Senior Vice
President and Manager of Wells Fargo Bank (1987-1992); Vice President and
Manager of Citibank NA - Private Banking and Investment Division (1980-1987);
Officer of Bank Securities Association; Member of the Advisory Board of Hawaii
Family Stress Center; Director of American Red Cross, Hawaii State Chapter;
Director of the Honolulu Symphony Society; Member of the Strategic Planning
Committee - Aloha United Way; Member of the Rotary Club of Honolulu; Member of
the Advisory Board of Leadership Council of Marin (1992-1994); Member of the
American Arbitration Association (1988-1992).
Irimga McKay* (36), Trustee and President - 1230 Columbia
Street, San Diego, California 92101. Senior Vice President of BISYS Fund
Services (1994- present); Senior Vice President of Concord Financial Group
(1986-1994).
Douglas Philpotts* (65), Trustee - Financial Plaza of the
Pacific, P.O. Box 3170, Honolulu, Hawaii 96802. Chairman of the Board of
Directors (1992-1994), President (1986-1992) and Director (1984-present) of
Hawaiian Trust Company, Limited; Director of Victoria Ward; Trustee of The
Strong Foundation and Seabury Hall; Trustee of Cash Assets Trust, U.S.
Treasuries Cash Assets Trust, Hawaiian Tax- Free Trust and Tax-Free Cash Assets
Trust (1992-present); Affiliated with The Pacific Club, Ohu Country Club, Maui
Country Club, Punahou O-Mens Club, and University of Hawaii Foundation
President's Club. Formerly a Director and Officer of various cultural,
educational, community and professional organizations.
Richard W. Gushman II (50), Trustee - 700 Bishop Street, Suite
200, Honolulu, Hawaii 96813. President and Chief Executive Officer of OKOA,
INC., a
23
<PAGE> 196
private Hawaii corporation involved in commercial real estate (1985-present);
Adviser to RAMPAC, Inc., a wholly owned subsidiary of the Bank of Hawaii,
involved with commercial real estate finance; Trustee of Cash Assets Trust,
Tax-Free Cash Assets Trust and U.S. Treasuries Cash Assets Trust (1993-present);
Member of the Boards of Aloha United Way Downtown Improvement Association, Boys
and Girls Club of Honolulu and Oceanic Cablevision, Inc.
Stanley W. Hong (60), Trustee -1132 Bishop Street, Honolulu,
Hawaii 96813. President and Chief Executive Officer of the Chamber of Commerce
of Hawaii (1996-present); Business Consultant (1994-present); Senior Vice
President of McCormack Properties, Ltd. (1993-1995); President and Chief
Executive Officer 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 Cash Assets Trust, Tax- Free Cash Assets Trust and
U.S. Treasuries Cash Assets Trust (1993-present); Director of Capital Investment
of Hawaii, Inc. (Real Estate and Wholesale Bakery) (1995- present); Director of
Central Pacific Bank (1995-present); Trustee of the Nature Conservancy of Hawaii
(1990-present); Regent of Chaminade University of Honolulu (1990-present).
Russell K. Okata (52), Trustee - 888 Mililani Street, Suite
601, Honolulu, Hawaii 96813-2991. Executive Director, Deputy Executive Director,
Administration Officer or Research Statistician of Hawaii Government Employees
Association AFSCME Local 152, AFL-CIO (1970-present); Trustee of Cash Assets
Trust, Tax-Free Cash Assets Trust and U.S. Treasuries Cash Assets Trust (1993-
present); Chairman of the Royal State Insurance Group (1988-present); Trustee of
several charitable organizations.
Oswald K. Stender (64), Trustee - P.O. Box 3466, Honolulu,
Hawaii 96801. Trustee of Bernice Pauahi Bishop Estate (1990-present); Director
of Hawaiian Electric Industries, Inc., a public utility holding company
(1993-present); 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 Cash Assets Trust, Tax-Free Cash Assets
Trust and U.S. Treasuries Cash Assets Trust (1993-present).
Craig Warren (34), Treasurer - 111 South King Street,
Honolulu, Hawaii 96813. Vice President of Bank of Hawaii - Asset Management and
Private Client Group (1994-present); Senior Financial Analyst of Federal Home
Loan Bank of San Francisco - Marketing Strategies and Analysis Division
(1993-1994); Chief Financial Officer of Wells Fargo Securities, Inc.
(1990-1992); Vice President of Wells Fargo Bank - Private Banking Group
(1987-1992).
Gregory Maddox (28), Secretary - 1230 Columbia Street, San
Diego, California 92101. Director of BISYS Fund Services (1991-present).
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<PAGE> 197
Cynthia Lindsey (38), Assistant Secretary - Director of BISYS
Fund Services (1987-present).
Alaina Metz (29), Vice President - Chief Administrative
Officer of BISYS Fund Services - Blue Sky Compliance (1995 - present); Alliance
Capital Management, L.P. (1989-1995).
William J. Tomko (38), Vice President - Senior Vice President
of BISYS Fund Services (1987-present).
Eileen Walther (43), Vice President - Vice President of
Accounting Services of BISYS Fund Services (1996-present); Assistant Vice
President of Templeton International (1984-1995).
As of the date of this SAI, Trustees and officers of the Trust
as a group beneficially owned less than 1% of the outstanding shares of each
Fund.
Trustees of the Trust who are not officers or employees of the
Trust, BISYS or Hawaiian Trust are entitled to receive from the Trust a
quarterly retainer and a fee for each Board of Trustees meeting attended. All
Trustees are reimbursed for all reasonable out-of-pocket expenses relating to
attendance at meetings. The following table sets forth the fees and expenses
paid by each Fund to the Trustees for the fiscal year ended July 31, 1996.
<TABLE>
<CAPTION>
AGGREGATE TRUSTEES' FEES
AND EXPENSES FOR THE
FISCAL YEAR ENDED
FUND JULY 31, 1996
---- -------------
<S> <C>
Diversified Fixed Income Fund $ 13,731
Growth and Income Fund $ 5,643
Growth Stock Fund $ 14,826
New Asia Growth Fund $ 594
Short Intermediate U.S. Treasury Securities $ 1,809
Fund
Tax-Free Securities Fund $ 22,959
Tax-Free Short Intermediate Securities Fund $ 3,790
U.S. Treasury Securities Fund $ 1,260
- --------------------
</TABLE>
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<PAGE> 198
The following table sets forth the aggregate compensation paid
by the Trust to the Trustees who are not officers and employees of the Trust,
BISYS or Hawaiian Trust and the aggregate compensation paid to such Trustees by
all investment companies (including the Trust) advised by Hawaiian Trust for the
periods indicated.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM TRUST AND
AGGREGATE BENEFITS ACCRUED BENEFITS OTHER FUNDS
COMPENSATION AS PART UPON ADVISED BY
NAME OF TRUSTEE FROM TRUST(1) OF FUND EXPENSES RETIREMENT HAWAIIAN TRUST (2)
- --------------- ------------- ---------------- ---------- ------------------
<S> <C> <C> <C> <C>
Richard W. Gushman II $10,000 None None $38,100
Stanley W. Hong $10,000 None None $37,192
Russell K. Okata $10,000 None None $37,075
Douglas Philpotts $7,500 None None $26,888
Oswald K. Stender $10,000 None None $32,750
- --------------------
<FN>
(1) Provided for the fiscal year ended July 31, 1996.
(2) Provided for the calendar year ended December 31, 1995. In addition to
the Funds, each of the Trustees served on the boards of one other trust
advised by Hawaiian Trust, comprising four separate funds.
</TABLE>
INVESTMENT ADVISER. Pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"), each of the Funds is advised by Hawaiian
Trust. Subject to the supervision of the Board of Trustees, Hawaiian Trust will
provide a continuous investment program for the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. Hawaiian Trust will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Funds. From time to time, the Funds, to the extent
consistent with their investment objectives, policies and restrictions, may
invest in securities of companies with which Hawaiian Trust has a lending
relationship. Hawaiian Trust will provide the services under the Advisory
Agreement in accordance with each of the Fund's investment objectives, policies,
and restrictions.
For its services under the Advisory Agreement, Hawaiian Trust
receives compensation from each Fund based on a percentage of the Fund's average
daily net assets. The rate of advisory fees payable by each Fund to Hawaiian
Trust is set forth in the prospectus. The following table sets forth the
aggregate fees paid by
26
<PAGE> 199
each Fund pursuant to its Advisory Agreement for the fiscal years ended July 31,
1996 and July 31, 1995:
<TABLE>
<CAPTION>
COMPENSATION PAID TO HAWAIIAN
TRUST UNDER THE ADVISORY AGREEMENT
FOR THE FISCAL YEAR ENDED JULY 31, 1996 FOR THE FISCAL YEAR ENDED JULY 31, 1995
----------------------------------------- ----------------------------------------
AGGREGATE ADVISORY AGGREGATE AGGREGATE ADVISORY AGGREGATE
FEE PAID FEE FEE PAID FEE
FUND (AFTER WAIVER, AS APPLICABLE) WAIVED (AFTER WAIVER, AS APPLICABLE) WAIVED
---- ----------------------------- -------- ----------------------------- --------
<S> <C> <C> <C> <C>
Diversified Fixed Income $ 814,802 N/A $ 210,909* $ 2,102*
Fund
Growth and Income Fund $ 503,952 N/A $ 219,158* $ 2,099*
Growth Stock Fund $ 1,359,262 N/A $ 871,574 $ 1,855
New Asia Growth Fund $ 52,972 N/A $ 8,511* $ 6,789*
Short Intermediate U.S. $ 61,600 $41,079 $ 63,374 $26,093
Treasury Securities Fund
Tax-Free Securities Fund $ 1,724,513 N/A $ 1,253,965* $11,920
Tax-Free Short $ 202,701 N/A $ 151,471* $ 1,569
Intermediate Securities
Fund
U.S. Treasury Securities $ 172,954 N/A $ 349,687 --
Fund
- --------------------
<FN>
* Period from commencement of operations through July 31, 1995.
Diversified Fixed Income Fund, Growth and Income Fund, Tax-Free
Securities Fund and Tax-Free Short Intermediate Securities Fund
commenced operations on October 14, 1994. New Asia Growth Fund
commenced operations on February 15, 1995.
</TABLE>
For the fiscal year ended July 31, 1994, the fee paid by the
Growth Stock Fund to Hawaiian Trust for services provided under the Advisory
Agreement was $235,505. The fee paid by the Short Intermediate U.S. Treasury
Securities Fund and the U.S. Treasury Securities Fund to Hawaiian Trust,
respectively, for services provided under the Advisory Agreement was $10,510
(after advisory fee waiver of $75,978) and $262,175.
The Advisory Agreement provides that Hawaiian Trust shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with the performance of the Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or loss resulting from willful misfeasance,
bad faith or gross negligence on its part in
27
<PAGE> 200
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Advisory Agreement.
The Advisory Agreement will continue in effect beyond its
initial two year term provided the continuance is approved annually (i) by the
holders of a majority of the respective Fund's outstanding voting securities or
by the Trust's Board of Trustees and (ii) by a majority of the Trustees of the
Trust who are not parties to the Advisory Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. The Advisory Agreement may be
terminated on 60 days' written notice by either party and will terminate
automatically if assigned.
The Trust has been advised that Hawaiian Trust should be able
to perform the services contemplated by the Advisory Agreement, the Custodian
Agreement, and the Prospectuses, without violation of the Glass-Steagall Act.
However, there are no controlling judicial or administrative interpretations or
decisions and future judicial or administrative interpretations of, or decisions
relating to, present federal or state statutes and regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, as well as
future changes in federal or state statutes and regulations and judicial or
administrative decisions or interpretations thereof, could prevent Hawaiian
Trust from continuing to perform, in whole or in part, such services. If
Hawaiian Trust were prohibited from performing any of such services, it is
expected that new agreements would be entered into with another entity or
entities qualified to perform such services.
THE SUB-ADVISER (New Asia Growth Fund only). Credit Lyonnais
International Asset Management (HK) Limited serves as Sub-Adviser to New Asia
Growth Fund. Pursuant to a separate sub-advisory agreement with Hawaiian Trust
(the "Sub-Advisory Agreement"), the Sub-Adviser provides investment advisory
services with respect to management of the foreign component of New Asia Growth
Fund's portfolio, including investment research with respect to all foreign
securities, currencies and cash equivalents in New Asia Growth Fund. For its
services, Hawaiian Trust pays the Sub-Adviser a fee, computed daily and payable
monthly, equal on an annual basis, to 0.50% of New Asia Growth Fund's average
daily net assets. The Sub-Adviser's fee is paid by Hawaiian Trust, and New Asia
Growth Fund does not pay any incremental fee for the services of the
Sub-Adviser. For the fiscal years ended July 31, 1996 and July 31, 1995,
Hawaiian Trust paid Credit Lyonnais fees in the amount of $29,567 and $4,728,
respectively, for services provided to New Asia under the Sub- Advisory
Agreement.
The Sub-Adviser is a Hong Kong company which is a wholly owned
indirect subsidiary of Credit Lyonnais S.A.
The Sub-Advisory Agreement will continue in effect beyond its
initial two year term provided its continuance is approved annually in the same
manner as the Advisory Agreement. The Sub-Advisory Agreement may be terminated
at any time without penalty on 60 days' written notice by either party, by the
Board of Trustees or
28
<PAGE> 201
by the vote of a majority of the Fund's outstanding voting securities. The Sub-
Advisory Agreement will terminate automatically if assigned.
ADMINISTRATOR AND DISTRIBUTOR. The Trust has retained BISYS as
administrator and distributor on behalf of each of its Funds. See, "Management,
Advisory and Other Services" in the applicable Prospectus.
Under the Administration Agreement with the Trust, BISYS, in
connection therewith, furnishes the Trust with office facilities, together with
those ordinary clerical and bookkeeping services that are not being furnished by
Hawaiian Trust. For expenses assumed and services provided as administrator
pursuant to the Administration Agreement, BISYS is entitled to receive a fee
from the Funds, computed daily and paid monthly, at an annual rate equal to
0.20% of the average daily net assets of each Fund. The following table sets
forth the aggregate fees paid, restated to reflect fee waivers, as applicable,
by each Fund to BISYS for services provided pursuant to the Administration
Agreement for the fiscal years ended July 31, 1996, July 31, 1995 and July 31,
1994:
COMPENSATION PAID TO BISYS
UNDER THE ADMINISTRATION AGREEMENT
<TABLE>
<CAPTION>
AGGREGATE FEES AGGREGATE FEES AGGREGATE FEES
PAID UNDER PAID UNDER PAID UNDER
ADMINISTRATION ADMINISTRATION ADMINISTRATION
AGREEMENT FOR AGREEMENT FOR AGREEMENT FOR
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994**
FUND (AFTER WAIVER) (AFTER WAIVER) ----------------
---- -------------- --------------
<S> <C> <C>
Diversified Fixed Income Fund $216,788 $52,202 N/A
Growth and Income Fund $100,430 $40,700 N/A
Growth Stock Fund $270,656 $169,099 $64,018
New Asia Growth Fund $8,807 $1,405* N/A
Short Intermediate U.S. $30,800 $33,598 $47,260
Treasury Securities Fund
Tax-Free Securities Fund $457,502 $310,511 N/A
Tax-Free Short Intermediate $60,810 $44,970 N/A
Securities Fund
U.S. Treasury Securities Fund $ 45,683 $93,618 $88,814
<FN>
* Period from February 15, 1995 (commencement of operations) through July
31, 1995.
</TABLE>
29
<PAGE> 202
** Period from commencement of operations through July 31, 1994.
Diversified Fixed Income Fund, Growth and Income Fund, Tax-Free
Securities Fund and Tax-Free Short Intermediate Securities Fund
commenced operations on October 14, 1994.
BISYS has entered into a Distribution Agreement with the Trust
pursuant to which it has the responsibility of distributing shares of the Funds.
For its services, BISYS is entitled to a Distribution Fee, as set forth in the
Distribution and Shareholder Service Plan (the "Distribution Plan"), pursuant to
Rule 12b-1 under the Investment Company Act of 1940, between the Trust and BISYS
on behalf of the Retail Class of Shares of each Fund. See "Distribution and
Shareholder Service Plan" below.
TRANSFER AGENT. Administrative Data Management Corporation
("ADM"), serves as Transfer Agent for each of the Funds.
CODE OF ETHICS. The Board of Trustees of the Trust has adopted
a Code of Ethics under Rule 17j-1 of the Investment Company Act (the "Code").
The Code restricts the investing activities of Fund officers, Trustees and
advisory persons and, as described below, imposes additional, more onerous
restrictions on Fund investment personnel.
All persons covered by the Code are required to preclear any
personal securities investment (with limited exceptions, such as government
securities) and must comply with ongoing requirements concerning recordkeeping
and disclosure of personal securities investments. The preclearance requirement
and associated procedures are designed to identify any prohibition or limitation
applicable to a proposed investment. In addition, all persons covered by the
Code are prohibited from purchasing or selling any security which, to such
person's knowledge, is being purchased or sold (as the case may be), or is being
considered for purchase or sale, by a Fund. Investment personnel are subject to
additional restrictions such as a ban on acquiring securities in an initial
public offering, "blackout periods" which prohibit trading by investment
personnel of a Fund within periods of trading by the Fund in the same security
and a ban on short-term trading in securities.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
As indicated in the Prospectuses, the Trust has adopted for
the Retail Class of each of the Funds a Distribution Plan under Section 12(b) of
the Act and Rule 12b-1 thereunder. The Distribution Plan for the Retail Class of
each of the Funds was adopted by the Board of Trustees, including a majority of
the trustees who were not "interested persons" (as defined in the Act) of the
Funds and who had no direct or indirect financial interest in the operation of
the Distribution Plan or in any agreement related to the Distribution Plan (the
"Qualified Trustees"). The Distribution Plan provides that with respect to the
Retail Class Shares, BISYS is entitled to receive a fee in an amount not to
exceed on an annual basis 0.75% of the average daily net asset value of the Fund
attributable to the Fund's Retail Class Shares (the "Distribution Fee") to
compensate it for the following: (a) payments BISYS makes to banks and other
institutions and industry professionals, such as broker/dealers, including
Hawaiian
30
<PAGE> 203
Trust, BISYS and their affiliates or subsidiaries, pursuant to an agreement in
connection with providing sales and/or administrative support services to the
holders of a Fund's Retail Class shares; or (b) payments to financial
institutions and industry professionals (such as insurance companies, investment
counselors, and BISYS' affiliates and subsidiaries) in consideration for the
distribution services provided and expenses assumed in connection with
distribution assistance, including, but not limited to, printing and
distributing prospectuses to persons other than current Retail Class
shareholders of a Fund, printing and distributing advertising and sales
literature and reports to Retail Class shareholders in connection with the sale
of a Fund's shares, and providing personnel and communication equipment used in
servicing shareholder accounts and prospective Retail Class shareholder
inquiries.
The Distribution Fee shall be paid to BISYS only to compensate
or to reimburse it for actual payments or expenses incurred as described above.
The Distribution Fees paid by the Funds to BISYS for services provided under the
Distribution Plan for the fiscal year ended July 31, 1996, restated to reflect
fee waivers, are set forth in the table below.
DISTRIBUTION FEES PAID TO BISYS UNDER THE DISTRIBUTION PLAN
-----------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE DISTRIBUTION
FEES PAID FOR FISCAL
FUND YEAR ENDED JULY 31, 1996
------ (AFTER WAIVER)
------------------------
<S> <C>
Diversified Fixed Income Fund $1,450
Growth and Income Fund $1,548
Growth Stock Fund $11,670
New Asia Growth Fund $2,674
Short Intermediate U.S. Treasury Securities Fund $2,169
Tax-Free Securities Fund $2,028
Tax-Free Short Intermediate Securities Fund $870
U.S. Treasury Securities Fund $2,630
</TABLE>
The Distribution Plan will continue in effect from year to
year if such continuance is approved by a majority vote of both the Trustees of
the Trust and the Qualified Trustees. Agreements related to the Distribution
Plan also must be approved by such vote of the Trustees and the Qualified
Trustees. Such agreements will terminate automatically if assigned, and may be
terminated at any time, without payment of any penalty, by a vote of a majority
of the outstanding voting securities of the proper Fund. The Distribution Plan
relating to a Fund may not be amended to
31
<PAGE> 204
increase materially the amounts payable thereunder without the approval of a
majority of the outstanding voting securities of the proper Fund, and no
material amendment to the Distribution Plan may be made except by a majority of
both the Trustees of the Trust and the Qualified Trustees.
CALCULATION OF YIELD AND TOTAL RETURN
As indicated in the Prospectuses, the Funds may advertise
certain yield information. As and to the extent required by the Commission,
yield will be calculated based on a 30-day (or one month) period, computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula: YIELD = 2[((a-b) divided by cd)+1)to the sixth power-1],
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursements); c = the average daily number of
shares outstanding during the period that were entitled to receive dividends;
and d = the maximum offering price per share on the last day of the period. The
net investment income of the Funds includes actual interest income, plus or
minus amortized purchase discount (which may include original issue discount) or
premium, less accrued expenses. Realized and unrealized gains and losses on
portfolio securities are not included in the Funds' net investment income. For
purposes of sales literature, yield also may be calculated on the basis of the
net asset value per share rather than the public offering price, provided that
the yield data derived pursuant to the calculation described above also are
presented.
The tax-equivalent yield for the Tax-Free Funds also may be
computed by dividing that portion of the yield of the Funds which is tax-exempt
by one minus a stated income tax rate and adding the product to that portion, if
any, of the yield of the Funds that is not tax-exempt.
The yield for the Funds will fluctuate from time to time,
unlike bank deposits or other investments that pay a fixed yield for a stated
period of time, and does not provide a basis for determining future yields since
it is based on historical data. Yield is a function of portfolio quality,
composition, maturity and market conditions as well as the expenses allocated to
the Fund.
In addition, investors should recognize that changes in the
net asset values of shares of the Funds will affect the yield of such Funds for
any specified period, and such changes should be considered together with the
Fund's yield in ascertaining the Fund's total return to shareholders for the
period. Yield information for the Funds may be useful in reviewing the
performance of the Fund and for providing a basis for comparison with investment
alternatives. The yield of a Fund, however, may not be comparable to the yields
from investment alternatives because of differences in the foregoing variables
and differences in the methods used to value portfolio securities, compute
expenses and calculate yield.
As indicated in the Prospectuses, the Funds may advertise
certain total return information. As and to the extent required by the
Commission, an average annual compound rate of return ("T") will be computed by
using the value at the end of
32
<PAGE> 205
a specified period ("ERV") of a hypothetical initial investment ("P") over a
period of years ("n") according to the following formula: P(1+T) to the nth
power = ERV. Aggregate total return will be calculated similarly to average
annual total return except that the return figure is aggregated over the
relevant period rather than annualized. In addition, as indicated in the
Prospectuses, the Funds may also, at times, calculate total return based on
net asset value per share (rather than the public offering price), in which
case the figures would not reflect the effect of any sales charges that would
have been paid by an investor, or based on the assumption that a sales charge
other than the maximum sales charge (reflecting a Volume Discount) was assessed,
provided that total return data derived pursuant to the calculation described
above also are presented.
From time to time, the Trust may quote the Funds' performance
in advertising and other types of literature as compared to the performance of
the S&P Index, the Dow Jones Industrial Average, indices of bonds, stocks or
government securities, and other mutual funds or mutual fund portfolios with
comparable investment objectives and policies. This information may be based on
data relating to various mutual fund or market indices such as those prepared by
Dow Jones & Co., Inc. and Standard & Poor's Corporation or data prepared by
Lipper Analytical Services, Inc. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, American Banker, Institutional Investor, Pensions and
Investments, USA Today, Fortune, CDA/Wiesenberger, Ibbotson Associates, Inc.,
Morningstar, IBC/Donoghue's Money Fund Reports and local newspapers and
periodicals.
The S&P Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The U.S. Treasury Securities
Fund, the Short Intermediate U.S. Treasury Securities Fund, the Diversified
Fixed Income Fund, the Tax-Free Securities Fund or the Tax-Free Short
Intermediate Securities Fund also may be compared, in reports and promotional
literature, to the Consumer Price Index, the Salomon One Year Treasury Benchmark
Index, the Ten Year U.S. Government Bond Average, S&P's Corporate Bond Yield
Averages, the Schabacker Investment Management Indices, the Salomon Brothers
High Grade Bond Index, the Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, the Lehman Brothers 20+ Treasury Index, the
Lehman Brothers 5-7 Year Treasury Index, and Bank Averages (which are calculated
from figures supplied by the U.S. League of Savings Institutions based on
effective annual rates of interest on both passbook and certificate accounts).
This comparative performance could be expressed as a ranking prepared by Lipper
Analytical Services, Inc., CDA/Wiesenberger or Morningstar, Inc., independent
services which monitor the performance of mutual funds. The Funds' performance
will be calculated by relating net asset value per share at the beginning of a
stated period to the net asset value of the investment, assuming reinvestment of
all gains distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare a Fund's past
performance with that of its competitors. Of course, past performance cannot be
a guarantee of future results.
The Trust also may discuss in advertising and other types of
literature that one or more of the Funds has been assigned a rating by an NRSRO,
such as Standard & Poor's Corporation. Such rating would assess the
creditworthiness of the
33
<PAGE> 206
investments held by a Fund. The assigned rating would not be a recommendation to
purchase, sell or hold the Fund's shares since the rating would not comment on
the market price of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to a Fund or its investments. The Trust may compare a
Fund's performance with other investments which are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with other rated investments.
Set forth below is total return and yield information for all
the Funds, except Balanced Fund which has not yet commenced operations as of the
date of this Statement of Additional Information.
34
<PAGE> 207
DIVERSIFIED FIXED INCOME FUND
The average annual and aggregate total return for the Diversified Fixed Income
Fund includes the performance of certain common trust fund ("Commingled")
accounts advised by Hawaiian Trust and managed the same as the Fund in all
material respects, for periods dating back to October 31, 1977, as applicable,
and prior to commencement of operations of the Fund's Retail and Institutional
Class shares. (See note "*"). Such performance is adjusted to reflect the
expenses associated with the Fund. The Commingled accounts were not registered
with the SEC under the 1940 Act, and therefore were not subject to the
investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been registered, the Commingled accounts' performance
may have been adversely affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
--------------- ----------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 -0.48% $995 3.85% $1,039
Five Years ended July 31, 1996 6.69% $1,382 7.97% $1,467
Ten Years ended July 31, 1996 6.70% $1,912 7.45% $2,052
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 -0.48% $995 3.85% $1,038
Five Years ended July 31, 1996 38.24% $1,382 46.70% $1,467
Ten Years ended July 31, 1996 91.18% $1,912 105.21% $2,052
Inception (October 31, 1977) to 92.13% $1,921 110.86% $2,111
July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 5.70% 6.19%
- -------------------
<FN>
* The Institutional and Retail Class Shares of the Fund commenced operations on
October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 4.0%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
35
<PAGE> 208
GROWTH AND INCOME FUND
The average annual and aggregate total return for the Growth and Income Fund
includes the performance of certain common trust fund ("Commingled") accounts
advised by Hawaiian Trust and managed the same as the Fund in all material
respects, for periods dating back to October 31, 1977, as applicable, and prior
to commencement of operations of the Fund's Retail and Institutional Class
shares. (See note "*"). Such performance is adjusted to reflect the expenses
associated with the Fund. The Commingled accounts were not registered with the
SEC under the 1940 Act, and therefore were not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
accounts had been registered, the Commingled accounts' performance may have been
adversely affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
--------------- ----------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 7.45% $1,075 12.29% $1,123
Five Years ended July 31, 1996 8.06% $1,473 9.20% $1,553
Ten Years ended July 31, 1996 9.62% $2,505 10.33% $2,672
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 7.45% $1,075 12.29% $1,123
Five Years ended July 31, 1996 47.36% $1,474 55.25% $1,553
Ten Years ended July 31, 1996 150.51% $2,505 167.20% $2,672
Inception (October 31, 1977) to 410.84% $5,108 457.34% $5,573
July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 0.93% 1.21%
- -------------------
<FN>
* The Institutional and Retail Class Shares of the Fund commenced operations on
October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 4.0%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
36
<PAGE> 209
GROWTH STOCK FUND
The average annual and aggregate total return for the Growth Stock Fund includes
the performance of certain common trust fund ("Commingled") accounts advised by
Hawaiian Trust and managed the same as the Fund in all material respects, for
periods dating back to October 31, 1977, as applicable, and prior to
commencement of operations of the Fund's Retail and Institutional Class shares.
(See note "*"). Such performance is adjusted to reflect the expenses associated
with the Fund. The Commingled accounts were not registered with the SEC under
the 1940 Act, and therefore were not subject to the investment restrictions
imposed by law on registered mutual funds. If the Commingled accounts had been
registered, the Commingled accounts' performance may have been adversely
affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
------------- --------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 3.90% $1,039 8.53% $1,085
Five Years ended July 31, 1996 8.88% $1,530 10.02% $1,612
Ten Years ended July 31, 1996 10.77% $2,780 11.52% $2,975
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 3.90% $1,039 8.53% $1,085
Five Years ended July 31, 1996 53.02% $1,530 61.20% $1,612
Ten Years ended July 31, 1996 178.01% $2,780 197.54% $2,975
Inception (October 31, 1977) to 616.67% $7,167 684.80% $7,848
July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 0.46% 0.73%
- -------------------
<FN>
*The Retail Class Shares commenced operations on November 1, 1993. The
Institutional Class shares commenced operations on October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 4.0%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
37
<PAGE> 210
<TABLE>
<CAPTION>
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND NEW ASIA GROWTH FUND
------------------------------------------------ --------------------
RETAIL CLASS INSTITUTIONAL CLASS RETAIL CLASS INSTITUTIONAL CLASS
------------ ------------------- ------------ -------------------
REDEEMABLE REDEEMABLE REDEEMABLE REDEEMABLE
VALUE OF A VALUE OF A VALUE OF A VALUE OF A
EXPRESSED AS HYPOTHETICAL EXPRESSED AS HYPOTHETICAL EXPRESSED AS HYPOTHETICAL EXPRESSED AS HYPOTHETICAL
A PERCENTAGE $1000 A PERCENTAGE $1000 A PERCENTAGE $1000 A PERCENTAGE $1000
BASED ON A INVESTMENT BASED ON A INVESTMENT BASED ON A INVESTMENT BASED ON A INVESTMENT
HYPOTHETICAL AT THE END HYPOTHETICAL AT THE END OF HYPOTHETICAL AT THE END HYPOTHETICAL AT THE END OF
PERIOD $1000 OF $1000 THE PERIOD $1000 OF $1000 INVESTMENT THE PERIOD
------ INVESTMENT THE PERIOD INVESTMENT ---------- INVESTMENT THE PERIOD ---------------- ----------
---------- ---------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One Year Ended
July 31, 1996 1.57% $1,016 4.18% $1,042 -3.62% $964 1.99% $1,020
Inception* to
July 31, 1996 1.86% $1,017 2.95% $1,030 5.46% $1,055 9.68% $1,097
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended
July 31, 1996 1.57% $1,016 4.18% $1,042 -3.62% $964 1.99% $1,020
Inception* to
July 31, 1996 4.97% $1,050 7.97% $1,080 8.07% $1,081 14.44% $1,144
YIELD
(including maximum applicable sales charge)**
30 Days Ended
July 31, 1996 5.45% 5.83% N/A N/A
- -----------------------
<FN>
* Short Intermediate U.S. Treasury Securities Fund commenced operations
of its Retail Class shares on December 13, 1993 and its Institutional
Class shares on October 14, 1994. The New Asia Growth Fund commenced
operations of its Retail and Institutional Class shares on February 15,
1995.
** The maximum applicable sales charge on the Retail Class shares of the
Short-Intermediate U.S. Treasury Securities Fund is 2.25%. The maximum
applicable sales charge on the New Asia Growth Fund is 5.25%. There is
no sales charge imposed in connection with the purchase of
Institutional Class shares of either Fund.
</TABLE>
38
<PAGE> 211
TAX FREE SECURITIES FUND
The average annual and aggregate total return for the Tax Free Securities Fund
includes the performance of certain common trust fund ("Commingled") accounts
advised by Hawaiian Trust and managed the same as the Fund in all material
respects, for periods dating back to October 31, 1977, as applicable, and prior
to commencement of operations of the Fund's Retail and Institutional Class
shares. (See note "*"). Such performance is adjusted to reflect the expenses
associated with the Fund. The Commingled accounts were not registered with the
SEC under the 1940 Act, and therefore were not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
accounts had been registered, the Commingled accounts' performance may have been
adversely affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
------------- --------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 1.31% $1,013 5.73% $1,057
Five Years ended July 31, 1996 5.69% $1,319 6.86% $1,393
Ten Years ended July 31, 1996 6.56% $1,887 7.28% $2,018
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 1.31% $1,013 5.73% $1,057
Five Years ended July 31, 1996 31.85% $1,319 39.32% $1,393
Ten Years ended July 31, 1996 88.69% $1,887 101.83% $2,018
Inception (October 31, 1977) to 55.75% $1,558 70.32% $1,703
July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 4.43% 4.86%
- -------------------
<FN>
* The Institutional and Retail Class Shares of the Fund commenced operations on
October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 4.0%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
39
<PAGE> 212
TAX FREE SHORT INTERMEDIATE SECURITIES FUND
The average annual and aggregate total return for the Tax Free
Short-Intermediate Securities Fund includes the performance of certain common
trust fund ("Commingled") accounts advised by Hawaiian Trust and managed the
same as the Fund in all material respects, for periods dating back to March 31,
1988, as applicable, and prior to commencement of operations of the Fund's
Retail and Institutional Class shares. (See note "*"). Such performance is
adjusted to reflect the expenses associated with the Fund. The Commingled
accounts were not registered with the SEC under the 1940 Act, and therefore were
not subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
------------- --------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 1.11% $1,011 3.67% $1,037
Five Years ended July 31, 1996 3.67% $1,197 4.45% $1,243
Inception (March 31, 1988) to 4.24% $1,414 4.81% $1,480
July 31, 1996
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 1.11% $1,011 3.67% $1,037
Five Years ended July 31, 1996 19.78% $1,198 24.31% $1,243
Inception (March 31, 1988) to 41.37% $1,414 48.03% $1,480
July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 3.45% 3.78%
- -------------------
<FN>
* The Institutional and Retail Class Shares of the Fund commenced operations on
October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 2.25%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
40
<PAGE> 213
U.S. TREASURY SECURITIES FUND
The average annual and aggregate total return for the U.S. Treasury Securities
Fund includes the performance of certain common trust fund ("Commingled")
accounts advised by Hawaiian Trust and managed the same as the Fund in all
material respects, for periods dating back to December 31, 1984, as applicable,
and prior to commencement of operations of the Fund's Retail and Institutional
Class shares. (See note "*"). Such performance is adjusted to reflect the
expenses associated with the Fund. The Commingled accounts were not registered
with the SEC under the 1940 Act, and therefore were not subject to the
investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been registered, the Commingled accounts' performance
may have been adversely affected.
<TABLE>
<CAPTION>
RETAIL CLASS* INSTITUTIONAL CLASS*
------------- --------------------
REDEEMABLE REDEEMABLE
VALUE OF A EXPRESSED AS VALUE OF A
EXPRESSED AS HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
A PERCENTAGE $1000 BASED ON A $1000
BASED ON A INVESTMENT HYPOTHETICAL INVESTMENT
HYPOTHETICAL AT THE END OF $1000 AT THE END OF
PERIOD $1000 INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ---------------- ---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One Year Ended July 31, 1996 -0.68% $993 3.71% $1,037
Five Years ended July 31, 1996 6.34% $1,360 7.40% $1,429
Ten Years ended July 31, 1996 6.08% $1,804 6.72% $1,916
AGGREGATE TOTAL RETURN
(including maximum applicable sales charge)**
One Year Ended July 31, 1996 -0.68% $993 3.71% $1,037
Five Years ended July 31, 1996 35.96% $1,360 42.89% $1,429
Ten Years ended July 31, 1996 80.36% $1,804 91.60% $1,916
Inception (December 31, 1984) 153.70% $2,537 170.06% $2,701
to July 31, 1996
YIELD
(including maximum applicable sales charge)**
30 Days Ended July 31, 1996 5.42% 5.90%
- -------------------
<FN>
* The Retail Class Shares of the Fund commenced operations on November 1, 1993
and the Institutional Class shares commenced operations on October 14, 1994.
**The maximum applicable sales charge on the Retail Class shares is 4.0%. There
is no sales charge imposed in connection with the purchase of Institutional
Class Shares.
</TABLE>
41
<PAGE> 214
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Fund is determined on each
day that the New York Stock Exchange (the "Exchange") is open for trading and
any other day (other than a day on which no Shares of that Fund are tendered for
redemption and no order to purchase shares is received) during which there is
sufficient trading in the Fund's portfolio securities that the Fund's net asset
value per share might be materially affected. The Exchange is closed on the
following holidays: New Year's Day, Presidents' Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day and Good Friday.
Securities of the Funds for which market quotations are
available are valued at latest reported prices. Securities of the Funds for
which the primary market is a national securities exchange or the National
Association of Securities Dealers Automated Quotations National Market System
are valued at last reported sale prices. In the absence of any sale of such
securities on the valuation date and in the case of other securities, including
U.S. Government securities but excluding money market instruments maturing in 60
days or less, the valuations are based on the mean between the bid and asked
prices. Money market instruments and other debt securities maturing in 60 days
or less are valued at amortized cost. The assets of the Funds, other than debt
securities maturing in 60 days or less, are valued at the mean between the bid
and asked prices. Futures contracts and options listed on a national exchange
are valued at the last sale price on the exchange on which they are traded at
the close of the Exchange, or, in the absence of any sale on the valuation date,
at mean between the bid and asked prices. Options not listed on a national
exchange are valued at the mean between the bid and asked prices. Quotation of
foreign securities in a foreign currency shall be converted to U.S. dollar
equivalents at the current rate obtained from a recognized bank or dealer.
Foreign currency exchange contracts shall be valued at the current cost of
covering or offsetting such contracts.
In all cases, bid prices will be furnished by reputable
independent pricing services approved by the Board of Trustees. Prices provided
by an independent pricing service may be determined without exclusive reliance
on quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by Hawaiian Trust in accordance with procedures adopted
by the Trustees and subject to ratification by the Trustees. If Hawaiian Trust
is unable to make such a determination in accordance with such procedures, the
securities and assets will be valued at fair value as determined in good faith
by the Trustees.
REDEMPTION OF SHARES
Reference is made to the sections in the Prospectus(es)
entitled "How to Redeem Retail Class Shares" and "How to Redeem Institutional
Class Shares." The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. The Trust uses the following
procedures to process telephone redemptions: (1) obtaining some or all of the
following information: account number, name(s), social security number
registered to the account, and personal identification; (2) recording all
telephone transactions; and (3) sending written confirmation of each transaction
to the registered owner.
42
<PAGE> 215
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group
of dealers in the execution of transactions in portfolio securities. In
connection with its duties to arrange for the purchase and sale of each Fund's
portfolio securities, Hawaiian Trust will select such broker-dealers ("Dealers")
as will, in Hawaiian Trust'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. Hawaiian Trust shall cause the Trust to
deal directly with the selling or purchasing principal or market maker without
incurring brokerage commissions unless Hawaiian Trust determines that better
price or execution may be obtained by paying such commissions. In allocating
transactions to Dealers, Hawaiian Trust 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 Hawaiian
Trust 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 Hawaiian Trust's
overall responsibilities as to the accounts over which it exercises investment
discretion. If, on the foregoing basis, the transaction in question could be
allocated to two or more Dealers, Hawaiian Trust is authorized, in making such
allocation, to consider (i) whether a Dealer has provided research services; and
(ii) whether a Dealer has sold shares of the Trust or any other investment
company or companies having Hawaiian Trust as its investment adviser or having
the same 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.
Purchases and sales of securities by U.S. Treasury Securities
Fund, Short Intermediate U.S. Treasury Securities Fund, Diversified Fixed Income
Fund, Tax-Free Securities Fund and Tax-Free Short Intermediate Securities Fund
usually will be principal transactions. Each of the Funds also will purchase
portfolio securities in underwritten offerings and may purchase securities
directly from the issuer. Generally, debt securities, taxable money market
securities and over the counter equities are traded on a net basis and do not
involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions.
Purchases and sales of equity securities on a securities
exchange are effected through brokers who charge a negotiated commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount.
BISYS and certain affiliates of the Sub-Adviser are registered
broker-dealers. From time to time, a portion of a Fund's brokerage transactions
may be conducted with such broker-dealers, subject to the criteria for
allocation of brokerage described above. The Trust's Board of Trustees has
adopted procedures pursuant to Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to such broker-dealers are fair and reasonable.
43
<PAGE> 216
As a result of its investment policies, each Fund may engage
in a substantial number of portfolio transactions. Accordingly, while each Fund
anticipates that its annual portfolio turnover rate should not exceed 100%,
under normal conditions, it is impossible to predict portfolio turnover rates. A
high portfolio turnover rate involves correspondingly greater transaction costs
in the form of dealer spreads and brokerage commissions, which are borne
directly by the Fund. The portfolio turnover rate will not be a limiting factor
when Hawaiian Trust deems portfolio changes appropriate.
For the fiscal years ended July 31, 1996 and July 31, 1995,
purchase and sale transactions by U.S. Treasury Securities Fund, Short
Intermediate U.S. Treasury Securities Fund, Diversified Fixed Income Fund,
Tax-Free Securities Fund and Tax-Free Short Intermediate Securities Fund did not
involve brokerage commissions. The total brokerage commissions paid by Growth
and Income Fund, Growth Stock Fund and New Asia Growth Fund for the fiscal years
ended July 31, 1996, July 31, 1995 and July 31, 1994, are set forth in the table
below:
BROKERAGE COMMISSIONS PAID BY CERTAIN FUNDS
-------------------------------------------
<TABLE>
<CAPTION>
TOTAL TOTAL TOTAL
COMMISSION COMMISSION COMMISSION
PAID FOR FISCAL PAID FOR FISCAL PAID FOR FISCAL
YEAR ENDED YEAR ENDED YEAR ENDED
FUND JULY 31, 1996 JULY 31, 1995 JULY 31, 1994**
---- ------------- ------------- ---------------
<S> <C> <C> <C>
Growth and Income Fund $269,961.90 $37,693.60* N/A
Growth Stock Fund $355,375.96 $130,066.20 $45,175
New Asia Growth Fund $95,781.41 $21,682.82* N/A
- --------------------
<FN>
* Period from commencement of operations through July 31, 1995. Growth
and Income Fund commenced operations on October 14, 1994. New Asia
Growth Fund commenced operations on February 15, 1995.
** In addition to the Growth Stock Fund, U.S. Treasury Securities Fund and
Short Intermediate U.S. Treasury Securities Fund were the only other
Funds operating during the fiscal year ended July 31, 1994. Neither
Fund paid brokerage commissions during such year.
</TABLE>
The portfolio turnover rate for each Fund is not expected to
exceed 100%. The portfolio turnover rate will not be a limiting factor when
Hawaiian Trust deems portfolio changes appropriate. The portfolio turnover rates
for each Fund for the fiscal years ended July 31, 1996 and July 31, 1995 are set
forth in the table below:
44
<PAGE> 217
PORTFOLIO TURNOVER RATES OF THE FUNDS
-------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
FUND ENDED JULY 31, 1996 ENDED JULY 31, 1995
---- ------------------- -------------------
<S> <C> <C>
Diversified Fixed Income Fund 58.86% 60.47%*
Growth and Income Fund 80.83% 12.78%*
Growth Stock Fund 61.30% 32.40%
New Asia Growth Fund 86.53% 55.62%*
Short Intermediate U.S. 47.17% 62.73%
Treasury Securities Fund
Tax-Free Securities Fund 24.78% 49.17%*
Tax-Free Short Intermediate 54.70% 89.98%*
Securities Fund
U.S. Treasury Securities Fund 15.75% 80.98%
- --------------------
<FN>
* Period from commencement of operations through July 31, 1995.
Diversified Fixed Income Fund, Growth and Income Fund, Tax-Free
Securities Fund and Tax-Free Short Intermediate Securities Fund
commenced operations on October 14, 1994. New Asia Growth Fund
commenced operations on February 15, 1995.
</TABLE>
FEDERAL AND HAWAIIAN TAX INFORMATION
The Prospectus describes generally the federal and certain
Hawaiian tax treatment of distributions by the Funds. This section of the SAI
includes certain additional information concerning federal and Hawaiian income
taxes.
Qualification as a "regulated investment company" under the
Code generally requires, among other things, that (a) at least 90% of each
Fund's annual gross income be derived from interest, payments with respect to
securities loans, dividends, gains from the sale or other disposition of
securities or options thereon, and certain related income; (b) each Fund derives
less than 30% of its gross income from gains from the sale or other disposition
of securities or options thereon, or certain other financial investments, held
for less than three months; and (c) each Fund diversifies its holdings so that,
at the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities and the securities of other
regulated investment companies), or of two or more issuers which the Fund
controls (i.e., owns, directly or indirectly, 20% of the voting stock) and which
are determined to be engaged in the same or similar trades or businesses or
related trades or businesses. As regulated investment companies, the Funds will
not be subject to federal income tax on their net investment income and net
capital gains distributed to
45
<PAGE> 218
their shareholders, provided that they distribute to their shareholders at
least 90% of their net investment income and tax-exempt income earned in each
year.
A 4% nondeductible excise tax will be imposed on each Fund to
the extent it does not meet certain minimum distribution requirements by the end
of each calendar year. This excise tax would not apply to tax-exempt income of
the Tax-Free Funds. For this purpose, any income or gain retained by a Fund that
is subject to tax will be considered to have been distributed by year-end. In
addition, dividends and distributions declared payable as of a date in October,
November or December of any calendar year are deemed under the Code to have been
received by the shareholders on December 31 of that calendar year (and also will
be taxable to shareholders in such year) if the dividend is actually paid in the
following January. Each Fund intends to distribute substantially all of its net
investment income and net capital gains and, thus, expects not to be subject to
the excise tax.
Income and dividends received by any of the Funds from sources
within foreign countries may be subject to withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Shareholders may be able to claim
U.S. foreign tax credits with respect to such taxes, subject to certain
conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. Because each of Balanced Fund, Growth and Income
Fund, Growth Stock Fund, Diversified Fixed Income Fund, Short Intermediate U.S.
Treasury Fund, Tax-Free Securities Fund, Tax-Free Short Intermediate Securities
Fund and U.S. Treasury Securities Fund is expected to limit their investment in
foreign securities, these Funds will not be eligible to elect to "pass through"
foreign tax credits to shareholders. New Asia Growth Fund invests primarily in
foreign securities. If more than 50% in value of New Asia Growth Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, New Asia Growth Fund will be eligible and intends to file an
election with the Internal Revenue Service pursuant to which shareholders of New
Asia Growth Fund will be required to include their proportionate shares of such
withholding taxes in their U.S. income tax returns as gross income, treat such
proportionate shares as taxes paid by them, and deduct such proportionate shares
in computing their taxable incomes or, alternatively, use them as foreign tax
credits against their U.S. income taxes. No deductions for foreign taxes,
however, may be claimed by noncorporate shareholders who do not itemize
deductions. A shareholder that is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
New Asia Growth Fund's election described in this paragraph but may not be able
to claim a credit or deduction against such U.S. tax for the foreign taxes
treated as having been paid by such shareholder. New Asia Growth Fund will
report annually to its shareholders the amount per share of such withholding
taxes.
Gains or losses on sales of portfolio securities by a Fund
will be long-term capital gains or losses if the securities have been held by it
for more than one year, except in certain cases where a Fund acquires a put or
writes a call thereon or otherwise engages in a transaction that "tolls" the
Fund's holding period. Other gains or losses on the sale of securities will be
short-term capital gains or losses. The amount of tax payable by an individual
or corporation will be affected by a combination of tax laws covering, for
example, deductions, credits, deferrals, exemptions, sources of income and other
matters.
A capital gains distribution or dividend will be a return of
invested capital to the extent the net asset value of an investor's shares is
thereby reduced
46
<PAGE> 219
below his or her cost, even though the distribution would be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal tax purposes.
If a shareholder exchanges or otherwise disposes of shares of
the Fund within 90 days of having acquired such shares, and if, as a result of
having acquired those shares, the shareholder subsequently pays a reduced sales
charge for shares of the Fund, or of a different fund, the sales charge
previously incurred acquiring the Fund's shares shall not be taken into account
(to the extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of such
other shares.
Any loss realized on a redemption or exchange of shares of a
Fund will be disallowed to the extent shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are disposed
of.
If an option written by a Fund lapses or is terminated through
a closing transaction, such as a repurchase by the Fund of the option from its
holder, such Fund will realize a short-term capital gain or loss, depending on
whether the premium income is greater or less than the amount paid by the Fund
in the closing transaction.
If securities are sold by a Fund pursuant to the exercise of a
call option written by it, such Fund will add the premium received to the sale
price of the securities delivered in determining the amount of gain or loss on
the sale. If securities are purchased by a Fund pursuant to the exercise of a
put option written by it, such Fund will subtract the premium received from its
cost basis in the securities purchased. The requirement that each Fund derive
less than 30% of its gross income from gains from the sale of securities held
for less than three months may limit the Fund's ability to write options.
The amount of any gain or loss realized by a Fund on closing
out a futures contract will generally result in a realized capital gain or loss
for tax purposes. Regulated futures contracts held at the end of each fiscal
year will be required to be "marked to market" for federal income tax purposes.
In this regard, they will be deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales and sixty
percent (60%) of any net realized gain or loss from any actual sales, will be
treated as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss. Transactions that qualify as designated hedges
are excepted from the marked to market rule and the "60%/40%" rule. Currency
transactions may be subject to Section 988 of the Code, under which foreign
currency gains or losses would generally be computed separately and treated as
ordinary income or losses. The Funds will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
FOREIGN SHAREHOLDERS. Under the Code, distributions of net
investment income by a Fund to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of 30%
or a lower treaty rate). Withholding will not apply if a dividend paid by a Fund
to a foreign shareholder is "effectively connected" with a U.S. trade or
business, in which case the reporting and withholding requirements applicable to
U.S. citizens or domestic corporations will apply. Distributions of net
long-term capital gains derived by non-resident aliens or
47
<PAGE> 220
foreign entities that are not effectively connected with a U.S. trade or
business are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions ordinarily
will be subject to U.S. income tax at a rate of 30% if the individual is
physically present in the U.S. for more than 182 days during the taxable year.
OTHER MATTERS. Investors should be aware that the investments
to be made by the Funds may involve sophisticated tax rules such as the original
issue discount, marked to market and real estate mortgage investment conduit
("REMIC") rules that would result in income or gain recognition by the Funds
without corresponding current cash receipts. Although the Funds will seek to
avoid significant noncash income, such noncash income could be recognized by the
Funds, in which case a Fund may distribute cash derived from other sources in
order to meet the minimum distribution requirements described above.
Special Tax Considerations For New Asia Growth Fund
- ---------------------------------------------------
Due to investment laws in certain developing countries in
Asia, it is anticipated that New Asia Growth Fund's investments in equity
securities in such countries will consist primarily of shares of investment
companies (or similar investment entities) organized under foreign law or of
ownership interests in special accounts, trusts or partnerships. New Asia Growth
Fund may invest up to 10% of its total assets in securities of closed-end
investment companies. If New Asia Growth Fund purchases shares of an investment
company (or similar investment entity) organized under foreign law, New Asia
Growth Fund will be treated as owning shares in a passive foreign investment
company ("PFIC") for U.S. federal income tax purposes. New Asia Growth Fund may
be subject to U.S. federal income tax, and an additional tax in the nature of
interest, on a portion of the distributions from such a company and on gain from
the disposition of the shares of such company (collectively referred to as
"excess distributions"), even if such excess distributions are paid by New Asia
Growth Fund as a dividend to its shareholders. New Asia Growth Fund may be
eligible to make an election with respect to certain PFICs in which it owns
shares that will allow it to avoid the taxes on excess distributions. However,
such election may cause New Asia Growth Fund to recognize income in a particular
year in excess of the distributions received from such PFICs. Alternatively, New
Asia Growth Fund may elect to "mark-to-market" at the end of each taxable year
all shares that it holds in PFICs. If it makes this election, New Asia Growth
Fund will recognize as ordinary income any increase in the value of such shares.
Unrealized losses, however, will not be recognized. By making the mark-to-market
election, New Asia Growth Fund can avoid imposition of the interest charge with
respect to its distributions from PFICs, but in any particular year may be
required to recognize income in excess of the distributions it receives from
PFICs and its proceeds from dispositions of PFIC stock.
Special Tax Considerations for the Tax-Free Funds.
- --------------------------------------------------
FEDERAL -- The portion of total dividends paid by the Tax-Free
Funds with respect to any taxable year that qualifies for exclusion from gross
income ("exempt-interest dividends") will be the same for all shareholders
receiving dividends during such year. In order for the Tax-Free Funds to pay
exempt-interest dividends during any taxable year, at the close of each fiscal
quarter at least 50% of the aggregate value of the Tax-Free Funds assets,
respectively, must consist of tax-
48
<PAGE> 221
exempt securities. In addition, the Tax-Free Funds must distribute 90% of the
aggregate interest excludable from gross income (net of non-deductible expenses)
and 90% of the investment company taxable income earned by it during the taxable
year. Not later than 60 days after the close of its taxable year, the Tax-Free
Funds will notify each shareholder of the portion of the dividends paid with
respect to such taxable year which constitutes exempt-interest dividends. The
aggregate amount of dividends so designated cannot exceed the excess of the
amount of interest excludable from gross income under Section 103 of the Code
received by such Funds during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code. In addition, market
discount earned on tax-exempt obligations will not qualify as tax-exempt income.
The Code treats interest on private activity bonds, as defined
therein, as an item of tax preference subject to an alternative minimum tax on
individuals and corporations at the applicable tax rates. Further,
exempt-interest dividends are includable in adjusted current earnings in
calculating corporate alternative minimum taxable income. Except for temporary
defensive purposes, the Trust will not invest in the types of Municipal
Obligations which would give rise to interest that would be subject to
alternative minimum taxation if more than 20% of its net assets would be so
invested, and may refrain from investing in that type of bond completely.
In addition, any loss realized by a shareholder upon the sale
or redemption of shares of a Fund held less than six months is disallowed to the
extent of any exempt-interest dividends received by the shareholder.
Shareholders who may be "substantial users" (or related
persons of substantial users) with respect to municipal securities held by the
Tax-Free Funds should consult their tax advisers to determine whether
exempt-interest dividends paid by the Funds with respect to such obligations
retain their federal exclusions.
HAWAIIAN TAX INFORMATION. The Tax-Free Funds, and dividends
and distributions made by the Tax-Free Funds 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. If at the close of each quarter
of the Tax- Free Funds' taxable year at least 50% of the value of its total
assets consists of obligations the interest on which, if such obligations were
held by an individual, would be exempt from Hawaii personal income tax (under
either the laws of Hawaii or of the United States), the Tax-Free Funds will be
entitled to pay dividends to its shareholders which will be exempt from Hawaii
personal income tax. Similar exemptions may be available in other states with
regard to the portion of tax-exempt dividends attributable to interest exempt
from state taxation under federal law. Under Hawaii law, however, interest
derived from obligations of states (and their political subdivisions) other than
Hawaii will not be exempt from Hawaii income taxation. (Interest derived from
bonds or obligations issued by or under the authority of the following is exempt
from Hawaii income taxation: Guam, Northern Mariana Islands, Puerto Rico, and
the Virgin Islands.)
Interest on Hawaiian Municipal 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,
industrial loan companies, financial corporations, and small business investment
companies.
49
<PAGE> 222
Persons or entities who are not Hawaii residents should not be
subject to Hawaii income taxation on dividends and distributions made by the
Trust but will be subject to other state and local taxes.
OTHER MATTERS. Shares of the Tax-Free Funds would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and IRAs since such
plans and accounts are generally tax-exempt and, therefore, would not benefit
from the exempt status of dividends from such Funds. Such dividends would be
ultimately taxable to the beneficiaries when distributed to them.
CAPITAL STOCK
Each Fund is comprised of two classes of shares -- the
"Institutional Class" and the "Retail Class" -- each comprised of an unlimited
number of units of beneficial interest in the Trust. When certain matters affect
one class but not another, the shareholders would vote as a class regarding such
matters. Subject to the foregoing, on any matter submitted to a vote of
shareholders, all shares then entitled to vote will be voted separately by Fund
unless otherwise required by the 1940 Act, in which case all shares will be
voted in the aggregate. For example, a change in a Fund's fundamental investment
policies would be voted upon only by shareholders of the Fund involved.
Additionally, approval of the advisory agreement is a matter to be determined
separately by Fund. Approval by the shareholders of one Fund is effective as to
that Fund whether or not sufficient votes are received from the shareholders of
the other Funds to approve the proposal as to those Funds. As used in the
Prospectus and in this SAI, the term "majority," when referring to approvals to
be obtained from shareholders of a Fund means the vote of the lesser of (i) 67%
of the shares of the Fund represented at a meeting if the holders of more than
50% of the outstanding shares of the Fund are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of the Fund. The term "majority,"
when referring to the approvals to be obtained from shareholders of the Trust as
a whole means the vote of the lesser of (i) 67% of the Trust's shares
represented at a meeting if the holders of more than 50% of the Trust's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Trust's outstanding shares. Shareholders are entitled to one vote for each
full share held and fractional votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in
any year in which it is not required to elect Trustees under the 1940 Act.
However, the Trust undertakes to hold a special meeting of its shareholders for
the purpose of voting on the question of removal of a Trustee or Trustees if
requested in writing by the holders of at least 10% of the Trust's outstanding
voting securities, and to assist in communicating with other shareholders as
required by Section 16(c) of the 1940 Act.
Each share of a class of a Fund represents an equal
proportional interest in that Fund or portfolio with each other share of the
same class and is entitled to such dividends and distributions out of the income
earned on the assets belonging to that Fund or portfolio as are declared in the
discretion of the Trustees. In the event of the liquidation or dissolution of
the Trust, shareholders of a Fund or portfolio are entitled to receive the
assets attributable to that Fund or portfolio that are available for
distribution, and a distribution of any general assets not attributable to a
particular Fund or portfolio that are available for distribution in such manner
and on such basis as the Trustees in their sole discretion may determine.
50
<PAGE> 223
Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Trust.
As of October 31, 1996, the persons set forth below were known
by the Trust to own of record or beneficially 5% or more of the Retail or
Institutional Shares, as applicable, of the indicated Fund. Unless otherwise
indicated, the address of HTCO, REINCO and HAWCO is Hawaiian Trust Company,
Ltd., P.O. Box 3170, Honolulu, HI 96802. In addition, unless otherwise
indicated, the address of BHC Securities, Inc. is Attn: Mutual Funds, 1 Commerce
Street, 2005 Market Street, Suite 12000, Philadelphia, PA 19103.
<TABLE>
<CAPTION>
Percentage of
Shares Held of
INSTITUTIONAL CLASS SHARES Record Or Beneficially
- -------------------------- ----------------------
Diversified Fixed Income Securities Fund
- ----------------------------------------
<S> <C>
HTCO 33.8%
HAWCO 64.6%
Growth and Income Fund
- ----------------------
HAWCO 36.3%
HTCO 60.3%
Growth Stock Fund
- -----------------
REINCO 8.1%
HTCO 45.6%
HAWCO 45.3%
New Asia Growth Fund
- --------------------
HAWCO 41.7%
REINCO 22.2%
HITCO 27.8%
Vanguard Fiduciary Trust Co. 6.0%
P.O. Box 2600
V.M. 421
Valley Forge, PA 19482
Short Intermediate U.S. Treasury
Securities Fund
HTCO 37.1%
HAWCO 57.8%
</TABLE>
51
<PAGE> 224
<TABLE>
<CAPTION>
<S> <C>
Tax-Free Securities Fund
- ------------------------
HTCO 97.5%
Tax-Free Short Intermediate
Securities Fund
- ---------------
HTCO 95.2%
U.S. Treasury Securities Fund
- -----------------------------
REINCO 97.8%
RETAIL CLASS SHARES
- -------------------
Diversified Fixed Income Fund
- -----------------------------
BHC Securities, Inc. 98.8%
Growth and Income Fund
- ----------------------
BHC Securities, Inc. 95.7%
Growth Stock Fund
- -----------------
BHC Securities, Inc. 93.5%
New Asia Growth Fund
- --------------------
BHC Securities, Inc. 80.0%
Merrill Lynch Pierce Fenner & Smith Incorporated 15.2%
4800 Deer Lake Drive East
3rd Floor,
Mutual Fund Operations
Jacksonville, Florida 32246
Short-Intermediate U.S. Treasury
Securities Fund
- ---------------
BHC Securities, Inc. 91.3%
Merrill Lynch Pierce Fenner & Smith Incorporated 7.9%
4800 Deer Lake Drive East
3rd Floor,
Mutual Fund Operations
Jacksonville, Florida 32246
Tax-Free Short Intermediate
Securities Fund
- ---------------
Douglas Philpotts Trustee 56.6%
c/o Douglas Philpotts
</TABLE>
52
<PAGE> 225
<TABLE>
<CAPTION>
<S> <C>
94B Polipoli
Kula, Hawaii 96790
BHC Securities, Inc. 42.3%
Tax-Free Securities Fund
- ------------------------
Douglas Philpotts Trustee 68.7%
c/o Douglas Philpotts
94B Polipoli
Kula, Hawaii 96790
BHC Securities, Inc. 29.8%
U.S. Treasury Securities Fund
- -----------------------------
Hugh Shearer Trustee 5.6%
P.O. Box 3196
Honolulu, HI 96801
BHC Securities, Inc. 72.7%
Merrill Lynch Pierce Fenner & Smith Incorporated 7.6%
4800 Deer Lake Drive East
3rd Floor,
Mutual Fund Operations
Jacksonville, Florida 32246
</TABLE>
CUSTODIAN
Bank One Trust Company, N.A. ("Bank One") has been retained to act
as Custodian for Balanced Fund, Diversified Fixed Income Fund, Growth and Income
Fund, Growth Stock Fund, Short Intermediate U.S. Treasury Securities Fund,
Tax-Free Securities Fund, Tax-Free Short Intermediate Securities Fund and U.S.
Treasury Securities Fund. Union Bank of California, formerly Mitsubishi ("Bank
of California") has been retained as Custodian for New Asia Growth Fund. With
regard to each Fund, the relevant Custodian, among other things, maintains a
custody account or accounts in the name of the Fund; receives and delivers all
assets for the Fund upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of the
assets of each Fund and pays all expenses of the Fund. For its services as
Custodian, each of Bank One and Bank of California, respectively, receives an
asset-based fee.
OTHER
The Registration Statement, including the Prospectus, the Statement
of Additional Information and the exhibits filed therewith, may be examined at
the office of the Commission in Washington, D.C. Statements contained in the
Prospectus or the Statement of Additional Information as to the contents of any
contract or other document referred to herein or in the Prospectus are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
53
<PAGE> 226
INDEPENDENT AUDITORS
The financial statements of Pacific Capital Funds as of July 31,
1996, appearing in this Statement of Additional Information, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
Ernst & Young LLP has been selected as the independent auditors for
the Pacific Capital Funds. Ernst & Young LLP provides audit services, tax return
preparation and assistance and consultation in connection with certain
Commission filings. Ernst & Young LLP is located at One Columbus, Suite 2300, 10
West Broad Street, Columbus, Ohio 43215.
FINANCIAL INFORMATION
Included in this Statement of Additional Information are the
audited financial statements for the Retail Class and Institutional Class of
each Fund at July 31, 1996. Financial statements are not provided for Balanced
Fund since Balanced Fund has not yet commenced operations as of the date of this
Statement of Additional Information.
54
<PAGE> 227
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of Pacific Capital Funds
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments of the Pacific Capital Funds
(comprising, respectively, Growth Stock Fund, U.S. Treasury Securities Fund,
Short Intermediate U.S. Treasury Securities Fund, Growth and Income Fund,
Diversified Fixed Income Fund, Tax-Free Securities Fund, Tax-Free Short
Intermediate Securities Fund, and New Asia Growth Fund) as of July 31, 1996,
and the related statements of operations, the statements of changes in net
assets, and the financial highlights for the periods presented herein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
respective portfolios constituting the Pacific Capital Funds at July 31, 1996,
the results of their operations, and the changes in their net assets and
financial highlights for the periods presented herein, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Columbus, Ohio
September 13, 1996
55
<PAGE> 228
PACIFIC CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<CAPTION>
SHORT INTERMEDIATE
GROWTH U.S. TREASURY U.S. TREASURY
STOCK SECURITIES SECURITIES GROWTH AND
FUND FUND FUND INCOME FUND
------------ ------------- ------------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $149,647,144;
$23,093,188;
$24,650,387; and
$70,381,459
respectively).......... $178,920,521 $23,694,556 $24,444,242 $76,207,067
Interest and dividends
receivable............. 256,999 572,461 277,389 99,538
Receivable for capital
shares issued.......... 34,755 -- -- 26,023
Receivable from brokers
for investments sold... 1,553,567 -- -- 1,112,135
Prepaid expenses and
other assets........... -- 3,246 12,307 8
------------ ----------- ----------- -----------
Total Assets.......... 180,765,842 24,270,263 24,733,938 77,444,771
------------ ----------- ----------- -----------
LIABILITIES:
Dividends payable....... -- 7,794 7,368 --
Payable to brokers for
investments purchased.. 2,732,781 -- -- 1,764,988
Accrued expenses and
other payables:
Investment advisory
fees.................. 121,054 12,798 6,364 51,489
Administration fees.... 24,211 3,413 3,182 10,298
Distribution fees--Re-
tail Class............ 1,117 211 243 233
Fund accounting and
transfer agent fees... 9,668 4,671 4,605 6,740
Other.................. 51,615 13,928 10,768 23,950
------------ ----------- ----------- -----------
Total Liabilities..... 2,940,446 42,815 32,530 1,857,698
------------ ----------- ----------- -----------
NET ASSETS:
Capital................. 152,835,520 27,535,547 25,006,372 66,385,781
Undistributed net
investment income...... 49,694 -- -- 22,307
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... (4,333,195) (3,909,467) (98,819) 3,353,377
Unrealized appreciation
(depreciation) from
investments............ 29,273,377 601,368 (206,145) 5,825,608
------------ ----------- ----------- -----------
Net Assets............ $177,825,396 $24,227,448 $24,701,408 $75,587,073
============ =========== =========== ===========
Net Assets
Retail Class........... $ 5,260,653 $ 979,045 $ 1,155,979 $ 1,159,979
Institutional Class.... 172,564,743 23,248,403 23,545,429 74,427,094
------------ ----------- ----------- -----------
Total................. $177,825,396 $24,227,448 $24,701,408 $75,587,073
============ =========== =========== ===========
Outstanding units of
beneficial interest
(shares)
Retail Class........... 442,493 107,197 122,898 94,173
Institutional Class.... 14,508,629 2,543,733 2,498,684 6,043,467
------------ ----------- ----------- -----------
Total................. 14,951,122 2,650,930 2,621,582 6,137,640
============ =========== =========== ===========
Net Asset Value
Retail Class--redemp-
tion price per share.. $ 11.89 $ 9.13 $ 9.41 $ 12.32
============ =========== =========== ===========
Retail Class--maximum
sales charge.......... 4.00% 4.00% 2.25% 4.00%
------------ ----------- ----------- -----------
Retail Class--maximum
offering price per
share (100%/(100%--
maximum sales charge)
of net asset value
adjusted to nearest
cent)...... $ 12.39 $ 9.51 $ 9.63 $ 12.83
============ =========== =========== ===========
Institutional Class--
offering and redemp-
tion price per share.. $ 11.89 $ 9.14 $ 9.42 $ 12.32
============ =========== =========== ===========
</TABLE>
See notes to financial statements.
56
<PAGE> 229
PACIFIC CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<CAPTION>
TAX-FREE
DIVERSIFIED TAX-FREE SHORT INTERMEDIATE
FIXED INCOME SECURITIES SECURITIES NEW ASIA
FUND FUND FUND GROWTH FUND
------------ ------------ ------------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $162,770,301;
$274,682,887;
$38,846,656; and
$9,467,465
respectively).......... $159,036,837 $286,298,801 $39,138,168 $ 9,029,235
Cash.................... -- -- -- 1,316,661
Foreign currency (Cost
$52,561)............... -- -- -- 52,561
Interest and dividends
receivable............. 3,297,828 3,556,991 505,359 10,451
Receivable for capital
shares issued.......... 2,651 -- -- 37,143
Receivable from brokers
for investments sold... 728,000 -- 2,395,696 54,722
Receivable from invest-
ment adviser........... -- -- -- 17,930
Prepaid expenses and
other assets........... 63 487 21 12,728
------------ ------------ ----------- -----------
Total Assets.......... 163,065,379 289,856,279 42,039,244 10,531,431
------------ ------------ ----------- -----------
LIABILITIES:
Dividends payable....... 50,682 77,168 8,280 --
Payable to brokers for
investments purchased.. -- -- 2,042,120 52,561
Payable for forward for-
eign currency con-
tracts................. -- -- -- 308
Accrued expenses and
other payables:
Investment advisory
fees.................. 82,569 146,386 16,839 --
Administration fees.... 22,019 39,036 5,052 1,389
Distribution fees--Re-
tail Class............ 226 128 95 433
Fund accounting and
transfer agent fees... 9,025 15,089 6,325 4,313
Other.................. 66,634 75,808 37,392 14,024
------------ ------------ ----------- -----------
Total Liabilities..... 231,155 353,615 2,116,103 73,028
------------ ------------ ----------- -----------
NET ASSETS:
Capital................. 165,226,478 276,300,982 39,648,587 10,778,400
Undistributed (distribu-
tion in excess of) net
investment income...... -- -- -- (25,243)
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... 1,341,210 1,585,768 (16,958) 187,744
Accumulated net realized
losses from foreign
currency transactions.. -- -- -- (44,379)
Unrealized appreciation
(depreciation) from
investments............ (3,733,464) 11,615,914 291,512 (438,381)
Unrealized appreciation
from translation of
assets and liabilities
in foreign currency.... -- -- -- 262
------------ ------------ ----------- -----------
Net Assets............ $162,834,224 $289,502,664 $39,923,141 $10,458,403
============ ============ =========== ===========
Net Assets
Retail Class........... $ 1,092,537 $ 568,866 $ 451,202 $ 1,989,666
Institutional Class.... 161,741,687 288,933,798 39,471,939 8,468,737
------------ ------------ ----------- -----------
Total................. $162,834,224 $289,502,664 $39,923,141 $10,458,403
============ ============ =========== ===========
Outstanding units of
beneficial interest
(shares)
Retail Class........... 104,506 54,465 44,881 179,099
Institutional Class.... 15,364,087 27,610,200 3,915,452 760,450
------------ ------------ ----------- -----------
Total................. 15,468,593 27,664,665 3,960,333 939,459
============ ============ =========== ===========
Net Asset Value
Retail Class--redemp-
tion price per share.. $ 10.45 $ 10.44 $ 10.05 $ 11.11
============ ============ =========== ===========
Retail Class--maximum
sales charge.......... 4.00% 4.00% 2.25% 5.25%
------------ ------------ ----------- -----------
Retail Class--maximum
offering price per
share (100%/(100%--
maximum sales charge)
of net asset value
adjusted to nearest
cent)................. $ 10.89 $ 10.88 $ 10.28 $ 11.73
============ ============ =========== ===========
Institutional Class--
offering and redemp-
tion price per share.. $ 10.53 $ 10.46 $ 10.08 $ 11.14
============ ============ =========== ===========
</TABLE>
See notes to financial statements.
57
<PAGE> 230
PACIFIC CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
SHORT INTERMEDIATE
U.S. TREASURY U.S. TREASURY GROWTH AND
GROWTH STOCK SECURITIES SECURITIES INCOME
FUND FUND FUND FUND
------------ ------------- ------------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income......... $ 563,003 $1,930,202 $ 1,230,870 $ 162,495
Dividend income......... 2,741,023 10,605 15,129 1,436,098
----------- ---------- ----------- ----------
Total Income.......... 3,304,026 1,940,807 1,245,999 1,598,593
----------- ---------- ----------- ----------
EXPENSES:
Investment advisory
fees................... 1,359,262 172,954 102,679 503,952
Administration fees..... 339,659 57,425 41,071 126,053
Distribution fees--Re-
tail Class............. 35,002 7,880 6,511 4,658
Custodian fees.......... 15,607 5,841 6,363 12,582
Accounting fees......... 53,199 9,579 7,486 21,384
Legal and audit fees.... 64,906 8,372 8,447 23,350
Organization costs...... 6,717 12,827 1,023 --
Trustees' fees and ex-
penses................. 14,826 1,260 1,809 5,643
Transfer agent fees..... 16,405 11,863 12,991 13,640
Registration and filing
fees................... 21,674 766 4,682 8,692
Printing costs.......... 20,088 1,974 1,982 8,856
Other................... 4,686 1,891 564 1,318
----------- ---------- ----------- ----------
Total expenses before
voluntary fee reduc-
tions................ 1,952,031 292,632 195,608 730,128
Expenses voluntarily
reduced.............. (92,335) (16,992) (55,692) (28,733)
----------- ---------- ----------- ----------
Net Expenses.......... 1,859,696 275,640 139,916 701,395
----------- ---------- ----------- ----------
Net Investment Income... 1,444,330 1,665,167 1,106,083 897,198
----------- ---------- ----------- ----------
REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains
(losses) from invest-
ment transactions...... 2,853,413 610,897 (66,180) 4,517,339
Net change in unrealized
appreciation
(depreciation)
from investments....... 9,013,715 (980,793) (370,513) 1,140,677
----------- ---------- ----------- ----------
Net realized/unrealized
gains (losses) from in-
vestments.............. 11,867,128 (369,896) (436,693) 5,658,016
----------- ---------- ----------- ----------
Change in net assets re-
sulting from opera-
tions.................. $13,311,458 $1,295,271 $ 669,390 $6,555,214
=========== ========== =========== ==========
</TABLE>
See notes to financial statements.
58
<PAGE> 231
PACIFIC CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
TAX-FREE
DIVERSIFIED TAX-FREE SHORT INTERMEDIATE NEW ASIA
FIXED INCOME SECURITIES SECURITIES GROWTH
FUND FUND FUND FUND
------------ ----------- ------------------ ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income......... $8,655,304 $16,628,597 $1,902,245 $ --
Dividend income......... 111,905 44,333 10,960 120,313
Foreign tax withholding. -- -- -- (5,420)
---------- ----------- ---------- ---------
Total Income.......... 8,767,209 16,672,930 1,913,205 114,893
---------- ----------- ---------- ---------
EXPENSES:
Investment advisory
fees................... 814,802 1,724,513 202,701 52,972
Administration fees..... 271,954 574,229 80,987 11,772
Distribution fees--
Retail Class........... 4,367 6,100 2,609 8,046
Custodian fees.......... 11,411 19,709 6,495 38,321
Accounting fees......... 45,603 106,514 18,454 1,761
Legal and audit fees.... 52,263 112,998 15,819 4,681
Organization costs...... -- -- -- 23,424
Trustees' fees and
expenses............... 13,731 22,959 3,790 594
Transfer agent fees..... 16,051 18,669 12,951 15,738
Registration and filing
fees................... 11,969 56,423 8,718 1,682
Printing costs.......... 16,800 28,424 4,177 15,884
Other................... 2,040 9,376 1,297 366
---------- ----------- ---------- ---------
Total expenses before
voluntary fee
reductions and
reimbursements........ 1,260,991 2,679,914 357,998 175,241
Expenses voluntarily
reduced............... (58,083) (120,799) (21,916) (8,337)
Expenses reimbursed.... -- -- -- (47,974)
---------- ----------- ---------- ---------
Net Expenses.......... 1,202,908 2,559,115 336,082 118,930
---------- ----------- ---------- ---------
Net Investment Income
(Loss)................. 7,564,301 14,113,815 1,577,123 (4,037)
---------- ----------- ---------- ---------
REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gains from
investment
transactions........... 1,793,439 2,578,744 247,802 187,718
Net realized losses from
foreign currency
transactions........... -- -- -- (55,916)
Net change in unrealized
depreciation from
investments............ (6,350,290) (505,505) (381,865) (603,577)
Net change in unrealized
appreciation from
translation of assets
and liabilities in
foreign currencies..... -- -- -- 3,412
---------- ----------- ---------- ---------
Net realized/unrealized
gains (losses) from
investments and foreign
currencies............. (4,556,851) 2,073,239 (134,063) (468,363)
---------- ----------- ---------- ---------
Change in net assets
resulting from
operations............. $3,007,450 $16,187,054 $1,443,060 $(472,400)
========== =========== ========== =========
</TABLE>
See notes to financial statements.
59
<PAGE> 232
PACIFIC CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT INTERMEDIATE
U.S. TREASURY U.S. TREASURY
GROWTH STOCK FUND SECURITIES FUND SECURITIES FUND
-------------------------- -------------------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.. $ 1,444,330 $ 1,414,887 $ 1,665,167 $ 3,360,178 $ 1,106,083 $ 739,009
Net realized gains
(losses) from
investment
transactions.......... 2,853,413 2,291,705 610,897 (4,219,260) (66,180) 5,148
Net change in
unrealized
appreciation
(depreciation) from
investments........... 9,013,715 20,099,233 (980,793) 6,833,930 (370,513) 344,160
------------ ------------ ------------ ------------ ----------- -----------
Change in net assets
resulting from
operations............. 13,311,458 23,805,825 1,295,271 5,974,848 669,390 1,088,317
------------ ------------ ------------ ------------ ----------- -----------
DISTRIBUTIONS TO RETAIL
CLASS SHAREHOLDERS:
From net investment
income (a)............ -- (135,165)(b) -- (786,481)(b) -- (40,812)(b)
From net investment
income (a)............ -- (29,334)(c) -- (40,655)(c) -- (19,044)(c)
From net investment
income................ (26,967) -- (58,924) -- (44,406) --
In excess of net
investment income..... -- -- (9,639) -- (3,140) --
From net realized
gains................. (73,928) -- -- -- -- --
In excess of net
realized gains........ (168,943) -- -- -- (2,008) --
DISTRIBUTIONS TO
INSTITUTIONAL CLASS
SHAREHOLDERS:
From net investment
income (a)............ -- (1,224,225)(c) (2,520,822)(c) -- (613,328)(c)
From net investment
income................ (1,401,180) -- (1,606,243) -- (1,061,677) --
In excess of net
investment income..... -- -- (262,742) -- (75,078) --
From net realized
gains................. (2,779,485) -- -- -- -- --
In excess of net
realized gains........ (6,351,795) -- -- -- (35,758) --
------------ ------------ ------------ ------------ ----------- -----------
Change in net assets
from shareholder
distributions.......... (10,802,298) (1,388,724) (1,937,548) (3,347,958) (1,222,067) (673,184)
------------ ------------ ------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 133,828,085 82,513,604 1,647,781 2,718,467 18,121,546 16,852,167
Dividends reinvested... 6,438,745 713,011 1,902,174 3,339,073 158,516 190,790
Cost of shares
redeemed.............. (105,692,774) (21,022,651) (30,979,541) (16,510,086) (9,729,562) (4,173,175)
------------ ------------ ------------ ------------ ----------- -----------
Change in net assets
from share
transactions........... 34,574,056 62,203,964 (27,429,586) (10,452,546) 8,550,500 12,869,782
------------ ------------ ------------ ------------ ----------- -----------
Change in net assets.... 37,083,216 84,621,066 (28,071,863) (7,825,656) 7,997,823 13,284,915
NET ASSETS:
Beginning of period.... 140,742,180 56,121,115 52,299,311 60,124,967 16,703,585 3,418,670
------------ ------------ ------------ ------------ ----------- -----------
End of period.......... $177,825,396 $140,742,180 $ 24,227,448 $ 52,299,311 $24,701,408 $16,703,585
============ ============ ============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued................. 11,098,985 8,237,688 173,866 307,618 1,882,513 1,803,713
Reinvested............. 541,450 68,923 200,813 375,250 16,520 20,407
Redeemed............... (8,707,702) (1,998,212) (3,272,020) (1,785,560) (1,016,011) (444,724)
------------ ------------ ------------ ------------ ----------- -----------
Change in shares........ 2,932,733 6,308,399 (2,897,341) (1,102,692) 883,022 1,379,396
============ ============ ============ ============ =========== ===========
<FN>
- ------
(a) On October 13, 1994, the Trust identified those Institutional shareholders
that were part of the Retail class and transferred these shareholders into
the Institutional class effective October 14, 1994.
(b) For the period August 1, 1994 through October 13, 1994.
(c) For the period October 14, 1994 through July 31, 1995.
</TABLE>
See notes to financial statements.
60
<PAGE> 233
PACIFIC CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DIVERSIFIED FIXED
GROWTH AND INCOME FUND INCOME FUND TAX-FREE SECURITIES FUND
------------------------- -------------------------- --------------------------
FOR THE YEAR OCTOBER 14, OCTOBER 14, FOR THE YEAR OCTOBER 14,
ENDED 1994 TO FOR THE YEAR 1994 TO ENDED 1994 TO
JULY 31, JULY 31, ENDED JULY 31, JULY 31, JULY 31,
1996 1995 (a) JULY 31, 1996 1995 (a) 1996 1995 (a)
------------ ----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 897,198 $ 676,590 $ 7,564,301 $ 2,357,474 $ 14,113,815 $ 10,774,359
Net realized gains from
investment
transactions.......... 4,517,339 276,982 1,793,439 741,453 2,578,744 2,569,877
Net change in
unrealized
appreciation
(depreciation) from
investments........... 1,140,677 4,684,931 (6,350,290) 2,616,826 (505,505) 12,121,419
------------ ----------- ------------ ----------- ------------ ------------
Change in net assets
resulting from
operations............. 6,555,214 5,638,503 3,007,450 5,715,753 16,187,054 25,465,655
------------ ----------- ------------ ----------- ------------ ------------
DISTRIBUTIONS TO RETAIL
CLASS SHAREHOLDERS:
From net investment
income................ (6,661) (2,751) (29,853) (454) (36,401) (18,362)
In excess of net
investment income..... (198) -- (1,073) -- (3,016) --
From net realized
gains................. (10,087) -- -- -- (5,488) --
In excess of net
realized gains........ -- -- (5,216) -- (2,095) --
DISTRIBUTIONS TO
INSTITUTIONAL CLASS
SHAREHOLDERS:
From net investment
income................ (890,537) (624,885) (7,534,448) (2,085,093) (14,077,414) (9,586,530)
In excess of net
investment income..... (26,449) -- (270,854) -- (1,166,451) --
From net realized
gains................. (1,430,857) -- -- -- (2,573,256) --
In excess of net
realized gains........ -- -- (1,188,466) -- (982,014) --
------------ ----------- ------------ ----------- ------------ ------------
Change in net assets
from shareholder
distributions.......... (2,364,789) (627,636) (9,029,910) (2,085,547) (18,846,135) (9,604,892)
------------ ----------- ------------ ----------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 51,831,280 40,974,709 199,818,303 56,868,583 29,212,660 293,909,646
Dividends reinvested... 1,252,724 3,296 891,166 2,354 3,570,050 16,515
Cost of shares
redeemed.............. (23,786,655) (3,889,573) (86,706,905) (5,647,023) (22,829,691) (27,578,198)
------------ ----------- ------------ ----------- ------------ ------------
Change in net assets
from share
transactions........... 29,297,349 37,088,432 114,002,564 51,223,914 9,953,019 266,347,963
------------ ----------- ------------ ----------- ------------ ------------
Change in net assets.... 33,487,774 42,099,299 107,980,104 54,854,120 7,293,938 282,208,726
NET ASSETS:
Beginning of period.... 42,099,299 -- 54,854,120 -- 282,208,726 --
------------ ----------- ------------ ----------- ------------ ------------
End of period.......... $ 75,587,073 $42,099,299 $162,834,224 $54,854,120 $289,502,664 $282,208,726
============ =========== ============ =========== ============ ============
SHARE TRANSACTIONS:
Issued................. 4,307,112 4,055,447 18,193,814 5,603,737 2,767,223 29,476,881
Reinvested............. 105,986 312 80,018 219 333,366 1,626
Redeemed............... (1,958,541) (372,676) (7,867,181) (542,014) (2,160,738) (2,753,693)
------------ ----------- ------------ ----------- ------------ ------------
Change in shares........ 2,454,557 3,683,083 10,406,651 5,061,942 939,851 26,724,814
============ =========== ============ =========== ============ ============
<FN>
- ------
(a) Period from commencement of operations.
</TABLE>
See notes to financial statements.
61
<PAGE> 234
PACIFIC CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX-FREE SHORT
INTERMEDIATE SECURITIES
FUND NEW ASIA GROWTH FUND
------------------------- --------------------------
FOR THE YEAR OCTOBER 14, FOR THE YEAR FEBRUARY 15,
ENDED 1994 TO ENDED 1995 TO
JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995(a) 1996 1995(a)
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income
(loss)................... $ 1,577,123 $ 1,220,408 $ (4,037) $ 10,915
Net realized gains
(losses) from investment
transactions............. 247,802 (264,760) 187,718 78,817
Net realized losses from
foreign currency
transactions............. -- -- (55,916) (11,617)
Net change in unrealized
appreciation
(depreciation) from
investments.............. (381,865) 673,377 (603,577) 165,196
Net change in unrealized
appreciation
(depreciation) from
translation
of assets and liabilities
in foreign currencies.... -- -- 3,412 (3,150)
----------- ----------- ----------- ----------
Change in net assets
resulting from operations. 1,443,060 1,629,025 (472,400) 240,161
----------- ----------- ----------- ----------
DISTRIBUTIONS TO RETAIL
CLASS SHAREHOLDERS:
From net investment
income................... (12,490) (2,044) -- --
In excess of net
investment income........ (1,065) -- (1,121) --
From net realized gains... -- -- (15,201) --
DISTRIBUTIONS TO
INSTITUTIONAL CLASS
SHAREHOLDERS:
From net investment
income................... (1,564,633) (1,083,945) -- --
In excess of net
investment income........ (133,354) -- (7,846) --
From net realized gains... -- -- (63,590) --
----------- ----------- ----------- ----------
Change in net assets from
shareholder distributions. (1,711,542) (1,085,989) (87,758) --
----------- ----------- ----------- ----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................... 7,865,169 46,135,652 10,749,362 2,962,039
Dividends reinvested...... 9,183 755 59,730 --
Cost of shares redeemed... (7,982,805) (6,379,367) (2,981,295) (11,436)
----------- ----------- ----------- ----------
Change in net assets from
share transactions........ (108,453) 39,757,040 7,827,797 2,950,603
----------- ----------- ----------- ----------
Change in net assets....... (376,935) 40,300,076 7,267,639 3,190,764
NET ASSETS:
Beginning of period....... 40,300,076 -- 3,190,764 --
----------- ----------- ----------- ----------
End of period............. $39,923,141 $40,300,076 $10,458,403 $3,190,764
=========== =========== =========== ==========
SHARE TRANSACTIONS:
Issued.................... 773,603 4,615,684 910,887 285,421
Reinvested................ 907 76 5,614 --
Redeemed.................. (788,553) (641,384) (261,382) (1,081)
----------- ----------- ----------- ----------
Change in shares........... (14,043) 3,974,376 655,119 284,340
=========== =========== =========== ==========
<FN>
- ------
(a) Period from commencement of operations.
</TABLE>
See notes to financial statements.
62
<PAGE> 235
PACIFIC CAPITAL FUNDS
GROWTH STOCK FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
COMMON STOCKS (90.1%):
Banks (0.7%):
15,000 BankAmerica Corp..................................... $ 1,196,250
------------
Beverages (5.9%):
138,000 Coca-Cola Co......................................... 6,468,750
125,800 PepsiCo, Inc......................................... 3,978,425
------------
10,447,175
------------
Chemicals (1.7%):
29,000 Avery Dennison Corp.................................. 1,500,750
111,000 Crompton & Knowles................................... 1,665,000
------------
3,165,750
------------
Computers & Peripherals (5.1%):
54,500 Cabletron Systems (b)................................ 3,120,125
25,000 Cisco Systems (b).................................... 1,293,750
26,000 Compaq Computer Corp. (b)............................ 1,423,500
73,400 Hewlett Packard Co................................... 3,229,600
------------
9,066,975
------------
Electrical Equipment (4.3%):
81,800 General Electric Co.................................. 6,738,275
23,825 SCI Systems Inc. (b)................................. 830,897
------------
7,569,172
------------
Electronic & Electrical (1.7%):
77,700 AMP, Inc............................................. 3,001,162
------------
Entertainment (1.1%):
36,000 Walt Disney Co....................................... 2,002,500
------------
Financial Services (1.3%):
59,000 Automatic Data Processing, Inc....................... 2,337,875
------------
Food Distributors (4.0%):
96,000 Albertsons, Inc...................................... 3,936,000
110,000 Sysco Corp........................................... 3,190,000
------------
7,126,000
------------
Food Processing & Packaging (7.8%):
88,300 ConAgra, Inc......................................... 3,752,750
82,500 Pioneer Hi-Bred International, Inc................... 4,434,375
133,050 Sara Lee Corp........................................ 4,257,600
28,000 Wm. Wrigley Jr. Co................................... 1,445,500
------------
13,890,225
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
COMMON STOCKS, CONTINUED:
Funeral Services (1.9%):
62,000 Service Corp. International.......................... $ 3,417,750
------------
Health Care (1.9%):
66,250 Columbia HCA Healthcare.............................. 3,395,313
------------
Insurance (2.5%):
48,000 American International Group, Inc.................... 4,518,000
------------
Manufacturing (1.9%):
28,000 Illinois Tool Works, Inc............................. 1,802,500
24,400 Minnesota Mining &
Manufacturing Co.................................... 1,586,000
------------
3,388,500
------------
Medical Supplies (3.2%):
181,000 Biomet, Inc. (b)..................................... 2,782,875
60,000 Medtronic, Inc....................................... 2,842,500
------------
5,625,375
------------
Metal & Mineral Production (1.2%):
75,000 Barrick Gold Corp.................................... 2,090,625
------------
Oil & Gas Exploration (1.6%):
25,000 Mobil Corp........................................... 2,759,375
------------
Oilfield Equipment & Services (0.4%):
10,000 Schlumberger Ltd..................................... 800,000
------------
Paint, Varnishes, Enamels (1.7%):
65,000 Sherwin Williams Co.................................. 2,941,250
------------
Pharmaceuticals (14.4%):
102,625 Abbott Laboratories.................................. 4,515,500
34,000 American Home Products Corp.......................... 1,929,500
61,200 Eli Lilly & Co....................................... 3,427,200
100,018 Johnson & Johnson, Inc............................... 4,775,860
65,000 Merck & Co., Inc..................................... 4,176,250
51,000 Pfizer, Inc.......................................... 3,563,625
81,000 Pharmacia & Upjohn, Inc.............................. 3,341,250
------------
25,729,185
------------
Publishing (1.6%):
67,000 Readers Digest....................................... 2,772,125
------------
Restaurants (1.2%):
46,900 McDonald's Corp...................................... 2,174,987
------------
</TABLE>
Continued
63
<PAGE> 236
PACIFIC CAPITAL FUNDS
GROWTH STOCK FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
COMMON STOCKS, CONTINUED:
Retail (3.1%):
50,000 Dollar General Corp.................................. $ 1,293,750
62,550 Kohl's Corp. (b)..................................... 1,962,506
96,000 Wal-Mart Stores, Inc................................. 2,304,000
------------
5,560,256
------------
Semiconductors (2.3%):
53,900 Intel Corp........................................... 4,049,238
------------
Soaps & Cleaning Agents (2.9%):
57,300 Procter & Gamble Co.................................. 5,121,187
------------
Software & Computer Services (3.6%):
20,250 Computer Associates
International, Inc.................................. 1,030,219
38,000 Microsoft (b)........................................ 4,479,250
24,000 Oracle Systems Corp. (b)............................. 939,000
------------
6,448,469
------------
Steel (0.5%):
18,000 Nucor Corp........................................... 843,750
------------
Telecommunications (1.8%):
117,875 Alltel Corp.......................................... 3,226,828
------------
Tobacco & Tobacco Products (2.7%):
45,800 Philip Morris Cos., Inc.............................. 4,791,825
------------
Transportation--Air (1.4%):
97,000 Southwest Airlines Co................................ 2,400,750
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telecommunications (4.7%):
54,425 Century Telephone Enterprises Inc..................... $ 1,734,797
5,050 Frontier Corp......................................... 142,031
50,000 GTE Corp.............................................. 2,062,500
92,150 SBC Communications.................................... 4,503,831
------------
8,443,159
------------
Total Common Stocks 160,301,031
------------
U.S. GOVERNMENT AGENCIES (2.8%):
Federal National Mortgage Assoc.:
5,000,000 5.23%, 8/23/96........................................ 4,983,293
------------
Total U.S. Government Agencies 4,983,293
------------
U.S. Treasury Bills (2.2%):
4,000,000 5.14%, 8/15/96........................................ 3,991,708
------------
Total U.S. Treasury Bills 3,991,708
------------
Investment Companies (5.4%):
4,583,551 Banc One Prime Money Market, Fiduciary Shares......... 4,583,551
79,000 S & P 500 Depository Receipt (b)...................... 5,060,938
------------
Total Investment Companies 9,644,489
------------
Total (Cost--$149,647,144) (a) $178,920,521
============
<FN>
- ---------
Percentages are based on net assets of $177,825,396.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion................ $32,212,995
Unrealized deprecia-
tion................ (2,939,618)
-----------
Net unrealized appre-
ciation............. $29,273,377
===========
<FN>
(b) Non-income producing securities.
</TABLE>
See notes to financial statements.
64
<PAGE> 237
PACIFIC CAPITAL FUNDS
U.S. TREASURY SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<S> <C>
U.S. TREASURY BILLS (6.1%):
1,500,000 5.11%, 9/19/96.......................................... $ 1,489,242
-----------
Total U.S. Treasury Bills 1,489,242
-----------
U.S. TREASURY BONDS (48.2%):
2,150,000 7.63%, 2/15/07.......................................... 2,224,605
6,800,000 7.25%, 5/15/16.......................................... 6,928,180
2,500,000 7.13%, 2/15/23.......................................... 2,513,250
-----------
Total U.S Treasury Bonds 11,666,035
-----------
U.S. TREASURY NOTES (41.9%):
3,000,000 7.13%, 2/29/00.......................................... 3,061,620
4,160,000 7.75%, 2/15/01.......................................... 4,356,352
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<S> <C>
980,000 8.00%, 5/15/01.......................................... $ 1,037,869
1,000,000 7.50%, 2/15/05.......................................... 1,047,370
650,000 6.50%, 8/15/05.......................................... 638,241
-----------
Total U.S Treasury Notes 10,141,452
-----------
INVESTMENT COMPANIES (1.6%):
397,827 Bank One Treasury Money
Market, Fiduciary Shares............................... 397,827
-----------
Total Investment Companies 397,827
-----------
Total (Cost--$23,093,188) (a) $23,694,556
===========
<FN>
- ------
Percentages are based on net assets of $24,227,448.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of $55,550. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion.................. $735,323
Unrealized deprecia-
tion.................. (189,505)
--------
Net unrealized appreci-
ation................. $545,818
========
</TABLE>
See notes to financial statements.
65
<PAGE> 238
PACIFIC CAPITAL FUNDS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
U.S. TREASURY NOTES (97.8%):
3,400,000 6.00%, 12/31/97........................................ $ 3,399,762
2,000,000 6.13%, 5/31/97......................................... 2,004,520
1,100,000 7.25%, 2/15/98......................................... 1,118,106
1,350,000 6.50%, 4/30/99......................................... 1,355,171
800,000 6.75%, 6/30/99......................................... 808,120
651,000 7.13%, 9/30/99......................................... 663,864
1,000,000 7.88%, 11/15/99........................................ 1,042,370
5,500,000 6.25%, 5/31/00......................................... 5,455,175
1,950,000 6.13%, 7/31/00......................................... 1,923,909
1,700,000 5.63%, 11/30/00........................................ 1,642,574
3,100,000 5.50%, 12/31/00........................................ 2,978,945
1,800,000 6.25%, 2/15/03......................................... 1,762,218
-----------
Total U.S. Treasury Notes 24,154,734
-----------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------- -----------
<S> <C>
INVESTMENT COMPANIES (1.2%):
289,508 Bank One Treasury
Money Market, Fiduciary Shares $ 289,508
-----------
Total Investment Companies 289,508
-----------
Total (Cost--$24,650,387) (a) $24,444,242
===========
<FN>
- ------
Percentages are based on net assets of $24,701,408.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion................. $ 111,841
Unrealized deprecia-
tion................. (317,986)
---------
Net unrealized appre-
ciation.............. $(206,145)
=========
</TABLE>
See notes to financial statements.
66
<PAGE> 239
PACIFIC CAPITAL FUNDS
GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (95.8%):
Aerospace/Defense (2.4%):
7,306 Boeing Co.............................................. $ 646,581
22,400 Rockwell International Corp............................ 1,176,000
-----------
1,822,581
-----------
Automotive Parts (1.9%):
43,375 Echlin, Inc............................................ 1,447,641
-----------
Banking (4.6%):
21,560 Bank of Boston Corp.................................... 1,142,680
16,225 BankAmerica Corp....................................... 1,293,944
23,004 Wachovia Corp.......................................... 1,017,926
-----------
3,454,550
-----------
Beverages (2.4%):
24,000 Coca-Cola Co........................................... 1,125,000
23,108 PepsiCo, Inc........................................... 730,791
-----------
1,855,791
-----------
Chemicals (3.8%):
51,025 Crompton & Knowles..................................... 765,375
16,469 E.I. Du Pont De Nemours Co............................. 1,329,872
14,200 Sigma-Aldrich.......................................... 745,500
-----------
2,840,747
-----------
Computers & Peripherals (4.2%):
12,175 Cisco Systems (b)...................................... 630,056
28,738 Hewlett Packard Co..................................... 1,264,472
22,925 Sun Microsystems, Inc. (b)............................. 1,252,278
-----------
3,146,806
-----------
Containers--Metal, Glass, Paper, Plastic (1.0%):
23,150 Bemis, Inc............................................. 755,269
-----------
Electrical Equipment (5.1%):
30,675 DSC Communications Corp. (b)........................... 920,250
27,008 General Electric Co.................................... 2,224,783
21,000 SCI Systems, Inc. (b).................................. 732,375
-----------
3,877,408
-----------
Electronic & Electrical (1.3%):
24,609 AMP, Inc............................................... 950,523
-----------
Financial Services (3.6%):
46,137 MBNA Corp.............................................. 1,286,069
19,756 Student Loan Marketing Assoc........................... 1,442,188
-----------
2,728,257
-----------
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Food Distributors (1.0%):
18,761 Albertsons, Inc........................................ $ 769,201
-----------
Food Processing & Packaging (3.0%):
18,450 Conagra, Inc........................................... 784,125
66,450 Hormel Foods Corp...................................... 1,495,125
-----------
2,279,250
-----------
Forest Products--Lumber, Paper (1.3%):
26,300 International Paper Co................................. 996,113
-----------
Funeral Services (1.2%):
16,825 Service Corp. International............................ 927,478
-----------
Health Care (1.4%):
20,950 Columbia HCA Healthcare................................ 1,073,688
-----------
Heavy Machinery--Industrial, Farm, Construction (2.2%):
29,850 Harnischfeger Industries, Inc.......................... 925,350
17,825 Ingersoll-Rand Co...................................... 759,791
-----------
1,685,141
-----------
Insurance (2.9%):
10,150 American International Group, Inc...................... 955,369
30,200 Travelers, Inc......................................... 1,275,950
-----------
2,231,319
-----------
Leisure--Recreation, Gaming (1.2%):
33,875 Carnival Corp. Cruise Lines............................ 910,391
-----------
Medical Supplies (0.9%):
14,825 Medtronic, Inc......................................... 702,334
-----------
Oil & Gas Exploration, Production, & Services (7.9%):
19,150 Amoco Corp............................................. 1,280,656
17,050 Exxon Corp............................................. 1,402,363
12,884 Mobil Corp............................................. 1,422,071
35,850 Phillips Petroleum Co.................................. 1,416,075
10,450 Williams Co., Inc...................................... 479,394
-----------
6,000,559
-----------
Oilfield Equipment & Services (1.0%):
9,104 Schlumberger Ltd....................................... 728,320
-----------
Paint, Varnishes, Enamels (1.0%):
16,450 Sherwin Williams Co.................................... 744,363
-----------
Pharmaceuticals (7.4%):
20,723 American Home Products Corp............................ 1,176,030
31,160 Johnson & Johnson, Inc................................. 1,487,890
20,650 Pfizer, Inc............................................ 1,442,919
</TABLE>
Continued
67
<PAGE> 240
PACIFIC CAPITAL FUNDS
GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Pharmaceuticals, continued:
35,475 Pharmacia & Upjohn, Inc................................ $ 1,463,343
-----------
5,570,182
-----------
Publishing, Except Newspaper (1.6%):
30,950 McGraw Hill, Inc....................................... 1,207,050
-----------
Restaurants (1.9%):
83,175 Wendy's International.................................. 1,413,975
-----------
Retail (4.0%):
26,675 Dollar General Corp.................................... 690,216
29,909 May Department Stores.................................. 1,342,165
31,775 Walgreen Co............................................ 1,008,856
-----------
3,041,237
-----------
Semiconductors (1.5%):
14,650 Intel Corp............................................. 1,100,581
-----------
Soaps & Cleaning Agents (1.8%):
15,100 Procter & Gamble Co.................................... 1,349,563
-----------
Software & Computer Services (3.3%):
13,280 Broderbund Software, Inc. (b).......................... 436,580
18,760 Computer Associates International, Inc................. 954,415
9,175 Microsoft Corp. (b).................................... 1,081,503
-----------
2,472,498
-----------
Steel (1.1%):
18,200 Nucor Corp............................................. 853,125
-----------
Tobacco & Tobacco Products (3.0%):
21,362 Philip Morris Cos., Inc................................ 2,234,999
-----------
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Toys & Bicycles--Manufacturing (1.2%):
35,900 Mattel, Inc............................................ $ 888,525
-----------
Transportation (1.0%):
25,425 Illinois Central Corp.................................. 730,969
-----------
Transportation Leasing & Trucking (0.8%):
25,950 Comair Holdings, Inc................................... 629,288
-----------
Utilities--Electric (4.9%):
41,875 Illinova Corp.......................................... 1,078,281
76,275 Southern Co............................................ 1,725,722
33,239 Wisconsin Energy Corp.................................. 884,988
-----------
3,688,991
-----------
Utilities--Telecommunications (7.0%):
23,450 Century Telephone Enterprises, Inc..................... $747,469
49,900 Frontier Corp.......................................... 1,403,438
34,661 GTE Corp............................................... 1,429,766
35,150 SBC Communications..................................... 1,717,956
-----------
5,298,629
-----------
Total Common Stocks 72,407,342
-----------
INVESTMENT COMPANIES (5.0%):
1,948,006 Banc One Prime Money Market, Fiduciary Shares.......... 1,948,006
500,000 Parkstone Prime Money Market, Institutional Shares..... 500,000
21,100 S & P 500 Depository Receipt (b)....................... 1,351,719
-----------
Total Investment Companies 3,799,725
-----------
Total (Cost--$70,381,459) (a) $76,207,067
===========
<FN>
- ------
Percentages are based on net assets of $75,587,073.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of $52,014. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion................ $ 8,012,176
Unrealized deprecia-
tion................ (2,238,582)
-----------
Net unrealized appre-
ciation............. $ 5,773,594
===========
<FN>
(b) Non income producing securities.
</TABLE>
See Notes to Financial Statements.
68
<PAGE> 241
PACIFIC CAPITAL FUNDS
DIVERSIFIED FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
CORPORATE BONDS (42.5%):
Banking (0.9%):
1,600,000 Wachovia Corp., 6.38%, 2/1/09........................ $ 1,472,000
------------
Banking--Foreign (10.4%):
5,000,000 Abbey National PLC, 6.69%, 10/17/05.................. 4,787,500
5,000,000 Bayerische Landesbank-NY, 6.20%, 2/9/06.............. 4,662,500
5,000,000 Dresdner Bank-NY, 6.63%, 9/15/05..................... 4,768,750
700,000 Interamerican Development Bank, 8.50%, 3/15/11....... 779,625
2,000,000 Swiss Bank Corp., 6.75%, 7/15/05..................... 1,927,500
------------
16,925,875
------------
Electric Services (6.8%):
5,000,000 Con Edison-Ambac, 6.63%, 7/1/05...................... 4,793,750
1,500,000 Duke Power Co., 8.00%, 11/1/99....................... 1,558,125
1,500,000 National Rural Utility, 6.45%, 4/1/01................ 1,471,875
3,500,000 National Rural Utility, 5.95%, 1/15/03............... 3,285,625
------------
11,109,375
------------
Electrical & Electronic (2.9%):
5,000,000 Emerson Electric, 6.30%, 11/1/05..................... 4,706,250
------------
Financial Services (9.5%):
5,000,000 Associates Corp., 6.38%, 11/15/05.................... 4,675,000
500,000 General Electric Capital Corp., 8.10%, 1/26/99....... 517,500
1,000,000 General Electric Capital Corp., 6.88%, 4/15/00....... 1,005,000
5,000,000 General Electric Capital Corp., 7.88%, 12/1/06....... 5,237,500
4,000,000 Norwest Financial Inc., 7.50%, 4/15/05............... 4,060,000
------------
15,495,000
------------
Health Care (2.2%):
3,300,000 Johnson & Johnson, 8.72%, 11/1/24.................... 3,543,375
------------
Industrial Goods & Services (0.2%):
350,000 Societe Nationale Elf Aquitaine, 8.00%, 10/15/01..... 367,063
------------
Insurance (1.7%):
350,000 MBIA Inc., 8.20%, 10/1/22............................ 372,313
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
CORPORATE BONDS, CONTINUED:
Insurance, continued:
1,500,000 MBIA Inc., 7.00%, 12/15/25........................... $ 1,378,125
1,000,000 St. Paul Cos., 7.29%, 8/28/07........................ 982,500
------------
2,732,938
------------
Investment Companies (0.4%):
700,000 Merrill Lynch & Co. Inc., 7.00%, 4/27/08............. 673,750
------------
Oil & Gas Exploration & Production Services (1.9%):
1,050,000 Amoco Canada, 7.95%, 10/1/22......................... 1,061,812
2,000,000 Shell Oil Co., 6.70%, 8/15/02........................ 1,982,500
------------
3,044,312
------------
Restaurants (2.9%):
5,000,000 McDonald's Corp., 6.63%, 9/1/05...................... 4,800,000
------------
Retail Stores (0.9%):
1,400,000 Wal-Mart Stores, 8.00%, 9/15/06...................... 1,477,000
------------
Telecommunications (1.8%):
650,000 BellSouth Telecommunications, 6.25%, 5/15/03......... 628,063
795,000 BellSouth Telecommunications, 7.00%, 2/1/05.......... 789,037
1,500,000 New England Telephone & Telegraph, 6.25%, 3/15/03.... 1,438,125
------------
2,855,225
------------
Total Corporate Bonds 69,202,163
------------
U.S. GOVERNMENT AGENCIES (10.5%):
Agency for International Development:
3,000,000 Israel, 6.05%, 8/15/00............................... 2,921,250
Federal Home Loan Mortgage Corp.:
3,000,000 7.35%, 5/16/05....................................... 2,978,460
1,000,000 7.23%, 5/17/05....................................... 984,870
Federal National Mortgage Assoc.:
3,000,000 Discount, 8/5/96..................................... 2,997,825
3,000,000 7.90%, 4/10/02....................................... 3,014,220
1,400,000 7.40%, 7/1/04........................................ 1,427,510
2,000,000 7.25%, 3/21/11....................................... 1,959,220
Tennessee Valley Authority:
750,000 8.63%, 11/15/29...................................... 797,812
------------
Total U.S. Government Agencies 17,081,167
------------
</TABLE>
Continued
69
<PAGE> 242
PACIFIC CAPITAL FUNDS
DIVERSIFIED FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
U.S. TREASURY BONDS (9.4%):
15,000,000 7.25%, 5/15/16....................................... $ 15,282,750
------------
Total U.S. Treasury Bonds 15,282,750
------------
U.S. TREASURY NOTES (35.2%):
15,000,000 5.88%, 8/15/98....................................... 14,904,600
9,500,000 6.75%, 4/30/00....................................... 9,582,745
13,500,000 6.25%, 2/15/03....................................... 13,216,635
7,500,000 7.25%, 8/15/04....................................... 7,738,725
12,000,000 6.50%, 5/15/05....................................... 11,794,080
------------
Total U.S. Treasury Notes 57,236,785
------------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
INVESTMENT COMPANIES (0.1%):
233,972 Banc One Prime Money Market, Fiduciary Shares........ $ 233,972
------------
Total Investment Companies 233,972
------------
Total (Cost--$162,770,301) (a) $159,036,837
============
<FN>
- ------
Percentages are based on net assets of $162,834,224.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of $11,085. Cost for federal income tax purposes differs from value by net
unrealized depreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion............... $780,368
Unrealized deprecia-
tion............... (4,524,917)
-----------
Net unrealized de-
preciation......... $(3,744,549)
===========
PLC Public Limited Company
</TABLE>
See Notes to Financial Statements.
70
<PAGE> 243
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS (79.0%):
California (4.8%):
1,500,000 Metropolitan Water District, 5.00%, 7/1/15, MBIA.... $ 1,376,250
3,000,000 Metropolitan Water District, Southern California,
5.75%, 7/1/21, MBIA................................ 2,985,000
2,565,000 Northern California Transmission, Oregon
Transmission Project, Series A, 7.00%, 5/1/13,
MBIA............................................... 2,968,988
1,735,000 San Francisco, Bay Area Rapid Transit, District
Sales Tax Revenue, 5.50%, 7/1/15, FGIC............. 1,695,962
5,000,000 State Department Water, Series P, 6.00%, 12/1/20,
FGIC............................................... 5,043,750
------------
14,069,950
------------
Colorado (0.3%):
1,000,000 Adams & Arapaho County, 5.35%, 12/1/15, FGIC........ 953,750
------------
Connecticut (0.3%):
1,000,000 Connecticut State, Special Tax Obligation Revenue,
6.25%, 10/1/14, FGIC............................... 1,041,250
------------
Florida (7.4%):
1,000,000 Dade County, Water & Sewer, 5.50%, 10/1/15, FGIC.... 976,250
3,000,000 Florida State, Board of Education, Series A, 5.50%,
6/1/17............................................. 2,910,000
2,205,000 Florida State, Board of Education, Series E, 5.75%,
6/1/19............................................. 2,191,219
2,000,000 Florida State, Bond Finance Department, General
Services Environmental Revenue, 5.75%, 7/1/13,
AMBAC.............................................. 2,012,500
2,000,000 Florida State, General Services Division, Facilities
Management Revenue, Series B, 5.70%, 9/1/20, AMBAC. 1,980,000
3,500,000 Florida State, Turnpike Authority Revenue,
Department of Transportation, 5.50%, 7/1/17, FGIC.. 3,421,250
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Florida, continued:
2,000,000 Florida State, Turnpike Revenue, Department of
Transportation, 5.50%, 7/1/21, FGIC................ $ 1,937,500
2,875,000 Orange County, Public Tax Service, 6.00%, 10/1/24,
FGIC............................................... 2,932,500
2,565,000 Orlando, Utilities Community Water & Electric
Revenue Refunding, Series D, 6.75%, 10/1/17........ 2,949,750
------------
21,310,969
------------
Georgia (2.9%):
1,285,000 Georgia State, Municipal Electric Authority Revenue,
Series B, 6.13%, 1/1/14, FGIC...................... 1,325,156
1,605,000 Metropolitan Atlanta, Rapid Transportation
Authority, Sales Tax Revenue, Series P, 6.25%,
7/1/11, AMBAC...................................... 1,739,419
4,690,000 Municipal Electric Authority, Third Crossover,
6.60%, 1/1/18, MBIA................................ 5,194,175
------------
8,258,750
------------
Hawaii (38.3%):
5,000,000 Hawaii, GO, 6.05%, 1/1/08, FGIC..................... 5,206,250
640,000 Hawaii, GO, 5.50%, 6/1/08, FGIC..................... 643,200
1,345,000 Hawaii, GO, Series BT, 6.38%, 2/1/09, Pre-refunded
on 2/1/01 @ 101.................................... 1,450,919
640,000 Hawaii, GO, 5.50%, 6/1/09, FGIC..................... 640,800
1,035,000 Hawaii, GO, 5.00%, 7/1/09, FGIC..................... 984,544
2,000,000 Hawaii, GO, 6.00%, 10/1/09, FGIC.................... 2,125,000
4,490,000 Hawaii, GO, 6.13%, 2/1/10, Pre-refunded on 2/1/01 @
101................................................ 4,793,075
640,000 Hawaii, GO, Series CE, 5.50%, 6/1/10, FGIC.......... 638,400
4,000,000 Hawaii, GO, Series CK, 5.25%, 9/1/10, FGIC.......... 3,890,000
3,145,000 Hawaii, GO, 5.25%, 6/1/13, FGIC..................... 3,015,268
1,000,000 Hawaii, GO, Series CL, 5.25%, 3/1/16, FGIC.......... 943,750
1,315,000 Hawaii County, GO, 4.50%, 2/1/03.................... 1,287,056
1,375,000 Hawaii County, GO, Series A, 4.50%, 2/1/04, FGIC.... 1,330,313
</TABLE>
Continued
71
<PAGE> 244
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
1,810,000 Hawaii County, GO, Series A, 5.00%, 2/1/10, FGIC...... $ 1,710,450
1,305,000 Hawaii County, GO, Series A, 7.30%, 6/1/10, Pre-
refunded on 6/1/00 @ 101............................. 1,443,655
2,095,000 Hawaii County, GO, Series A, 5.10%, 2/1/13............ 1,966,681
415,000 Hawaii County, GO, Series A, 5.60%, 5/1/13, FGIC...... 416,038
2,320,000 Hawaii County, GO, 5.20%, 2/1/15...................... 2,180,800
1,455,000 Hawaii Department Budget & Finance, Queens Health
System, 5.88%, 7/1/11................................ 1,458,638
1,745,000 Hawaii Department Budget & Finance, Queens Health
System, 6.05%, 7/1/16................................ 1,755,906
1,170,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage, Kapiolani Health Care System, 6.30%,
7/1/08, MBIA......................................... 1,237,275
2,535,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage, Kapiolani Health Care System, 6.40%,
7/1/13, MBIA......................................... 2,652,244
1,385,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.90%, 7/1/04, FGIC................ 1,464,637
3,680,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 7.00%, 7/1/08, FGIC................ 3,891,600
2,535,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.88%, 4/1/12, MBIA................ 2,620,480
965,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.88%, 4/1/12, MBIA................ 997,540
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
1,605,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.50%, 7/1/12, FGIC.............. $ 1,641,113
2,820,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 7.20%, 12/1/14, MBIA............. 3,094,950
1,285,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, Series A, 6.25%, 3/1/21.......... 1,315,519
965,000 Hawaii Department Transportation, Special Facility
Revenue, 5.75%, 3/1/13............................. 936,050
965,000 Hawaii Harbor Capital Improvement Revenue, 6.20%,
7/1/08, MBIA....................................... 1,015,663
4,525,000 Hawaii Housing Finance & Development Corp., 5.85%,
7/1/17............................................. 4,496,719
1,925,000 Hawaii Housing Finance & Development Corp., Federal
National Mortgage Assoc., 5.70%, 7/1/13............ 1,903,343
4,185,000 Hawaii Housing Finance & Development Corp., Federal
National Mortgage Assoc., 7.00%, 7/1/31............ 4,331,475
1,580,000 Hawaii Housing Finance & Development Corp., Single
Family Mortgage Purchase Revenue, Series B, 6.90%,
7/1/16............................................. 1,639,250
2,340,000 Hawaii Housing Finance & Development Corp.,
University of Hawaii Housing, 5.70%, 10/1/25,
AMBAC.............................................. 2,316,600
2,565,000 Honolulu City & County, Series A, 7.35%, 7/1/06,
FGIC............................................... 3,004,256
3,000,000 Honolulu City & County, Series A, 6.00%, 1/1/11,
FGIC............................................... 3,153,750
3,000,000 Honolulu City & County, Series A, 5.75%, 4/1/11,
FGIC............................................... 3,063,750
</TABLE>
Continued
72
<PAGE> 245
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
1,605,000 Honolulu City & County, Series A, 5.75%, 4/1/12,
FGIC................................................ $ 1,641,113
1,380,000 Honolulu City & County, GO, Series A, 5.00%, 11/1/12,
MBIA................................................ 1,281,674
2,890,000 Honolulu City & County, Series A, 5.75%, 4/1/13,
FGIC................................................ 2,944,188
1,480,000 Honolulu City & County, Series C, 7.15%, 6/1/10, Pre-
refunded on 6/1/00 @ 101............................ 1,629,850
1,055,000 Honolulu City & County Water, 6.00%, 12/1/10, FGIC... 1,114,344
1,595,000 Honolulu City & County Water, 6.00%, 12/1/11, FGIC... 1,680,731
640,000 Honolulu City & County Water, 6.00%, 12/1/14, FGIC... 670,400
1,280,000 Honolulu City & County Refunding & Improvement,
Series B, 5.50%, 10/1/11, FGIC...................... 1,283,200
640,000 Honolulu City & County Refunding & Improvement,
Series B, 5.25%, 10/1/12, FGIC...................... 620,800
630,000 Kauai County, 5.35%, 8/1/02.......................... 648,113
535,000 Kauai County, 7.20%, 8/1/02, AMBAC, Pre-refunded on
8/1/00 @ 101........................................ 591,844
695,000 Kauai County, 5.55%, 8/1/04.......................... 721,063
740,000 Kauai County, 5.65%, 8/1/05.......................... 770,525
780,000 Kauai County, 5.75%, 8/1/06.......................... 814,124
710,000 Kauai County, 7.40%, 8/1/06, AMBAC, Pre-refunded on
8/1/00 @ 101........................................ 790,763
690,000 Kauai County, 7.50%, 8/1/08, AMBAC, Pre-refunded on
8/1/00 @ 101........................................ 771,075
925,000 Kauai County, Series C, 5.90%, 8/1/09, AMBAC......... 965,469
1,020,000 Maui County, GO, 5.90%, 6/1/14....................... 1,039,125
1,605,000 Maui County, Series A, 6.80%, 12/1/07, Pre-refunded
on 12/1/00 @ 101.................................... 1,763,494
645,000 Maui County Refunding, 5.25%, 9/1/06................. 645,805
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
890,000 Maui County Refunding, 5.13%, 12/15/10.............. $ 854,400
355,000 Maui County Water, Series A, 6.10%, 12/1/02, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 382,956
375,000 Maui County Water, Series A, 6.20%, 12/1/03, FGIC... 406,406
400,000 Maui County Water, Series A, 6.30%, 12/1/04, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 435,500
425,000 Maui County Water, Series A, 6.40%, 12/1/05, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 464,313
390,000 Maui County Water, Series A, 6.50%, 12/1/06, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 428,025
380,000 Maui County Water, Series A, 6.60%, 12/1/07, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 418,950
520,000 Maui County Water, Series A, 6.65%, 12/1/08, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 574,600
455,000 Maui County Water, Series A, 6.65%, 12/1/09, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 502,775
595,000 Maui County Water, Series A, 6.70%, 12/1/10, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 658,963
535,000 Maui County Water, Series A, 6.70%, 12/1/11, Pre-
refunded on 12/1/01 @ 101, FGIC.................... 592,513
------------
110,764,058
------------
Kansas (1.7%):
2,565,000 Burlington Pollution Control Refunding, Kansas Gas &
Electric Co. Project, 7.00%, 6/1/31................ 2,808,675
2,000,000 Kansas City, Utilities System Revenue Refunding &
Improvement, 6.38%, 9/1/23......................... 2,090,000
------------
4,898,675
------------
</TABLE>
Continued
73
<PAGE> 246
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Maine (0.7%):
1,925,000 Maine State Turnpike Authority, Turnpike Revenue,
6.00%, 7/1/14...................................... $ 1,958,688
------------
Massachusetts (2.4%):
3,790,000 Commonwealth of Massachusetts, Series B, 5.50%,
7/1/15............................................. 3,676,300
2,375,000 Massachusetts State Health & Educational Authority,
Series P, 5.60%, 11/1/16........................... 2,363,125
1,000,000 Massachusetts State Water Pollution Abatement Trust,
5.70%, 2/1/13...................................... 1,000,000
------------
7,039,425
------------
Michigan (2.3%):
4,000,000 Michigan Environmental Protection Program, GO,
5.40%, 11/1/19..................................... 3,810,000
1,545,000 Michigan Strategic Obligations Revenue, 6.95%,
5/1/11............................................. 1,757,437
1,250,000 Saline Area Schools, GO, 5.50%, 5/1/15, FGIC........ 1,221,875
------------
6,789,312
------------
Minnesota (0.8%):
2,000,000 North St. Paul, Maplewood, Independent School
District, No. 622, Series A, 6.88%, 2/1/15, Pre-
refunded on 2/1/05 @ 100........................... 2,260,000
------------
New Jersey (1.3%):
2,000,000 New Jersey Wastewater Treatment Trust, Series B,
6.38%, 4/1/14...................................... 2,120,000
1,500,000 South Brunswick Township Board of Education, 6.40%,
8/1/14, FGIC....................................... 1,593,750
------------
3,713,750
------------
New Mexico (1.5%):
2,000,000 Rio Rancho Water & Waste Water Systems Revenue,
Series A, 5.90%, 5/15/15, FSA...................... 2,007,500
2,085,000 Santa Fe Revenue, 6.25%, 6/1/15, Pre-refunded on
6/1/04 @ 100....................................... 2,267,437
------------
4,274,937
------------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
North Carolina (1.2%):
3,085,000 North Carolina Easton Municipal Power, 6.50%,
1/1/18............................................. $ 3,447,488
------------
Ohio (0.7%):
1,120,000 Cleveland Waterworks Revenue, 6.25%, 1/1/16......... 1,157,800
1,000,000 Ohio Water Development Authority Pollution Control,
5.50%, 12/1/15, MBIA............................... 972,500
------------
2,130,300
------------
Oregon (0.6%):
1,605,000 Umatilla County, School District Number 016R,
Pendleton, 6.00%, 7/1/14, AMBAC.................... 1,671,206
------------
Pennsylvania (1.1%):
3,150,000 Southeastern Pennsylvania Transportation Authority,
Series A, 6.00%, 3/1/15, FGIC...................... 3,216,938
------------
South Carolina (0.9%):
2,285,000 Piedmont Municipal Power Agency, South Carolina
Electric Refunding, Series A, 6.50%, 1/1/14, FGIC.. 2,490,650
------------
Tennessee (3.2%):
1,000,000 Johnson City, School Sales Tax, 6.70%, 5/1/21....... 1,078,750
1,965,000 Shelby County School, Series B, 6.00%, 3/1/19....... 1,989,562
6,300,000 Shelby County Refunding, Series A, 5.63%, 4/1/15.... 6,229,125
------------
9,297,437
------------
Texas (2.2%):
1,520,000 Harris County, Certificates of Obligation, 6.00%,
10/1/15............................................ 1,567,500
1,280,000 Texas State Public Financial Authority, Series A,
6.00%, 10/1/12..................................... 1,316,800
1,400,000 Texas State, Series Correction, 5.75%, 8/1/18....... 1,398,250
</TABLE>
Continued
74
<PAGE> 247
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Texas, continued:
2,000,000 Texas State Refunding, Public Finance Authority,
Series A, 5.95%, 10/1/15........................... $ 2,032,500
------------
6,315,050
------------
Virginia (4.4%):
3,500,000 Commonwealth of Virginia Public School Authority,
5.63%, 6/1/15...................................... 3,469,375
2,995,000 Fairfax County Public Improvement, Series A, 5.50%,
6/1/14............................................. 2,972,538
1,925,000 Fairfax County Refunding, Series C, 5.40%, 5/1/11... 1,929,812
2,750,000 Norfolk Water Revenue, 5.75%, 11/1/13, MBIA......... 2,763,750
1,750,000 Richmond Refunding, 5.20%, 1/15/14.................. 1,662,500
------------
12,797,975
------------
Total Municipal Bonds 228,700,558
------------
DAILY DEMAND NOTES (0.4%):
Idaho (0.4%):
1,200,000 Idaho Health Facilities, St. Luke Medical Center,
3.65%, 5/1/22, LOC: Credit Suisse *................ 1,200,000
------------
Total Daily Demand Notes 1,200,000
------------
ALTERNATIVE MINIMUM TAX PAPER (19.2%):
Hawaii (18.7%):
740,000 Hawaii Airports System Revenue, 7.00%, 7/1/10, FGIC,
AMT................................................ 809,375
510,000 Hawaii Airports System Revenue, 7.38%, 7/1/11,
AMBAC, AMT......................................... 558,450
640,000 Hawaii Airports System Revenue, 7.30%, 7/1/20,
AMBAC, AMT......................................... 698,400
320,000 Hawaii Airports System Revenue, Second Series,
7.50%, 7/1/09 FGIC, AMT............................ 352,000
10,585,000 Hawaii Airports System Revenue, Second Series,
6.90%, 7/1/12, MBIA, AMT........................... 11,934,588
1,890,000 Hawaii Airports System Revenue, Second Series,
7.00%, 7/1/18, MBIA, AMT........................... 2,045,925
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
2,320,000 Hawaii Airports System Revenue, Second Series, 7.50%,
7/1/20, FGIC, AMT................................... $ 2,546,200
1,500,000 Hawaii Airports System Revenue, Second Series, 6.75%,
7/1/21, AMT, MBIA................................... 1,582,500
425,000 Hawaii Department Budget & Finance, Series C, 7.38%,
9/1/18, AMT......................................... 430,078
3,205,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.60%, 7/1/22, AMT................ 3,317,175
1,475,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, 6.55%, 12/1/22, MBIA, AMT......... 1,539,531
7,000,000 Hawaii Department Budget & Finance, Special Purpose
Mortgage Revenue, Series A, 6.60%, 1/1/25, MBIA,
AMT................................................. 7,341,250
3,000,000 Hawaii Department Budget & Finance, Special Purpose
Revenue, Series A, 6.20%, 5/1/26, MBIA, AMT......... 3,052,500
1,825,000 Hawaii Harbor Capital Improvement Revenue, 6.10%,
7/1/07, FGIC, AMT................................... 1,911,688
1,605,000 Hawaii Harbor Capital Improvement Revenue, 7.25%,
7/1/10, MBIA, AMT................................... 1,747,443
2,245,000 Hawaii Harbor Capital Improvement Revenue, 7.00%,
7/1/17, MBIA, AMT................................... 2,416,181
1,350,000 Hawaii Harbor Capital Improvement Revenue, 6.50%,
7/1/19, FGIC, AMT................................... 1,402,313
3,205,000 Hawaii Harbor Capital Improvement Revenue, 6.38%,
7/1/24, FGIC, AMT................................... 3,313,169
</TABLE>
Continued
75
<PAGE> 248
PACIFIC CAPITAL FUNDS
TAX-FREE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
3,205,000 Hawaii Housing Finance & Development Corp., Single
Family Mortgage Revenue, Series A, 6.00%, 7/1/26,
AMT................................................ $ 3,160,931
2,500,000 Hawaii Student Loan, 3.65%, 9/1/10, AMT, LOC: Nat
West*.............................................. 2,500,000
1,445,000 Honolulu City & County, Series B, 7.25%, 2/1/08,
FGIC, AMT.......................................... 1,556,988
------------
54,216,685
------------
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- ------------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Oregon (0.5%):
1,500,000 Portland Airports Revenue, International Airport
Series 10, 5.88%, 7/1/15, AMT...................... $ 1,516,875
------------
Total Alternative Minimum Tax Paper 55,733,560
------------
INVESTMENT COMPANIES (0.2%):
664,684 Nuveen Tax Free Money Market........................ 664,683
------------
Total Investment Companies 664,683
------------
Total (Cost--$274,682,887) (a) $286,298,801
============
<FN>
- ------
Percentages are based on net assets of $289,502,664.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Portfolio
Investments is the rate in effect at July 31, 1996.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized
appreciation........ $12,655,660
Unrealized
depreciation........ (1,039,746)
-----------
Net unrealized
appreciation........ $11,615,914
===========
AMBAC Indemnity Corporation
AMT Alternative Minimum Tax Paper
GO General Obligation
FGIC Insured by Financial Guaranty Insurance Corp.
FSA Insured by Financial Security Assurance
MBIA Insured by Municipal Bond Insurance Association
</TABLE>
See notes to financial statements.
76
<PAGE> 249
PACIFIC CAPITAL FUNDS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
ALTERNATIVE MINIMUM TAX PAPER (19.5%):
Florida (2.6%):
1,000,000 Dade County, Aviation Revenue, 5.75%, 10/1/99......... $ 1,040,000
-----------
Hawaii (11.7%):
1,000,000 Hawaii State Airports System, Revenue Refunding,
5.15%, 7/1/98........................................ 1,015,000
1,050,000 Hawaii State Airports System, Revenue, 5.30%, 7/1/99,
AMT.................................................. 1,072,312
2,000,000 Hawaii State Airports System, Revenue, Second Series,
5.45%, 7/1/00, AMT, MBIA............................. 2,047,840
550,000 Hawaii State Housing Finance & Development, Series A,
4.40%, 7/1/98, AMT................................... 549,313
-----------
4,684,465
-----------
Texas (5.2%):
550,000 Brazos, Higher Education Authority, Series A-2, 5.60%,
6/1/99, AMT.......................................... 563,063
1,500,000 Texas State College Student Loan, 5.10%, 8/1/99, AMT.. 1,518,750
-----------
2,081,813
-----------
Total Alternative Minimum Tax Paper 7,806,278
-----------
MUNICIPAL BONDS (77.3%):
Alaska (2.5%):
1,000,000 Alaska State Housing Finance Corp., 4.60%, 6/1/00..... 1,001,250
-----------
Arizona (8.3%):
750,000 Arizona State Transportation Board, 5.50%, 1/1/00..... 775,313
1,000,000 Phoenix, 5.70%, 7/1/99................................ 1,036,250
1,500,000 Salt River Project, Arizona Agricultural, Series B,
4.45%, 1/1/00........................................ 1,488,750
-----------
3,300,313
-----------
Hawaii (43.2%):
2,500,000 Hawaii State Airport System Revenue, 5.55%, 7/1/00,
MBIA................................................. 2,581,250
1,500,000 Hawaii State Airport System Revenue Refunding, 5.40%,
7/1/99............................................... 1,539,375
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Hawaii, continued:
270,000 Hawaii State Community Development Authority, Special
Tax Assessment, 4.20%, 7/1/97........................ $ 269,198
120,000 Hawaii State Community Development Authority, District
#1, Special Tax Assessment, 4.45%, 7/1/98............ 120,300
165,000 Hawaii State Community Development Authority, District
#2, Special Tax Assessment, 4.45%, 7/1/98............ 165,413
3,000,000 Hawaii State, GO, 5.50%, 1/1/00....................... 3,086,250
2,500,000 Hawaii State, GO, Series Cd, 4.60%, 2/1/00............ 2,503,125
1,500,000 Hawaii State, GO, Series Ck, 5.00%, 9/1/00, FGIC...... 1,522,500
1,200,000 Hawaii State, GO, Series Cl, 4.50%, 3/1/01, FGIC...... 1,191,000
700,000 Honolulu, City & County GO, Series A, 5.10%, 1/1/00,
FGIC................................................. 711,375
1,000,000 Honolulu, City & County GO, Series A, 4.40%, 11/1/00,
MBIA................................................. 991,250
750,000 Honolulu, City & County GO, Series B, 5.10%, 6/1/00,
FGIC................................................. 763,125
375,000 Honolulu, City & County Improvement District, 5.85%,
10/15/97............................................. 383,906
370,000 Honolulu, City & County Improvement District, 6.05%,
10/15/98............................................. 382,950
370,000 Honolulu, City & County Improvement District, 6.20%,
10/15/99............................................. 387,575
620,000 Maui County, GO, Series A, 5.35%, 6/1/00.............. 636,275
-----------
17,234,866
-----------
Massachusetts (3.2%):
1,265,000 Massachusetts State Construction, Series D, 5.13%,
11/1/00.............................................. 1,288,719
-----------
</TABLE>
Continued
77
<PAGE> 250
PACIFIC CAPITAL FUNDS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Minnesota (5.6%):
700,000 Minnesota State, GO, 5.00%, 8/1/00.................... $ 714,000
1,500,000 Minnesota State Revenue, Series A, 5.00%, 6/30/01,
AMBAC................................................ 1,518,750
-----------
2,232,750
-----------
New Jersey (2.5%):
1,000,000 New Jersey State Transit Authority, Series B, 4.50%,
6/15/00, MBIA........................................ 998,750
-----------
Oregon (2.5%):
1,000,000 Oregon State, GO, Higher Education, Series C, 4.60%,
3/1/00............................................... 1,005,000
-----------
Puerto Rico (2.5%):
1,000,000 University of Puerto Rico, University Revenue
Refunding, Series N, 4.63%, 6/1/00, MBIA............. 1,005,000
-----------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Rhode Island (3.2%):
1,250,000 Rhode Island Housing & Mortgage Financial Corp., MFH
Series A, 5.00%, 7/1/00, AMBAC....................... $ 1,278,125
-----------
Texas (1.3%):
500,000 Tarrant County Texas Health Facilities Development,
4.75%, 9/1/00, AMBAC................................. 501,250
-----------
Wisconsin (2.5%):
1,000,000 Milwaukee, GO, 5.00%, 2/1/01.......................... 1,015,000
-----------
Total Municipal Bonds 30,861,023
-----------
INVESTMENT COMPANIES (1.2%):
470,867 Nuveen Tax Free Money Market.......................... 470,867
-----------
Total Investment Companies 470,867
-----------
Total (Cost--$38,846,656) (a) $39,138,168
===========
<FN>
- ------
Percentages are based on net assets of $39,923,141.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion.................. $391,984
Unrealized deprecia-
tion.................. (100,472)
--------
Net unrealized appreci-
ation................. $291,512
========
AMBAC Insured by AMBAC Indemnity Corporation
AMT Alternative Minimum Tax Paper
FGIC Insured by Financial Guaranty Insurance Corporation
GO General Obligation
MBIA Insured by Municipal Bond Insurance Association
MFH Multi-Family Housing
</TABLE>
See notes to financial statements.
78
<PAGE> 251
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JULY 31, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- ----------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS (86.2%):
Hong Kong (30.3%):
Consumer Goods (1.1%):
500,000 Tingyi (Cayman Islands) Holding Co. (b).................... $ 109,914
----------
Diversified-Conglomerates, Holding Companies (7.6%):
67,000 Citic Pacific Ltd.......................................... 276,376
170,000 First Pacific Co. Ltd...................................... 258,299
43,000 Hutchison Whampoa Ltd...................................... 256,889
----------
791,564
----------
Electrical Equipment (1.1%):
590,000 Elec & Eltek (Bermuda) International Holdings (b).......... 111,388
----------
Financial Services (2.6%):
13,200 Dah Sing Financial Holdings Ltd............................ 38,576
14,800 HSBC Holdings PLC.......................................... 236,355
----------
274,931
----------
Food Distributors & Wholesalers (2.8%):
600,000 NG Fung Hong Ltd........................................... 290,950
----------
Real Estate (9.6%):
140,000 Amoy Properties Ltd........................................ 155,690
41,000 Cheung Kong Holdings Ltd. (b).............................. 279,667
514,000 Fairyoung Holdings Ltd. (b)................................ 222,660
48,000 Henderson Land Development Co. Ltd......................... 342,933
----------
1,000,950
----------
Textile Manufacturing (1.3%):
500,000 Chaifa Holdings Ltd. (b)................................... 140,626
----------
Utilities-Electric (2.4%):
147,000 Consolidated Electric Power Asia Ltd. (b).................. 253,766
----------
Wholesale & International Trade (1.8%):
227,000 Goldlion Holdings Ltd. (b)................................. 190,798
----------
Total Hong Kong 3,164,887
----------
Indonesia (6.6%):
Chemicals (1.6%):
120,000 PT Budi Acid Jaya.......................................... 172,230
----------
Construction (2.0%):
90,000 PT Semen Gresik (Persero).................................. 203,806
----------
Technology (0.5%):
55,000 PT Bukaka Teknik Utama..................................... 49,118
----------
Tobacco & Tobacco Products (0.7%):
20,000 PT Gudang Garam............................................ 71,869
----------
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- ------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Indonesia, continued:
Transportation (1.8%):
204,000 PT Steady Safe (b)................... $ 190,857
----------
Total Indonesia 687,880
----------
Malaysia (15.6%):
Chemicals (1.5%):
60,000 Metacorp Berhad...................... 153,877
----------
Construction (3.9%):
180,000 Sunrise Berhad (b)................... 403,927
----------
Engineering, Industrial Construction (2.0%):
55,000 Ekran Berhad (b)..................... 207,173
----------
Financial Services (3.1%):
200,000 Berjaya Capital Berhad (b)........... 180,325
100,000 Public Finance Berhad (b)............ 145,862
----------
326,187
----------
Holding Companies (1.7%):
50,000 Arab Malaysian Corp. Berhad (b)...... 181,326
----------
Real Estate (2.0%):
85,000 Malaysian Resources Corp. Berhad (b). 212,883
----------
Retail (1.4%):
120,000 LARUT Consolidated Berhad (b)........ 150,030
----------
Total Malaysia 1,635,403
----------
Philippines (6.7%):
Automotive Parts (2.0%):
644,000 Republic Glass Holdings Corp......... 208,891
----------
Real Estate (4.7%):
325,000 Fil-Estate Land, Inc................. 341,061
760,000 Robinson's Land Corp., Series B (b).. 150,811
----------
491,872
----------
Total Philippines 700,763
----------
Singapore (1.5%):
Hotels & Motels (1.5%):
45,000 Orchard Parade Holdings Ltd.......... 162,409
----------
Total Singapore 162,409
----------
Thailand (13.3%):
Chemicals (0.2%):
4,700 Thai Plastic & Chemical PLC (b)...... 24,007
----------
</TABLE>
Continued
79
<PAGE> 252
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- ----------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Thailand, continued:
Electrical Services (2.9%):
74,000 Cogeneration PLC (b)....................................... $ 298,871
----------
Financial Services (5.6%):
26,000 Finance One................................................ 133,835
26,700 Krung Thai Bank PLC........................................ 103,607
9,000 National Finance & Securities.............................. 26,727
27,500 Phatra Thanakit PLC........................................ 172,045
22,000 Thai Farmers Bank PLC (b).................................. 145,476
----------
581,690
----------
Manufacturing-Consumer Goods (1.6%):
170,000 Aromatics Thailand PLC (b)................................. 164,918
----------
Mining (2.2%):
8,500 Banpu PLC.................................................. 230,212
----------
Oil & Gas Exploration, Production & Services (0.8%):
7,100 PTT Exploration & Production PLC........................... 88,838
----------
Total Thailand 1,388,536
----------
United States (12.2%):
Automobiles (1.7%):
12,000 Tata Engineering & Locomotive Co. GDR (b).................. 180,000
----------
Computers & Peripherals (1.2%):
11,200 Macronix International Co. Ltd. ADR (b).................... 126,700
----------
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- ----------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
United States, continued:
Construction & Housing (3.2%):
15,200 Dong-Ah Construction Industrial Co. EDR (b)................ $ 338,200
----------
Electrical Equipment (4.8%):
8,000 Bombay Suburban Electric
Supply Ltd. (b)........................................... 146,000
60,000 Elec & Eltek International Co. Ltd......................... 163,200
542 Sams E-GD96NV-N (b)........................................ 11,721
16 Sams EL-GD96V-N (b)........................................ 692
54 Samsung Electronics GDR N (b).............................. 2,335
1,800 Samsung Electronics GDR US................................. 45,000
19,200 Silicone Precision GDR (b)................................. 129,984
----------
498,932
----------
Food Processing & Packaging (1.3%):
60,000 Want Want Holdings Ltd. (b)................................ 138,600
----------
Total United States 1,282,432
----------
Total Common Stocks 9,022,310
----------
RIGHTS/WARRANTS (0.1%):
Malaysia (0.1%):
32,000 Public Finance Berhad Rights............................... 6,925
----------
United States (0.0%):
15,200 Dong Ah Construction Ind 96-tech EDR....................... --
----------
Total Rights/Warrants 6,925
----------
Total (Cost--$9,467,465)(a) $9,029,235
==========
</TABLE>
FORWARD CURRENCY CONTRACTS:
<TABLE>
<CAPTION>
CONTRACT
DELIVERY CONTRACT VALUE (U.S.
DATE PRICE DOLLARS) DEPRECIATION
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENCY PURCHASED:
Philippine Peso...................... 8/1/96 $26.24 $22,088 $ (29)
Thai Bahts........................... 8/1/96 25.37 32,536 (148)
------- -----
$54,624 $(177)
======= =====
</TABLE>
<TABLE>
<CAPTION>
CONTRACT
DELIVERY CONTRACT VALUE (U.S.
DATE PRICE DOLLARS) DEPRECIATION
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENCY SOLD:
Malaysian Dollar..................... 8/5/96 $2.488 $39,879 $(128)
Thai Bahts........................... 8/1/96 25.072 435 (3)
------- -----
$40,314 $(131)
======= =====
<FN>
- ------
Percentages are based on net assets of $10,458,403.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<S> <C>
Unrealized apprecia-
tion................. $ 115,094
Unrealized deprecia-
tion................. (553,324)
---------
Net unrealized depre-
ciation.............. $(438,230)
=========
(b) Represents non-income producing security.
ADR American Depository Receipt
EDR European Depository Receipt
GDR Global Depository Receipt
PLC Public Limited Company
</TABLE>
See Notes to Financial Statements.
80
<PAGE> 253
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
1. ORGANIZATION
Pacific Capital Funds (the "Trust") was organized on October 30, 1992, and
is registered under the Investment Company Act of 1940, as amended, ("the
1940 Act"), as a diversified, open-end management investment company
established as a Massachusetts business trust. The Trust currently consists
of the following investment portfolios (individually, a "Fund" and
collectively, the "Funds"): Growth Stock Fund, U.S. Treasury Securities
Fund, Short Intermediate U.S. Treasury Securities Fund, Growth and Income
Fund, Diversified Fixed Income Fund, Tax-Free Securities Fund, Tax-Free
Short Intermediate Securities Fund, and New Asia Growth Fund. The Trust is
authorized to issue for each Fund an unlimited number of shares without par
value in two classes of shares: Retail Class and Institutional Class. The
Institutional Class commenced operations October 14, 1994 when the Trust
identified those Institutional Shareholders that were part of the Retail
Class (as of October 13, 1994) and transferred the Shareholders into the
Institutional Class. Retail Class Shares are subject to initial sales
charges, imposed at the time of purchase, in accordance with the Funds'
prospectuses. Each class of shares for each Fund has identical rights and
privileges except with respect to distribution (12b-1) fees paid by Retail
Class Shares, voting rights on matters affecting a single class of shares
and the exchange privileges of each class of shares.
The Funds' investment objectives are as follows. Growth Stock Fund seeks
long-term capital appreciation; U.S. Treasury Securities Fund and Short
Intermediate U.S. Treasury Securities Fund seek a high level of current
income consistent with prudent risk of capital. Growth and Income Fund seeks
primarily current income and secondarily capital appreciation. Diversified
Fixed Income Fund seeks a high level of current income. Tax-Free Securities
Fund and Tax-Free Short Intermediate Securities Fund seek a high level of
current income exempt from federal and Hawaii income taxes. New Asia Growth
Fund seeks long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
SECURITIES VALUATION
Investments of the Funds for which the primary market is a national
securities exchange or the National Association of Securities Dealers
Automated Quotation National Market System ("NASDAQ") are valued at last
reported sale price on the day of valuation. In the absence of any sale of
such securities on the valuation date, the valuations are based on the mean
of the latest quoted bid and asked prices. Securities, including thinly
traded, unlisted, and restricted securities, for which market quotations
are not readily available, are valued at fair market value by the
investment adviser under the supervision of the Fund's Board of Trustees.
Investments in investment companies are valued at their respective net
asset values as reported by such companies. Money market instruments and
other debt securities maturing in 60 days or less are valued at amortized
cost, which approximates market value. Investments in foreign securities,
currency holdings and other assets and liabilities of New Asia Growth Fund
are valued based on quotations from the primary market in which they are
traded and translated from the local currency into U.S. dollars using
current exchange rates. The differences between the cost and market values
of securities are reflected as either unrealized appreciation or
depreciation.
Continued
81
<PAGE> 254
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
SECURITIES TRANSACTIONS AND RELATED INCOME
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or accretion of discount. Dividend income is recorded on the ex-
dividend date and is reduced by applicable foreign taxes withheld. Gains or
losses realized from sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
FOREIGN CURRENCY TRANSLATION
The New Asia Growth Fund isolates that portion of the results of operations
resulting from changes in currency exchange rates from the fluctuation
arising from changes in market prices of securities held.
Purchases and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the exchange rate on the dates of the
transactions. Reported net realized foreign exchange gains or losses arise
from sales and maturities of portfolio securities, sales of foreign
currencies, currency exchange fluctuations between the trade and settlement
dates of securities transactions, and the difference between the amounts of
assets and liabilities recorded and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign currency
appreciation or depreciation arises from changes in the value of assets and
liabilities, including investments in securities, resulting from changes in
currency exchange rates.
RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES
Investments in securities of foreign issuers carry certain risks not
ordinarily associated with investments in securities of domestic issuers.
Such risks include future political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws
and restrictions. In addition, with respect to certain countries, there is
the possibility of expropriation of assets, confiscatory taxation,
political or social instability or diplomatic developments which could
adversely affect investments in those countries.
Certain countries may also impose substantial restrictions on investments
in their capital markets by foreign entities, including restrictions on
investments in issuers of industries deemed sensitive to relevant national
interests. These factors may limit the investment opportunities available
in the New Asia Growth Fund and result in a lack of liquidity and a high
price volatility with respect to securities of issuers from developing
countries.
Withholding taxes on foreign dividends have been provided for in accordance
with the New Asia Growth Fund's understanding of applicable countries' tax
rules and rates.
FORWARD CURRENCY EXCHANGE CONTRACTS
The New Asia Growth Fund may from time to time enter into foreign currency
exchange transactions to convert to and from different foreign currencies.
The Fund may enter into currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market, or use forward currency contracts to purchase or to sell foreign
currencies. A forward foreign currency contract is an obligation by the
Fund to purchase or to sell a specific currency at a future date at a price
set at the time of the contract. The Fund may use forward foreign currency
exchange contracts in order to protect against uncertainty in fluctuations
of future foreign exchange rates. The use of such forward
Continued
82
<PAGE> 255
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
contracts is limited to hedging against movements in the value of foreign
currencies relative to the U.S. dollar in connection with specific
portfolio transactions or with respect to portfolio positions. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate
of the underlying currency and any appreciation or depreciation is recorded
for financial statement purposes as unrealized until the contract
settlement date, at which time the Fund records realized gains or losses
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of a forward
foreign exchange currency contract or if the value of the foreign currency
changes unfavorably.
WHEN-ISSUED AND FORWARD COMMITMENTS
The Funds may purchase securities on a "when-issued" basis and may also
purchase or sell securities on a forward commitment. The Funds record when-
issued securities on the trade date and maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. The value of securities underlying when-issued or
forward commitments to purchase securities, and any subsequent fluctuation
in their value, is taken into account when determining the net asset value
of the Funds commencing with the date the funds agree to purchase the
securities. The Funds do not accrue interest or dividends on when-issued
securities until the underlying securities are received.
REPURCHASE AGREEMENTS
The Funds may acquire securities from member banks of the Federal Deposit
Insurance Corporation and from registered broker-dealers which Hawaiian
Trust Company, Limited ("Hawaiian Trust") deems creditworthy under
guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price ("repurchase agreement"). The repurchase price generally equals the
price paid by a Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller, under a repurchase agreement, is required
to maintain the value of collateral held pursuant to the agreement at not
less than 102% of the repurchase price (including accrued interest).
Securities subject to repurchase agreements will be held by the Trust's
custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a
Fund under the 1940 Act.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly
for the U.S. Treasury Securities Fund, Short Intermediate U.S. Treasury
Securities Fund, Diversified Fixed Income Fund, Tax-Free Securities Fund,
and Tax-Free Short Intermediate Securities Fund. Dividends from net
investment income are declared and paid monthly for the Growth Stock Fund
and Growth and Income Fund. Dividends from net investment income are
declared and paid quarterly for the New Asia Growth Fund. Distributable net
realized capital gains, if any, are declared and distributed annually.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of foreign currency transactions and deferrals
of certain losses. Permanent book and tax basis differences are reflected
in the components of net assets.
Continued
83
<PAGE> 256
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
FEDERAL INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company
by complying with the provisions available to certain investment companies
as defined in applicable sections of the Internal Revenue Code, and to make
distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income
taxes.
ORGANIZATION COSTS
Costs incurred by the Trust in connection with organization, registration
and the initial public offering of shares have been deferred and are
amortized using the straight-line method over a period of two years from
the commencement of the public offering of shares of each Fund. In the
event that any of the initial shares of a Fund are redeemed during such
period by any holder thereof, the Trust will reduce the redemption proceeds
otherwise payable to such holder to cover any unamortized organizational
expenses of the Trust in the same proportion as the number of initial
shares of the Fund being redeemed bears to the number of initial shares of
the Trust outstanding at the time of redemption.
CONCENTRATION OF CREDIT RISK
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund have a majority of their investments in the securities of issuers in
Hawaii. Such concentration may subject the Fund to the effects of economic
changes occurring within that State.
OTHER
Expenses that are directly related to one Fund are charged directly to that
Fund. Other operating expenses for the Funds or the Trust are prorated to
the Funds on the basis of relative net assets or other appropriate basis.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
year ended July 31, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
Growth Stock Fund.................................... $127,216,990 $93,331,275
U.S. Treasury Securities Fund........................ 4,293,385 34,368,828
Short Intermediate U.S. Treasury Securities Fund..... 15,669,617 9,168,899
Growth and Income Fund............................... 79,843,714 46,845,973
Diversified Fixed Income Fund........................ 209,733,272 77,472,503
Tax-Free Securities Fund............................. 74,992,960 70,042,525
Tax-Free Short Intermediate Securities Fund.......... 22,073,029 21,863,212
New Asia Growth Fund................................. 11,714,868 4,574,925
</TABLE>
Continued
84
<PAGE> 257
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
4. RELATED PARTY TRANSACTIONS
Investment advisory services are provided to the Trust by Hawaiian Trust
(the "Adviser"). Under the terms of the investment advisory agreement with
the Trust, the Adviser is entitled to receive fees based on a percentage of
the average net assets of the Fund. Hawaiian Trust also served the Trust as
custodian prior to November 1995. Under the terms of the custodian
agreement, the custodian is entitled to receive fees based on a percentage
of the average net assets of each Fund and is entitled to be reimbursed for
its reasonable out-of-pocket expenses incurred in the performance of its
duties under the agreement. November 1995, Bank One became custodian
pursuant to a custodian agreement with the Trust. The custodian agreement
entitles Bank One to receive fees based on transaction volume.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of The BISYS Group, Inc. BISYS, with whom certain
officers and a trustee of the Trust are affiliated, serves the Trust as
principal underwriter and administrator. Such officers and trustee are not
paid any fees directly by the Funds for serving as officers and trustee of
the Trust. Under the terms of the management and administration agreement,
BISYS's fees are computed at an annual rate of 0.20% of the average daily
net assets of each Fund.
BISYS also serves as the Trust's distributor and receives fees for providing
distribution services in accordance with a Distribution Agreement (the
"Agreement") pursuant to Rule 12b-1 under the 1940 Act. Under the Agreement,
Retail Class Shares pay BISYS a fee not to exceed, on an annual basis, 0.75%
of the average daily net assets attributable to the Retail Class of shares
of each Fund for payments BISYS makes to banks, including the Adviser, other
institutions and broker/dealers, and for expenses BISYS and any of its
affiliates or subsidiaries incur for providing distribution or shareholder
service assistance. For the year ended July 31, 1996, BISYS, as the Trust's
principal underwriter, received approximately $149,309 from commissions on
sales of Retail Class shares of which $128,062 was reallowed to affiliated
dealers of the Trust's shares and $18,390 was reallowed to other dealers of
the Trust's shares.
BISYS Ohio serves the Trust as fund accountant. Under the terms of the fund
accounting agreement, BISYS Ohio is entitled to receive fees based on a
percentage of the average net assets of each Fund and is reimbursed for
certain out-of-pocket expenses incurred in providing fund accounting
services.
Fees may be voluntarily reduced or expenses reimbursed to assist the Funds
in maintaining competitive expense ratios.
Continued
85
<PAGE> 258
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
Information regarding these transactions for the year ended July 31, 1996 is
as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY FEES
---------------------------
ANNUAL FEE AS A ADMINISTRATION 12b-1 FEES
PERCENTAGE OF FEES FEES VOLUNTARILY
AVERAGE DAILY VOLUNTARILY VOLUNTARILY REDUCED-- EXPENSES ACCOUNTING
NET ASSETS REDUCED REDUCED (RETAIL CLASS) REIMBURSED FEES
--------------- ----------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Growth Stock Fund....... 0.80% $ -- $69,003 $23,332 $ -- $53,199
U.S. Treasury Securities
Fund................... 0.60% -- 11,742 5,250 -- 9,579
Short Intermediate U.S.
Treasury Securities
Fund................... 0.50% 41,079 10,271 4,342 -- 7,486
Growth and Income Fund.. 0.80% -- 25,623 3,110 -- 21,384
Diversified Fixed Income
Fund................... 0.60% -- 55,166 2,917 -- 45,603
Tax-Free Securities
Fund................... 0.60% -- 116,727 4,072 -- 106,514
Tax-Free Short
Intermediate Securities
Fund................... 0.50% -- 20,177 1,739 -- 18,454
New Asia Growth Fund.... 0.90% -- 2,965 5,372 47,974 1,761
</TABLE>
Continued
86
<PAGE> 259
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
5. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Trust were as follows:
<TABLE>
<CAPTION>
U.S. TREASURY
GROWTH STOCK FUND SECURITIES FUND
------------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------------- ---------- ------------ ----------
FOR THE YEAR ENDED FOR THE YEAR ENDED
JULY 31, 1996 JULY 31, 1996
------------------------- ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued........... $ 2,212,900 181,079 $ 120,008 12,543
Dividends reinvested.... 269,722 22,667 60,138 6,342
Shares redeemed......... (1,174,009) (94,879) (205,941) (21,534)
------------- ---------- ------------ ----------
Net increase............ $ 1,308,613 108,867 $ (25,795) (2,649)
============= ========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Shares issued........... $ 131,615,185 10,917,906 $ 1,527,773 161,323
Dividends reinvested.... 6,169,023 518,783 1,842,036 194,471
Shares redeemed......... (104,518,765) (8,612,823) (30,773,600) (3,250,486)
------------- ---------- ------------ ----------
Net increase............ $ 33,265,443 2,823,866 $(27,403,791) (2,894,692)
============= ========== ============ ==========
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JULY 31, 1995(A) JULY 31, 1995(A)
------------------------- ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Exchange out to Institu-
tional Class (a)....... $ (53,141,072) (5,373,213) $(57,119,258) (6,595,757)
Shares issued........... 2,302,509 232,372 713,608 79,829
Dividends reinvested.... 164,056 16,321 822,476 92,953
Shares redeemed......... (2,510,546) (251,844) (1,047,673) (118,142)
------------- ---------- ------------ ----------
Net increase............ $ (53,185,053) (5,376,364) $(56,630,847) (6,541,117)
============= ========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Exchange in from Retail
Class (a).............. $ 53,141,072 5,373,213 $ 57,119,258 6,595,757
Shares issued........... 80,211,095 8,005,315 2,004,859 227,789
Dividends reinvested.... 548,955 52,603 2,516,597 282,297
Shares redeemed......... (18,512,105) (1,746,368) (15,462,413) (1,667,418)
------------- ---------- ------------ ----------
Net increase............ $ 115,389,017 11,684,763 $ 46,178,301 5,438,425
============= ========== ============ ==========
<FN>
- ------
(a) On October 13, 1994, the Trust identified those institutional shareholders
that were part of the Retail class and transferred these shareholders into
the Institutional class effective October 14, 1994.
</TABLE>
Continued
87
<PAGE> 260
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
SHORT INTERMEDIATE U.S.
TREASURY SECURITIES FUND GROWTH AND INCOME FUND
-------------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------------ ------------ ------------ ----------
FOR THE YEAR ENDED FOR THE YEAR ENDED
JULY 31, 1996 JULY 31, 1996
-------------------------- ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued........... $ 747,638 76,883 $ 924,629 74,394
Dividends reinvested.... 47,554 4,976 16,890 1,409
Shares redeemed......... (95,449) (9,947) (128,162) (10,325)
------------ ----------- ------------ ----------
Net increase............ $ 699,743 71,912 $ 813,357 65,478
============ =========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Shares issued........... $ 17,373,908 1,805,630 $ 50,906,651 4,232,718
Dividends reinvested.... 110,962 11,544 1,235,834 104,577
Shares redeemed......... (9,634,113) (1,006,064) (23,658,493) (1,948,216)
------------ ----------- ------------ ----------
Net increase............ $ 7,850,757 811,110 $ 28,483,992 2,389,079
============ =========== ============ ==========
<CAPTION>
OCTOBER 14, 1994
FOR THE YEAR ENDED THROUGH
JULY 31, 1995(a) JULY 31, 1995(b)
-------------------------- ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Exchange out to Institu-
tional Class (a)....... $ (2,996,089) (322,160)
Shares issued........... 122,119 12,825 $ 295,585 28,572
Dividends reinvested.... 57,771 6,162 2,751 260
Shares redeemed......... (47,185) (5,005) (1,461) (137)
------------ ----------- ------------ ----------
Net increase............ $ (2,863,384) (308,178) $ 296,875 28,695
============ =========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Exchange in from Retail
Class (a).............. $ 2,996,089 322,160
Shares issued........... 16,730,048 1,790,888 $ 40,679,124 4,026,875
Dividends reinvested.... 133,019 14,245 545 52
Shares redeemed......... (4,125,990) (439,719) (3,888,112) (372,539)
------------ ----------- ------------ ----------
Net increase............ $ 15,733,166 1,687,574 $ 36,791,557 3,654,388
============ =========== ============ ==========
<FN>
- ------
(a) On October 13, 1994, the Trust identified those institutional shareholders
that were part of the Retail class and transferred these shareholders into
the Institutional class effective October 14, 1994.
(b) Period from commencement of operations.
</TABLE>
Continued
88
<PAGE> 261
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
DIVERSIFIED FIXED TAX-FREE
INCOME FUND SECURITIES FUND
------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES
------------ ---------- ------------ ----------
FOR THE YEAR ENDED FOR THE YEAR ENDED
JULY 31, 1996 JULY 31, 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued.......... $ 1,199,728 107,934 $ 619,694 58,332
Dividends reinvested... 35,296 3,293 17,516 1,652
Shares redeemed........ (100,216) (9,260) (608,257) (58,984)
------------ ---------- ------------ ----------
Net increase........... $ 1,134,808 101,967 $ 28,953 1,000
============ ========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Shares issued.......... $198,618,575 18,085,880 $ 28,592,966 2,708,891
Dividends reinvested... 855,870 76,725 3,552,534 331,714
Shares redeemed........ (86,606,689) (7,857,921) (22,221,434) (2,101,754)
------------ ---------- ------------ ----------
Net increase........... $112,867,756 10,304,684 $ 9,924,066 938,851
============ ========== ============ ==========
<CAPTION>
OCTOBER 14, 1994 OCTOBER 14, 1994
THROUGH THROUGH
JULY 31, 1995(a) JULY 31, 1995(a)
------------------------ ------------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued.......... $ 25,920 2,495 $ 528,482 54,846
Dividends reinvested... 454 44 10,172 1,019
Shares redeemed........ -- -- (25,416) (2,400)
------------ ---------- ------------ ----------
Net increase........... $ 26,374 2,539 $ 513,238 53,465
============ ========== ============ ==========
INSTITUTIONAL CLASS
SHARES:
Shares issued.......... $ 56,842,663 5,601,242 $293,381,164 29,422,035
Dividends reinvested... 1,900 175 6,343 607
Shares redeemed........ (5,647,023) (542,014) (27,552,782) (2,751,293)
------------ ---------- ------------ ----------
Net increase........... $ 51,197,540 5,059,403 $265,834,725 26,671,349
============ ========== ============ ==========
<FN>
- ------
(a) Period from commencement of operations.
</TABLE>
Continued
89
<PAGE> 262
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
<TABLE>
<CAPTION>
TAX-FREE
SHORT INTERMEDIATE NEW ASIA
SECURITIES FUND GROWTH FUND
---------------------- --------------------
AMOUNT SHARES AMOUNT SHARES
----------- --------- ---------- --------
FOR THE YEAR ENDED FOR THE YEAR ENDED
JULY 31, 1996 JULY 31, 1996
---------------------- --------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued.................. $ 194,515 19,329 $1,841,034 156,856
Dividends reinvested........... 2,672 265 13,647 1,284
Shares redeemed................ (52,273) (5,147) (101,353) (8,592)
----------- --------- ---------- --------
Net increase................... $ 144,914 14,447 $1,753,328 149,548
=========== ========= ========== ========
INSTITUTIONAL CLASS SHARES:
Shares issued.................. $ 7,670,654 754,274 $8,908,328 754,031
Dividends reinvested........... 6,511 642 46,083 4,330
Shares redeemed................ (7,930,532) (783,406) (2,879,942) (252,790)
----------- --------- ---------- --------
Net increase................... $ (253,367) (28,490) $6,074,469 505,571
=========== ========= ========== ========
<CAPTION>
OCTOBER 14, 1994 FEBRUARY 15, 1995
THROUGH THROUGH
JULY 31, 1995(a) JULY 31, 1995(a)
---------------------- --------------------
<S> <C> <C> <C> <C>
RETAIL CLASS SHARES:
Shares issued.................. $ 304,476 30,574 $ 309,769 29,601
Dividends reinvested........... 83 9 -- --
Shares redeemed................ (1,469) (149) (1,510) (140)
----------- --------- ---------- --------
Net increase................... $ 303,090 30,434 $ 308,259 29,461
=========== ========= ========== ========
INSTITUTIONAL CLASS SHARES:
Shares issued.................. $45,831,176 4,585,110 $2,652,270 255,820
Dividends reinvested........... 672 67 -- --
Shares redeemed................ (6,377,898) (641,235) (9,926) (941)
----------- --------- ---------- --------
Net increase................... $39,453,950 3,943,942 $2,642,344 254,879
=========== ========= ========== ========
<FN>
- ------
(a) Period from commencement of operations.
</TABLE>
6. FEDERAL INCOME TAXES (UNAUDITED)
For federal income tax purposes, the following Funds have capital loss
carryforwards as of July 31, 1996, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
---------- -------
<S> <C> <C>
U.S. Treasury Securities Fund.............................. $ 288,915 2002
U.S. Treasury Securities Fund.............................. 326,761 2003
U.S. Treasury Securities Fund.............................. 3,238,241 2004
Tax-Free Short Intermediate Securities Fund................ 2,005 2003
Tax-Free Short Intermediate Securities Fund................ 14,953 2004
</TABLE>
Continued
90
<PAGE> 263
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the fiscal year ended
July 31, 1997. Growth Stock Fund and Short Intermediate U.S. Treasury
Securities Fund deferred such losses of $4,333,996 and $98,889,
respectively. Similarly, New Asia Growth Fund deferred foreign currency
losses of $20,918.
The following table presents distributions from long-term capital gains for
the following Funds for the year ended July 31, 1996:
<TABLE>
<S> <C>
Growth Stock Fund.................................................. $2,436,884
Growth and Income Fund............................................. 3,839,756
Diversified Fixed Income Fund...................................... 1,353,238
Tax-Free Securities Fund........................................... 1,539,060
New Asia Growth Fund............................................... 91,852
</TABLE>
Pacific Capital Funds designates the following eligible distribution for the
dividends received deduction for corporations for the Fund's taxable year
ended July 31, 1996.
<TABLE>
<CAPTION>
GROWTH AND
GROWTH STOCK INCOME
FUND FUND
------------ ---------------
<S> <C> <C>
RETAIL CLASS:
Dividend income.................................. $ 2,741,023 $1,436,098
Dividends income per share....................... $0.072 $0.160
INSTITUTIONAL CLASS:
Dividend income.................................. $2,741,023 $1,436,098
Dividend income per share........................ $0.104 $0.184
The Pacific Capital Funds designate the following exempt-interest dividends
for the Fund's taxable year ended July 31, 1996.
<CAPTION>
TAX-FREE
TAX-FREE SHORT
SECURITIES INTERMEDIATE
FUND SECURITIES FUND
------------ ---------------
<S> <C> <C>
RETAIL CLASS:
Exempt-interest distributions.................... $ 39,417 $13,555
Exempt-interest distributions per share.......... $0.530 $0.400
INSTITUTIONAL CLASS:
Exempt-interest distributions.................... $15,243,865 $1,697,987
Exempt-interest distributions per share.......... $0.561 $0.427
</TABLE>
Continued
91
<PAGE> 264
PACIFIC CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JULY 31, 1996
Exempt-interest distributions include amounts subject to the Federal
alternative minimum tax of $10,798 and $1,351 for the Tax-Free Securities
Fund and the Tax-Free Short Intermediate Securities Fund, respectively.
The percentage break-down of the exempt-interest income by state for the
Tax-Free Securities Fund the Tax-Free Short Intermediate Securities Fund for
the taxable year ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
TAX-FREE
TAX-FREE SHORT
SECURITIES INTERMEDIATE
STATE FUND SECURITIES FUND
----- ---------- ---------------
<S> <C> <C>
Alaska............................................. -- % 1.7%
Arizona............................................ 0.2 8.0
California......................................... 3.2 --
Colorado........................................... 0.2 --
Connecticut........................................ 0.4 --
Florida............................................ 8.5 3.1
Georgia............................................ 3 --
Hawaii............................................. 56.8 57.6
Idaho.............................................. 0.1 --
Iowa............................................... 0.1 --
Kansas............................................. 1.8 --
Maine.............................................. 0.7 --
Massachusetts...................................... 2.6 2.9
Michigan........................................... 2.1 --
Minnesota.......................................... 1.1 3.2
Mississippi........................................ -- 0.1
New Jersey......................................... 1.3 2.6
New Mexico......................................... 1.7 0.4
New York........................................... 0.3 --
North Carolina..................................... 1.2 --
Ohio............................................... 0.7 4.7
Oregon............................................. 1.4 2.8
Pennsylvania....................................... 1.1 --
Puerto Rico........................................ -- 2.5
Rhode Island....................................... -- 3.3
South Carolina..................................... 0.9 --
Tennessee.......................................... 3.4 --
Texas.............................................. 2.3 6.0
Virginia........................................... 4.2 --
Wisconsin.......................................... 0.7 1.1
----- -----
Total............................................ 100.0% 100.0%
===== =====
</TABLE>
92
<PAGE> 265
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH STOCK FUND
-------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED NOVEMBER 1,
JULY 31, 1996 JULY 31, 1995 1993 TO
------------------------ ---------------------------- JULY 31,
RETAIL INSTITUTIONAL RETAIL (c) INSTITUTIONAL (b) 1994 (a)
------ ------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $11.71 $ 11.71 $ 9.83 $ 9.89 $ 10.00
------ -------- ------ -------- -------
Investment Activities
Net investment income.. 0.07 0.10 0.12 0.11 0.07
Net realized and
unrealized gain (loss)
from investments...... 0.89 0.89 1.87 1.83 (0.18)
------ -------- ------ -------- -------
Total from Investment
Activities........... 0.96 0.99 1.99 1.94 (0.11)
------ -------- ------ -------- -------
Distributions
Net investment income.. (0.07) (0.10) (0.11) (0.12) (0.06)
Net realized gains..... (0.22) (0.22) -- -- --
In excess of net real-
ized gains............ (0.49) (0.49) -- -- --
------ -------- ------ -------- -------
Total Distributions... (0.78) (0.81) (0.11) (0.12) (0.06)
------ -------- ------ -------- -------
NET ASSET VALUE, END OF
PERIOD................. $11.89 $ 11.89 $11.71 $ 11.71 $ 9.83
====== ======== ====== ======== =======
Total Return (excludes
sales charges)......... 8.25%(f) 8.53%(f) 20.43% 20.64%(d) (1.05)%(f)
ANNUALIZED
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of pe-
riod (000)............. $5,261 $172,565 $3,905 $136,837 $56,121
Ratio of expenses to av-
erage net assets....... 1.34%(e) 1.09%(e) 1.36% 1.13%(e) 1.41%(e)
Ratio of net investment
income to average net
assets................. 0.60%(e) 0.86%(e) 1.12% 1.30%(e) 0.98%(e)
Ratio of expenses to av-
erage net assets*...... 1.88%(e) 1.13%(e) 1.98% 1.21%(e) 2.31%(e)
Ratio of net investment
income to average net
assets*................ 0.06%(e) 0.82%(e) 0.50% 1.23%(e) 0.07%(e)
Portfolio turnover (g).. 61.30% 61.30% 32.40% 32.40% 25.89%
Average Commission Rate
paid (h)............... $0.0895 $0.0895
<FN>
- ------
* During the period, certain fees were voluntarily reduced. In addition, the
investment adviser reimbursed expenses. If such voluntary fee reductions
and expense reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) On October 13, 1994, the Trust identified those Institutional shareholders
that were part of the Retail Class and transferred these shareholders into
the Institutional Class at the prevailing net asset value effective
October 14, 1994. The Financial Highlights presented for the Institutional
Class reflects operations and distributions for the period from October
14, 1994 through July 31, 1995.
(c) The Financial Highlights presented for the Retail Class reflects
operations and distributions for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 combined with the operations and
distributions of the Retail Class only for the period from October 14,
1994 through July 31, 1995.
(d) Represents total return for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 plus total return for the
Institutional Class for the period from October 14, 1994 through July 31,
1995.
(e) Annualized.
(f) Not annualized.
(g) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(h) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and
sold for which commissions were charged.
</TABLE>
See notes to financial statements.
93
<PAGE> 266
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S TREASURY SECURITIES FUND
------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED NOVEMBER 1,
JULY 31, 1996 JULY 31, 1995 1993 TO
------------------------ ---------------------------- JULY 31,
RETAIL INSTITUTIONAL RETAIL (c) INSTITUTIONAL (b) 1994 (a)
------ ------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $9.42 $ 9.43 $ 9.04 $ 8.66 $ 10.00
----- ------- ------ ------- -------
Investment Activities
Net investment income.. 0.53 0.59 0.50 0.44 0.31
Net realized and
unrealized gain (loss)
from investments...... (0.20) (0.24) 0.38 0.76 (1.00)
----- ------- ------ ------- -------
Total from Investment
Activities........... 0.33 0.35 0.88 1.20 (0.69)
----- ------- ------ ------- -------
Distributions
Net investment income.. (0.53) (0.55) (0.50) (0.43) (0.27)
In excess of net in-
vestment income....... (0.09) (0.09) -- -- --
----- ------- ------ ------- -------
Total Distributions... (0.62) (0.64) (0.50) (0.43) (0.27)
----- ------- ------ ------- -------
NET ASSET VALUE, END OF
PERIOD................. $9.13 $ 9.14 $ 9.42 $ 9.43 $ 9.04
===== ======= ====== ======= =======
Total Return (excludes
sales charges)......... 3.43%(f) 3.71%(f) 10.18% 10.49%(d) (6.95%)(f)
ANNUALIZED
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of pe-
riod (000)............. $ 979 $23,248 $1,035 $51,264 $60,125
Ratio of expenses to av-
erage net assets....... 1.20%(e) 0.95%(e) 1.19% 1.02%(e) 1.15%(e)
Ratio of net investment
income to average net
assets................. 5.55%(e) 5.81%(e) 5.57% 5.78%(e) 4.62%(e)
Ratio of expenses to av-
erage net assets*...... 1.74%(e) 0.99%(e) 1.81% 1.09%(e) 2.09%(e)
Ratio of net investment
income to average net
assets*................ 5.01%(e) 5.77%(e) 4.96% 5.71%(e) 3.68%(e)
Portfolio turnover (g).. 15.75% 15.75% 80.98% 80.98% 11.36%
<FN>
- ------
* During the period, certain fees were voluntarily reduced. In addition, the
investment adviser reimbursed expenses. If such voluntary fee reductions
and expense reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) On October 13, 1994, the Trust identified those Institutional shareholders
that were part of the Retail Class and transferred these shareholders into
the Institutional Class at the prevailing net asset value effective
October 14, 1994. The Financial Highlights presented for the Institutional
Class reflects operations and distributions for the period from October
14, 1994 through July 31, 1995.
(c) The Financial Highlights presented for the Retail Class reflects
operations and distributions for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 combined with the operations and
distributions of the Retail Class only for the period from October 14,
1994 through July 31, 1995.
(d) Represents total return for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 plus total return for the
Institutional Class for the period from October 14, 1994 through July 31,
1995.
(e) Annualized.
(f) Not annualized.
(g) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
See notes to financial statements.
94
<PAGE> 267
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED NOVEMBER 1,
JULY 31, 1996 JULY 31, 1995 1993 TO
------------------------ ---------------------------- JULY 31,
RETAIL INSTITUTIONAL RETAIL (c) INSTITUTIONAL (b) 1994 (a)
------ ------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 9.60 $ 9.61 $ 9.52 $ 9.30 $ 10.00
------ ------- ------ ------- -------
Investment Activities
Net investment income.... 0.48 0.53 0.52 0.44 0.24
Net realized and
unrealized gain (loss)
from investments........ (0.11) (0.13) 0.05 0.31 (0.52)
------ ------- ------ ------- -------
Total from Investment
Activities............. 0.37 0.40 0.57 0.75 (0.28)
------ ------- ------ ------- -------
Distributions
Net investment income.... (0.50) (0.53) (0.49) (0.44) (0.20)
In excess of net invest-
ment income............. (0.04) (0.04) -- -- --
In excess of net realized
gains................... (0.02) (0.02) -- -- --
------ ------- ------ ------- -------
Total Distributions..... (0.56) (0.59) (0.49) (0.44) (0.20)
------ ------- ------ ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 9.41 $ 9.42 $ 9.60 $ 9.61 $ 9.52
====== ======= ====== ======= =======
Total Return (excludes
sales charges)........... 3.90%(f) 4.18%(f) 6.28% 6.57%(d) (2.76%)(f)
ANNUALIZED
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of pe-
riod (000)............... $1,156 $23,545 $489 $16,214 $3,419
Ratio of expenses to aver-
age net assets........... 0.92%(e) 0.67%(e) 0.99% 0.75%(e) 1.00%(e)
Ratio of net investment
income to average net as-
sets..................... 5.14%(e) 5.40%(e) 5.51% 5.84%(e) 3.96%(e)
Ratio of expenses to aver-
age net assets*.......... 1.67%(e) 0.92%(e) 1.78% 0.99%(e) 5.39%(e)
Ratio of net investment
income to average net
assets*.................. 4.39%(e) 5.15%(e) 4.72% 5.61%(e) (0.43%)(e)
Portfolio turnover (g).... 47.17% 47.17% 62.73% 62.73% 0.00%
<FN>
- ------
* During the period, certain fees were voluntarily reduced. In addition, the
investment adviser reimbursed expenses. If such voluntary fee reductions
and expense reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) On October 13, 1994, the Trust identified those Institutional shareholders
that were part of the Retail Class and transferred these shareholders into
the Institutional Class at the prevailing net asset value effective
October 14, 1994. The Financial Highlights presented for the Institutional
Class reflects operations and distributions for the period from October
14, 1994 through July 31, 1995.
(c) The Financial Highlights presented for the Retail Class reflects
operations and distributions for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 combined with the operations and
distributions of the Retail Class only for the period from October 14,
1994 through July 31, 1995.
(d) Represents total return for the Fund, as a whole, for the period from
August 1, 1994 through October 13, 1994 plus total return for the
Institutional Class for the period from October 14, 1994 through July 31,
1995.
(e) Annualized.
(f) Not annualized.
(g) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
See notes to financial statments.
95
<PAGE> 268
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
---------------------------------------------------
FOR THE YEAR ENDED OCTOBER 14, 1994 TO
JULY 31, 1996 JULY 31, 1995 (a)
------------------------- ------------------------
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------- ------------- ------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 11.44 $11.43 $10.00 $10.00
------- ------- ------ -------
Investment Activities
Net investment income.... 0.16 0.17 0.17 0.20
Net realized and
unrealized gain from
investments............. 1.19 1.21 1.44 1.42
------- ------- ------ -------
Total from Investment
Activities............. 1.35 1.38 1.61 1.62
------- ------- ------ -------
Distributions
Net investment income.... (0.15) (0.17) (0.17) (0.19)
In excess of net
investment income....... (0.01) (0.01) -- --
Net realized gains....... (0.31) (0.31) -- --
------- ------- ------ -------
Total Distributions..... (0.47) (0.49) (0.17) (0.19)
------- ------- ------ -------
NET ASSET VALUE, END OF
PERIOD................... $ 12.32 $12.32 $11.44 $11.43
======= ======= ====== =======
Total Return (excludes
sales charges)........... 11.96%(b) 12.29%(b) 16.35%(b) 16.41%(b)
ANNUALIZED
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000)............. $ 1,160 $74,427 $328 $41,771
Ratio of expenses to
average net assets....... 1.37%(c) 1.11%(c) 1.40%(c) 1.14%(c)
Ratio of net investment
income to average net
assets................... 1.03%(c) 1.43%(c) 2.08%(c) 2.47%(c)
Ratio of expenses to
average net assets*...... 1.91%(c) 1.15%(c) 1.99%(c) 1.22%(c)
Ratio of net investment
income to average net
assets*.................. 0.49%(c) 1.39%(c) 1.49%(c) 2.39%(c)
Portfolio turnover (d).... 80.83% 80.83% 12.78% 12.78%
Average Commission Rate
paid (e)................. $0.0921 $0.0921
<FN>
- ------
* During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the ratios would have
been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and
sold for which commissions were charged.
</TABLE>
See notes to financial statements.
96
<PAGE> 269
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DIVERSIFIED FIXED INCOME FUND
---------------------------------------------------
FOR THE YEAR ENDED OCTOBER 14, 1994 TO
JULY 31, 1996 JULY 31, 1995 (a)
------------------------ ------------------------
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------ ------------- ------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $10.75 $10.84 $10.00 $10.00
------ -------- ------ -------
Investment Activities
Net investment income..... 0.59 0.58 0.49 0.55
Net realized and
unrealized gain (loss)
from investments......... (0.19) (0.16) 0.74 0.78
------ -------- ------ -------
Total from Investment Ac-
tivities................ 0.40 0.42 1.23 1.33
------ -------- ------ -------
Distributions
Net investment income..... (0.58) (0.61) (0.48) (0.49)
In excess of net invest-
ment income.............. (0.02) (0.02) -- --
In excess of net realized
gains.................... (0.10) (0.10) -- --
------ -------- ------ -------
Total Distributions...... (0.70) (0.73) (0.48) (0.49)
------ -------- ------ -------
NET ASSET VALUE, END OF PE-
RIOD...................... $10.45 $10.53 $10.75 $10.84
====== ======== ====== =======
Total Return (excludes
sales charges)............ 3.69%(b) 3.85%(b) 12.66%(b) 13.70%(b)
ANNUALIZED
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)..................... $1,093 $161,742 $27 $54,827
Ratio of expenses to aver-
age net assets............ 1.15%(c) 0.88%(c) 1.18%(c) 0.93%(c)
Ratio of net investment in-
come to average net as-
sets...................... 5.31%(c) 5.56%(c) 6.25%(c) 6.71%(c)
Ratio of expenses to aver-
age net assets*........... 1.69%(c) 0.92%(c) 1.77%(c) 1.01%(c)
Ratio of net investment in-
come to average net as-
sets*..................... 4.77%(c) 5.52%(c) 5.66%(c) 6.63%(c)
Portfolio turnover (d)..... 58.86% 58.86% 60.47% 60.47%
<FN>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
See notes to financial statements.
97
<PAGE> 270
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TAX-FREE SECURITIES FUND
---------------------------------------------------
FOR THE YEAR ENDED OCTOBER 14, 1994 TO
JULY 31, 1996 JULY 31, 1995 (a)
------------------------ ------------------------
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------ ------------- ------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $10.53 $10.56 $10.00 $10.00
------ -------- ------ --------
Investment Activities
Net investment income..... 0.50 0.52 0.39 0.42
Net realized and
unrealized gain from
investments.............. 0.07 0.07 0.50 0.51
------ -------- ------ --------
Total from Investment
Activities.............. 0.57 0.59 0.89 0.93
------ -------- ------ --------
Distributions
Net investment income..... (0.49) (0.52) (0.36) (0.37)
In excess of net
investment income........ (0.04) (0.04) -- --
Net realized gains........ (0.09) (0.09) -- --
In excess of net realized
gains.................... (0.04) (0.04) -- --
------ -------- ------ --------
Total Distributions...... (0.66) (0.69) (0.36) (0.37)
------ -------- ------ --------
NET ASSET VALUE, END OF
PERIOD.................... $10.44 $10.46 $10.53 $10.56
====== ======== ====== ========
Total Return (excludes
sales charges)............ 5.54%(b) 5.73%(b) 9.06%(b) 9.54%(b)
ANNUALIZED
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)..................... $569 $288,934 $563 $281,646
Ratio of expenses to
average net assets........ 1.14%(c) 0.89%(c) 1.15%(c) 0.89%(c)
Ratio of net investment
income to average net
assets.................... 4.66%(c) 4.92%(c) 4.93%(c) 5.16%(c)
Ratio of expenses to
average net assets*....... 1.68%(c) 0.93%(c) 1.74%(c) 0.98%(c)
Ratio of net investment
income to average net
assets*................... 4.12%(c) 4.88%(c) 4.34%(c) 5.07%(c)
Portfolio turnover (d)..... 24.78% 24.78% 49.17% 49.17%
<FN>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
See notes to financial statements.
98
<PAGE> 271
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
--------------------------------------------------
FOR THE YEAR ENDED OCTOBER 14, 1994 TO
JULY 31, 1996 JULY 31, 1995 (a)
------------------------ ------------------------
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------ ------------- ------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $10.11 $10.14 $10.00 $10.00
------ ------- ------ -------
Investment Activities
Net investment income..... 0.37 0.40 0.30 0.32
Net realized and
unrealized gain (loss)
from investments......... (0.03) (0.03) 0.08 0.11
------ ------- ------ -------
Total from Investment
Activities.............. 0.34 0.37 0.38 0.43
------ ------- ------ -------
Distributions
Net investment income..... (0.37) (0.40) (0.27) (0.29)
In excess of net
investment income........ (0.03) (0.03) -- --
------ ------- ------ -------
Total Distributions...... (0.40) (0.43) (0.27) (0.29)
------ ------- ------ -------
NET ASSET VALUE, END OF
PERIOD.................... $10.05 $10.08 $10.11 $10.14
====== ======= ====== =======
Total Return (excludes
sales charges)............ 3.41%(b) 3.67%(b) 3.90%(b) 4.36%(b)
ANNUALIZED
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)..................... $451 $39,472 $308 $39,993
Ratio of expenses to
average net assets........ 1.08%(c) 0.83%(c) 1.05%(c) 0.85%(c)
Ratio of net investment
income to average net
assets.................... 3.64%(c) 3.90%(c) 3.82%(c) 4.03%(c)
Ratio of expenses to
average net assets*....... 1.63%(c) 0.88%(c) 1.64%(c) 0.94%(c)
Ratio of net investment
income to average net
assets*................... 3.09%(c) 3.85%(c) 3.23%(c) 3.94%(c)
Portfolio turnover (d)..... 54.70% 54.70% 89.98% 89.98%
<FN>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
</TABLE>
See notes to financial statements.
99
<PAGE> 272
PACIFIC CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NEW ASIA GROWTH FUND
------------------------------------------------------
FOR THE YEAR ENDED FEBRUARY 15, 1995 TO
JANUARY 31, 1996 JULY 31, 1995(a)
-------------------------- -------------------------
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------- ------------- ------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 11.21 $11.22 $10.00 $10.00
------- ------- ------ ------
Investment Activities
Net investment income
(loss)................ (0.02) (0.01) 0.02 0.04
Net realized and
unrealized gain from
investments........... 0.20 0.22 1.19 1.18
------- ------- ------ ------
Total from Investment
Activities........... 0.18 0.21 1.21 1.22
------- ------- ------ ------
Distributions
In excess of net in-
vestment income....... (0.02) (0.03) -- --
Net realized gains..... (0.26) (0.26) -- --
------- ------- ------ ------
Total Distributions... (0.28) (0.29) -- --
------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 11.11 $11.14 $11.21 $11.22
======= ======= ====== ======
Total Return (excludes
sales charges)......... 1.71%(b) 1.99%(b) 12.10%(b) 12.20%(b)
ANNUALIZED
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of pe-
riod (000)............. $ 1,990 $8,469 $330 $2,861
Ratio of expenses to av-
erage net assets....... 2.22%(c) 1.98%(c) 2.24%(c) 1.97%(c)
Ratio of net investment
income (loss) to aver-
age net assets......... (0.28%)(c) (0.02%)(c) 0.80%(c) 1.18%(c)
Ratio of expenses to av-
erage net assets*...... 3.58%(c) 2.84%(c) 3.51%(c) 2.74%(c)
Ratio of net investment
income (loss) to aver-
age net assets*........ (1.64%)(c) (0.88%)(c) (0.47%)(c) 0.42%(c)
Portfolio turnover (d).. 86.53% 86.53% 55.62% 55.62%
Average Commission Rate
paid (e) $0.0069 $0.0069
<FN>
- ------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and
sold for which commissions were charged.
</TABLE>
See notes to financial statements.
100
<PAGE> 273
APPENDIX A
RATINGS OF FIXED INCOME SECURITIES
The following is a description of the ratings given by Moody's
Investor Service, Inc. ("Moody's"), Duff & Phelps, Inc. ("D&P"), Fitch Investor
Service ("Fitch"), Standard & Poor's Corporation ("S&P"), IBCA Limited ("IBCA")
and Thompson Bank Watch ("Thompson"), each an NRSRO, to corporate bonds and
commercial paper.
CORPORATE BOND RATINGS
MOODY'S:
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by 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 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 risk appear somewhat larger than in Aaa securities.
A - Bonds 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 sometime in the future.
Baa - Bonds 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.
Ba - Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
A-1
<PAGE> 274
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
S&P:
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capability
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability
to default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
CC - The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC--debt rating. The C
rating may be used to cover a situation where a bankruptcy petition has been
filed but debt service payments are continued.
A-2
<PAGE> 275
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Debt rated D is in default. The D rating is assigned on the day
an interest or principal payment is missed. The D rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings 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 or risk of default upon failure of such completion. The investor
should exercise judgment with respect to such likelihood and risk.
L - The letter "L" indicates that the rating pertains to the
principal amount of those bonds to the extent that the underlying deposit
collateral is insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp. and interest is adequately collateralized.
* - Continuance of the rating is contingent upon Standard & Poor's
receipt of an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.
NR - Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not take
into account currency exchange and related uncertainties.
D&P:
AAA - Bonds rated AAA are judged to be of highest credit quality
and carry the smallest amount of investment risk.
AA - Bonds rated AA are of high credit quality, but modest risk may
vary over time due to economic conditions.
A - Bonds rated A have average but adequate protection, but risk is
more variable and greater in periods of economic stress.
BBB - Bonds rated BBB offer below average protection which is still
considered sufficient for prudent investment.
The ratings from AA to BBB may be modified by the addition of a
plus or minus sign to show a security's relative standing within its category.
A-3
<PAGE> 276
FITCH:
AAA - Bonds rated AAA are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA - Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated "F-1+."
A - Bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB - Bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.
B - Bonds rated B are considered highly speculative. While bonds in
this class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC - Bonds rated CCC have certain identifiable characteristics
which, if not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC - Bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C - Bonds rated C are in imminent default in payment of interest or
principal.
DDD-DD- and D - Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these bonds, and
"D" represents the lowest potential for recovery.
THOMSON:
Thomson rates only bank debt.
A-4
<PAGE> 277
AAA - Bonds rated AAA have a very high ability to pay interest and
principal on a timely basis.
AA - Bonds rated AA have a superior ability to pay interest and
repay principal with limited incremental risk versus AAA bonds.
A - Bonds rated A have a strong ability to repay principal and
interest, but could be more vulnerable to adverse internal and external
developments.
BBB - Bonds rated BBB have an acceptable capacity to pay interest
and repay principal and are more vulnerable to risk than higher-rated
obligations.
BB, B, CCC, and CC, designations are assigned by Thomson to
non-investment grade long-term debt. Such issues are regarded as having
speculative characteristics regarding the likelihood of timely payment of
principal and interest. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. The D designation indicates that the long-term
debt is in default.
The ratings from AAA through CC may include a plus or minus sign
designation which indicates where within the respective category the issue is
placed.
IBCA:
AAA - Bonds rated AAA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly.
AA - Bonds rated AA have a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk albeit not very significantly.
A - Bonds rated A have a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
BBB - Bonds rated BBB have a low expectation of investment risk.
Capacity for timely repayment of principal and interest is adequate, although
adverse changes in business, economic or financial conditions are more likely to
lead to increased investment risk than for obligations in higher categories.
BB, B, CCC, CC, and C Bonds are speculative. BB represents the
lowest degree of speculation and indicates a possibility of investment risk
developing. C represents the highest degree of speculation and indicates that
the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to
denote a relative status within major rating categories.
A-5
<PAGE> 278
CORPORATE COMMERCIAL PAPER RATINGS
MOODY'S:
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representations as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated issuer
or issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
P-1 (Prime-1) - Issuers rated P-1 have a superior capacity for
repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics:
- Leading market positions in well established industries
- High rates of return on funds employed
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation
- Well established access to a range of financial markets
and assured sources of alternate liquidity.
P-2 (Prime-2) - Issuers rated P-2 have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be subject to more variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
P-3 (Prime-3) - Issuers rated P-3 have an acceptable capacity for
repayment of short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its commercial paper
obligations are supported by the credit of another entity or entities, then the
name or names of such supporting entity or entities are listed within
parentheses beneath the name of the issuer, or there is a footnote referring the
reader to another page for the name or names of the supporting entity or
entities. In assigning ratings to such issuers, Moody's evaluates the financial
strength of the indicated affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment. Moody's makes no representation and gives no opinion on
the legal
A-6
<PAGE> 279
validity or enforceability of any support arrangement. You are cautioned to
review with your counsel any questions regarding particular support
arrangements.
S&P:
A Standard & Poor's commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. The four categories
are as follows:
A - Issues rated A are regarded as having the greatest capacity for
timely payment. Bonds in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1 - Issues rated A-1 indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Commercial paper
with overwhelming safety characteristics will be rated A-1+.
A-2 - Issues rated A-2 have a strong capacity for timely payments
on issues. However, the relative degree of safety is not as high as for issues
designated "A-1."
A-3 - Issues rated 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.
B - Issues rated B are regarded as having only adequate capacity
for timely payment. However, such capacity may be damaged by changing conditions
or short-term adversities.
C - Issues rated C are short-term debt obligations with a doubtful
capacity for payment.
D - This rating indicates that the issue is either in default or is
expected to be in default upon maturity.
D&P:
Duff 1+ - The Duff 1+ rating for corporate commercial paper
indicates the highest certainty of timely payment. Corporate commercial paper
with very high certainty of payment, excellent liquidity and minor risk will be
rated Duff 1. Corporate commercial paper with high certainty of timely payment,
strong liquidity and very small risk will be rated Duff 1-.
Duff 2 - The Duff 2 rating for corporate commercial paper indicates
good certainty of timely payment. Liquidity factors and company fundamentals are
sound. Although ongoing funding needs may enlarge total financing requirements,
access to capital market is good. Risk factors are small.
FITCH:
F-1 - The highest rating for corporate paper is F-1+. Issuers so
rated have exceptionally strong credit quality. Issuers rated F-1 have very
strong credit quality, reflecting assurance of timely payment only slightly less
in degree than F-1+ issues.
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<PAGE> 280
F-2 - Issuers rated F-2 have good credit quality and satisfactory
degree of assurance of timely payment, reflecting the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
THOMSON:
TBW-1 - The TBW-1 rating reflects a very high degree of likelihood
that principal and interest will be timely repaid and paid.
TBW-2 - Bank commercial paper rated TBW-2 has a strong degree of
safety regarding payment.
TBW-3 - Bank commercial paper rated TBW-3 is the lowest investment
grade category, reflecting an adequate capacity to timely service principal and
interest but more exposure to adverse internal and external developments than
higher-rated issues.
TBW-4 - Bank commercial paper rated TBW-4 indicates that the debt
is regarded as non-investment grade and therefore speculative.
CORPORATE NOTE RATINGS
S&P:
The two highest ratings for corporate notes are SP-1 and SP-2.
SP-1 - Notes rated SP-1 reflect a very strong or strong capacity to
pay principal and interest. Note issues with overwhelming safety characteristics
will be rated SP-1+.
SP-2 - Notes rated SP-2 reflect a satisfactory capacity to pay
principal and interest.
A-8
<PAGE> 281
APPENDIX B
OPTIONS AND FUTURES
The following instruments may be used by a Fund for hedging purposes or to
enhance income to the extent described in the applicable Prospectus and this
Statement of Additional Information.
OPTIONS ON EQUITY AND DEBT SECURITIES -- A call option is a short-term contract
pursuant to which the purchaser of the option, in return for a premium, has the
right to buy the security or currency underlying the option at a specified price
at any time during the term of the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to deliver the underlying security or currency against payment of
the exercise price. A put option is a similar contact that gives its purchaser,
in return for a premium, the right to sell the underlying security or currency
at a specified price during the option term. The writer of the put option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to buy the underlying security or currency at the exercise price.
OPTIONS ON SECURITIES INDEXES -- A securities index assigns relative values to
the securities included in the index and fluctuates with changes in the market
values of those securities. A securities index option operates in the same way
as a more traditional stock option, except that exercise of a securities index
option is effected with cash payment and does not involve delivery of
securities. Thus, upon exercise of a securities index option, the purchaser will
realize, and the writer will pay, an amount based on the difference between the
exercise price and the closing price of the securities index.
STOCK INDEX FUTURES CONTRACTS -- A stock index futures contract is a bilateral
agreement pursuant to which one party agrees to accept, and the other party
agrees to make, delivery of an amount of cash equal to a specified dollar amount
times the difference between the stock index value at the close of trading of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the stocks comprising the index is made. Generally,
contracts are closed out prior to the expiration date of the contract.
INTEREST RATE FUTURES CONTRACTS -- Interest rate futures contracts are bilateral
agreements pursuant to which one party agrees to make, and the other party
agrees to accept, delivery of a specified type of debt security at a specified
future time and at a specified price. Although such futures contracts by their
terms call for actual delivery or acceptance of debt securities, in most cases,
the contracts are closed out before the settlement date without the making or
taking of delivery.
OPTIONS ON FUTURE CONTRACTS -- Put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
FORWARD CONTRACTS ON FOREIGN CURRENCIES -- A forward contract on a foreign
currency is an obligation to purchase or sell a specific currency at a future
date, which may be any number of days agreed upon by the parties from the date
of the contract at a price set on the date of the contract.
B-1
<PAGE> 282
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) (1) Included in the Prospectuses (Part A)
for Growth Stock Fund, U.S. Treasury
Securities Fund, and Short-Intermediate
U.S. Treasury Securities Fund:
Financial Highlights (selected per share
data and ratios) for the fiscal period
from commencement of operations through
July 31, 1994 and for the fiscal years
ended July 31, 1995 and 1996.
(2) Included in the Prospectuses (Part A)
for Diversified Fixed Income Fund,
Growth and Income Fund, New Asia Growth
Fund, Tax-Free Securities Fund and
Tax-Free Short Intermediate Securities
Fund:
Financial Highlights (selected per share
data and ratios) for the fiscal period
from commencement of operations through
July 31, 1995 and for the fiscal year
ended July 31, 1996.
(3) Included in the Statement of Additional
Information (Part B) for Growth Stock
Fund, U.S. Treasury Securities Fund and
Short-Intermediate U.S. Treasury
Securities Fund:
Audited Financial Statements:
Schedule of Portfolio
Investments as of July 31,
1996.
Statement of Assets and
Liabilities as of July 31,
1996.
Statement of Operations for
the year ended July 31,
1996.
Statement of Changes in Net
Assets for the years ended
July 31, 1995 and 1996.
Financial Highlights for
the period from
commencement of operations
through July 31, 1994 and
for the years ended July
31, 1995 and 1996.
(4) Included in the Statement of Additional
Information (Part B) for Diversified
Fixed Income Fund, Growth and Income
Fund, New Asia Growth Fund, Tax-Free
Securities Fund and Tax Free Short
Intermediate Securities Fund:
<PAGE> 283
Audited Financial Statements:
Schedule of Portfolio
Investments as of July 31,
1996.
Statement of Assets and
Liabilities as of July 31,
1996.
Statement of Operations for
the period from
commencement of operations
through July 31, 1996.
Statement of Changes in Net
Assets for the period from
commencement of operations
through July 31, 1995 and
for the year ended July 31,
1996.
Financial Highlights for the
period from commencement of
operations through July 31,
1995 and for the year ended
July 31, 1996.
(b) Exhibits:
---------
Exhibit
Number Description
------ -----------
1(a)* - Declaration of Trust
(b)* - Amendment No. 1 to
Declaration of Trust
(c)++ - Amendment No. 2 to
Declaration of Trust
2* - By-Laws
3 - Not applicable
4 - Instruments Defining
Rights of Shareholders
(Incorporated by reference
to Exhibits 1 and 2 above.)
5(a)** - Investment Advisory
Agreement between Hawaiian
Trust Company, Limited and
the Registrant, dated as of
October 29, 1993
("Investment Advisory
Agreement")
(b)+ - Addendum and Amended
Schedule A to Investment
Advisory Agreement
(c)= - Sub-Advisory Agreement
between Hawaiian Trust
Company, Limited and Credit
Lyonnais Asset Management
(UK) Limited
6(a)** - Distribution Agreement
between BISYS Fund Services
(formerly, The Winsbury
Company
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<PAGE> 284
Exhibit
Number Description
------ -----------
Limited Partnership) and the
Registrant, dated as of
October 29, 1993
("Distribution Agreement")
(b)= - Amended Schedules A and B
to Distribution Agreement
(c)*** - Form of Selling Agreement
7 - Not applicable
8(a)++ - Form of Custodian Agreement
between Bank One Trust
Company, N.A. and the
Registrant, on behalf of
Balanced Fund, Diversified
Fixed Income Fund, Growth
and Income Fund, Growth
Stock Fund, Short
Intermediate U.S. Treasury
Fund, Tax-Free Securities
Fund, Tax-Free Short
Intermediate Securities Fund
and U.S. Treasury Securities
Fund (the "Custodian
Agreement")
(b)=== - Custodian Agreement between
Union Bank of California and
Hawaiian Trust Company,
Limited, on behalf of New
Asia Growth Fund.
9(a)** - Administration Agreement
between BISYS Fund Services
(formerly The Winsbury
Company Limited Partnership)
and the Registrant, dated as
of October 29, 1993
("Administration Agreement")
(b)= - Amended Schedule A to
Administration Agreement
(c)** - Transfer Agency Agreement
between Administrative Data
Management Corporation and
the Registrant, dated as of
August 17, 1993 ("Transfer
Agency Agreement")
(d)= - Amended Appendix E to
Transfer Agency Agreement
(e)** - Fund Accounting Agreement
between BISYS Fund Services
(formerly, The Winsbury
Service Corporation) and the
Registrant, dated as of
October 29, 1993 ("Fund
Accounting Agreement")
C-3
<PAGE> 285
Exhibit
Number Description
(f)= - Amended Schedule A to the
Fund Accounting Agreement
10** - Opinion and Consent of
Counsel
11 - Consent of Independent
Auditors
12 - Not Applicable
13** - Form of Investment Letter
14 - Not Applicable
15(a)** - Distribution and Shareholder
Service Plan between the
Registrant and BISYS Fund
Services (formerly, The
Winsbury Company), dated as
of October 29, 1993
(b)= - Amended Appendix A to the
Distribution and Shareholder
Service Plan
16(a)== - Schedule of computation of
each performance quotation
provided in the Registration
Statement in response to
Item 22 (relating to Retail
Class Shares of Pacific
Capital Growth Stock Fund,
Growth and Income Fund,
Diversified Fixed Income
Fund, U.S. Treasury
Securities Fund,
Short-Intermediate U.S.
Treasury Fund, Tax-Free
Securities Fund and Tax-Free
Short-Intermediate
Securities Fund).
(b)== - Schedule of computation of
each performance quotation
provided in the Registration
Statement in response to
Item 22 (relating to
Institutional Class Shares
of Pacific Capital Growth
Stock Fund, Growth and
Income Fund, Diversified
Fixed Income Fund, U.S.
Treasury Securities Fund,
Short-Intermediate U.S.
Treasury Fund, Tax-Free
Securities Fund and Tax-Free
Short-Intermediate
Securities Fund).
16(c)=== - Schedule of computation of
each performance quotation
provided in the Registration
Statement in response to
Item 22 (relating to
Institutional and Retail
Class Shares of New Asia
Growth Fund).
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<PAGE> 286
Exhibit
Number Description
------ -----------
17(a) Financial Data Schedule for
Diversified Fixed Income
Fund -- Retail Class
(b) Financial Data Schedule for
Diversified Fixed Income
Fund -- Institutional Class
(c) Financial Data Schedule for
Growth and Income Fund --
Retail Class
(d) Financial Data Schedule for
Growth and Income
Fund -- Institutional Class
(e) Financial Data Schedule for
Growth Stock Fund -- Retail
Class
(f) Financial Data Schedule for
Growth Stock Fund --
Institutional Class
(g) Financial Data Schedule for
New Asia Growth Fund --
Retail Class
(h) Financial Data Schedule for
New Asia Growth Fund --
Institutional Class
(i) Financial Data Schedule for
Short Intermediate U.S.
Treasury Securities Fund --
Retail Class
(j) Financial Data Schedule for
Short Intermediate U.S.
Treasury Securities Fund --
Institutional Class
(k) Financial Data Schedule for
Tax-Free Securities Fund --
Retail Class
(l) Financial Data Schedule for
Tax-Free Securities
Fund -- Institutional Class
(m) Financial Data Schedule for
Tax-Free Short Intermediate
Securities Fund -- Retail
Class
(n) Financial Data Schedule for
Tax-Free Short Intermediate
Securities Fund --
Institutional Class
(o) Financial Data Schedule for
U.S. Treasury
Securities Fund -- Retail
Class
(p) Financial Data Schedule for
U.S. Treasury Securities Fund
--Institutional Class
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<PAGE> 287
18 Not applicable.
19 Other Exhibits
- Power of Attorney
For Trustees and certain Officers:
Irimga McKay
Deborah G. Patterson
Douglas Philpotts
Richard W. Gushman, II
Stanley W. Hong
Russell G. Okata
Oswald K. Stender
Craig Warren
- ----------------------------------
* Refiled electronically herein. Initially filed as an exhibit to
Registrant's Registration Statement on Form N-1A (File No. 33-57684),
filed on January 29, 1993.
** Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A, filed on February 28, 1994.
*** Refiled electronically herein. Initially filed as an exhibit to
Pre-Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A, filed on July 8, 1993.
+ Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 2 to Registrant's Registration Statement
on Form N-14, filed on October 21, 1994.
++ Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 4 to Registrant's Registration Statement
on Form N-1A, filed on December 28, 1994.
= Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 5 to Registrant's Registration Statement
on Form N-1A, filed on April 7, 1995.
== Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 5 and Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, filed on April 7,
1995 and July 14, 1995, respectively.
=== Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 6 to Registrant's Registration Statement
on Form N-1A, filed on July 14, 1995.
++ Refiled electronically herein. Initially filed as an exhibit to
Post-Effective Amendment No. 7 to Registrant's Registration Statement
on Form N-1A, filed on November 2, 1995.
C-6
<PAGE> 288
Item 25. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
No person is controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities.
--------------------------------
As of October 31, 1996, the number of record holders of each
class of securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Fund Number of Record Holders
---- ------------------------
<S> <C>
Balanced Fund 0
-------------
Retail Class 0
Institutional Class
Diversified Fixed Income Fund
-----------------------------
Retail Class 122
Institutional Class 101
Growth and Income Fund
----------------------
Retail Class 238
Institutional Class 140
Growth Stock Fund
-----------------
Retail Class 566
Institutional Class 136
New Asia Growth Fund
--------------------
Retail Class 447
Institutional Class 146
Short Intermediate U.S.
Treasury Securities Fund
------------------------
Retail Class 31
Institutional Class 74
Tax-Free Securities Fund
------------------------
Retail Class 11
Institutional Class 89
Tax-Free Short Intermediate
Securities Fund
---------------
Retail Class 15
Institutional Class 47
U.S. Treasury Securities Fund
-----------------------------
Retail Class 70
Institutional Class 12
</TABLE>
Item 27. Indemnification.
---------------
Section 5.3 of Article V of the Registrant's Declaration of Trust
provides:
C-7
<PAGE> 289
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) The Trustees shall provide for indemnification by the
Trust (or by the appropriate Series thereof) to the fullest extent
permitted by law of every person who is, or has been, a Trustee or
officer of the Trust or any Series of the Trust against all liability
and against all expenses reasonably incurred or paid by him in
connection with
any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Trustee
or officer of the Trust or of any Series and against amounts paid or
incurred by him in the settlement thereof;
(ii) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgements, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or Officer:
(i) against any liability to the Trust or the Shareholders
by reason of a final adjudication by the court or other body before
which the proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i)
resulting in a payment by a Trustee or officer, unless there has been
a determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition; or
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a majority
of the Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(C) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or
officer may now or hereafter be entitled, shall continue as to a
person who has ceased to be such Trustee or officer and shall inure to
the benefit of the heirs, executors, administrators and assigns of
such a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than Trustees
and officers may be entitled by contract or otherwise under law.
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<PAGE> 290
(D) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 5.3 may be advanced by the Trust prior
to final disposition thereof upon receipt of any undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this
Section 5.3, provided that either:
(i) such undertaking is secured by a surety
bond or some other appropriate security provided by
the recipient, or the Trust shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Disinterested
Trustees acting on the matter (provided that a
majority of the Disinterested Trustees act on the
matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of
readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled
to indemnification.
As used in this Section 5.3, a
"Disinterested Trustee" is one who is neither (i) an
"Interested Person" of the Trust (including anyone
who has been exempted from being an "Interested
Person" by any rule, regulation or order of the
Commission), as defined in the 1940 Act, nor (ii)
involved in the claim, action, suit or proceeding.
Item 28. Business and Other Connections of Investment Adviser and Sub-Adviser.
---------------------------------------------------------------------
a. INVESTMENT ADVISER. Hawaiian Trust Company, Limited serves as
investment adviser to all of the Registrant's investment portfolios.
To the knowledge of Registrant, none of the trustees or executive
officers of Hawaiian Trust Company, Limited except those set forth below, is or
has been at any time during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial nature. Set forth
below are the names and principal businesses of the directors and executive
officers of Hawaiian Trust Company, Limited who are or during the past two
fiscal years have been engaged in any other business, profession, vocation or
employment of a substantial nature for their own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal Business(es) During at
Name Position(s) Least the Last Two Fiscal Years
- ---- ----------- -------------------------------
<S> <C> <C>
William E. Aull Director President, Hawaii Pacific University
Owner/Manager, various Australian cattle/sheep
ranches.
Herbert M. Richards, Jr. Director President and Manager, Kahua
Ranch, Ltd.
K. Tim Yee Director President and Chief Executive
Officer Queen Emmu Foundation
Frank McGee Senior Vice Riggs National Bank
President
</TABLE>
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<PAGE> 291
b. Sub-Adviser. Credit Lyonnais International Asset Management (HK)
Limited ("Credit Lyonnais") serves as sub-adviser to New Asia Growth Fund.
To the knowledge of Registrant, none of the trustees or
executive officers of Credit Lyonnais, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature. Set forth below are
the names and principal businesses of the directors and executive officers of
Credit Lyonnais who are or during the past two fiscal years have been engaged in
any other business, profession, vocation or employment of a substantial nature
for their own account or in the capacity of director, officer, employee, partner
or trustee.
<TABLE>
<CAPTION>
Principal Business(es) During at
Name Position(s) Least the Last Two Fiscal Years
- ---- ----------- -------------------------------
<S> <C> <C>
Ghassan Alain Director Member of the General Management
Hugues Hindie Committee of Credit Lyonnais S.A.;
Head of Asset Management and
Investor Relations Division
Thomas Douglas Tremayne Director Managing Director of CLIAM (HK),
Waring Ltd.
David Peter Wong Director Group Finance Director of CLIAM
(HK), Ltd.
Kim Teo Poh Jin Director Managing Director of CLIAM
Singapore
Henry Dominic Chicheley Director Group Investment Director of
Thornton CLIAM (HK), Ltd.
David Charles Robert Director Director of CLIAM North America
Harding
Paul Mack Director Managing Director of CLIAM Hong
Kong
</TABLE>
Item 29. Principal Underwriter.
----------------------
(a) BISYS Fund Services (formerly known as The Winsbury
Company) acts as distributor and administrator for the Registrant. BISYS Fund
Services also distributes the securities of The Riverfront Funds, Inc., the MMA
Praxis Mutual Funds, the MarketWatch Funds, The Coventry Group, the Conestoga
Family of Funds, the Pacific Capital Funds, The Parkstone Group of Funds, The
HighMark Group, The Sessions Group, the American Performance Funds, AmSouth
Mutual Funds, The Victory Portfolios, The ARCH Tax-Exempt Trust, the Qualivest
Funds, the Summit Investment Trust, The M.S.D.&T Funds, Inc. and The ARCH Fund,
Inc., each of which is a management investment company. The parent of BISYS Fund
Services, Inc. (the sole general partner of BISYS Fund Services) is The BISYS
Group, Inc.
C-10
<PAGE> 292
(b) The following are the directors, officers and
partners of BISYS Fund Services:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Addresses BISYS Fund Services the Registrant
- ------------------ ------------------- --------------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, NJ 07424
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Avenue
Columbus, OH 43219
WC Subsidiary Corporation Limited Partner None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
---------------------------------
Persons maintaining physical possession of accounts, books and
other documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are as follows:
(1) Pacific Capital Funds
3435 Stelzer Avenue
Columbus, OH 43219-3035
Attention: Secretary
(Registrant)
(2) Hawaiian Trust Company, Limited
Financial Plaza of the Pacific
111 S. King Street
Honolulu, Hawaii 96813
Attention: Trust Investments
(Investment Adviser)
(3) BISYS Fund Services
3435 Stelzer Avenue
Columbus, OH 43219-3035
(Manager, Administrator and Distributor)
C-11
<PAGE> 293
(4) Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
(Declaration of Trust, Bylaws, Minute Book)
(5) Credit Lyonnais International Asset Management
(HK) Limited
8 Connaught Place
Hong Kong
Item 31. Management Services.
--------------------
Other than as set forth under the captions "Management of the
Funds" and "Other Information" in the Prospectus constituting Part A of this
Registration Statement and "Management" and "Custodian" in the Statement of
Additional Information constituting Part B of this Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
-------------
(a) Insofar as indemnification for liability
arising under the Securities Act of 1933 may
be permitted to trustees, officers and
controlling persons of the Registrant
pursuant to the provisions set forth above
in response to Item 27, or otherwise, the
Registrant has been advised that in the
opinion of the Securities and Exchange
Commission such indemnification is against
public policy as expressed in such Act and
is, therefore, unenforceable. In the event
that a claim for indemnification against
such liabilities (other than the payment by
the Registrant of expenses incurred or paid
by a trustee, officer or controlling person
of the 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, the 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 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.
(b) Registrant undertakes to hold a special
meeting of its shareholders for the purpose
of voting on the question of removal of a
trustee or trustees if requested in writing
by the holders of at least 10% of the
Registrant's outstanding voting securities,
and to assist in communicating with other
shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
(C) Registrant undertakes to furnish each person
to whom a prospectus is delivered with a
copy of Registrant's latest annual report to
shareholders, upon request and without
charge.
C-12
<PAGE> 294
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 the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of San Diego, and State of
California on the 21st day of November, 1996.
PACIFIC CAPITAL FUNDS
By: /s/ Irimga McKay
-------------------
Irimga McKay
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date(s) indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------------------------------------------------
<S> <C> <C>
/s/Irimga McKay President November 21, 1996
- ----------------------------- (Principal Executive
(Irimga McKay) Officer)
* Treasurer (Principal
- ---------------------------- Financial and Accounting
(Craig Warren) Officer)
* Trustee and Chairman
- ----------------------------
(Deborah G. Patterson)
* Trustee
- ----------------------------
(Douglas Philpotts)
* Trustee
- ----------------------------
(Richard W. Gushman, II)
* Trustee
- ----------------------------
(Stanley W. Hong)
* Trustee
- ----------------------------
(Russell K. Okata)
* Trustee
- ----------------------------
(Oswald K. Stender)
*By: /s/Irimga McKay November 21, 1996
- ----------------------------
(Irimga McKay
Attorney-in-Fact)
</TABLE>
C-13
<PAGE> 295
EXHIBIT INDEX
11 Consent of Independent Auditors
17(a) Financial Data Schedule for
Diversified Fixed Income Fund--Retail Class
(b) Financial Data Schedule for Diversified
Fixed Income Fund -- Institutional Class
(c) Financial Data Schedule for Growth and
Income Fund -- Retail Class
(d) Financial Data Schedule for Growth and
Income Fund -- Institutional Class
(e) Financial Data Schedule for Growth Stock
Fund -- Retail Class
(f) Financial Data Schedule for Growth Stock
Fund -- Institutional Class
(g) Financial Data Schedule for New Asia Growth
Fund -- Retail Class
(h) Financial Data Schedule for New Asia Growth
Fund -- Institutional Class
(i) Financial Data Schedule for Short
Intermediate U.S. Treasury Securities Fund
-- Retail Class
(j) Financial Data Schedule for Short
Intermediate U.S. Treasury Securities Fund
-- Institutional Class
(k) Financial Data Schedule for Tax-Free
Securities Fund -- Retail Class
(l) Financial Data Schedule for Tax-Free
Securities Fund -- Institutional Class
(m) Financial Data Schedule for Tax-Free Short
Intermediate Securities Fund -- Retail Class
(n) Financial Data Schedule for Tax-Free Short
Intermediate Securities Fund --
Institutional Class
(o) Financial Data Schedule for U.S. Treasury
Securities Fund -- Retail Class
(p) Financial Data Schedule for U.S. Treasury
Securities Fund --Institutional Class
19 Power of Attorney
C-14
<PAGE>
PACIFIC CAPITAL FUNDS
DECLARATION OF TRUST
Dated as of October 30, 1992
<PAGE>
DECLARATION OF TRUST
OF
PACIFIC CAPITAL FUNDS
Dated as of October 30, 1992
THE DECLARATION OF TRUST of Pacific Capital Funds is made as of this
30th day of October, 1992, by the party signatory hereto, as trustee (such
person, so long as he shall continue in office in accordance with the terms of
this Declaration of Trust, and all other persons who at the time in question
have been duly elected or appointed as trustees in accordance withe the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold, in
trust, all money and property contributed to the trust fund to manage and
dispose of the same for the beneficial interest issued hereunder and subject to
the provisions hereof, to wit:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1.Name. The name of the trust created hereby is Pacific
Capital Funds.
Section 1.2.Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "Bylaws" means the bylaws referred to in Section 3.9 hereof, as
from time to time amended.
(b) "Class" means the Shares representing the beneficial interests
in a class of a Series which is established and designated in Section 6.1 hereof
or which may be established and designated from time to time by the Trustees
pursuant to that Section. References to Series
1
<PAGE>
throughout this Declaration shall be deemed to refer to the Classes thereof, as
the context may require.
(c) The terms "Commission," "Affiliated Person" and "Interested
Person" have the meanings given them in the 1940 Act.
(d) "Custodian" means any Person other than the Trust who has
custody of any Trust Property as required by ss. 17(f) of the 1940 Act, but does
not include a system for the central handling of securities described in said
ss. 17(f).
(e) "Declaration" means this Declaration of Trust as amended from
time to time. Reference in this Declaration of Trust to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(f) "Distributor" means the distributor of the Shares of the Trust
or a Series or Class pursuant to the contract(s) described in Section 4.2
hereof.
(g) "Fundamental Policies" shall mean the investment restrictions
set forth in the Prospectus and designated as fundamental investment
restrictions therein.
(h) "Investment Adviser" means the investment adviser to the Trust
or a Series or Class pursuant to the contract(s) described in Section 4.1
hereof.
(i) "Majority Shareholder Vote" means the vote of the holders of a
majority of Shares of the Trust, or of a Class or Series, as the case may be,
which shall consist of: (i) a majority of Shares of the Trust, or of a Class or
Series, as the case may be, represented in person or by proxy and entitled to
vote at a meeting of Shareholders at which a quorum of the Trust, or of a Class
or Series, as the case may be, as determined in accordance with the Bylaws, is
present; (ii) a majority of Shares of the Trust, or of a Class or Series, as the
case may be, issued and outstanding and entitled to vote when action is taken by
written consent of Shareholders of the Trust, or of a Class or Series, as the
case maybe; or (iii) a "majority of the outstanding voting securities" of the
Trust, or of a Class or Series, as the case may be, as that phrase is defined in
the 1940 Act, when action is taken by Shareholders of the Trust, or of a Class
or Series, as the case may be, with respect to approval of an investment
advisory or management contract or an underwriting or distribution agreement or
continuance thereof or amendment thereto.
(j) "Majority of the Trustees" means, as the context directs, a
majority of the Trustees then holding office or a majority of the Trustees
present and voting at a meeting in which a quorum is present and voting.
(k) "1940 Act" means the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended from time to time.
2
<PAGE>
(l) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities and governments and agencies and political subdivisions
thereof.
(m) "Prospectus" means the prospectus(es) (including the statement
of additional information to the extent incorporated by reference therein)
constituting part of the Registration Statement of Trust under the Securities
Act of 1933, as amended, as such prospectus(es) may be amended or supplemented
and filed with the Commission from time to time.
(n) "Registration Statement" means the registration statement of the
Trust under the Securities Act of 1933, as amended, as such registration
statement may be in effect from time to time.
(o) "Series" means the Shares representing the beneficial interests
in one of the separately managed components of the assets of the Trust which is
established and designated in Section 6.1 hereof or which may be established and
designated from time to time by the Trustees pursuant to that section and which
may be divided into more than one Class.
(p) "Shareholder" means a record owner of outstanding Shares.
(q) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the shares
of any and all Series or Classes which may be established by the Trustees, and
includes factions of Shares as well as whole Shares.
(r) "Transfer Agent" means the transfer agent of the Trust or a
Series or Class pursuant to the contract(s) described in Section 4.3 hereof.
(s) "Trust" means Pacific Capital Funds.
(t) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(u) "Trustees" means the persons or persons who have signed the
Declaration, so long as they shall continue in office in accordance with the
provisions hereof, and all other persons who may from time to time be duly
elected, qualified and serving as Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
3
<PAGE>
Section 2.1.Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that at all times after the
Registration Statement of the Trust first becomes effective, the number of
Trustees shall in no event be less than three (3) nor more than fifteen (15).
Section 2.2. Election and Term. The Trustees shall be elected by a
Majority Shareholder Vote following the establishment of the Trust. The Trustee
shall have the power to set and alter the terms of office of the Trustees, and
they may at any time lengthen or lessen their own terms or make their terms of
unlimited duration, subject to the resignation and removal provisions of Section
2.3 hereof. In the absence of any action to otherwise define the term of office
of the Trustees, their terms shall be of unlimited duration, subject to the
resignation and removal provisions of Section 2.3 hereof. Subject to Section
16(a) of the 1940 Act, the Trustees may elect their own successors and may,
pursuant to Section 2.4 hereof, appoint Trustees to fill vacancies. The Trustees
may adopt Bylaws not inconsistent with this Declaration or any provision of law
to provide for election or removal of Trustees by Shareholders at such time or
times as the Trustees shall determine to be necessary, advisable or required by
law.
Section 2.3. Resignation and Removal. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided that the
aggregate number of Trustees after such removal shall not be less than the
number required by Section 2.1 hereof) with cause, by the action of two-thirds
of the remaining Trustees. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property or property of any Series of
the Trust held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustees, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence. Each Trustee, by assuming the office of
Trustee, is deemed to give to the other Trustees an irrevocable power of
attorney to execute on his behalf such documents as the remaining Trustees shall
require as provided in the second preceding sentence.
Section 2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annual the
Declaration, to terminate the Trust or any series of the Trust or to revoke any
existing agency created pursuant to the terms of the Declaration. In the case of
an existing vacancy, including a vacancy existing by reason of an increase in
the number of Trustees, subject to the provisions of Section 16(a) of the 1940
Act, the remaining Trustees, or prior to the public offering of Shares of the
Trust, if only one Trustee shall then remain in office, the remaining Trustee,
shall fill such vacancy by the appointment of such other person as they or
4
<PAGE>
he, in their or his discretion shall see fit, made by a written instrument
signed by a majority of the remaining Trustees or by the remaining Trustee, as
the case may be. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of such
vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted to
the Trustees under the Declaration except as herein otherwise expressly
provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the property and business of the Trust and of any Series of the
Trust to the same extent as if the Trustees were the sole owners of such
property and business in their own right, but with such powers of delegation as
may be permitted by the Declaration. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign governments, and to do all such other things
and execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust or any Series or Class of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of the Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
5
<PAGE>
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of negotiable or non-negotiable instruments, debt
and equity securities, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements, options and other
securities of any kind, including, without limitation, those issued, guaranteed
or sponsored by any and all Persons including, without limitation, states,
territories and possessions of the United States, the District of Columbia and
any of the political subdivisions, agencies or instrumentalities thereof, and by
the United States Government or its agencies or instrumentalities, or
international instrumentalities, or by any bank or savings institution, or by
any corporation or organization organized under the laws of the United States or
of any state, territory or possession thereof, and of corporations, or
organizations organized under foreign laws, or in "when issued" contracts for
any such securities, or retain assets of the Trust or any Series thereof in cash
and from time to time change the investments of the assets of the Trust or any
Series thereof; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of every kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one ore more
persons, firms, associations or corporations to exercise any of said rights,
powers and privileges in respect of any said instruments, and the Trustees shall
be deemed to have the foregoing powers with respect to any additional securities
or other assets in which Trust or any Series of the Trust may invest should the
Fundamental Policies or other investment policies disclosed in the Prospectus so
authorize either explicitly or by implication.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all of the Trust Property,
including the property of any Series of the Trust, shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property or property of any series of the Trust to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust or the Series, or in the name of any other Person as nominee, on such
terms as the Trustees may determine, provided that the interest of the Trust
therein is appropriately protected. The right, title and interest of the
Trustees in the Trust Property and the property of each Series of the Trust
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee he shall automatically cease to
have any right, title, or interest in any of the Trust Property or the property
of any Series of the Trust, and the right, title and interest of such Trustees
in all such property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective without the requirement that
conveyancing documents be executed and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees
shall have the
6
<PAGE>
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Article VII, VIII and IX and Section 6.9 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular Series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by laws of the
Commonwealth of Massachusetts governing business corporations.
Section 3.5. Borrowing Money; Lending Trust Assets. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets of
the Trust or any Series thereof, to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any other Person and to
lend Trust or Series assets.
Section 3.6. Delegation; Committees.
(a) The Trustees shall have power, consistent with their continuing
exclusive authority over the management of the Trust and the Trust Property, to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
(b) Notwithstanding any provisions of Section 3.9 of the
Declaration, and in addition to such provisions or any other provision of this
Declaration or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
except with respect to:
(i) The approval of any action for which Shareholder approval is
required by law, by this Declaration, by the Bylaws of the Trust or by
other Trustee action unless otherwise required by applicable law;
(ii) The filling of vacancies in the office of a Trustee or in any
committee;
(iii) The fixing of compensation of the Trustees for serving as
Trustees or on any committee;
(iv) The amendment or repeal of this Declaration or the Bylaws or
the adoption of new provisions for this Declaration or new Bylaws;
(v) The amendment or repeal of any resolution of the Trustees that
by its express terms is not so amendable or repealable;
7
<PAGE>
(vi) A dividend or distribution to the Shareholders of the Trust or
any Series thereof, except at a rate, in a periodic amount or within a
price range determined by the Trustees; or
(vii) The establishment of other committees of the Trustees or the
appointment of the members thereof.
Section 3.7. Collection and Payment. The Trustees shall have power
to collect all property due to the Trust or any Series of the Trust to pay all
claims, including taxes, against the Trust Property or the property of any
Series of the Trust; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property or the property of any Series of the Trust; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust or any Series of the Trust; and to enter into
releases, agreements and other instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur
and pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Declaration, and to pay
reasonable compensation from the funds of the Trust and any Series of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; Bylaws. Except as otherwise provided
herein or in the Bylaws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
telephone conference call or similar communications equipment by means of which
all persons participating in the meeting can hear each other, or by written
consent of all of the Trustees. The Trustees may adopt Bylaws not inconsistent
with this Declaration to provide for the conduct of the business of the Trust
and may amend or repeal such Bylaws to the extent such power is not reserved to
the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have the
power to: (a) employ or contract with such Persons as the Trustees may be deem
desirable for the transaction of the business of the Trust to include, by way of
illustration, contracting with one or more Persons to provide discretionary
investment management of the Trust Property and the various Series of the Trust;
(b) enter into joint ventures, partnerships and any other combination or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate each agents or
employees as they consider appropriate, and appoint from their own number or
otherwise, and terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property or the property of the
appropriate Series of the Trust, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted to be
8
<PAGE>
taken by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, Share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust has dealings, including the Investment
Manager, Distributor, Transfer Agent and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust or any Series
of the Trust and the method by which its accounts shall be kept; (i) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust; and (j) in general, to carry
on any other business in connection with or incidental to any of the foregoing
powers, to do everything necessary, suitable or proper for the accomplishment of
any purpose or the attainment of any object or the furtherance of any of the
foregoing, either alone or in association with others, and to do every other act
or thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
Section 3.11. Principal Transactions. Except in transactions
permitted by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions of
any agreement to which the Trust is a party, the Trustees shall not, on behalf
of the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust, to any Trustee or
officer of the Trust or the firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with the Investment
Manager, Distributor or Transfer Agent or with any Affiliated Person of such
person; but the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
9
<PAGE>
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to approval by Majority
Shareholder Vote of the Trust or the affected Series or Class, the Trustees may
in their discretion from time to time enter into investment advisory or
management contract(s) whereby the other party to such contract(s) shall
undertake to furnish the Trust or any Series or Class thereof such management,
investment, advisory, administration, accounting, legal, statistical and
research facilities and services, promotional activities, and such other
facilities and services, if any, as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine. Notwithstanding any provisions of the Declaration,
the Trustees may authorize the Investment Manager (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities or other assets of
the Trust or any Series or Class thereof on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Manager and all
without further action by the Trustees. Any such purchases, sales, loans and
exchanges so effected by an officer, employee or Trustee shall be deemed to have
been authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders of the Trust or of the affected
Series or Class in order to submit to a vote of Shareholders at such meeting the
approval of continuance of any such investment advisory or management
contract(s).
Section 4.2. Distributor. The Trustees may in their discretion from
time to time enter into contracts(s), providing for the sale of Shares to net
the Trust or the applicable Series or Class thereof not less than the net asset
value per Share (as described in Article VIII hereof) and pursuant to which the
Trust or Series or Class thereof may either agree to sell the Shares to the
other party to the contract or appoint such other party its sales agent for such
Shares. In each case, the contract shall be on such terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of this Article IV, including, without limitation, the provision for the
repurchase or sale of shares of the Trust or any Series or Class thereof by such
other party as principal or as agent of the Trust.
Section 4.3. Transfer Agent. The Trustees may in their discretion
from time to time enter into transfer agency and shareholder service contract(s)
whereby the other party to such contract(s) shall undertake to furnish transfer
agency and shareholder services to the Trust or any Series of Class thereof. The
contract(s) shall have such terms and conditions as the Trustees may in their
discretion determine which are not inconsistent with the Declaration. Such
services may be provided by one or more Persons.
Section 4.4. Parties to Contract. Any contract of the character
described in Section 4.1, 4.2 or 4.3 of this Article IV and any other contract
may be entered into with any Person, although one or more of the Trustees or
officers of the Trust may be an officer, director,
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trustees, Shareholder or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust or
any Series thereof under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article IV.
The same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2 and 4.3 above or otherwise, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts referred to in this Section 4.4.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholder, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property, including the property of any Series or Class
of the Trust, or the acts, obligations or affairs of the Trust or any Series or
Class thereof. Every note, bond, contract, instrument, certificate, share or
undertaking or any other act executed or done by or on behalf of the Trust shall
be deemed to have been done by the Trustees solely in their capacities as
Trustees. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than the Trust or
applicable Series or Class thereof or its Shareholders, in connection with Trust
Property or the property of any Series or Class thereof or the affairs of the
Trust or any Series or Class thereof, save only that arising from bad faith,
willful misfeasance, gross negligence or reckless disregard of his duty to such
Person; and all such Persons shall look solely to the Trust Property or the
property of the appropriate Series or Class of the Trust for satisfaction of
claims of any nature arising in connection with the affairs of the Trust or any
Series or Class thereof. If any Shareholder, Trustee, officer, employee or
agent, as such, of the Trust is made a party to any suit or proceeding to
enforce any such liability, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each Shareholder harmless
from and against all claims by reasons of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonable incurred by him in connection with any such claim or
liability and, upon request, shall assume the defense of any such claim,
provided that any expenses incurred by the Trust in connection with any such
indemnification, reimbursement or assumption shall be paid solely out of the
funds and property of the Series or Class of the Trust. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation event though not specifically provided herein.
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Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
Section 5.3. Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) The Trustees shall provide for indemnification by the Trust (or
by the appropriate Series thereof) to the fullest extent permitted by law
of every person who is, or has been, a Trustee or officer of the Trust or
any Series of the Trust against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer of the Trust or of
any Series and against amounts paid or incurred by him in the settlement
thereof;
(ii) The words "claim", "action", "suit", or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal, or
other, including appeals), actual or threatened; and the words "liability"
and "expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason
of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) resulting
in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition; or
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(B) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a majority of
the Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of defense to any
claim, action, suit or proceeding of the character described in paragraph (a) of
this Section 5.3 may be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine,
based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be bound as entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one who is
neither (i) an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation or
order of the Commission), as defined in the 1940 Act, nor (ii) involved in
the claim, action, suit or proceeding.
Section 5.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for performance of any of his
duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
Insurance. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate,
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Share, other security of the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under the Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking made or issued by
the Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations of
any such instrument are not binding upon any of the Trustees or Shareholders,
individually, but bind only the Trust Property or the property of the
appropriate Series of the Trust, and may contain any further recital which they
may deem appropriate, but the omission of such recital shall not operate to bind
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, its Shareholders,
Trustees, officers, employees and agents in such amounts as the Trustees shall
deem adequate in their sole judgment.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his or her duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel or upon reports made to the
Trust by any of its officers or employees or by the Investment Manager, the
Distributor, Transfer Agent, consultants selected with reasonable care by the
Trustees, or officers or employees of the Trust, regardless or whether such
counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferrable shares of beneficial interest, no
par value. The number of shares of beneficial interest authorized hereunder is
unlimited. Initially there shall be authorized eight (8) Series of Shares,
designated as the "U.S. Treasury Bond Series," "Intermediate Bond Series," the
"Diversified Bond Series," the "Tax-Free Intermediate Bond Series," the "Tax
Free Bond Series," the "Growth Stock Series," the "Balanced Series" and the
"Income Stock Series." Each Share of each Series shall represent an equal
proportionate interest in the Trust with each other Share. Each Series shall
consist of two classes, a "Retail Class" and an "Institutional Class." Subject
to the provisions of Section 6.9 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate, independently managed portfolios) and additional Classes of shares
within any Series. All Shares issued hereunder including, without limitation,
Shares issued in connection with a dividend in Shares or a split in Shares,
shall be fully paid and nonassessable.
Section 6.2. Rights of Shareholders.
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(a) The ownership of the Trust Property and the property of each
Series of the Trust of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
(or Series thereof) nor can they be called upon to assume any losses of the
Trust (or Series thereof) or suffer an assessment of any kind by virtue of their
ownership of Shares. The Shares shall be personal property giving only the
rights specifically set forth in the Declaration. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any Series of Shares.
(b) Notwithstanding anything elsewhere contained in this Declaration
or in the Bylaws of the Trust, the Shareholders of the Trust shall have such
rights, and the Trust, the Board of Trustees, and the Trustees shall have such
obligations, as would exist if the Trust were a common law trust covered by
Section 16(c) of the 1940 Act or any successor to Section 16(c). In the event
that the Trust has outstanding two or more Series of Shares pursuant to Section
6.9 below, each such Series shall be considered as if it were a separate common
law trust covered by Section 16(c). However, the Trust may at any time or from
time to time apply to the Commission for one or more exemptions from all or part
of Section 16(c) and, if an exemptive order or orders are issued by the
Commission, such order or orders shall be deemed part of Section 16(c) for the
purposes of this Section 6.2.
Section 6.3. Trust Only. It is the intention of the Trustees to
create only the relationship of Trustees and beneficiary between the Trustees
and each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then-issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times (including,
without limitation, each business day), and on such terms as the Trustees may
deem best, and may in such manner acquire other assets (including the
acquisition of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or fractions
of a Share as described in the Prospectus.
Section 6.5. Register of Shares. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by each of them and a record of all transfers thereof. Such register may be
in written form or any other form capable of being converted into written
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form within a reasonable time for visual inspection. Such Register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
Bylaws provided, until he had given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but, until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by the laws of
the Commonwealth of Massachusetts.
Section 6.7. Notices. Any and all notices to which any Shareholder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust.
Section 6.8. Voting Powers. The Shareholders shall have power to
vote only (a) for the election of Trustees as provided in Section 2.2 hereof,
(b) with respect to any investment advisory or management contract as provided
in Section 4.1 hereof, (c) with respect to termination of the Trust or any
Series thereof as provided in Section 9.2 hereof, (d) with respect to any
amendment of the Declaration to the extent and as provided in Section 9.3
hereof, (e) with respect to any merger, consolidation or sale of assets as
provided in Section 9.4 hereof, (f) with respect to incorporation of the Trust
to the extent and as provided in Section 9.5 hereof, (g) to the same extent as
the stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (h) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act or any other law, the
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Declaration, the Bylaws or any registration of the Trust with the Commission (or
any successor agency) or any state, or as and when the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust as of the record date, as determined in accordance with
the Bylaws, shall not be voted and except that the Trustees may, in conjunction
with the establishment of any Series or Classes of Shares, establish conditions
under which the several Series or Classes shall have separate voting rights or
no voting rights. There shall be no cumulative voting in the election of
Trustees. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, the Declaration or the
Bylaws to be taken by Shareholders. The Bylaws may include further provisions
for Shareholders' votes and meetings and related matters.
Section 6.9. Series or Classes of Shares. If the Trustees shall
divide the shares of the Trust into two or more Series or two or more Classes of
any Series, as provided in Section 6.1 hereof, the following provisions shall be
applicable.
(a) All provisions herein relating to the Trust shall apply equally
to each Series of the Trust except as the context otherwise requires.
(b) The number of authorized shares and the number of shares of each
Series or of each Class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or one or more Classes
that may be established and designated from time to time. The Trustees may hold
as treasury Shares (of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series or any class reacquired by the Trust at their discretion from time to
time.
(c) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with respect to
any one or more Series which represents the interest in the assets of the Trust
immediately prior to the establishment of two or more Series and the power of
the Trustees to invest and reinvest assets applicable to any other Series shall
be as set forth in the instrument of the Trustees establishing such Series which
is hereinafter described.
(d) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or Class of all purposes, subject only to the
rights of creditors of such Series or Class and except as may otherwise be
required by applicable tax laws, and shall be so recorded upon the books of
account of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any
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particular Series or Class, the Trustees shall allocate them among any one or
more of the Series or Classes established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the shareholders of all Series or Classes for all purposes.
(e) The assets belonging to each particular Series or Class shall be
charged with the liabilities of the Trust in respect of that Series or Class and
all expenses, costs, charges and reserves attributable to that Series or Class,
and any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series or
Class shall be allocated and charged by the Trustees to an among any one or more
of the Series or Class established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the holders of Shares of
all Series and Classes for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to determine which
items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders. The assets of a particular Series or Class of the Trust shall,
under no circumstances, be charged with liabilities attributable to any other
Series or Class of the Trust. All persons extending credit to, or contracting
with or having any claim against a particular Series or Class of the Trust shall
look only to the assets of that particular Series or Class for payment of such
credit, contract or claim.
(f) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this Declaration with respect
to any one or more Series or Classes which represents the interests in the
assets of the Trust immediately prior to the establishment of two or more Series
or Classes. With respect to any other Series or Class, dividends and
distributions on Shares of a particular Series or Class may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or resolution adopted only once or with such
frequency as the Trustees may determine, to the holders of Shares of that Series
or Class, from such of the income and capital gains, accrued or realized, from
the assets belonging to that Series or Class, as the Trustees may determine,
after providing for actual and accrued liabilities belonging to that Series or
Class. All evidence and distributions on Shares of a particular Series or Class
shall be distributed pro rata to the Shareholders of that Series or Class in
proportion to the number of Shares of that Series or Class held by such
Shareholders at the date and time of record establishment of the payment of such
dividends or distribution.
(g) Each Share of a Series or Class of the Trust shall represent a
beneficial interest in the net assets of such Series or Class. Each holder of
Shares of a Series or Class shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such Series or
Class. Upon redemption of his Shares or indemnification for liabilities incurred
by reason of his being or having been a Shareholder of a Series or Class, such
Shareholder shall be paid solely out of the funds and property of such Series or
Class of the Trust.
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Upon liquidation or termination of a Series or Class of the Trust, Shareholders,
of such Series or Class shall be entitled to receive a pro rata share of the net
assets of such Series or Class. A Shareholder of a particular Series or Class of
the Trust shall not be entitled to participate in a derivative or class action
on behalf of any other Series or Class or the Shareholders of any other Series
or Class of the Trust.
(h) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled to
vote shall be voted by individual Series, except that (1) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual Series,
and (2) when the Trustees have determined that the matter affects only the
interests of Shareholders o a limited number of Series or Classes, then only the
Shareholders of such Series or Classes shall be entitled to vote thereon. Except
as otherwise provided in this Article VI, the Trustee shall have the power to
determine the designations preferences, privileges, limitations and rights, of
each Class and Series of Shares.
(i) The establishment and designation of any Series or Class of
Shares shall be effective upon the execution by a majority of the ten Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Class, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding of
any particular Series or Class previously established and designated, the
Trustees may be an instrument executed by a majority of their number abolish
that Series or Class and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions.
(a) All outstanding Shares may be redeemed at the option of the
holders thereof, upon and subject to the terms and conditions provided in
Article VII and Article VIII hereto. The Trust shall, upon application of any
Shareholder or pursuant to authorization from any Shareholder, redeem or
repurchase from such Shareholder outstanding Shares for an amount per share
determined by the Trustees in accordance with any applicable laws and
regulations; provided that (a) the Trust, at its option, may exchange cash or a
portion of the assets of the Trust for redeemed shares, (b) such amount per
share shall not exceed the cash equivalent of the proportionate interest of each
share or of any Class or Series of Shares in the assets of the Trust at the time
of the redemption or repurchase and (c) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting such
redemption or repurchase, which may vary as between Series or within a Series in
proportion to the length of time such Shares have been outstanding at such rates
as the Trustees may establish, as and to the extent
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permitted under the 1940 Act, and may, at any time and from time to time,
pursuant to the 1940 Act, suspend such right of redemption. The procedures for
effecting and suspending redemption shall be as set forth in the Prospectus from
time to time. Payment will be made in such manner as described in the
Prospectus. Redemption is conditional upon the Trust having funds legally
available for redemption.
(b) The Trust may declare a suspension of the right of redemption or
postpone the date of payment or redemption for the whole or any part of any
period (i) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, (ii) during which trading in markets the
Trust normally utilizes is restricted, (iii) during which an emergency exists as
a result of which disposal by the Trust of securities owned by it is to
reasonably practical or it is not reasonably practical for the Trust fairly to
determine the value of its net assets, or (iv) during any other period when the
Commission may for the protection of security holders of the Trust by order
permit suspension of the right of redemption or postponement of the date of
payment or redemption; providing that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (ii), (iii),
or (iv) exist. Such suspension shall take effect at such time as the Trust shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event on
the first day on which said stock exchange shall have expired (as to which in
the absence of an official filing by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension. Any suspension as provided above may be with respect to one or
more Series of the Trust, as designated by the Trustees, and may vary as between
Series as to the terms and conditions, if any, of such suspension.
Section 7.2. Redemption of Shares; Disclosure of Holding. If the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of Shares or other securities of the Trust or any Series
thereof has or may become concentrated in any Person to an extent which would
disqualify the Trust or any Series thereof as a regulated investment company
under the Internal Revenue Code, then the Trustees shall have the power by lot
or other means deemed equitable by them (a) to call for redemption by any such
Person a number, or principal amount, of Shares or other securities of the Trust
or the appropriate Series thereof sufficient, in the opinion of the Trustees, to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or Series thereof into conformity with the requirements for such
qualification and (b) to refuse to transfer or issue Shares or other securities
of the Trust or any series thereof to any Person whose acquisition of the Shares
or other securities of the Trust in question would in the opinion of the
Trustees result in such disqualification. The redemption shall be effected at a
redemption price determined in accordance with Section 7.1 hereof.
The holders of Shares or other securities of the Trust shall upon
demand disclose
20
<PAGE>
to the Trustees in writing such information with respect to direct and indirect
ownership of Shares or other securities of the Trust or any Series thereof as
the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code, or to comply with the requirements of any other authority.
Section 7.3. Redemptions of Accounts of Less than Specified Minimum.
The Trustees shall have the power at any time to redeem Shares of any
Shareholder at a redemption price determined in accordance with Section 7.1 if
at such time the aggregate net asset value of the Shares in such Shareholder's
account is reduced by redemption to less than a minimum amount specified in the
Prospectus. A Shareholder will be notified that the value of his account is less
than the minimum amount specified in the Prospectus and allowed at least a
period of time specified in the Prospectus to make an additional investment
before redemption is processed.
Section 7.4. Other Redemptions. The Trust may repurchase Shares of
its capital stock in the open market, or at private sale, or otherwise, out of
funds legally available therefor, at a price based upon but not exceeding the
net asset value last determined prior to the purchase, at such time as may be
established by the Trustees consistent with any applicable rules promulgated by
the Commission under the 1940 Act. The Trust may also reduce the number of
outstanding Shares pursuant to the provisions of Section 8.3 hereof.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each
outstanding Share of each Series or Class of the Trust shall be determined on
such days and at such time or times as the Trustees may determine. The method of
determination of net asset value shall be determined by the Trustees and shall
be as set forth in the Prospectus. The time and method of determination of net
asset value may vary among each Series or Class when the Trustees deem
appropriate. The power and duty to make the daily calculations may be delegated
by the Trustees to the Investment Manager, the Custodian, the Transfer Agent or
such other person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from
time to time distribute ratably among the Shareholders of a Series or Class such
proportion of the net profits, surplus (including paid-in surplus), capital or
assets of such Series or Class held by the Trustees as they may deem proper.
Such distribution may be made in cash or property (including without limitation
any type of obligations of such Series or Class or any assets thereof), and the
Trustees may distribute ratably among the Shareholders additional Shares
issuable hereunder in such manner, at such time and on such terms as the
Trustees may deem proper. Such distributions
21
<PAGE>
may be among the Shareholders of record at the time of declaring a distribution
or among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of a Series or Class or to
meet obligations of a Series or Class, or as they may deem desirable to use in
the conduct of its affairs or to retain for future requirements or extensions of
the business of the Trust or Series or Class. The Trustees may adopt and offer
to Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power,
exercisable in their discretion, to distribute for any fiscal year as ordinary
dividends and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust or the Series to avoid or reduce liability for
taxes.
Section 8.3. Determination of Net Income. The Trustees shall have
the power, which may be exercised or not as the Trustees determine to be
appropriate, to determine the net income of any or all Series or Classes of the
Trust one or more times on any business day and at each such determination or at
such times as it deems appropriate declare such net income as dividends. The
determination of net income and the declaration of dividends shall be as set
forth in the Prospectus. The Trustees shall have full discretion to determine
whether any cash or property received shall be treated as income or as principal
and whether any item of expenses shall be charged to the income or the principal
account, and their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, with the balance,
if any, to be treated as principal.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding
any of the foregoing provisions of this Article VIII, the Trustee may prescribed
in their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to further the interests of the Trust, any Series or Class or the Shareholders
of the Trust or of any Series or Class, or to enable any Series or Class to
comply with any provisions of the 1940 Act, or any rule or regulation
thereunder, including any rule or regulation adopted pursuant to Section 22 of
the 1940 Act by the Commission or any securities association registered under
the Securities Exchange Act of 1934, or any order of exemption issued by said
Commission, all as in effect now or hereafter amended or modified. Without
limiting the generality of the foregoing, the Trustees may establish Classes or
Series of Shares in accordance with Section 6.9 hereof.
ARTICLE IX
22
<PAGE>
DURATION; TERMINATION OF
TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust and each Series and Class of the
Trust shall continue without limitation of time but subject to the provisions of
this Article IX.
Section 9.2. Termination of Trust. (a) The Trust or any Series or
Class thereof may be terminated (i) by the affirmative vote of the holders of
not less than two-thirds of the Shares of the Trust, or the Series or Class as
the case may be, at any meeting of Shareholders, or (ii) by an instrument of
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than two-thirds of such Shares, or (iii) by the
Trustees by written notice to the Shareholders. Upon the termination of the
Trust or any series:
(i) The Trust or Series or Class shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or Series or
Class shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series or Class, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Property or property of such Series
or Class to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and to do
all other acts appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, transfer or other disposition of
all or substantially all the Trust Property or property of such Series or
Class shall require Shareholder approval in accordance with Section 9.4
hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or property of such Series or
Class, in cash or in kind or partly each, among the Shareholders of the
Trust or such Series or Class according to their respective rights.
(b) After termination of the Trust or any Series or Class and
distribution to the Shareholders of the Trust or such Series or Class as herein
provided, a majority of the Trustees shall execute and lodge among the records
of the Trust an instrument in writing setting forth the fact of such
termination. The Trustees shall also cause such instrument to be filed in the
office of the Secretary of the Commonwealth of Massachusetts and in such other
places as may be required by the laws of Massachusetts. The Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or such Series or Class, and the rights and interests of
all Shareholders of the Trust of such Series or Class shall thereupon cease.
23
<PAGE>
Section 9.3. Amendment Procedure.
(a) This Declaration may be amended by a Majority Shareholder Vote,
at a meeting of Shareholders or by written consent without a meeting. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to change the name of the Trust, to establish and designate any
Series or Class of Shares pursuant to Section 6.9(i) hereof, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code, but the Trustees shall not be liable for failing so to do.
(b) No amendment may be made under this Section 9.3 which would
change any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares outstanding and entitled to vote, or by such
other vote as may be established by the Trustees with respect to any Series or
Class of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an amendment
and reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or
any Series may merge or consolidate with, or may acquire the assets of (whether
or not subject to the liabilities of), any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
the Trust Property or the property of any Series thereof, including its good
will, upon such terms and conditions and for such consideration when and as
authorized, at any meeting of Shareholders called for the purpose, by the
affirmative vote of the holders of not less than two-thirds of such Shares, or,
if the proposed action does not affect all Series of the Trust, by such other
vote as may be established by the Trustees with respect to any Series or Class
of Shares; provided, however, that, if such merger, consolidation, sale, lease
or exchange is recommended by the Trustees, a Majority Shareholder Vote shall be
sufficient
24
<PAGE>
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
Section 9.5. Incorporation. Notwithstanding the requirements of
Section 9.4 above, with approval of a Majority Shareholder Vote, or by such
other vote as may be established by the Trustees with respect to any Series or
Class of Shares, the Trustees may cause to be organized or assist in organizing
a corporation or corporations under the laws of any jurisdiction or trust,
partnership, association or other organization to take over all of the Trust
Property or the property of any Series thereof or to carry on any business in
which the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property or the property of such Series to any
such corporation, trust, association or organization in exchange for the Shares
or other securities thereof or otherwise, and to lend money to, subscribe for
the Shares or other securities of, and enter into any contracts with any such
corporation, trust, partnership, association or organization in which the Trust
holds or is about to acquire Shares or any other interest. The Trustees may also
cause a merger or consolidation between the Trust (or any Series thereof) or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.
ARTICLE X
Reports to Shareholders
The Trustees shall at least semi-annually submit to the Shareholders
a written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
Miscellaneous
Section 11.1. Filing. This Declaration and any amendment hereto
shall be filed in the office of the Secretary of the Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee or by the Secretary or any
Assistant Secretary of the Trust stating that such action was duly taken in a
manner provided herein, and unless such amendment or such certificate sets forth
some later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
25
<PAGE>
instrument all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 11.2. Principal Places of Business and Resident Agent. The
principal executive office of the Trust is fixed and located at 1900 East
Dublin-Granville Road, Columbus, Ohio 43229. The resident agent in the
Commonwealth of Massachusetts for the Trust shall be CT Corporation System
located at 2 Oliver Street, Boston, Massachusetts 02109. The Trustees shall have
full power and authority to change from time to time the resident agent and
location of the principal executive office.
Section 11.3. Governing Law. This Declaration is executed by the
Trustees with reference to the laws of the Commonwealth of Massachusetts, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to the laws of said
Commonwealth, notwithstanding any Massachusetts law governing choice of law
which may require the construction of this Declaration in accordance with the
laws of another state or jurisdiction.
Section 11.4. Counterparts. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5. Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary of the Trust, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any Bylaws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
tot he affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustee and their successors.
26
<PAGE>
Section 11.6. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of the Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
affect only such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provisions of the
Declaration in any jurisdiction.
27
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the date first above written.
/s/ J. David Huber
---------------------------------
J. David Huber
Sole Trustee
1900 East Dublin-Granville Road
Columbus, Ohio 43229
28
<PAGE>
STATE OF OHIO )
) ss.
COUNTY OF FRANKLIN )
On this 29th day of October, 1992, before me, a Notary Public in and
for said State, duly commissioned and sworn, personally appeared J. David Huber,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to this instrument, and acknowledged
to me that he subscribed his name on the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal on the date in this certificate first above written.
[SEAL] /s/ Elizabeth A. Berry
---------------------------
Notary Public
Comm. Exp. 3/25/93
29
<PAGE>
AMENDMENT NO. 1 TO DECLARATION OF TRUST
OF
PACIFIC CAPITAL FUNDS
The undersigned Secretary of the Pacific Capital Funds (the
"Trust"), a trust with transferable shares of the type commonly called a
Massachusetts business trust, DOES HEREBY CERTIFY, pursuant to the authority
conferred on the Secretary of the Trust by Section 9.3(c) of the Declaration of
Trust, dated as of October 30, 1992 as amended to date (the "Declaration of
Trust"), that the following amendment was duly adopted by the affirmative vote
of a majority of the Trustees at a regular meeting held on September 16, 1993
pursuant to the resolutions attached as Exhibit A hereto:
1. Page 18 of the Declaration of Trust is hereby amended to
delete the names "U.S. Treasury Bond Series," "Intermediate
Bond Series, "Diversified Bond Series," "Tax-Free Bond
Series," and "Tax-Free Intermediate Bond Series," therefrom
and to substitute therefor the names "U.S. Treasury Securities
Series," "Short Intermediate U.S. Treasury Securities Series,"
"Diversified Fixed Income Series," "Tax-Free Securities
Series" and "Tax-Free Short Intermediate Securities Series."
IN WITNESS WHEREOF, the undersigned has executed this Amendment to
the Declaration of Trust this 5th day of December, 1994.
/s/ C. David Bunstine
--------------------------------
Name: C. David Bunstine
Title:Secretary
1900 East Dublin-Granville Road
Columbus, Ohio 43229
<PAGE>
EXHIBIT A
RESOLVED, that the name of the U.S. Treasury Bond Fund be changed to
the U.S. Treasury Securities Fund, that the name of the Intermediate
Bond Fund be changed to the Short Intermediate U.S. Treasury
Securities Fund, that the name of the Diversified Bond Fund be
changed to the Diversified Fixed Income Fund, that the name of the
Tax-Free Intermediate Bond Fund be changed to the Tax-Free Short
Intermediate Securities Fund and that the name of the Tax-Free Bond
Fund be changed to the Tax-Free Securities Fund; and
FURTHER SOLVED, that the appropriate Officers of Pacific Capital be,
and each of them hereby is, authorized and directed to execute and
deliver any and all instruments, certificates or other documents,
including an amendment to the Declaration of Trust of Pacific
Capital, and to take such other actions as they deem necessary,
advisable, or appropriate to carry out the purpose and intent of the
foregoing resolutions, and the execution by any such Officer of any
document or the performing by any such Officer of any act or thing
in connection with the foregoing matters shall conclusively
establish such authority from Pacific Capital and the approval and
ratification of Pacific Capital of the documents so executed and the
actions so taken.
2
<PAGE>
STATE OF OHIO )
: SS.
COUNTY OF FRANKLIN )
On this 5th day of December, 1994, before me, a Notary Public in and
for said state, duly commissioned and sworn, personally appeared C. David
Bunstine, personally known to me (or proved to me on the basis of satisfactory
evidence) to the person whose name is subscribed to this instrument, and
acknowledged to me that he subscribed his name on the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal on the date in this certificate first above written .
/s/___________________
Notary Public
3
<PAGE>
AMENDMENT No. 2 TO DECLARATION OF TRUST
OF
PACIFIC CAPITAL FUNDS
As of December 5, 1994
The undersigned, constituting a majority of the Trustees of Pacific
Capital Funds (hereinafter referred to as the ("Trust"), a trust with
transferable shares of the type commonly called a Massachusetts business trust,
DO HEREBY CERTIFY, pursuant to the authority conferred on the Trustees of the
Trust by Sections 3.1, 6.2, 6.9 and 9.3 of the Declaration of Trust dated as of
October 30, 1992, as amended to date (the "Declaration of Trust") and by
resolutions adopted by the affirmative vote of a majority of the Trustees at
regular meetings held on June 20, 1994 and December 5, 1994, attached as Exhibit
A hereto, that:
1. page 18 of the Declaration of Trust is hereby
amended to delete the name "Income Stock Series"
therefrom and substitute therefore the name
"Growth and Income Series"; and
2. there is hereby established one additional series of shares of
the Trust which shall be designated the "New Asia Growth
Series". The New Asia Growth Series shall have all of the
rights and preferences with respect to series of shares of the
Trust set forth in the Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands this 5th
day of December, 1994.
/s/ Stephen G. Mintos
------------------------------------
Stephen G. Mintos
/s/ Douglas Philpotts
------------------------------------
Douglas Philpotts
/s/ Richard W. Gushman II
------------------------------------
Richard W. Gushman II
/s/ Stanley W. Hong
------------------------------------
Stanley W. Hong
/s/ Deborah G. Patterson
------------------------------------
Deborah G. Patterson
/s/ Russell Okata
------------------------------------
Russell Okata
/s/ Oswald K. Stender
------------------------------------
Oswald K. Stender
____________________________________
Thelma Zen
<PAGE>
EXHIBIT A
PACIFIC CAPITAL FUNDS
Resolution of the Board of Trustees
at a regular meeting held on June 20, 1994
RESOLVED, that the Trustees hereby determine that it is desirable to
establish an additional investment series (the "Additional Fund") of the
Pacific Capital Funds (the "Trust"), and that the proper officers of Trust
be, and they hereby are, authorized to file all such documents and
reports, including any necessary filings or amendments to the Trust's
Declaration of Trust, or to the Trust's registration statement on Form
N-1A, with the SEC or any state securities commissions and to do all such
other acts and things as they or any of them deem necessary or desirable
to effectuate the establishment of the Additional Fund.
Resolution of the Board of Trustees at a regular meeting held
on December 5, 1994
RESOLVED, that the name of the Income Stock Fund be changed to the Growth
and Income Fund; and
FURTHER RESOLVED, that the appropriate Officers of the Trust be, and each
of them hereby is, authorized and directed to execute and deliver any and
all instruments, certificates or other documents, including an amendment
to the Declaration of Trust of Pacific Capital, and to take such other
actions as they deem necessary, advisable, or appropriate to carry out the
purpose and intent of the foregoing resolutions, and the execution by any
such Officer of any document or the performing by any such Officer of any
act or thing in connection with the foregoing matters shall conclusively
establish such authority from the Trust and the approval and ratification
of the Trust of the documents so executed and the actions so taken.
2
<PAGE>
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) SS.
COUNTY OF RIVERSIDE )
December 5, 1994
Then personally appeared Stephen G. Mintos, Douglas Philpotts,
Richard W. Gushman II, Stanley W. Hong, Deborah G. Patterson, Russell Okata
and Oswald K. Stender each of which acknowledged the foregoing act to be his or
her free act and deed.
Before me, /s/ Barbara D. Reynolds
Barbara D. Reynolds -----------------------------
Notary Public Notary Public
Commission Expires: 12/27/96
3
<PAGE>
BYLAWS
OF
PACIFIC CAPITAL FUNDS
October 30, 1992
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS...................................................1
ARTICLE II SHAREHOLDERS..................................................1
Section 1. Meetings......................................................1
Section 2. Notice of Meetings............................................1
Section 3. Record Date for Meeting and Other Purposes....................1
Section 4. Proxies.......................................................2
Section 5. Inspection of Records.........................................2
Section 6. Action without Meeting........................................2
ARTICLE III TRUSTEES......................................................2
Section 1. Meetings of the Trustees......................................2
Section 2. Quorum and Manner of Acting...................................3
ARTICLE IV COMMITTEES....................................................3
Section 1. Executive and Other Committees................................3
Section 2. Meetings, Quorum and Manner of Acting.........................4
ARTICLE V OFFICERS......................................................4
Section 1. General Provisions............................................4
Section 2. Term of Office and Qualifications.............................4
Section 3. Removal.......................................................4
Section 4. Powers and Duties of the Chairman.............................4
Section 5. Powers and Duties of the President............................4
Section 6. Powers and Duties of the Treasurer............................5
Section 7. Powers and Duties of the Secretary............................5
Section 8. Powers and Duties of Vice President...........................5
Section 9. Powers and Duties of Assistant Treasurers.....................5
Section 10. Powers and Duties of Assistant Secretaries....................5
Section 11. Compensation of Officers and Trustees.........................6
ARTICLE VI FISCAL YEAR...................................................6
ARTICLE VII WAIVERS OF NOTICE.............................................6
ARTICLE VIII AMENDMENTS....................................................6
i
<PAGE>
BYLAWS
OF
PACIFIC CAPITAL FUNDS.
ARTICLE I.
DEFINITIONS
Capitalized terms used herein without definition shall have the respective
meanings given them in the Declaration of Trust of Pacific Capital Funds dated
October 30, 1992, as amended from time to time.
ARTICLE II.
SHAREHOLDERS
Section 1. Meetings. Meetings of Shareholders shall be held to the extent
provided in the Declaration at such place within or without The Commonwealth of
Massachusetts as the Trustees shall designate. Meetings of Shareholders may be
called by the Trustees and shall be called by the Trustees whenever required by
law or upon the written request of the holders of at least ten percent (10) of
the outstanding Shares entitled to vote. The holders of a majority of
outstanding Shares of the Trust or Series of the Trust present in person or by
proxy and entitled to vote shall constitute a quorum with respect to Shares of
the Trust or such Series at any meeting of the Shareholders thereof.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time and place of the meeting, shall be given by the Trustees by
mail to each Shareholder entitled to vote thereat, at his or her address as
recorded on the register of the Trust mailed at least (10) days and not more
than ninety (90) days before the meeting. Any adjourned meeting may be held as
adjourned without further notice. No notice need be given to any Shareholder who
shall have failed to inform the Trust of his or her current address or if a
written waiver of notice, executed before or after the meeting by the
Shareholder or his or her attorney "thereunto authorized, is filed with the
records of the meeting.
Section 3. Record Date for Meeting and Other Purposes. For the purpose of
determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
ninety (90) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes, except for
dividend payments which shall be governed by the Declaration.
1
<PAGE>
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other office or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole Share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such Share is a minor or a person of unsound mind, and subject to
guardianship or the legal control of any other person as regards the charge or
management of such Share, he or she may vote by his or her guardian or such
other person appointed or having such control, and such vote may be given in
person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders of
a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without any meeting if a majority of Shareholders of
the trust or the applicable Series or Class of the Trust entitled to vote on the
matter (or such larger proportion thereof as shall be required by law, the
Declaration or these Bylaws for approval of such matter) consent to the action
in writing and the written consents are filed with the records of the meetings
of Shareholders. Such consents shall be treated for all purposes as a vote taken
at a meeting of Shareholders.
ARTICLE III.
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, or by any one
of the Trustees, in office at the time. Notice of the time and place of each
meeting other than regular or stated meetings shall be given by the Secretary or
an Assistant Secretary or by the officer or Trustee calling the meeting and
shall be mailed to each Trustee at least two days before the meeting, or shall
be sent by confirmed facsimile to each Trustee at his or her business address or
personally delivered to him or her at least one day before the meeting.
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Such notice may, however, be waived by any Trustee. Notice of a meeting need not
be given to any Trustee if a written waiver of notice, executed by him or her
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Except as may be required by
applicable law, notice or waiver of notice need not specify the purpose of any
meeting. The Trustees may meet by means of a telephone conference call or
similar communications equipment by means of which all persons participating in
the meeting are connected and can be clearly heard, which meeting shall be
deemed to have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken by the Trustees without a meeting if all
the Trustees consent to the action in writing and the written consents are filed
with the records of the Trustees' meeting. Such consents shall be treated for
all purposes as a vote taken at a meeting of the Trustees. Notwithstanding the
foregoing, all actions of the Trustees shall be taken in compliance with the
applicable provisions of the 1940 Act.
Section 2. Quorum and Manner of Acting. A majority of the Trustees shall
be present in person at any regular or special meeting of the Trustees in order
to constitute a quorum for the transaction of business at such meetings and
(except as otherwise required by law, the Declaration or these Bylaws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE IV.
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may appoint from their own number an executive
committee to consist of not less than three (3) Trustees to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Declaration or these Bylaws they are prohibited from
delegating. The Trustees may also appoint from their own number or otherwise
other committees from time to time, the number composing such committees, the
powers conferred upon the same (subject to the same limitations as with respect
to the executive committee) and the term of membership on such committees to be
determined by the Trustees. The Trustees may designate a chairman of any such
committee. In the absence of such designation the committee may elect its own
chairman.
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Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (a)
provide for stated meetings of any committee, (b) specify the manner of calling
and notice required for special meetings of any committee, (c) specify the
numbers of members of a committee required to constitute a quorum and the number
of members of a committee required to exercise specified powers delegated to
such Committee, (d) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a committee
without a meeting, and (e) authorize the members of a committee to meet by means
of a telephone conference call. Each committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the office of the
Trust.
ARTICLE V.
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
Chairman, a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents at the
business of the Trust may require, including one or more Vice Presidents, one or
more Assistant Secretaries, and one or more Assistant Treasurers. The Trustees
may delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration or these Bylaws, each officer shall hold office at the
pleasure of the Trustees. Any two offices may be held by the same individual.
Any officer may be, but none need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer without cause, by a vote of a majority of the
Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed without or without cause of such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Chairman of the Board
shall preside at all meetings of the Board of Trustees. The Chairman also shall
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
Section 5. Powers and Duties of the President. The President shall be the
principal executive officer of the Trust. He or she may call meetings of the
Trustees and of any committee thereof when he or she deems it necessary and
shall preside at all meetings of the Shareholders. Subject to the control of the
Trustees and to the control of any committees of the Trustees, within their
respective spheres, as directed by the Trustees. the President shall at all time
exercise general supervision and direction over the affairs of the Trust. The
President shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents,
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clerks and employees as he or she may find necessary to transact the business of
the Trust. He or she will also have the power to grant, issue, execute or sign
such powers of attorney, proxies or other documents as may be deemed advisable
or necessary in furtherance of the interests of the Trust. The President shall
have such other powers and duties as from time to time may be conferred upon or
assigned to him or her by the Chairman or the Trustees.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his or her hands to such
Custodian as the Trustees may employee. He or she shall render a statement of
condition of the finances of the Trust to the Trustees as often as they shall
require the same and he or she shall in general perform all the duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him or her by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his or her duties, if required to do so by the Trustees,
in such sum and with such surety or sureties as the Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he or she shall have custody of the seal of the
Trust, if any; he or she shall have charge of the Share transfer books, lists
and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these Bylaws and as required by law; and
subject to these Bylaws, he or she shall in general perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him or her by the Trustees.
Section 8. Powers and Duties of Vice President. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him or her from time to time by the Trustees and the
President.
Section 9. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall give a bond for the faithful discharge
of his or her duties, if required so to do by the Trustees, in such sums and
which such surety or sureties as the Trustees shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
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Section 11. Compensation of Officers and Trustees. Subject to any
applicable provisions of the Declaration, the compensation of the officers and
Trustees shall be fixed from time to time by the Trustees or, in the case of
officers, by an committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he or she is also a Trustee.
ARTICLE VI.
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of February in
each year and shall end on the last day of January in each year, provided,
however, that the Trustee may from time to time change the fiscal year.
ARTICLE VII.
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, or actual attendance at the meeting in person or by proxy by such
person or persons, shall be deemed equivalent thereto. A notice shall be deemed
o have been sent by facsimile when transmission of such facsimile has been
completed and a printed confirmation report obtained.
ARTICLE VIII
AMENDMENTS
These Bylaws, or any of them, may be altered, amended or repealed, or new
Bylaws may be adopted by (a) a Majority Shareholder Vote or (b) by the Trustees,
provided, however, that no Bylaw may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration or these Bylaws, a vote of the Shareholders.
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INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of October 29, 1993, between Pacific Capital
Funds, a Massachusetts business trust (herein called the "Trust"), and Hawaiian
Trust Company, Ltd., a state-chartered trust company having its principal place
of business in Honolulu, Hawaii (herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory services to certain existing investment portfolios of the
Trust and may retain the Investment Adviser to serve in such capacity to certain
additional investment portfolios of the Trust, all as now or hereafter may be
identified on Schedule A hereto (such initial investment portfolios and any such
additional investment portfolios together called the "Funds") and the Investment
Adviser represents that it is willing and possesses legal authority to so
furnish such services without violation of applicable laws and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Funds for the period and on the terms
set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for
the compensation herein provided. Additional investment portfolios
may from time to time be added to those covered by this Agreement by
the parties executing a new Schedule A which shall become effective
upon its execution and shall supersede any Schedule A having an
earlier date.
2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of
the following:
(a) The Trust's Declaration of Trust, dated October 30, 1992, and
filed with the Secretary of State of Massachusetts on the same
date, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time
to time be amended or restated, is herein called the
"Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto:
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this
Agreement;
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(d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") on January 29, 1993, and all amendments
thereto;
(e) the Trust'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 SEC and all amendments thereto
(such Registration Statement, as in effect and as it shall
from time to time be amended or supplemented, is herein called
the "Registration Statement"); and
(f) the most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and
Statement of Additional Information, as in effect, and all
amendments and supplements thereto, are herein collectively
called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide a continuous
investment program for the Funds, including investment research and
management with respect to all securities and other investments and
cash equivalents in the Funds. The Investment Adviser will determine
from time to time what securities and other investments will be
purchased, retained or sold by the Trust with respect to the Funds.
The Investment Adviser will provide the services under this
Agreement in accordance with each of the Fund's investment
objectives, policies and restrictions as stated in the Prospectus
and resolutions of the Trust's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
SEC under the 1940 Act and in addition will conduct its
activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to the investment advisory activities of the
Investment Adviser;
(c) will place or cause to be placed orders for the Funds either
directly with the issuer or with any broker or dealer. (In
placing orders with brokers and dealers, the Investment
Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent
with this obligation and to the extent permitted by the 1940
Act, when the execution and price offered by
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two or more brokers or dealers are comparable, the Investment
Adviser may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the
Investment Adviser with research advice and other services. In
connection with its duties to arrange for the purchase and
sale of the Trust's portfolio securities, the Investment
Adviser will select such broker-dealers as will, in the
Investment 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 Trust understands that purchases from underwriters include
a commission or concession paid by the issuer to the
underwriter and that principal transactions placed through
broker-dealers include a spread between the bid and asked
prices. In allocating transactions to broker-dealers, the
Investment Adviser is authorized to consider, in determining
whether a particular broker-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 the
value of research services provided by the broker-dealer, and
thus need not pay the lowest spread or commission available if
the Investment 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
broker-dealer, viewed either in terms of the particular
transaction or the Investment Adviser's overall
responsibilities as to the accounts over which it exercises
investment discretion. If, on the foregoing basis, the
transaction in question could be allocated to two or more
broker-dealers, the Investment Adviser is authorized, in
making such allocation, to consider (i) whether a
broker-dealer has provided research services, as further
discussed below and (ii) whether a broker-dealer has sold
shares of the Trust or any other investment company or
companies having the Investment 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
Investment Adviser, and that research received by such other
accounts may or may not be useful to the Trust. In no instance
will portfolio securities be purchased from or sold to any
affiliate of the Trust, including the Trust's distributor or
investment adviser, or any affiliated person of any such
person, except in accordance with Section 17 of the 1940 Act
and the Rules and Regulations thereunder;
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(d) will maintain records with respect to the securities
transactions of the Funds and will furnish the Trust's Board
of Trustees with such periodic and special reports as the
Board may request;
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Funds and prior, present, or potential
shareholders, except to the extent that such information is
generally available to the public other than as a result of
disclosure by the Investment Adviser, and will not use such
records and information for any purpose other than performance
of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust,
which approval shall not be unreasonably withheld and may not
be withheld where the Investment Adviser 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 Trust; and
(f) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Funds, the Investment Adviser's
personnel will not inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for
the Trust's account are customers of the Investment Adviser or
of its parent or its subsidiaries or affiliates. In dealing
with such customers, the Investment Adviser and its parent,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held
by the Trust.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services
to others so long as its services under this Agreement are not
impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Funds are the property of the
Trust and further agrees to surrender promptly to the Trust any of
such records upon the Trust's request. The Investment Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses . During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of portfolio
securities and the transaction costs of purchasing such portfolio
securities (including brokerage commissions, if any) purchased for
the Funds.
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7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the
Investment Adviser and the Investment Adviser will accept as full
compensation therefor a fee equal to the fee set forth on Schedule A
hereto as it may be amended from time to time as agreed upon by the
Trust and the Investment Adviser. The obligations of the Funds to
pay the above-described fee to the Investment Adviser will begin as
of the respective dates of the initial public sale of shares in the
Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having
jurisdiction over the Trust) exceed the expense limitations of any
such state, the Investment Adviser will reimburse the Fund for a
portion of such excess expenses equal to such excess times the ratio
of the fees otherwise payable by the Fund to the Investment Adviser
hereunder to the aggregate fees otherwise payable by the Fund to the
Investment Adviser hereunder and to the Fund's administrator under
its Administration Agreement. The obligation of the Investment
Adviser to reimburse the Funds hereunder is limited in any fiscal
year to the amount of its fee hereunder for such fiscal year,
provided, however, that notwithstanding the foregoing, the
Investment Adviser shall reimburse the Funds for such proportion of
such excess expenses regardless of the amount of fees paid to it
during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of
the Investment Adviser in the performance of its duties or from
reckless disregard by it of its obligations and duties under this
Agreement.
It is further agreed that the Investment Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Trust's Registration Statement under the 1940 Act and the 1933 Act,
except for information supplied by the Investment Adviser for
inclusion therein. The Investment Adviser shall promptly inform the
Trust as to any information concerning the Investment Adviser
appropriate for inclusion in such Registration Statement, or as to
any transaction or proposed transaction which might result in an
assignment of this Agreement. Finally, the Trust agrees to indemnify
the Investment Adviser to the full extent permitted by the
Declaration of Trust and the 1940 Act.
9. Duration and Termination. This Agreement will become effective as of
the date first written above (or, if a particular Fund is not in
existence on that
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date, on the date the particular Fund commences operations after a
registration statement relating to that Fund becomes effective with
the SEC), provided that it shall have been approved by vote of a
majority of the outstanding voting securities of such Fund, in
accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until
its second anniversary.
Thereafter, if not terminated, this Agreement shall continue in
effect as to a particular Fund for successive annual periods,
provided such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Trust's Board
of Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the
vote of a majority of the Trust's Board of Trustees or by the vote
of a majority of all votes attributable to the outstanding shares of
such Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to a particular Fund at any time on sixty days'
written notice, without the payment of any penalty, by the Trust (by
vote of the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of such Fund) or by the Investment
Adviser. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities," interested persons" and
"assignment" shall have the same meanings as ascribed to such terms
in the 1940 Act.)
10. Investment Adviser's Representations. The Investment Adviser hereby
represents and warrants that it is willing and possesses all
requisite legal authority to provide the services contemplated by
this Agreement without violation of applicable law and regulations,
including but not limited to the Glass-Steagall Act and the
regulations promulgated thereunder.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought.
12. Use of Name. The Investment Adviser and the Trust each agree that
the term "Pacific Capital Funds" (including, for all purposes of
this paragraph, any combination, variation or abbreviation thereof
and any logo or graphic used in association therewith) is a property
right of an affiliate of the Investment Adviser which has been
licensed to the Investment Adviser. The Investment Adviser hereby
sublicenses the right to use such term to the Trust, subject such
license and subject to the following agreements and comments. The
Trust agrees and consents that: (i) it will use the term "Pacific
Capital Funds" as a component of its corporate name, the name of any
series or class, or both and for no other purpose; (ii) it will not
grant to any third party the right to use the term "Pacific Capital
Funds" for any purpose; (iii) the Investment Adviser or any
corporate affiliate of the
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Investment Adviser may use or grant to others the right to use the
term "Pacific Capital Funds" as all or a portion of a corporate or
business name or for any commercial purpose, other than a grant of
such right to another registered investment company not advised by
the Investment Adviser or one of its affiliates; and (iv) in the
event that the Investment Adviser or an affiliate thereof is no
longer acting as investment adviser to any Fund, the Trust shall,
upon request by the Investment Adviser, promptly take such action as
may be necessary to change its corporate name to one not containing
the term "Pacific Capital Funds" and following such change, shall
not use the term "Pacific Capital Funds" as a part of its corporate
name or for any other commercial purpose, and shall use its best
efforts to cause its trustees, officers and shareholders to take any
and all actions that the Investment Adviser may request to effect
the foregoing and to reconvey to the Investment Adviser any and all
rights to such term.
13. Miscellaneous. The names "Pacific Capital Funds" and "Trustees of
Pacific Capital Funds" refer respectively to the Trust created and
to the Trustees, as trustees but not individually or personally,
acting from time to time under an Agreement and Declaration of Trust
dated as of October 30, 1992 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of
The Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed.
The obligations of "Pacific Capital Funds" entered into in the name
or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the assets of
the Trust and all person dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
---------------------------------
Name: Stephen G. Mintos
Title: President
HAWAIIAN TRUST COMPANY, LTD.
By: /s/ Thomas J. Macdonald
---------------------------------
Name: Thomas J. Macdonald
Title: President
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Schedule A
to the
Investment Advisory Agreement
between Pacific Capital Funds and
Hawaiian Trust Company, Ltd.
Name of Fund Compensation(1)
------------ ---------------
Short Intermediate U.S. Treasury Annual rate of fifty one-hundredths of
Securities Fund and Tax-Free Short one percent (o.50%) of the average daily
Intermediate Securities Fund net assets of each such Fund.
Diversified Fixed Income Fund, U.S. Annual rate of sixty one-hundredths of
Treasury Securities Fund and Tax-Free one percent (0.60%) of the average daily
Securities Fund net assets of each such Fund
Growth Stock Fund, Balanced Fund and Annual rate of eighty one-hundredths of
Income Stock Fund one percent (0.80%) of the average daily
net assets of each such Fund.
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
------------------------------
Name: Stephen G. Mintos
Title: President
HAWAIIAN TRUST COMPANY, LTD.
By: /s/ Thomas J. Macdonald
------------------------------
Name: Thomas J. Macdonald
Title: President
- ----------
(1) All fees are computed daily and paid monthly.
A-1
<PAGE>
Amended Schedule A
to the
Investment Advisory Agreement
between Pacific Capital Funds and
Hawaiian Trust Company, Ltd.
Name of Fund Compensation(1)
------------ ---------------
Short Intermediate U.S. Treasury Annual rate of fifty one-hundredths
Securities Fund and Tax-Free Short of one percent (0.50%) of the
Intermediate Securities Fund average daily net assets of each
such Fund.
Diversified Fixed Income Fund, U.S. Annual rate of sixty one-hundredths
Treasury Securities Fund and of one percent (0.60%) of the
Tax-Free Securities Fund average daily net assets of each
such Fund.
Growth Stock Fund, Balanced Fund Annual rate of eighty
and Income Stock Fund one-hundredths of one percent
(0.80%) of the average daily net
assets of each such Fund.
Pacific Region Fund Annual rate of ninety
one-hundredths of one percent
(0.90%) of the average daily net
assets of the Fund.
PACIFIC CAPITAL FUNDS
By:_______________________________
Name:_____________________________
Title:____________________________
HAWAIIAN TRUST COMPANY, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
Dated:________________
- ----------
(1) All fees are computed daily and paid monthly.
A-1
<PAGE>
ADDENDUM
ADDENDUM, dated ___________, 1994, to Investment Advisory Agreement
dated October 29, 1993 between Pacific Capital Funds, a Massachusetts business
trust (the "Trust"), and Hawaiian Trust Company, Ltd., a state-chartered trust
company having its principal place of business in Honolulu, Hawaii (the
"Investment Adviser").
Sections 3 of the Investment Advisory Agreement is hereby
supplemented with respect to the New Asia Growth Fund series of the Trust by
adding the following paragraph after subsection (f) thereof:
In carrying out its responsibilities as described in this Section 3,
the Investment Adviser may, without limitation, subject to the requirements of
Section 15 of the 1940 Act (including the requirements of Trustee and
shareholder approval), retain one or more sub-advisers to manage the portfolio
of a Fund, at the Investment Adviser's own cost and expense. Any such
sub-adviser shall have full investment discretion, including the discretion to
select broker-dealers, and shall make all determinations with respect to
investment of the portion of the Fund's assets assigned to it, subject to
overall supervision by the Investment Adviser.
PACIFIC CAPITAL FUNDS
By:_______________________________
Name:_____________________________
Title:____________________________
HAWAIIAN TRUST COMPANY, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
A-2
<PAGE>
SUB-ADVISORY AGREEMENT
[Pacific Capital New Asia Growth Fund]
AGREEMENT made as of October 29, 1994 between Hawaiian Trust
Company, Ltd. (the "Adviser"), and Credit Lyonnais International Asset
Management (HK) Limited ("Sub-Adviser").
WHEREAS, Pacific Capital Funds (the "Trust") is registered as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser has been appointed investment adviser to the
Trust's [Pacific Capital New Asia Growth Fund] Fund (the "Fund"); and
WHEREAS, the Adviser desires to retain Sub-Adviser to assist it in
the provision of a continuous investment program for the Fund and Sub-Adviser is
willing to do so;
WHEREAS, the Board of Trustees and the Fund's sole shareholder have
approved this Agreement, and Sub-Adviser is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints Sub-Adviser to act as
sub-adviser to the Fund as permitted by the Adviser's Advisory Agreement with
the Trust pertaining to the Fund. Intending to be legally bound, Sub-Adviser
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the Trust's
Board of Trustees, Sub-Adviser will assist the Adviser in providing a continuous
investment program with respect to the foreign component of the Fund's
portfolio, including investment research and management with respect to all
foreign securities and investments and cash equivalents in the Fund. Sub-Adviser
will provide services under the Agreement in accordance with the Fund's
investment objective, policies and restrictions as stated in the Fund's
prospectus and resolutions of the Trust's Board of Trustees applicable to the
Fund.
Without limiting the generality of the foregoing, Sub-Adviser
further agrees that it:
(a) will prepare, subject to the Adviser's approval, lists of
foreign countries for investment by the Fund and determine from time to
time what securities and other investments will be purchased, retained or
sold for the Fund, including, with the assistance of the Adviser, the
Funds investments in futures and forward currency contracts;
<PAGE>
(b) will manage in consultation with the Adviser the Fund's
temporary investments in securities;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer;
(d) will not purchase shares of the Fund for itself or for accounts
with respect to which it exercises sole investment discretion in
connection with such transactions except as permitted by the Trust's Board
of Trustees or by federal, state and local law;
(e) will manage the Fund's overall cash position, and determine from
time to time what portion of the Fund's assets will be held in different
currencies;
(f) will provide the Adviser with foreign broker research, a
quarterly review of international economic and investment developments,
and occasional "Spot Lights" on international investment issues;
(g) will attend regular business and investment-related meetings
with the Trust's Board of Trustees and the Adviser if requested to do so
by the Trust and/or the Adviser; and
(h) will maintain books and records with respect to the securities
transactions for the Fund, furnish to the Adviser and the Trust's Board of
Trustees such periodic and special reports as they may request with
respect to the Fund, and provide in advance to the Adviser all reports to
the Board of Trustees for examination and review within a reasonable time
period to the Trust's Board meetings.
3. Covenants by Sub-Adviser. Sub-Adviser agrees with respect to the
services provided to the Fund that it:
(a) will conform with all Rules and Regulations of the Securities
and Exchange Commission;
(b) will telecopy trade information to the Adviser on the first
business day following the date of the trade and cause broker
confirmations to be sent directly to the Adviser; and
(c) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and prior,
present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder (except after prior notification to and approval in
writing by the Trust, which approval shall not be unreasonably withheld
and may not be withheld and will not be deemed granted where Sub-Adviser
may be
2
<PAGE>
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 Trust).
4. Services Not Exclusive. Except as provided herein, the services
furnished by Sub-Adviser hereunder are deemed not to be exclusive and nothing in
this Agreement shall (i) prevent Sub-Adviser from acting as investment adviser
or manager for any other person or persons, including other management
investment companies, except that the Sub-Adviser will not enter into an
agreement to provide principal adviser or sub-advisory services to any
registered investment company that distributes any class of shares in Hawaii,
Guam or Arizona, or (ii) limit or restrict Sub-Adviser from buying, selling or
trading any securities or other investments (including any securities or other
investments which the Fund is eligible to buy) for its or their own accounts or
for the accounts of others for whom it or they may be acting; provided, however,
that Sub-Adviser agrees that it will not undertake any activities which, in its
reasonable judgment, will adversely affect the performance of its obligations to
the Fund under this Agreement.
5. Portfolio Transactions. Investment decisions for the Fund shall
be made by Sub-Adviser independently from those for any other investment
companies and accounts advised or managed by Sub-Adviser. The Fund and such
investment companies and accounts may, however, invest in the same securities.
When a purchase or sale of the same security is made at substantially the same
time on behalf of the Fund and/or another investment company or account, the
transaction will be averaged as to price, and available investments allocated as
to amount, in a manner which Sub-Adviser believes to be equitable to the Fund
and such other investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or sold by the Fund. To the extent permitted by
law, Sub-Adviser may aggregate the securities to be sold or purchased for the
Fund with those to be sold or purchased for other investment companies or
accounts in order to obtain best execution.
Sub-Adviser shall place orders for the purchase and sale of
portfolio securities and will solicit broker-dealers to execute transactions in
accordance with the Fund's policies and restrictions regarding brokerage
allocations. Sub-Adviser shall place orders pursuant to its investment
determination for the Fund either directly with the issuer or with any broker or
dealer selected by Sub-Adviser. In executing portfolio transactions and
selecting brokers or dealers, Sub-Adviser shall use its reasonable best efforts
to seek the most favorable execution of orders, after taking into account all
factors Sub-Adviser deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. Consistent
with this obligation, Sub-Adviser may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of the Fund and/or other
accounts over
3
<PAGE>
which Sub-Adviser or any of its affiliates exercises investment discretion.
Sub-Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
Sub-Adviser's overall responsibilities to the Fund and to the Company. In no
instance will portfolio securities be purchased from or sold to Sub-Adviser, or
the Fund's principal underwriter, or any affiliated person thereof except as
permitted by the Securities and Exchange Commission.
6. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
7. Expenses. During the term of this Agreement, Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased by the Fund.
8. Compensation.
(a) For the services provided and the expenses assumed with
respect to the Fund pursuant to this Agreement, the Sub-Adviser will be entitled
to a fee, computed daily and payable monthly, from Adviser, calculated at the
annual rate of 0.50% of the Fund's average daily net assets;
9. Standard of Care; Limitation of Liability. Sub-Adviser shall
exercise due care and diligence and use the same skill and care in providing its
services hereunder as it uses in providing services to other investment
companies, but shall not be liable for any action taken or omitted by
Sub-Adviser in performance of services rendered hereunder in the absence of bad
faith, willful misconduct, gross negligence or reckless disregard of its duties.
10. Reference to Sub-Adviser. Neither the Adviser nor any affiliate
or agent of it shall make reference to or use the name of Sub-Adviser or any of
its affiliates, or any of their clients, except references concerning the
identity of and services provided by sub-Adviser to the Fund, which references
shall not differ in substance from those included in the current registration
statement pertaining to the Fund, this agreement and the Advisory Agreement
between the Adviser and the Trust with respect to the Fund, in any advertising
or promotional materials without the prior approval of Sub-Adviser, which
approval shall not be unreasonably withheld or
4
<PAGE>
delayed. The Adviser hereby agrees to make all reasonable efforts to cause the
Fund and any affiliate thereof to satisfy the foregoing obligation.
11. Duration and Termination. Unless sooner terminated, this
Agreement shall continue until October 29, 1996 and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by the Trust's Board of Trustees or vote
of the lesser of (a) 67% of the shares of the Fund represented at a meeting if
holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy of (b) more than 50% of the outstanding shares of the Fund,
provided that in either event its continuance also is approved by a majority of
the Trust's Trustees who are not "interested persons" (as defined in the 1940
Act) of any party to this Agreement (the "Disinterested Trustees"), by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable at any time without penalty, on 60 days' notice, by
Adviser, Sub-Adviser or by the Trust's Board of Trustees or by vote of lesser of
(a) 67% of the shares of the Fund represented at a meeting if holders of more
than 50% of the outstanding shares of the Fund are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Fund. This Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
12. Amendment of this Agreement. No provision of Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective with respect to the Fund until approved by the vote of (i) a majority
of the outstanding voting securities of the Fund and (ii) a majority of the
Disinterested Trustees cast in person at a meeting called for the purpose of
voting on such approval.
13. Notice. Any notice, advice or report to be given pursuant to
this Agreement shall be delivered or mailed:
To Sub-Adviser at:
Credit Lyonnais International Asset Management (HK) Limited
Room 604-6, Three Exchange Square,
8 Connaught Place, Central,
Hong Kong
To the Adviser at:
Hawaiian Trust Company
111 S. King Street
Honolulu, Hawaii 96813
5
<PAGE>
To the Trust at:
c/o The Winsbury Company
1900 E. Dublin - Granville Road
Columbus, Ohio 43229
14. Miscellaneous. 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. 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.
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and shall be governed by
the laws of the Commonwealth of Massachusetts.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Personal Liability. The names "Pacific Capital Funds" and
"Trustees" refer respectively to the Trust created and to the Trustees as
trustees but not individually or personally, acting from time to time under an
Agreement and Declaration of Trust dated as of October 30, 1992 to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "Pacific Capital Funds" entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust and all persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
ATTEST: HAWAIIAN TRUST COMPANY, LTD.
By: /s/ William J. Barton
--------------------------------
Name: William J. Barton
-------------------------------
Title: Senior Vice President
------------------------------
CREDIT LYONNAIS INTERNATIONAL ASSET
MANAGEMENT (HK) LIMITED
By: /s/ Robert O. Brenks
--------------------------------
Name: Robert O. Brenks
-------------------------------
Title: Associate Director
------------------------------
PACIFIC CAPITAL FUNDS
By: /s/ Steven Mintos
--------------------------------
Name: Steven Mintos
-------------------------------
Title: Chairman
------------------------------
7
<PAGE>
DISTRIBUTION AGREEMENT
PACIFIC CAPITAL FUNDS
The Winsbury Company Limited Partnership
d/b/a The Winsbury Company
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Pacific Capital Funds (the "Trust"), a
Massachusetts business trust, has agreed that The Winsbury Company Limited
Partnership, d/b/a The Winsbury Company (the "Distributor"), shall be, for the
period of this Distribution Agreement (the "Agreement"), the distributor of the
units of beneficial interest of each of the investment portfolios of the Trust
identified on Schedule A hereto (the "Funds"). Such units of beneficial interest
are hereinafter called "Shares".
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act"). As used in
this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Securities and Exchange Commission (the "Commission"), together with
any amendments thereto. The term "prospectus" shall mean each form of prospectus
and Statement of Additional Information used by the Funds for delivery to
shareholders and prospective shareholders after the effective dates of the above
referenced registration statements, together with any amendments and supplements
thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and may in the future be the distributor of
the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Trust.
The Trust further understands that investors and potential investors in the
Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable which are primarily intended to result in
the sale of the Shares, including, but not
1
<PAGE>
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities
of Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the
Investment Company Act of 1940, as amended (the "1940 Act"), all rules and
regulations promulgated by the Commission thereunder and all rules and
regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only as principal in entering into selling
agreements, if any, with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain
2
<PAGE>
all statements required to be stated therein in conformity with said Act and the
rules and regulations of said Commission and all statements of fact contained in
any such registration statement and prospectus are true and correct.
Furthermore, neither any registration statement nor any prospectus includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements herein not misleading
to a purchaser of the Shares. The Trust may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Trust's counsel, be necessary
or advisable. If the Trust shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Trust of a
written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement. The Trust shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its
3
<PAGE>
partners and employees and any such controlling person, as aforesaid, is
expressly conditioned upon the Trust being notified of any action brought
against Distributor, its partners or employees, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Trust at
its principal office and sent to the Trust by the person against whom such
action is brought, within 10 days after the summons or other first legal process
shall have been served. The failure to so notify the Trust of any such action
shall not relieve the Trust from any liability which the Trust may have to the
person against whom such action is brought by reason of any such untrue, or
allegedly untrue, statement or omission, or alleged omission, otherwise than on
account of the Trust's indemnity agreement contained in this paragraph 1.11. The
Trust will be entitled to assume the defense of any suit brought to enforce any
such claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Trust and approved by
Distributor, which approval shall not be unreasonably withheld. In the event the
Trust elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Trust does not elect to assume the defense of any such suit, or
in case Distributor reasonably does not approve of counsel chosen by the Trust,
the Trust will reimburse Distributor, its partners and employees, or the
controlling person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by Distributor or them. The
Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
4
<PAGE>
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Commission of any
stop order suspending the effectiveness of the
registration statement or prospectus then in effect or
the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires
the making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and,
5
<PAGE>
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus
which may from time to time be filed with the
Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed requests by or actions of the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor 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 Trust.
1.16 This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
2. Fee.
2.1 The Distributor shall receive from the Funds identified on
Schedule B hereto (the "Distribution Plan Funds") a distribution fee at the rate
and upon the terms and conditions set forth in the Distribution and Shareholder
Services Plan attached as Schedule C hereto, and as amended from time to time.
The distribution fee shall be accrued daily and shall be paid on the first
business day of each month, or at such time(s) as the Distributor shall
reasonably request.
3. Offering Price.
All Shares shall be offered and sold at the public offering price
determined in accordance with the terms and provisions described in the
Prospectus.
4. Public Offering Price.
The public offering price of a Share of a Fund shall be the net
asset value of a Share, plus any applicable sales charge, all as set forth in
the current prospectus of the Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the then current prospectus of the Fund.
6
<PAGE>
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Shares of
the Funds at net asset value without assessing any sales load (a) in connection
with the merger or consolidation of the Trust or the Fund(s) with any other
investment company or the acquisition by the Trust or the Fund(s) of all or
substantially all of the assets or of the outstanding Shares of any other
investment company; (b) in connection with a pro rata distribution directly to
the holders of Shares in the nature of a stock dividend or split; (c) upon the
exercise of subscription rights granted to the holders of Shares on a pro rata
basis; (d) in connection with the issuance of Shares pursuant to any exchange
and reinvestment privileges described in any then current prospectus of the
Fund; and (e) otherwise in accordance with any then current prospectus of the
Fund.
6. Term and Matter Relating to the Trust as a
Massachusetts Business Tract.
This Agreement shall become effective on October 29, 1993 and,
unless sooner terminated as provided herein, shall continue until the last day
of October, 1994, and thereafter shall continue automatically for successive
annual periods ending on the last day of October each year, provided such
continuance is specifically approved at least annually by (i) the Trust's Board
of Trustees or (ii) by vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of the Trust, provided, however, that in either
event the continuance is also approved by the majority of the Trust's Trustees
who are not parties to the Agreement or interested persons (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable
without penalty, on not less than sixty days' notice, by the Trust's Board of
Trustees, by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Trust or by the Distributor. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act).
The names "Pacific Capital Funds" and "Trustees of Pacific Capital
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under the Agreement and
Declaration of Trust dated as of October 30, 1992 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
the Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"Pacific Capital Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
7
<PAGE>
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place designated
below, whereupon it shall become a binding agreement between us.
Yours very truly,
PACIFIC CAPITAL FUND
By: /s/ Stephen G. Mintos
-----------------------------
Name: Stephen G. Mintos
Title: President
Accepted:
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Kenneth B. Quintenz
-----------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
8
<PAGE>
Dated: As of October 29, 1993
Schedule A
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Fund
- ------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation
General Partner
By: /s/ Kenneth B. Quintenz
-----------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
A-1
<PAGE>
Dated: As of October 29, 1993
Schedule B
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Distribution Plan Fund
- ------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
PACIFIC CAPITAL FUNDS
By: /s Stephen G. Mintos
---------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation
General Partner
By: /s/ Kenneth B. Quintenz
---------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
B-1
<PAGE>
Schedule C
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
October 29, 1993
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes the distribution and shareholder
service plan of Pacific Capital Funds, a Massachusetts business trust (the
"Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"). The Plan relates to those investment portfolios ("Funds")
identified on Appendix A hereto as amended from time to time (the "Distribution
Plan Funds").
Section 1. Each Distribution Plan Fund shall pay to the distributor
(the "Distributor") of the Retail Class of the Trust's units of beneficial
interest (the "Shares"), a fee in an amount not to exceed on an annual basis
0.75% of the average daily net asset value of such Fund attributable to the
Shares of such Fund (the "Distribution Fee") to compensate or reimburse the
Distributor for the following: (a) payments the Distributor makes to banks and
other institutions and industry professionals, such as broker/dealers, including
the Adviser, Distributor and their affiliates or subsidiaries (collectively
referred to as "'Participating Organization(s)"), pursuant to an agreement in
connection with providing sales and/or administrative support services to the
holders of a Fund's Shares; or (b) payments to financial institutions and
industry professional (such as insurance companies, investment counselors, and
the Distributor's affiliates and subsidiaries) in consideration for the
distribution services provided and expenses assumed in connection with
distribution assistance, including but not limited to printing and distributing
Prospectuses to persons other than current Retail Class Shareholders of a Fund,
printing and distributing advertising and sales literature and reports to Retail
Class Shareholders used in connection with the sale of a Fund's Shares, and
personnel and communication equipment used in servicing shareholder accounts and
prospective Retail Class Shareholder inquires.
Section 2. The Distribution Fee shall be paid by the Distribution
Plan Funds to the Distributor only to compensate or to reimburse the Distributor
for payments or expenses incurred pursuant to Section 1. Notwithstanding
anything herein to the contrary, the Distribution Plan Funds shall not be
obligated to make any payments under this Plan that exceed the maximum amounts
payable under Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
Section 3. The Plan shall not take effect with respect to a
Distribution Plan Fund until it has been approved by a vote of at least a
majority of the outstanding voting securities of
C-1
<PAGE>
the Retail Class of such Fund.
Section 4. The Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Plan or such
agreement.
Section 5. The Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Distribution Plan Funds pursuant to the Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding voting securities of the Retail Class of such Fund.
Section 8. All agreements with any person relating to implementation
of the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of
the Independent Trustees or by vote of a majority of the
outstanding voting securities of the Retail Class of the
Distribution Plan Fund, on not more than 60 days'
written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
Section 9. The Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to the Plan shall be approved in the manner provided for approval of the Plan in
Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
C-2
<PAGE>
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
C-3
<PAGE>
Dated: As of October 29, 1993
Schedule A
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Distribution Plan Fund
- ------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
1
<PAGE>
Amended Schedule A
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Fund
- ------------------------------------------------
U.S. Treasury Securities Fund
Short-Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Growth and Income Fund
New Asia Growth Fund
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
----------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
(formerly known as The Winsbury Corporation),
General Partner
By: /s/ Stephen G. Mintos
----------------------------
Name: Stephen G. Mintos
Title: Executive Vice President
Dated: January 30, 1995
A-1
<PAGE>
Amended Schedule B
to the
Distribution Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Distribution Plan Fund
- ----------------------------------------------------
U.S. Treasury Securities Fund
Short-Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Growth and Income Fund
New Asia Growth Fund
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
----------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
(formerly known as The Winsbury Corporation),
General Partner
By: /s/ Stephen G. Mintos
----------------------------
Name: Stephen G. Mintos
Title: Executive Vice President
Dated: January 30, 1995
B-1
<PAGE>
FORM OF
SELLING AGREEMENT
The Winsbury Company Limited Partnership
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Ladies and Gentlemen:
This will confirm the agreement between the undersigned (the "Distributor")
as Distributor of each of the portfolios (each, a "Fund," collectively the
"Funds") of Pacific Capital Funds and you ("Selling Agent") concerning the
provision of sales support assistance relating to the Funds, of which we are the
principal underwriter as defined in the Investment Company Act of 1940 (the
"1940 Act") and the exclusive agent for the continuous distribution of said
shares.
The terms and conditions of this Selling Agreement are as follows:
Section 1. You agree to provide reasonable sales support assistance in
connection with the sale of Fund Shares to your customers ("Customers"), which
assistance may include forwarding sales literature and advertising provided by
the Funds or by us to Customers and providing such other sales support
assistance as may be requested by us from time to time. All services rendered
hereunder by you shall be performed in a professional, competent and timely
manner.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the sales support
services contemplated hereby.
Section 3. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us, or the Funds except those
contained in the Funds' applicable then current prospectuses and statements of
additional information, as amended or supplemented from time to time, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us or the Funds in writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us or the
Funds in any matter or in any respect, except as provided herein. By your
written acceptance of this Agreement, you agree to and do release, indemnify and
hold us and the Fund harmless from and against any and all direct or indirect
liabilities or losses resulting from requests, directions, actions or inactions
of or by you or your officers, employees or agents regarding your
responsibilities hereunder or the purchase, redemption, transfer or registration
of Fund shares (or orders relating
1
<PAGE>
to the same) by or on behalf of Customers. You and your employees will, upon
request, be available during normal business hours to consult with us or the
Funds or our respective designees concerning the performance of your
responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by you
hereunder, we will pay to you, and you will accept as full payment therefor, a
fee as described in the applicable them current prospectuses. The fees payable
under this Section 5 shall be used primarily for sales support services
provided, and related expenses incurred, by you. By your acceptance of this
Agreement, you agree to and do waive such portion of any fee payable to you
hereunder to the extent necessary to assure that such fee and other expenses
required to be accrued hereunder with respect to the Fund shares owned by or on
behalf of Customers on any day does not exceed the income to be accrued by the
Fund to such shares on that day. The fee rate payable to you may be
prospectively increased or decreased by us or by the Funds in our or in its sole
discretion, at any time upon notice to you. Further, we or the Fund may, in our
or its discretion and without notice, suspend or withdraw the sale of Fund
shares of any or all Funds for the account of any Customer or Customers.
Section 6. You agree to provide to us and the Funds, at least quarterly, a
written report of amounts expended by you in connection with the provision of
sales support services hereunder and the purposes for which such expenditures
were made. In addition, you will furnish us or the Funds or our respective
designees with such information as we or they may reasonably request (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
us and the Funds and our respective designees (including, without limitation,
any auditors or legal counsel designated by us or the Funds), in connection with
the preparation of reports to the Funds' Board of Directors concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any other person
or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that the compensation payable to you hereunder, together with
any other compensation you receive in connection with the investment of your
Customers' assets in shares of the Funds, will be disclosed by you to your
Customers to the extent required by applicable laws or regulations, will be
authorized by your Customers and will not be excessive or unreasonable under the
laws and instruments governing your relationships with Customers. By your
written acceptance of this Agreement, you represent and warrant that: (i) in the
event an issue pertaining to this Agreement or the Distribution Plan related
hereto is submitted for shareholder approval, and you have the authority to do
so, you will vote any shares held for your own account in the same proportion as
the vote of the shares held for your Customers' benefit; and (ii) you will not
engage in activities pursuant to this Agreement which constitute acting as a
broker or dealer under state law unless you have obtained any licenses required
by such law. In addition, you
2
<PAGE>
understand that this Agreement has been entered into pursuant to Rule 12b-1
under the Act, and is subject to the provisions of said rule, as well as any
other applicable rules or regulations promulgated by the Securities and Exchange
Commission.
Section 9. You agree to conform to compliance standards adopted by the Fund
or its distributor as to when a class of shares in a Fund may be appropriately
sold to particular investors.
Section 10. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by federally chartered and supervised banks and other banking
organizations. As such, you may be restricted in the activities you may
undertake and for which you may be paid. You will perform only those activities
which are consistent with statutes and regulations applicable to you. You will
act solely as agent for, upon the order of, and for the account of your
customers.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee and continues
in effect until terminated. This Agreement is terminable, without penalty, at
any time by the Funds (which termination may be by a vote of a majority of the
disinterested Directors of the Funds or by vote of the holders of a majority of
the outstanding shares of such Funds) or by us or you upon notice to the other
party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address or number stated herein
(with a conforming copy by mail), or to such other address as either party shall
so provide in writing to the other.
Section 13. This Agreement will be construed in accordance with the laws of
the Commonwealth of Massachusetts without giving effect to principles of
conflict of laws, and is nonassignable by the parties hereto.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of letter where indicated below and promptly return it to us,
at the following address:
Very truly yours,
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation
General Partnership
Date: ____________________ By: ____________________
3
<PAGE>
Name: ____________________
Title: ___________________
Accepted and Agreed to:
SELLING AGENT
_______________________________
(Firm Name)
_______________________________
(Address)
_______________________________
(City)(State)(County)
Fax: #_________________________
Attention:_____________________
Date:____________________ By:____________________________
Name:__________________________
Title:_________________________
4
<PAGE>
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
<PAGE>
BANK ONE TRUST COMPANY, N.A.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Execution Form
Name of Fund: Pacific Capital Funds, with respect to each portfolio (each a
"Portfolio") listed on Schedule C as it may be amended from time to time.
Address of Fund: _______________________________________________________________
________________________________________________________________________________
Execution Date: ________________________________________________________________
Effective Date: ________________________________________________________________
This Custodian Agreement is entered into on the Execution Date set forth above
effective on the Effective Date set forth above, by and between the above named
Fund ("Fund") and Bank One Trust Company, N.A. ("Custodian"), with its principal
offices located at 100 East Broad Street, Columbus, Ohio 43271. In consideration
of the mutual covenants and conditions of this agreement, the Custodian and Fund
hereby agree to the Provisions of this agreement attached hereto and the
Schedules (if any) of this amendment attached hereto.
IN WITNESS WHEREOF, this agreement is executed by the Custodian and the Fund on
the Execution Date.
CUSTODIAN FUND
- --------- ----
BANK ONE TRUST COMPANY, N.A. PACIFIC CAPITAL FUNDS
BY ____________________________ BY __________________________
TITLE__________________________ TITLE _______________________
ATTEST ________________________ ATTEST ______________________
2
<PAGE>
BANK ONE TRUST COMPANY, NA.
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Table of Contents for Provisions
Section 1 Appointment of Custodian
Section 2 Delivery of Securities, Cash and Other Property
Section 3 Accounts
Section 4 Proper Instructions
Section 5 Payments for Shares
Section 6 Collection of Income
Section 7 Payment of Monies
Section 8 Duties of Custodian with Respect to Securities of the
Fund Held by Custodian
Section 9 Registration of Securities
Section 10 Segregated Account
Section 11 Voting and Other Action
Section 12 Transfer Taxes and Other Disbursements
Section 13 Responsibility of Custodian
Section 14 Options
Section 15 Futures Contracts
Section 16 Records and Reports
Section 17 Effective Period, Termination and Interpretive and
Additional Provisions
Section 18 Successor Custodian
Section 19 Compensation of Custodian
Section 20 Notices
Section 21 Overdrafts
Section 22 Governing Law
Section 23 Severability
Section 24 Non-Waiver
Section 25 No Third Party Benefit
Section 26 Captions
Section 27 Governed Accounts
Section 28 Matters relating to the Fund as a Massachusetts
Business Trust
3
<PAGE>
BANK ONE TRUST COMPANY, NA
CUSTODIAN AGREEMENT
FOR
MUTUAL FUNDS
Provisions
These Provisions are applicable to the Custodian Agreement between the Custodian
and the Fund described in the foregoing Execution Form.
1. Appointment of Custodian. Subject to the terms and conditions of this
agreement, the Fund hereby appoints and Custodian hereby accepts such
appointment by the Fund as custodian for certain cash, securities and other
property owned by the Fund.
2. Delivery of Securities. Cash and Other Property. The Fund shall deliver
to Custodian the cash, securities and other property described in Schedule D
which shall be approved in writing by Fund and Custodian at the time of delivery
and thereafter attached hereto. Custodian shall accept for deposit hereunder
additional cash, securities and other property upon receiving written notice
from Fund. The Custodian shall only be responsible for custody hereunder of
cash, securities, and other properly delivered to it and then only while they
are held in and as a part of the custodial account. All securities described in
Schedule D and all additional securities received by Custodian from time to time
shall be hereinafter referred to collectively as the "Securities" and shall be
held by Custodian subject to the terms and conditions of this agreement.
3. Accounts. Custodian shall open and maintain a separate account or
accounts in the name of each Portfolio of the Fund, subject only to draft or
order by Custodian pursuant to the terms of this agreement, and shall maintain
in such account or accounts all cash received by it from or for the account of
the Portfolio, other than cash maintained by the Portfolio pursuant to Rule
17f-3 promulgated under the Investment Company Act of 1940 (the "40 Act").
Custodian may deposit the securities held in the account of a Portfolio:
(a) in the banking department of Custodian;
(b) in such other banks or trust companies, including affiliates
of Custodian, as Custodian may deem appropriate provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that the use of each such bank or trust
company shall on behalf of each applicable
4
<PAGE>
Portfolio be approved or ratified by vote of a majority of the
Board of Trustees of the Fund. Such funds shall be deposited
by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity;
(c) in its accounts with a clearing agency registered with the
Securities and Exchange Commission (the "Commission") under
Section 17A of the Securities Exchange Act of 1934 (the
"Exchange Act"), which acts as a securities depository (the
"Securities Depository"); or
(d) in a book-entry account which is maintained for the Custodian
by a Federal Reserve bank (the "Book Entry Account").
So long as Custodian maintains any account pursuant to subsections
(c) and (d) above for a Portfolio, Custodian shall comply with the
requirements of Rule 17f-4, including, but not limited to:
(i) deposit the Securities in such an account that includes
only assets held for the Portfolio;
(ii) send the Fund confirmation of any transfers to or from
the account maintained for the Portfolio;
(iii) with respect to Securities transferred to the account of
the Portfolio, identify as belonging to the Portfolio,
by book entry or otherwise, a quantity of such
Securities in the fungible bulk of Securities (A)
registered in the name of Custodian or its nominee, or
(B) shown on Custodian's account on the books of the
Securities Depository, the Book-Entry Account, or
Custodian's agent;
(iv) promptly send to the Fund reports it receives from the
appropriate Federal Reserve Bank or Securities
Depository on its system of internal accounting control;
and
(v) send to the Fund such reports of the systems of internal
accounting control of Custodian and its agents through
which such Securities are deposited as are available and
as the Fund may reasonably request from time to time.
4. Proper Instructions. For the purpose of this agreement, "proper
instructions" shall mean (a) any oral authorizations, instructions or approvals
of any kind transmitted to Custodian in person or by telephone by a person
believed in good faith by Custodian to be a
5
<PAGE>
person authorized by a resolution of the Board of Directors of the Fund to give
such authorizations, instructions or approvals on behalf of the Fund; or (b)
written authorizations, instructions, or approvals of any kind transmitted to
Custodian by mail, personal delivery, telecopy, telegram or other written means
by at least two (2) persons believed in good faith by Custodian to be persons
authorized by a resolution of the Board of Directors of the Fund to give such
authorization, instructions or approvals on behalf of the Fund. The Fund shall
confirm any oral authorization, instruction or approval described in (a), above,
the same business day by transmittal to Custodian of a written authorization,
instruction or approval described in (b), above.
5. Payments for Shares. Custodian shall receive instructions from the
transfer agent of the Fund (the "Transfer Agent") as to allocation of payments
for Shares of a Portfolio, issued from time to time by the Fund pursuant to its
Dividend Reinvestment Plan. Such payments will be made available to the
Portfolio in federal funds as of specified times agreed upon from time to time
by the Fund and Custodian.
6. Collection of Income. Custodian shall collect all income and other
payments with respect to registered Securities held hereunder to which each
Portfolio shall be entitled by law or pursuant to custom in the securities
business, and shall collect all income and principal and other payments with
respect to bearer Securities if, on the date of payment by the issuer, such
Securities are held by Custodian or agent thereof, and shall deposit such income
and principal, as collected, into such Portfolio's account. Without limiting the
generality of the foregoing, Custodian shall detach and present for payment all
coupons and other income and principal items requiring presentation as and when
they become due, shall collect dividends and interest when due on Securities
held hereunder, and shall endorse and deposit for collection, in the name of the
Portfolio, checks, drafts, and other negotiable instruments on the same day as
received. The Custodian is further authorized, empowered and directed to invest,
said proceeds and any other monies not directed by the Fund or Fund's agent to
be invested in short term interest bearing or short term discount obligations to
the best of Custodian's ability. It is contemplated that the Fund will, from
time to time, provide Custodian with certain written guidelines setting forth
specific short term interest bearing and short term discount obligations which
are acceptable to Fund, and Custodian agreed to act within said guidelines.
Unless provided otherwise in written instructions from the Fund to the
Custodian, the Custodian is specifically authorized, empowered and directed to
invest any short term monies in:
(a) Securities of The One Group U.S. Treasury Securities Money Market
Fund, The One Group Prime Money Market Fund, and The One Group
Municipal Money Market Fund. The One Group is an open-end
investment company registered under the '40 Act. The fact that
the Custodian, any affiliate of the Custodian, or any affiliate
of BANC
6
<PAGE>
ONE CORPORATION is providing services to and receiving
remuneration from the foregoing investment company or investment
trust as investment advisor, custodian, transfer agent,
registrar, or otherwise shall not preclude the Custodian from
investing in the securities of such investment company or
investment trust;
(b) savings accounts, time deposit accounts, certificates of deposit,
money market funds or other evidences of deposit issued by BANK
ONE, COLUMBUS, N.A. and/or any other national bank, savings and
loan institution, state member bank, state non-member bank, or
other depository institution which now or in the future is an
affiliate or subsidiary of Custodian or of BANC ONE CORPORATION.
With respect to Securities of foreign issuers, while Custodian will me its best
efforts to collect any monies which may to its knowledge become collectible
arising from such Securities including dividends, interest and other income and
principal, and to notify the Fund of any call for redemption, offer of exchange,
right of subscription, reorganization or other proceedings affecting such
Securities, it is understood that Custodian shall be under no responsibility for
any failure or delay in effecting such collections or giving such notices.
Custodian shall not be under any obligation or duty to take action to effect
collection of any amount, if the Securities (domestic or foreign) on which such
amount is payable are in default and payment is refused after due demand or
presentation. Custodian will, however, promptly notify the Fund in writing of
such default and refusal to pay.
7. Payment of Monies. Upon receipt of proper instructions from the Fund on
behalf of the applicable Portfolio, which may be continuing instructions when
Fund and Custodian specifically agree in writing, Custodian shall pay out monies
of a Portfolio from the custodial account in the following cases only:
(a) Upon the purchase of Securities for the account of the Portfolio
but only (i) against the delivery of such Securities to Custodian
(or any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the '40 Act to
act as a custodian and has been designated by Custodian as its
agent for this purpose) registered in the name of the Portfolio
or in the name of a nominee of the Fund or in the name of a
nominee of Custodian referred to in Section 9 below or in proper
form for transfer; (ii) in the case of a purchase effected
through a Securities Depository, in accordance with the
conditions set forth in Section 3 above or (iii) in the case of
repurchase agreements entered into between the Fund and another
bank or broker-dealer, against delivery of Securities either in
certificate form or through an entry crediting Custodian's
account at the Federal
7
<PAGE>
Reserve Bank with such securities.
(b) In connection with conversion, exchange, surrender, or redemption
of securities owned by the Fund as set forth in Section 8(b) of
this agreement;
(c) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, distribution plan
payments and other operating expenses of the Fund;
(d) For the payment of any dividends or other distributions on shares
of the Portfolio declared pursuant to the governing documents of
the Fund; and
(e) In connection with options and futures contracts, as set forth in
sections 14 and 15 of this agreement, respectively.
(f) For any other purpose of the Fund, but only upon receipt of, in
addition to proper instructions from the Fund, a certified copy
of a resolution of the Board of Trustees of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
8. Duties of Custodian with Respect to Securities of the Fund Held by
Custodian.
(a) Holding Securities. Custodian shall hold and physically segregate
for the account of each Portfolio all Securities owned by the
Fund other than securities held in a Securities Depository or
Book Entry Account, as provided in Section 3 of this agreement.
(b) Delivery of Securities. Custodian shall release and deliver
Securities owned by a Portfolio held by Custodian or in a
Securities Depository or Book Entry Account for Custodian only
upon receipt of proper instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions
when the Fund and Custodian specifically agree in writing, and
only in the following cases:
(i) Upon the sale of such Securities for the account of the
8
<PAGE>
Portfolio and the receipt of payment therefor;
(ii) Upon the receipt of payment in connection with any
repurchase agreement related to such Securities entered into
by the Portfolio;
(iii) In the case of a sale effected through a Securities
Depository or Book Entry Account, in accordance with the
provisions of Section 3 of this agreement;
(iv) In connection with tender or other similar offers for
Securities owned by the Portfolio, provided that, in any
such case, the cash or other consideration is to be
delivered to Custodian;
(v) To the issuer thereof or its agent when such Securities are
called, redeemed, retired, or otherwise become payable,
provided that, in any such case, the cash or other
consideration is to be delivered to Custodian;
(vi) To the issuer thereof, or its agent, for transfer into the
name of the Custodian or into the name of any nominee or
nominees of Custodian, or for exchange for a different
number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units, or for
exchange of interim receipts or temporary Securities or
definitive Securities, provided that, in any such case, the
new Securities are to be delivered to Custodian;
(vii) To the broker selling the same, against a receipt, for
examination in accordance with "street delivery" custom
provided that Custodian may adopt such procedures to ensure
their prompt return to Custodian by the broker in the event
the broker elects not to accept them;
(viii) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization, or
readjustment of the Securities of the issuer of such
Securities, or pursuant to provisions for conversion
contained in such Securities provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to Custodian;
(ix) In the case of warrants, rights or similar Securities, the
surrender thereof upon the exercise of such warrants, rights
or
9
<PAGE>
similar Securities or the surrender of interim receipts or
temporary securities for definitive Securities, provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to Custodian;
(x) If the Custodian and the Fund have executed a Securities
Lending Agreement, for delivery in connection with any loans
of securities made by the Portfolio pursuant to the terms of
such Securities Lending Agreement;
(xi) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio but only
against receipt of amounts borrowed;
(xii) For delivery with the provisions of any agreement among the
Fund on behalf of the Portfolio, Custodian and a
broker-dealer registered under the Exchange Act and a member
of the National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation (the "O.C.C.") and of any
registered national securities exchange or any similar
organization, regarding escrow or other arrangements in
connection with transactions of the Fund;
(xiii) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to the 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 Portfolio;
(xiv) Upon receipt of instructions from the Transfer Agent for
the Fund, for delivery to such Transfer Agent or to holders
of Shares in connection with distributions in kind, as may
be described from time to time in one or more currently
effective prospectuses of the Fund, in satisfaction of
requests by holders of Shares for repurchase or redemption;
and
(xv) For any other purpose of the Fund, but only upon receipt of
in addition to proper instructions from the Fund on behalf
of the
10
<PAGE>
applicable Portfolio, a certified resolution of the Board of
Trustees of the Fund 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
purpose, and naming the person or persons to whom delivery
of such Securities shall be made.
(c) Security Holdings Disclosure. The Custodian is not authorized and
shall not disclose the name, address, or security positions of
the Fund in response to requests concerning shareholder
communications under Section 14 of the Securities Exchange Act of
1934, the rules and regulations thereunder, and any similar
state, regulation or rule in effect from time to time.
(d) Because the Fund and the Custodian are deemed to be affiliates
pursuant to interpretive positions taken by the staff of the
Commission, the Custodian agrees to cooperate with the Fund in
establishing such procedures and policies as are necessary or
appropriate to assure compliance with the provisions of Rule
17f-2 under the '40 Act.
9. Registration of Securities. Securities held by Custodian (other than
bearer Securities) shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of Custodian, unless the Fund has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment adviser as the
Fund. All Securities accepted by Custodian on behalf of the Fund under the terms
of this agreement shall be in "street name" or other good delivery form.
10. Segregated Account. Custodian shall upon receipt of proper instructions
establish and maintain a segregated account or accounts for and on behalf of
each applicable Portfolio, into which account or accounts may be transferred
cash and/or Securities including Securities maintained in an account by the
Custodian pursuant to Section 3 of this agreement (a) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, Custodian
and a dealer or broker which is registered under the Exchange Act and is a
member in good standing of the NASD relating to compliance with the rules of the
O.C.C. 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 Portfolio; (b) for purposes of segregating
cash or government Securities in connection with options purchased or written by
the Fund or commodity futures contracts or options thereon purchased, sold, or
written by the Fund; and (c) for any other purpose, upon receipt of, in addition
to proper instructions, a certified copy of a resolution of the Board of
Trustees signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such segregated
account and
11
<PAGE>
declaring such purposes to be proper corporate purposes.
11. Voting and Other Action. Custodian shall promptly deliver or mail to
the Fund all forms of proxies and all notices of meetings relating to Securities
held for the account of each Portfolio, and, upon receipt of proper
instructions, shall execute and deliver such proxies or other authorizations as
may be required. Neither Custodian nor its nominee shall vote any Securities or
execute any proxy to vote the same or give any consent to take any other action
with respect thereto (except as otherwise herein provided) unless directed to do
so by the Fund on behalf of the Portfolio upon receipt of proper instructions.
12. Transfer Taxes and Other Disbursements. The Fund shall pay or reimburse
Custodian from time to time for any transfer taxes payable upon transfers of
Securities made hereunder, and for all other necessary and proper disbursements
and expenses made or incurred by Custodian in the performance of its duties and
obligations under this agreement. Custodian shall execute and deliver and shall
cause any Securities Depository to execute and deliver such certificates in
connection with Securities delivered to it or by it under this agreement as may
be required under the laws of any jurisdiction to exempt from taxation any
exemptible transfers and/or deliveries of any such Securities.
13. Responsibility of Custodian. As long as and to the extent that it
exercises reasonable care, Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this agreement; shall be held harmless in
acting upon proper instructions, certified resolutions of the Board of Trustees
of the Fund, or any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party or
parties; and shall be entitled to receive as conclusive proof of any fact or
matter required to be ascertained by it hereunder, a certificate by the
President, Treasurer, or Secretary or Assistant Secretary of the Fund. Custodian
may receive and accept a certified resolution of the Board of Trustees of the
Fund as conclusive evidence (a) of the authority of any person to act in
accordance with such resolution or (b) of any determination or of any action by
the Board of Trustees of the Fund pursuant to the Declaration of Trust or the
Code of Regulation or the By-Laws as described in such resolution, and such vote
may be considered as in full force and effect until receipt by Custodian of
written notice from the Secretary or Assistant Secretary to the contrary.
Custodian shall be entitled to reasonably rely upon and may act upon advice of
counsel (who may or may not be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to such
advice.
If the Fund on behalf of a Portfolio requires Custodian to take any action with
respect to Securities, which action involves the payment of monies or which
action may, in the opinion of Custodian, result in Custodian or its nominee
being liable for the payment of money or incurring liability of some other form,
the Fund on behalf of a Portfolio, as a prerequisite to
12
<PAGE>
requiring Custodian to take such action, shall provide indemnity to Custodian in
an amount and form satisfactory to it.
With respect to Securities held by Custodian on behalf of a Portfolio, Custodian
shall collect all income or other payments, release and deliver such Securities,
and take any other action as directed by the Fund with respect to dividends,
splits, distributions, spin-offs, puts, calls, conversions, redemptions,
tenders, exchanges, mergers, reorganizations, rights, warrants or any other
similar activity relating to the Securities. The Custodian shall request
direction of Fund upon receipt of actual notice of any such activity. For
purposes of this paragraph, Custodian shall be deemed to have actual notice if
any such activity is published in one or more of the following publications:
J.J. Kenneys Munibase System, Xitek, Inc,. Financial Card Service, Standard &
Poors' Called Bond Listing, Depository Trust Reorganization Notices, and The
Wall Street Journal. If Custodian does not have actual notice of such activity,
any such activity will be handled by Custodian on a "best efforts" basis.
14. Options.
(a) Purchase of Options by a Portfolio. Upon the purchase by a
Portfolio of any Option (as defined below), the Fund on behalf of
the Portfolio shall promptly deliver to the Custodian a
certificate signed by an appropriate officer of the Fund (a
"Certificate") specifying with respect to each such Option: (i)
whether the Option is a put or call Option; (ii) the name of the
issuer of the securities subject to the Option and the title and
number of such securities; (iii) the expiration date: (iv) the
exercise price; (v) the date of purchase and settlement; (vi) the
premium to be paid by the Portfolio; and (vii) the name of the
registered broker-dealer who is acting as the clearing agent (the
"Clearing Agent"). Upon receipt of a Clearing Agent's
confirmation of the purchase of the Option held by such Clearing
Agent for the account of Custodian as custodian for the
Portfolio, Custodian shall pay the premium payable to the
Clearing Agent through whom the purchase was made; provided, that
such premium conforms to the total premium payable as set forth
in such Certificate.
(b) Sale of Options by a Portfolio. Upon the sale of any Option
purchased by a Portfolio in accordance with subsection (a) above,
the Fund on behalf of the Portfolio shall promptly deliver to
Custodian a Certificate specifying with respect to such sale: (i)
the type of Option (put or call); (ii) the name of the issuer of
the securities subject to the Option and the title and number of
such securities; (iii) the date of sale; (iv) the sales price;
(v) the date of settlement; (vi) the total amount payable to the
Portfolio upon such sale; and (vii) the name of the Clearing
Agent through whom the sale was made. Custodian shall consent to
the
13
<PAGE>
delivery of the Option sold by the Clearing Agent which
previously supplies the confirmation described in subsection (a)
above with respect to such Option against payment to Custodian of
the total amount payable to the Portfolio; provided that the same
conforms to the total amount payable as set forth in such
Certificate.
(c) Upon the exercise by the Portfolio of any Call Option (as defined
below) purchased by the Portfolio pursuant to subsection (a)
above, the Fund on behalf of the Portfolio shall promptly deliver
to Custodian a Certificate specifying with respect to such Call
Option: (i) the name of the issuer of the securities subject to
such Call Option and the title and number of such securities;
(ii) the expiration date; (iii) the date of exercise and
settlement; (iv) the exercise price per share, (v) the total
amount to be paid by the Portfolio upon such exercise; and (vi)
the name of the Clearing Agent through whom such Call Option was
exercised. Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, (A) pay out of
the moneys held for the account of the Portfolio the total amount
payable to the Clearing Agent through whom the Call Option was
exercised; provided that the same conforms to the total amount
payable as set forth in such Certificate, and (B) delete the
exercised Call Option from the statements delivered to the Fund
pursuant to Section 16 of this agreement.
(d) Upon the exercise by a Portfolio of any Put Option (as defined
below) purchased by the Portfolio pursuant to subsection (a)
hereof, the Fund on behalf of the Portfolio shall deliver to
Custodian a Certificate specifying with respect to such Put
Option: (i) the name of the issuer of the securities subject to
such Put Option and the title and number of such securities; (ii)
the expiration date; (iii) the date of exercise and settlement;
(iv) the exercise price per share; (v) the total amount to be
paid to the Portfolio upon such exercise; and (vi) the name of
the Clearing Agent through whom such Put Option was exercised.
Custodian shall upon receipt of the amount payable upon the
exercise of the Put Option (A) deliver or cause the Securities
Depository or Book Entry Account to deliver, out of the account
of the Portfolio to which such Put Option was allocated, the
securities which were subject to such Put Option; provided that
the same conforms to the amount payable to the Portfolio as set
forth in such Certificate, and (B) delete the exercised Put
Option from the statements to be delivered to the Fund pursuant
to Section 16 of this agreement.
(e) Whenever a Portfolio writes a Covered Call Option (as defined
below)
14
<PAGE>
with respect to securities held by Custodian hereunder, the Fund
on behalf of the Portfolio shall promptly deliver to Custodian a
Certificate specifying with respect to such Covered Call Option:
(i) the name of the issuer of the securities subject to such
Covered Call Option and the title and number of such securities;
(ii) the expiration date; (iii) the exercise price: (iv) the
premium to be received by the Portfolio; (v) the date such
Covered Call Option was written; and (vi) the name of the
Clearing Agent through whom the premium is to be received.
Custodian shall deliver or cause to be delivered, in exchange for
receipt of the premium specified in the Certificate with respect
to such Covered Call Option, such receipts as are required in
accordance with the customs prevailing among brokers in Covered
Call Options, and shall impose, or direct the Securities
Depository or Book Entry Account to impose, upon the underlying
Securities specified in the Certificate such restrictions as may
be required by such receipts.
(f) Whenever a Covered Call Option written by a Portfolio and
described in the preceding subsection (e) is exercised, the Fund
on behalf of the Portfolio shall promptly deliver to Custodian a
Certificate instructing Custodian to deliver, or to direct the
Securities Depository or Book Entry Account to deliver, the
securities subject to such Covered Call Option and specifying:
(i) the name of the issuer of the securities subject to such
Covered Call Option and the title and number of such securities;
(ii) the Clearing Agent to whom the underlying securities are to
be delivered; and (iii) the total amount payable to the Portfolio
upon such delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to subsection (e) hereof, Custodian
shall deliver, or cause the Securities Depository or Book Entry
Account to deliver, the underlying securities as specified in the
Certificate for the amount to be received as set forth in such
Certificate.
(g) Whenever a Portfolio purchases any Option identical to a
previously written Covered Call Option described in subsection
(e) hereof in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund on behalf of the Portfolio shall
promptly deliver to Custodian a Certificate specifying with
respect to the Option being purchased: (i) that the transaction
is a Closing Purchase Transaction, (ii) the name of the issuer of
the securities subject to such Option and the title and number of
such securities; (iii) the exercise price; (iv) the premium to be
paid by the Portfolio; (v) the expiration date; (vi) the date of
such purchase; and (vii) the name of the Clearing Agent to whom
the premium is to be paid. Upon Custodian's payment of the
premium and the return and/or
15
<PAGE>
cancellation of any receipt issued pursuant to subsection (e) of
this Section 14 with respect to the Covered Call option being
liquidated through the Closing Purchase Transaction, Custodian
shall (A) remove, or direct the Securities Depository or Book
Entry Account to remove, the previously imposed restriction on
the securities underlying the Covered Call Option, and (B) delete
such Option from statements delivered to the Fund by Custodian
pursuant to Section 16 of this agreement.
(h) Upon the expiration of any Option purchased by a Portfolio
pursuant to subsection (a) of this Section 14 or any Covered Call
Option written by a Portfolio and described in subsection (e) of
this Section 14, Custodian shall (i) delete such Option from the
statements delivered to the Fund pursuant to Section 16 of this
agreement and, if such expired Option was a Covered Call Option
written by the Portfolio, (ii) free, or instruct the Securities
Depository or Book Entry Account to free, the Securities
underlying such Covered Call Option from the restrictions imposed
by receipts issued in connection therewith.
(i) For purposes of this Section 14, the following terms shall have
the meanings as set forth below:
(i) "Option" shall mean a Call Option, Covered Call Option
and/or Put Option.
(ii) "Call Option" shall mean an option entitling the holder
thereof, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer or
such Call Option the specified underlying Securities.
(iii) "Covered Call Option" shall mean an option entitling its
holder, upon timely exercise and payment of the specified
exercise price, to purchase from the writer of such Covered
Call Option the specified underlying Securities which are
owned by such writer and are subject to appropriate
restrictions.
(iv) "Put Option" shall mean an option entitling the holder
thereof, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer
of such Put Option for the specified exercise price.
15. Futures Contracts.
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<PAGE>
(a) Whenever a Portfolio shall enter into a Futures Contract (as
defined below) to be held by Custodian under this agreement, the
Fund on behalf of the Portfolio shall deliver to Custodian a
Certificate specifying with respect to such Futures Contract: (i)
the category of Futures Contract (the name of the underlying
stock index or financial instrument); (ii) the number of
identical Futures Contracts entered into; (iii) the delivery or
settlement date of the Futures Contract; (iv) the date the
Futures Contract was entered into; (v) whether the Fund is buying
(going long) or selling (going short) on such Futures Contract;
(vi) the amount of cash and/or the amount and kind of Securities,
if any, to be deposited by Custodian in a margin account with
respect to such Futures Contract and the name in which the margin
account has been, or is to be, established; (vii) the name of the
broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (viii) the amount of fee
or commission, if any, to be paid to the broker, dealer, or
futures commission merchant. Custodian shall upon receipt of such
broker's, dealer's, or futures commission merchant's statement
confirming the purchase (creation of a long position) or sale
(creation of a short position) of a Futures Contract which is
held by such broker, dealer, or futures commission merchant in
the name of Custodian (or of a duly appointed and registered
nominee of Custodian or a designated depository or its nominee)
as custodian for the Portfolio, make payment of the fee or
commission, if any, specified in the Certificate and deposit in
such margin account the amount of cash and/or the amount and kind
of Securities specified in such Certificate.
(b) The Portfolio shall, from time to time, make such additional
deposits to, or withdrawals from, a margin account as specified
in a Certificate received by Custodian. Such Certificate shall
specify the amount of cash and/or the amount and kind of
Securities specifically to be deposited in, or withdrawn from, a
specified margin account. In the event that the Fund fails to
specify in a Certificate the name of the issuer, the title and
the number of shares or the principal amount of any particular
Securities to be deposited by Custodian in a margin account,
Custodian shall not be under any obligation to make any such
deposit and shall so notify the Fund.
(c) Custodian shall make deliveries or payments from a margin account
to the broker, dealer, or futures commission merchant in whose
name, or for whose benefit, the account was established only upon
the receipt of a certificate specifying the broker, dealer, or
futures commission merchant to whom such payment or delivery is
to be made, the amount
17
<PAGE>
of money and/or the amount and kind of securities to be paid or
delivered, and the date on which such payment or delivery is to
be made. After receipt of such a Certificate, Custodian shall
make the payments and/or deliveries to the broker, dealer, or
futures commission merchant therein specified.
(d) Whenever a Futures Contract held by Custodian hereunder is
retained by a Portfolio until delivery or settlement is made on
such Futures Contract, the Fund on behalf of the Portfolio shall
deliver to Custodian a Certificate specifying: (i) the Futures
Contract; (ii) with respect to a Stock Index Futures Contract (as
defined below), the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract (as
defined below), the Securities and/or amount of cash to be
delivered or received; (iii) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be
made or received; and (iv) the amount of cash and/or Securities
to be withdrawn from the related margin account. Upon the receipt
of a broker's, dealer's, or futures commission merchant's
statement or confirmation reasonably believed by Custodian to be
in the form customarily used by brokers, dealers or futures
commission merchants confirming that the Futures Contract is
being settled and that the Portfolio's position in such Futures
Contract is thereby terminated, Custodian shall make the payment
or delivery specified in the Certificate, and delete such Futures
Contract from the statements delivered to the Fund pursuant to
Section 16 of this agreement.
(e) Whenever a Portfolio shall enter into a Futures Contract to
offset a Futures Contract held by Custodian hereunder, the Fund
on behalf of the Portfolio shall deliver to Custodian a
Certificate specifying: (i) the items of information required in
a Certificate described in subsection (a) above, and (ii) the
Futures Contract being offset. Custodian shall, upon receipt of a
broker's, dealer's, or futures commission merchant's statement or
confirmation reasonably believed by Custodian to be in the form
customarily used by brokers, dealers, or futures commission
merchants confirming the offsetting transaction, make payment of
the fee or commission, if any, specified in the Certificate and
delete the Futures Contract being offset from the statements
delivered to the Fund pursuant to Section 16 of this agreement.
(f) Custodian shall accept cash and/or Securities tendered or
delivered by a broker, dealer, or futures commission merchant in
connection with any Futures Contract held by Custodian hereunder
when instructed to accept such cash and/or Securities in a
Certificate. Such Certificate
18
<PAGE>
shall instruct Custodian where to deposit such cash and/or
Securities.
(g) For purposes of this Section 15, the following terms shall have
the meanings set forth below:
(i) "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contract.
(ii) "Financial Futures Contract" shall mean the firm commitment
to buy or sell fixed income securities, including U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds,
Government National Mortgage Association mortgage-backed
securities and commercial paper, at a specified time at an
agreed upon price.
(iii) "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified
dollar amount times the difference between the value of a
particular stock index at the close of the last business day
of the contract and the price at which the Futures Contract
is originally struck.
16. Records and Reports. Fund hereby acknowledges that it may have the
right to receive broker confirmations within the time period prescribed by 12
C.F.R Section 12.5 at no additional cost. In lieu of receiving such
confirmations within such time period, Custodian and Fund agree to the
alternative procedures set forth below.
Custodian shall create and maintain records relating to its activities and
obligations under this agreement in such manner as will meet the obligations of
the Fund under the '40 Act, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, applicable Federal and State tax laws and any
other law or administrative rules or procedures which may be applicable to the
Fund and employees and agents of the Securities and Exchange Commission. All
such records shall remain the property of the Fund, shall be subject to the
provisions of Section 13 of this agreement, and shall be open to the inspection
and audit at reasonable times by duly authorized officers, employees or agents
of the Fund. Custodian shall, at the Fund's request, supply the Fund with a
tabulation of Securities owned by each Portfolio and held by Custodian and shall
supply to the Fund a report from time to time as parties shall agree of all
monies received or paid on behalf of each Portfolio and of the resultant cash
balance, a list of all security transactions that remain unsettled at such time,
and such other reports as the Fund may reasonably request.
17. Effective Period, Termination and Interpretive and Additional
Provisions. This agreement shall become effective as of the date first set forth
in this agreement, and may be terminated by either party by 90 days advance
written notice delivered pursuant to Section
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20 of this agreement to the other party.
Upon termination hereof, the Fund shall pay to Custodian such compensation as
may be due as of the date of such termination, and shall likewise reimburse
Custodian for its costs, expenses and disbursements as of the date of such
termination as contemplated by this agreement.
In connection with the operation of this agreement, Custodian and the Fund may
agree from time to time on such provisions interpretive or in addition to the
provisions of this agreement as may in their joint opinion be consistent with
the general tenor of this agreement. Any such interpretive or additional
provisions shall be signed by both parties and annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
Federal or State regulations, or any provision of the Declaration of Trust and
By-Laws of the Fund as the same may from time to time be amended.
18. Successor Custodian. If a successor custodian for the Fund, or one or
more of the Portfolios is appointed by the Board of Trustees of the Fund,
Custodian shall, upon termination, deliver to such successor custodian, duly
endorsed and in form for transfer, all Securities of each applicable Portfolio
then held hereunder and all other property of the applicable Portfolio(s)
deposited with or held by it hereunder and Custodian shall be released of all
duties and obligations under this agreement
If no such successor custodian is appointed and this agreement is terminated
pursuant to Section 17 of this agreement, Custodian shall, in like manner, at
its office, upon receipt of a certified resolution of the Board of Trustees of
the Fund, deliver such property in accordance with such resolution.
In the event that no written order designating a successor custodian or
certified copy of a resolution of the Board of Trustees of the Fund shall have
been delivered to Custodian on or before the date when such termination shall
become effective, then Custodian shall have the right to deliver to a bank or
trust company of its own selection qualified to act as a custodian under the '40
Act, all property of applicable Portfolios held by Custodian, under this
agreement. Thereafter, such bank or trust company shall be the successor of
Custodian under this agreement and Custodian shall be released of all duties and
obligations under this agreement. Alternatively, Custodian shall have the right
to commence an action in the nature of an interpleader, and seek to deposit the
property in a court of competent jurisdiction.
19. Compensation of Custodian. Custodian shall be entitled to compensation
for its services as set forth in Schedule A attached hereto and made a part
hereof (the "Fee Schedule") and for reimbursement of its out of pocket expenses.
20. Notices. Any notices required or desired to be given to any party
hereto shall be in writing, shall be addressed to such other party at that
party's address set forth at the
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beginning of this agreement and shall be deemed given when deposited in the
United States mail, certified, return receipt requested, or actually received by
the party to whom it was addressed if delivered by an alternate method. Any
party may change the address to which notices or other communications are to be
given by giving the other parties notice of such change.
21. Overdrafts. Any Securities purchased in anticipation of the delivery of
cash on behalf of the Portfolio shall not be credited to the Account of the
Portfolio if such cash is not actually received by the Custodian by the
anticipated delivery date. In such event, Custodian may, in its sole discretion,
advance the necessary funds to complete the transaction and immediately shall
notify the Portfolio of the foregoing. Upon receipt of such notification, the
Portfolio shall wire such funds to the Custodian, in such amount as agreed upon
by the Funds and Custodian to make the Custodian whole in connection with the
shortfall, by 1:00 p.m. eastern standard time on the day the notification is
received or, alternatively, instruct the Custodian to sell Securities in the
Portfolio's account in the amount agreed. Upon Custodian's receipt of the funds
representing the shortfall, the subject Securities will be credited to the
Portfolio's account. If the Custodian has not received funds in the amount
necessary to cover the shortfall in the Portfolio's account within two days
following notification, Custodian is authorized to sell the subject Securities
and retain that portion of the proceeds necessary to make the Custodian whole,
and shall credit any remaining proceeds to the Account of the Portfolio.
22. Governing Law. This agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of Ohio.
23. Severability. The intention of the parties to this agreement is to
comply fully with all laws, rules, regulations and public policies, and this
agreement shall be construed consistently with all laws, rules, regulations and
public policies to the extent possible. If and to the extent that any court of
competent jurisdiction determines it is impossible to construe any provision of
this agreement consistently with any law, rule, regulation or public policy and
consequently holds that provision to be invalid, such holding shall in no way
affect the validity of the other provisions of this agreement, which shall
remain in full force and effect.
24. Non-Waiver. No failure by any party to insist upon compliance with any
term of this agreement, to exercise any option, enforce any right, or seek any
remedy upon any default of any other party shall affect, or constitute a waiver
of, the first party's right to insist on such strict compliance, exercise that
option, enforce that right, or seek that remedy with respect to that default or
any prior, contemporaneous, or subsequent default. No custom or practice of the
parties at variance with any provision of this agreement shall affect or
constitute a waiver of, any party's right to demand strict compliance with all
provisions of this agreement.
25. No Third Party Benefit. This agreement is intended for the exclusive
benefit
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of the parties to this agreement and their respective successors and assigns,
and nothing contained in this agreement shall be construed as creating any
rights or benefits in or to any third party.
26. Captions. The captions of the various sections of this agreement are
not part of the context of this agreement, but are only labels to assist in
locating those sections and shall be ignored in construing this agreement.
27. Governed Accounts. All sub-accounts governed by this Agreement are
listed in Schedule B attached hereto ("Sub-Accounts").
28. Matters Relating to the Fund as a Massachusetts Business Trust. The
Declaration of Trust establishing the Fund, dated October 30, 1992, a copy of
which, together with all amendments thereto (the "Declaration") is on file in
the office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Pacific Capital Funds" refers to the Trustees under the Declaration
collectively as trustees and not individually or personally. The obligations of
"Pacific Capital Funds" entered into in the name or on behalf thereof by any of
the Fund's Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders,
representatives, or agents of the Fund personally, but bind only the assets of
the Fund, and all persons dealing with any Portfolio of the Fund must look
solely to the assets of the Fund belonging to such Portfolio for the enforcement
of any claims against the Fund.
CUSTODIAN FUND
BANK ONE TRUST COMPANY, N.A. PACIFIC CAPITAL FUNDS
By______________________________ By_______________________
Title____________________________ Title______________________
Attest___________________________ Attest_____________________
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SCHEDULE A
FEE SCHEDULE
This agreement is made as of __________________, 199___, by and between
Pacific Capital Funds, with its principal office located at
_________________________________ (the"Fund") on behalf of each Portfolio listed
on Schedule C and Bank One Trust Company, N.A., with its principal offices
located at 100 East Broad Street, Columbus, Ohio 43271 ("Custodian").
Whereas the above-mentioned Fund and Custodian entered into a Custodian
Agreement as of ________, 199__, and whereas Section 19 of said Agreement
stipulates that the compensation of Custodian shall be agreed upon by said Fund
and Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to the
following schedule attached hereto.
For the purpose of this Agreement, a transaction is defined as any purchase
or sale of a security, free receipt, free delivery and corporate reorganization
items such as tenders, mergers and acquisitions.
Said fee shall be computed and billed to the Fund on a monthly basis.
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SCHEDULE B
SUB-ACCOUNTS
Set forth below is a list of all sub-accounts opened by the Custodian under
the terms and conditions of the Custodian Agreement dated _________, 199__, by
and between Pacific Capital Funds, with its principal offices located
at___________________________________ (the "Fund"), on behalf of each Portfolio
listed on Schedule C, and Bank One Trust Company, N.A., with its principal
offices located at 100 East Broad Street, Columbus, Ohio 43271 (the
"Custodian"). Any additions or deletions to this list will be by execution of a
new Schedule B.
Sub-Account Name Sub-Account Number
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SCHEDULE C
LIST OF PORTFOLIOS
Diversified Fixed Income Fund
Growth and Income Fund
Growth Stock Fund
Short Intermediate U.S. Treasury Securities Fund
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
U.S. Treasury Securities Fund
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MITSUBISHI GLOBAL CUSTODY
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between Pacific Capital Funds
("Principal"), on behalf of Pacific Capital New Asia Growth Fund (the "Fund")
and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian"). Principal
desires that Custodian hold and administer on behalf of Principal all Securities
(as herein defined). Custodian is willing to do so on the terms and conditions
set forth in this Agreement. Accordingly, Principal and Custodian agree as
follows:
1. Definitions. Certain terms used in this Agreement are defined as
follows:
(a) "Account" means, collectively, each custodianship account
maintained by Custodian pursuant to Paragraph 3 of this Agreement.
(b) "Eligible Foreign Securities Depository", ("Depository") shall
mean a securities depository or clearing agency incorporated or organized under
the laws of a country other than the United States which operates (i) the
central system for handling securities or equivalent book-entries in that
country, or (ii) a transnational system for the central handling of securities
or equivalent book-entries.
(c) "Investment Manager" means an investment advisor or manager
identified by Principal in a written notice to Custodian as having the authority
to direct Custodian regarding the management, acquisition, or disposition of
Securities.
(d) "Securities" means all of the Fund's domestic or foreign
securities or both within the meaning of Section 2(a)36 of the Investment
Company Act of 1940 ("1940 Act") and regulations issued by the U.S. Securities
and Exchange Commission ("SEC") under Section 17(f) of the 1940 Act, 17 C.F.R.
270.17f-5(c)(1), as amended, which are held by Custodian in the Account, and
shall include cash of any currency or other property and all income and proceeds
of sale of such securities or other property.
(e) "Eligible Foreign Custodian", ("Sub-Custodian") shall mean (i) a
banking institution or trust company incorporated or organized under the laws of
a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (for a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders' equity
in excess of $100 million in U.S. currency (or a foreign currency equivalent
thereof), or (iii) any other entity that shall have been so qualified by
<PAGE>
exemptive order, rule or other appropriate action of the SEC. Custodian shall
evaluate and determine at least annually the continued eligibility of each
Sub-Custodian as described in Paragraph 5(d) of this Agreement.
2. Representations
(a) Principal represents that with respect to any Account
established by Principal to hold Securities, Principal is authorized to enter
into this Agreement and to retain Custodian on the terms and conditions and for
the purposes described herein.
(b) Custodian represents that (i) it is organized under the laws of
the United States and has its principal place of business in the United States,
(ii) it is a bank within the meaning of Section 202(a)(2) of the Investment
Advisers Act of 1940 and Section 2(a)(5) of the Investment Company Act of 1940,
as amended, and (iii) it has equity capital in excess of $1 million.
3. Establishment of Accounts. Principal hereby establishes with Custodian,
and may in the future establish, one or more Accounts in Principal's name. The
Account shall consist of Securities delivered to and receipted for by Custodian
or by any Sub-Custodian. Custodian, in its sole discretion, may reasonably
refuse to accept any property now or hereafter delivered to it for inclusion in
the Account, provided that custodian accepts publicly traded securities and cash
which are customarily held by custodian in domestic and global markets.
4. Custody. Subject to the terms of this Agreement, Custodian shall be
responsible for the safekeeping and custody of the Securities. Custodian may (i)
retain possession of all or any portion of the Securities in a foreign branch or
other office of Custodian, or (ii) retain, in accordance with Paragraph 5 of
this Agreement, one or more Sub-Custodians to hold all or any portion of the
Securities. Custodian and any Sub-Custodian may, in accordance with Paragraph 5
of this Agreement, deposit definitive or book-entry Securities with one or more
Depositories.
(a) If Custodian retains possession of Securities, Custodian shall
ensure the Securities are at all times properly identified as being held for the
appropriate Account. Custodian shall segregate physically the Securities from
any Property owned by Custodian. Custodian shall not be required to segregate
physically the Securities from other securities or property held by Custodian
for third parties as Custodian, but Custodian shall maintain adequate records
showing the true ownership of the Securities.
(b) If Custodian deposits Securities with a Sub-Custodian, Custodian
shall maintain adequate records showing the identity and location of the
Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to
which such Securities belong.
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<PAGE>
(c) If Custodian or any Sub-Custodian deposits Securities with a
Depository, Custodian shall maintain, or shall cause the Sub-Custodian to
maintain, adequate records showing the identity and location of the Depository,
the Securities held by the Depository, and each Account to which such Securities
belong.
(d) If Principal directs Custodian to deliver certificates or other
physical evidence of ownership of Securities to any broker or other party, other
than a Sub-Custodian or Depository employed by Custodian for purposes of
maintaining the Account, Custodian's sole responsibility shall be to exercise
care and diligence in effecting the delivery as instructed by Principal. Upon
completion of the delivery, Custodian shall be discharged completely of any
further liability or responsibility with respect to the safekeeping and custody
of Securities so delivered.
(e) Custodian shall ensure that (i) the Securities will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of Custodian or any Sub-Custodian or Depository except for the Securities'
safe custody or administration, and (ii) the beneficial ownership of the
Securities will be freely transferable without the payment of money or value
other than for safe custody or administration.
(f) Principal or its authorized representative shall have reasonable
access to inspect books and records maintained by Custodian or any Sub-Custodian
or Depository holding Securities hereunder to verify the accuracy of such books
and records. Custodian shall notify Principal promptly of any applicable law or
regulation in any country where Securities are held that would restrict such
access or inspection.
(g) The Custodian shall limit the Securities maintained in the
custody of Sub-Custodians in accordance with Paragraph 5 of this Agreement to:
(a) foreign securities, as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Principal or any Investment Manager may
determine to be reasonably necessary to effect the Fund's foreign securities
transactions.
5. Sub-Custodians and Depositories. With Principal's approval, as provided
in Paragraph 5(c) of this Agreement, Custodian may from time to time retain one
or more Sub-Custodians and Depositories to hold Securities hereunder.
(a) Custodian shall exercise reasonable care in the selection of
Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength, general
reputation and standing in the country in which it is located, its ability to
provide efficiently the custodial services required, and the relative cost of
such services, (ii) whether the Sub-Custodian or Depository would provide a
level of safeguards for safekeeping and custody of Securities not materially
different from those prevailing in the U.S., (iii) whether the Sub-Custodian or
Depository has branch offices in the U.S. in order
3
<PAGE>
to facilitate jurisdiction over and enforcement of judgments against it, and
(iv) in the case of a Depository, the number of its participants and its
operating history.
(b) Custodian shall given written notice to Principal of its
intention to deposit Securities with a Sub-Custodian or (directly or through a
Sub-Custodian) with a Depository. The notice shall identify the proposed
Sub-Custodian or Depository and shall include reasonably available information
relied on by Custodian in making the selection.
(c) Within 30 days of its receipt of a notice from Custodian
pursuant to Paragraph 5(b) of this Agreement regarding Custodian's proposed
selection of one or more Sub-Custodians or Depositories, Principal shall given
written notice to Custodian of Principal's approval or disapproval of the
proposed selection. Principal hereby approves Custodian's retention of those
Sub-Custodians and Depositories, if any, that have been identified to it by
Custodian prior to Principal's execution of this Agreement.
(d) Custodian shall evaluate and determine at least annually the
continued eligibility of each Sub-Custodian and Depository approved by Principal
to act as such hereunder. In discharging this responsibility, Custodian shall
(i) monitor continuously the day to day services and reports provided by
Sub-Custodian or Depository, (ii) at least annually, obtain and review the
annual financial report published by such Sub-Custodian or Depository and any
reports on such Sub-Custodian or Depository prepared by a reputable independent
analyst, (iii) at least triennially, physically inspect the operations of such
Sub-Custodian or Depository and (iv) Custodian shall provide client with a
report of its annual review of each Sub-Custodian and Depository.
(e) If Custodian determines that any Sub-Custodian or Depository no
longer satisfies the applicable requirements described in Paragraph 1(b) (in the
case of a Depository) or Paragraph 1(e) (in the case of a Sub-Custodian) of this
Agreement or is otherwise no longer capable or qualified to perform the
functions contemplated herein, Custodian shall promptly given written notice
thereof to Principal. The notice shall, in addition, either (i) indicate
Custodian's intention to transfer Securities held by the removed Sub-Custodian
or Depository to another Sub-Custodian or Depository previously approved by
Principal, or (ii) include a notice pursuant to Paragraph 5(b) of this Agreement
of Custodian's intention to deposit Securities with a new Sub-Custodian or
Depository.
6. Registration. Subject to any specific instructions from Principal,
Custodian shall hold or cause to be held all Securities in the name of
Custodian, or any Sub-Custodian or Depository approved by Principal pursuant to
Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as
Custodian shall determine to be appropriate under the circumstances.
7. Transactions. Principal or any Investment Manager from time to time may
instruct Custodian (which in turn shall be responsible for giving appropriate
instructions to any
4
<PAGE>
Sub-Custodian or Depository) regarding the purchase or sale of Securities in
accordance with this Paragraph 7:
(a) Custodian shall effect and account for each Securities and
currency sale on the date such transaction actually settles; provided, however,
that Principal may in its sole discretion direct Custodian, in such manner as
shall be acceptable to Custodian, to account for Securities and currency
purchases and sales on contractual settlement date, regardless of whether
settlement of such transactions actually occurs on contractual settlement date.
Principal may, from time to time, direct Custodian to change the accounting
method employed by Custodian in a written notice delivered to Custodian at least
thirty (30) days prior to the date a change in accounting method shall become
effective.
(b) Custodian shall effect purchases by charging the Account with
the amount necessary to make the purchase and effecting payment o the seller or
broker for the securities or other property purchased. Custodian shall have no
liability of any kind to any person, including Principal, except in the case of
negligent or intentional tortious acts, or willful misconduct, if the Custodian
effects payment in accordance with sub-section (g) of this Paragraph 7, and the
seller or broker fails to deliver the securities or other property purchased.
Custodian shall exercise such ordinary care and diligence as would be employed
by a reasonably prudent custodian and due diligence in examining and verifying
the certificates or other indicia of ownership of the property purchased before
accepting them.
(c) Custodian shall effect sales by delivering certificates or other
indicia of ownership of the Property, and, as instructed, shall receive cash for
such sales. Custodian shall have no liability of any kind to any person,
including Principal, if Custodian exercises due diligence and delivers such
certificates or indicia of ownership in accordance with sub-section (g) of this
Paragraph 7 and the purchaser or broker fails to effect payment. If a purchase
or sale is effected through a Depository, Custodian shall exercise such ordinary
care and diligence as would be employed by a reasonably prudent custodian and
due diligence in verifying proper consummation of the transaction by the
Depository.
(d) Principal or, where applicable, the Investment Manager, is
responsible for ensuring Custodian receives timely instructions and/or funds to
enable Custodian to effect settlement of any purchase or sale of Securities or
currency transactions, or such other disposition of Securities as may be
required in connection with operation of the Fund. If Custodian does not receive
such timely instructions or funds, Custodian shall have no liability of any kind
to any person, including Principal, for failing to effect settlement. However,
Custodian shall use reasonable efforts to effect settlement as soon as possible
after receipt of appropriate instructions. Principal shall be liable for
interest compensation and/or principal amounts to Custodian and/or its
counterparty for failure to deliver instructions or funds in a timely manner to
effect settlements of foreign exchange funds movement.
5
<PAGE>
(e) At the direction of Principal or the Investment Manager, as the
case may be, Custodian shall convert currency in the Account to other currencies
through customary channels including, without limitation, Custodian or any of
its affiliates, as shall be necessary to effect any transaction directed by
Principal or the Investment Manager. Principal or the Investment Manager, as the
case may be, acknowledges that 1) the foreign currency exchange department is a
part of the Custodian or one of its affiliates or subsidiaries, 2) the Account
is not obligated to effect foreign currency exchange with Custodian, 3) the
Custodian will receive benefits for such foreign currency transactions which are
in addition to the compensation which the Custodian receives for administering
the Account, and 4) the Custodian will make available the relevant data so that
Principal or the Investment Manager, as the case may be, can determine that the
foreign currency exchange transactions are as favorable to the Account as terms
generally available in arm's length transactions between unrelated parties.
(f) Custodian shall have no responsibility to manage or recommend
investments of the Account or to initiate any purchase, sale, or other
investment transaction in the absence of instructions from Principal or, were
applicable, an Investment Manager.
(g) Settlement and payment for Securities received for the Account
of the Fund and the delivery of Securities maintained for the Account of the
Fund may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Securities from such purchaser or dealer.
8. Capital Changes; Income.
(a) Custodian may, without further instructions from Principal or
any Investment Manager, exchange temporary certificates and may surrender and
exchange Securities for other securities in connection with any reorganization,
recapitalization, or similar transaction in which the owner of the Securities is
not given an option. Custodian has no responsibility to effect any such exchange
unless it has received actual notice of the event permitting or requiring such
exchange at its office designated in Paragraph 14 of this Agreement or at the
office of its designated agents.
(b) Custodian, or its designated agents, are authorized, as
Principal's agent, to surrender against payment maturing obligations and
obligations called for redemption, and to collect and receive payments of
interest and principal, dividends, warrants, and other things of value in
connection with Securities. Except as otherwise provided in Paragraph 15(d) of
this Agreement, Custodian or its designated agents shall not be obligated to
enforce collection of any item by legal process or other means.
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<PAGE>
(c) Custodian or its designated agents are authorized to sign for
Principal all declarations, affidavits, certificates, or other documents that
may be required to collect or receive payments or distributions with respect to
Securities. Custodian or its designated agents are authorized to disclose,
without further consent of Principal, Principal's identity to issuers of
Securities, or the agents of such issuers, who may request such disclosure.
9. Notices re Account Securities. Custodian shall notify Principal or,
where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and any
subscription rights, proxies, and other shareholder information pertaining to
the Securities actual notice of which is received by Custodian at its office
designated in Paragraph 14 of this Agreement or at the offices of its designated
agents. Custodian's sole responsibility in this regard shall be to give such
notices to Principal or the Investment Manager, as the case may be, promptly
after Custodian receives them, and Custodian shall not otherwise be responsible
for the timeliness of such notices. Custodian has no responsibility to respond
or otherwise act with respect to any such notice unless and until Custodian has
received appropriate instructions from Principal or the Investment Manager.
10. Taxes. Custodian shall pay or cause to be paid from the Account all
taxes and levies in the nature of taxes imposed on the Account or the Securities
thereof by any country. However, Custodian shall use reasonable efforts to
obtain refunds of taxes withheld on Securities or the income thereof that are
available under applicable tax laws, treaties, and regulations.
11. Cash. The Principal may from time to time, direct Custodian to hold
Account cash in The HighMark Group of mutual funds or in any investment company
for which Custodian or its affiliates or subsidiaries, acts as investment
advisor, custodies the assets, or provides other services. Principal shall
designate the particular HighMark fund or such other above-mentioned fund that
Principal deems appropriate for the Account. Principal or any Investment
Manager, where applicable, acknowledges that Custodian will receive fees for
such services which will be in addition to those fees charged by Custodian as
agent for the Account.
12. Reports. Custodian shall give written reports to Principal showing (i)
each transaction involving Securities effected by or reported to Custodian, (ii)
the identity and location of Securities held by Custodian as of the date of the
report, (iii) any transfer of location of Securities not otherwise reported, and
(iv) such other information as shall be agreed upon by Principal and Custodian.
Unless otherwise agreed upon by Principal and Custodian, Custodian shall provide
the reports described in this Paragraph 12 on a monthly basis.
13. Instructions from Principal.
(a) Principal shall certify or cause to be certified to Custodian in
writing the names and specimen signatures of all persons authorized to give
instructions, notices, or other communications on behalf of Principal or any
Investment Manager pursuant to this
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Agreement ("Instructions"). Such certification shall remain effective until
Custodian receives notice to the contrary.
(b) Any two (2) persons authorized by the Principal or Investment
Manager, as the case may be, may give Instructions called for by this Agreement
to Custodian in writing, or by telecopy, telex, telegram, or other form of
electronic communication acceptable to Custodian. Unless otherwise expressly
provided, all Instructions shall continue in full force and effect until
canceled or superseded. Any two (2) persons authorized by the Principal or
Investment Manager may given and Custodian may accept oral Instructions on an
exception basis; provided, however, that Principal or Investment Manager shall
promptly confirm any oral Instructions in writing or by telecopy or other means
permitted hereunder. Principal will hold Custodian harmless for the failure of
Principal or Investment Manager to send confirmation in writing or the failure
of such confirmation to conform to the telephone Instructions received. The
Custodian may electronically record any Instruction given by telephone, and any
other telephone discussions with respect to the Custody Account.
(c) All such communications shall be deemed effective upon receipt
by Custodian at its address specified in Paragraph 14 of this Agreement, as
amended from time to time. Custodian without liability may rely upon and act in
accordance with any Instruction that Custodian in good faith believes has been
given by Principal or an Investment Manager.
(d) Custodian may at any time request Instructions from Principal
and may await such Instructions without incurring liability. Custodian has no
obligation to act in the absence of such requested Instructions, but may,
however, without liability take such action as it deems appropriate to carry out
the purposes of this Agreement.
14. Addresses. Until further notice from either party, all communications
called for under this Agreement shall be addressed as follows:
If to Principal:
Name: Pacific Capital Funds New Asia Growth Fund
BISYS Investment Services Group
Street Address: 1900 East Dublin-Granville Road
City, State, Zip: Columbus, Ohio 43229
Attn: Mr. David Bunstine, Manager
Telephone: (614) 899-4654
Telecopier: (614) 899-4614
Telex (Answerback):
8
<PAGE>
If to Custodian: THE BANK OF CALIFORNIA, NATIONAL
ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 15th Floor
San Francisco, California 94111
Telephone: (415) 291-7685
Telecopier: (415) 291-7697
Telex (Answerback): 215748/MBCTD UR
15. Custodian's Responsibilities and Liabilities:
(a) Custodian's duties and responsibilities shall be limited to
those expressly set forth in this Agreement, or as otherwise agreed by Custodian
in writing. In carrying out its responsibilities, Custodian shall exercise no
less than the same degree of care and diligence it exercises with respect to
similar property of its own.
(b) Custodian (i) shall not be required to maintain any special
insurance for the benefit of Principal, and (ii) shall not be liable or
responsible for any loss of or damage to Securities resulting from any causes
beyond Custodian's reasonable control including, without limitations, acts of
God, war, government action, civil commotion, fire, earthquake, or other
casualty or disaster. However, Custodian shall use reasonable efforts to replace
Securities lost or damaged due to such causes with securities of the same class
and issue with all rights and privileges pertaining thereto. The Custodian shall
be liable to the Principal for any loss which shall occur as the result of the
failure of a Sub-Custodian to exercise reasonable care with respect to the
safekeeping of Securities to the same extent that the Custodian would be liable
to the Principal if the Custodian were holding such Securities in their own
premises. The Custodian shall be liable to the Principal only to the extent of
the Principal's direct damages, to be determined based on the market value of
the property which is subject to loss and without reference to any special
conditions or circumstances.
(c) The parties intend that Custodian shall not be considered a
fiduciary of the Account. Accordingly, Custodian shall have no power to make
decisions regarding any policy, interpretation, practice, or procedure with
respect to the Account, but shall perform the ministerial and administrative
functions described in this Agreement provided herein and within the framework
of policies, interpretations, rules, practices, and procedures made by Principal
or an Investment Manager, where applicable, as the same shall be reflected in
instructions to Custodian from Principal or any Investment Manager.
(d) Custodian shall not be required to appear in or defend any legal
proceedings with respect to the Account or the Securities unless Custodian has
been indemnified to its satisfaction against loss and expense (including
reasonable attorneys' fees).
9
<PAGE>
(e) Custodian may consult with counsel acceptable to it after
written notification to Principal concerning its duties and responsibilities
under this Agreement, and shall not be liable for any action taken or not taken
in good faith on the advice of such counsel.
16. Indemnities.
(a) Principal hereby agrees to indemnify Custodian against all
liability, claims, demands, damages, losses, and costs, including reasonable
attorneys' fees and expenses of legal proceedings, resulting from Custodian's
compliance with instructions from Principal or any Investment Manager and the
terms of this Agreement, except where Custodian has acted with negligence or
willful misconduct.
(b) Custodian's right to indemnity under Paragraph 16(a) of this
Agreement shall survive the termination of this Agreement.
17. Compensation; Expenses. Principal shall reimburse Custodian for all
reasonable out-of-pocket expenses and processing costs incurred by Custodian in
the administration of the Account including, without limitation, reasonable
counsel fees incurred by Custodian pursuant to Paragraph 15(e) of this
Agreement. Principal also shall pay Custodian reasonable compensation for its
services hereunder as specified in Appendix A. Custodian shall be entitled to
withdraw such expenses or compensation from the Account if Principal fails to
pay the same to Custodian within 45 days after Custodian has sent an appropriate
billing to Principal.
18. Amendment; Termination. This Agreement may be amended at any time by a
written instrument signed by the parties. Either party may terminate this
Agreement and the Account upon 90 days' written notice to the other, sent by
registered mail or overnight courier, unless the parties agree on a different
time period. Upon such termination, Custodian may not deliver the Securities to
the Principal, on behalf of the Fund, but instead shall deliver or cause to be
delivered the Securities, less any amounts due and owing to Custodian under this
Agreement, to a successor custodian designated by Principal or, if a successor
custodian has not accepted an appointment by the effective date of termination
of the Account, to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in the United States, of its own
selection, having an aggregate capital surplus, and undivided profits, as shown
by its last published report, of not less than $25,000,000. Thereafter, such
bank or trust company shall be the successor of the Custodian under this
Agreement. Upon completion of such delivery Custodian shall be discharged of any
further liability or responsibility with respect to the Securities so delivered.
19. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors in interest. Without consent
of the parties and approval of the Board of Trustees of the Principal, this
agreement cannot be assigned to any third party.
10
<PAGE>
20. Governing Law. The validity, construction, and administration of this
Agreement shall be governed by the applicable laws of the United States from
time to time in force and effect and, to the extent not preempted by such laws
of the United States, by the laws of the State of California from time to time
in force and effect.
11
<PAGE>
21. Effective Date. This Agreement shall be effective as of the date
appearing below and shall supersede any prior or existing agreements between the
parties pertaining to the subject matter hereof.
Date:_______________________________
By:_________________________________
Authorized Signature
"Principal"
The Bank of California, National Association
By:_________________________________
Title:______________________________
By:_________________________________
Title:______________________________
"Custodian"
12
<PAGE>
ADMINISTRATION AGREEMENT
As of October 29, 1993
The Winsbury Company Limited Partnership
d/b/a The Winsbury Company
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Gentlemen:
Pacific Capital Funds, a Massachusetts business trust (the "Trust"),
herewith confirms its Agreement with The Winsbury Company Limited Partnership,
d/b/a The Winsbury Company ("Administrator") as follows:
The Trust desires to employ a portion of its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its Declaration of Trust and in the Prospectuses and
Statements of Additional Information relating to each of the investment
portfolios and any additional investment portfolios of the Trust, as each are or
will be identified on Schedule A hereto (such investment portfolios and any
additional investment portfolios together called the "Funds"), copies of which
have been or will be submitted to Administrator, and in resolutions of the
Trust's Board of Trustees. The Trust and Administrator hereby agree that
Administrator will serve as the administrator for the Funds upon the following
terms and conditions.
1. Services as Administrator
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreement, the custodian for the Funds under its
Custodian Agreement, the transfer agent for the Funds under its Transfer Agency
Agreement and the fund accountant for the Funds under its Fund Accounting
Agreement.
Administrator will maintain office facilities (which may be in the
offices of Administrator or an affiliate but shall be in such location as the
Trust shall reasonably determine); furnish statistical and research data,
clerical and certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Securities and Exchange Commission (the
"Commission") on Form N-SAR or any replacement forms therefor; compile data for,
prepare and file all the Funds' federal and state tax returns and required tax
filings other than those required to be made by the Funds' custodian and
transfer agent; prepare compliance filings pursuant to state securities laws
with the advice of the Trust's counsel; assist to the extent requested by the
Trust
1
<PAGE>
with the Trust's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statements (on Form N-1A or any replacement
therefor); compile data for, prepare and file timely Notices to the Commission
required pursuant to Rule 24f-2 under the Investment Company Act of 1940 (the
"1940 Act"); keep and maintain the financial accounts and records of the Funds,
including calculation of daily expense accruals; in the case of money market
funds, periodic review of the amount of the deviation, if any, of the current
net asset value per share (calculated using available market quotations or an
appropriate substitute that reflects current market conditions) from each money
market fund's amortized cost price per share; and generally assist in all
aspects of the operations of the Funds. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, Administrator hereby agrees that all records
which it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
request. Administrator further agrees to preserve for the periods prescribed by
Rule 3la-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act. Administrator may delegate some or all of its
responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such acts
were its own
2. Fees Expenses Expense Reimbursement
In consideration of services rendered and expenses assumed pursuant
to this Agreement, each of the Funds will pay Administrator on the first
business day of each month, or at such time(s) as Administrator shall request
and the parties hereto shall agree, a fee computed daily and paid as specified
below equal to the lesser of (a) the fee calculated at the applicable annual
rate set forth on Schedule A hereto or (b) such other fee as may from time to
time be agreed upon in writing by the Trust and Administrator. The fee for the
period from the day of the month this Agreement is entered into until the end of
that month shall be prorated according to the proportion which such period bears
to the full monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated according
to the proportion which such period bears to the full monthly period and shall
be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the
value of the net assets of a particular Fund shall be computed in the manner
described in the Trust's Declaration of Trust or in the Prospectus or Statement
of Additional Information respecting that Fund as from time to time is in effect
for the computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such Fund.
2
<PAGE>
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust. The compensation of such person or persons shall be paid by Administrator
and no obligation may be incurred on behalf of the Funds in such respect. Other
expenses to be incurred in the operation of the Funds including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not partners,
officers, directors, shareholders or employees of Administrator or the
investment adviser or distributor for the Funds, commission fees and state Blue
Sky qualification and renewal fees and expenses, investment advisory fees,
custodian fees, transfer and dividend disbursing agents' fees, fund accounting
fees including pricing of portfolio securities, certain insurance premiums,
outside and, to the extent authorized by the Trust, inside auditing and legal
fees and expenses, costs of maintenance of corporate existence, typesetting and
printing prospectuses for regulatory purposes and for distribution to current
Shareholders of the Funds, costs of Shareholders' and Trustees' reports and
meetings and any extraordinary expenses will be borne by the Funds; provided,
however, that the Funds will not bear, directly or indirectly, the cost of any
activity which is primarily intended to result in the distribution of shares of
the Funds.
If in any fiscal year the aggregate expenses of a particular Fund
(as defined under the securities regulations of any state having jurisdiction
over the Trust) exceed the expense limitations of any such state, Administrator
will reimburse such Fund for a portion of such excess expenses equal to such
excess times the ratio of the fees respecting such Fund otherwise payable to
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to Hawaiian Trust Company, Limited under
the Investment Advisory Agreements between Hawaiian Trust Company, Limited and
the Trust. The expense reimbursement obligation of Administrator is limited to
the amount of its fees hereunder for such fiscal year, provided, however, that
notwithstanding the foregoing, Administrator shall reimburse a particular Fund
for such proportion of such excess expenses regardless of the amount of fees
paid to it during such fiscal year to the extent that the securities regulations
of any state having jurisdiction over the Trust so require. Such expense
reimbursement, if any, will be estimated daily and reconciled and paid on a
monthly basis.
3. Proprietary and Confidential Information
Administrator agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and prior, present, or
potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Administrator 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 Trust.
3
<PAGE>
4. Limitation of Liability
Administrator shall not be liable for any loss suffered by the Funds
in connection with the matters to which this Agreement relates, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also a
partner, employee, or agent of Administrator, who may be or becomes an officer,
Trustee, employee, or agent of the Trust or the Funds shall be deemed, when
rendering services to the Trust or the Funds, or acting on any business of that
party, to be rendering such services to or acting solely for that party and not
as a partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
5. Term
This Agreement shall become effective as of the date first written
above and shall continue for two years from the date hereof, and unless sooner
terminated as provided herein, thereafter shall be renewed automatically for
successive one-year terms, unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term; provided, however, that after such termination for so
long as the Administrator, with the written consent of the Trust, in fact
continues to perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this Agreement,
including without limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due the Administrator and unpaid
by the Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. The Administrator shall be entitled to collect
from the Trust, in addition to the compensation described under Section 3
hereof, the amount of all of the Administrator's cash disbursements for services
in connection with the Administrator's activities in effecting such termination,
including without limitation, the delivery to the Trust and/or its designees of
the Trust's property, records, instruments and documents, or any copies thereof.
Subsequent to such termination for a reasonable fee, the Administrator will
provide the Trust with reasonable access to any Trust documents or records
remaining in its possession. This Agreement is terminable with respect to a
particular Fund only upon mutual agreement of the parties hereto or for "cause"
(as defined below) by the party alleging "cause," in either case on not less
than 60 days' notice by the Trust's Board of Trustees or by the Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
4
<PAGE>
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstance which substantially impairs the
performance of the obligations and duties of the party to be terminated, or the
ability to perform those obligations and duties, as contemplated herein.
Notwithstanding the foregoing, the absence of either or both an annual review or
ratification of this Agreement by the Board of Trustees shall not, in and of
itself, constitute "cause" as used herein.
If, for any reason other than "cause" as defined above,
Administrator is replaced as administrator, or if a third party is added to
perform all or a part of the services provided by Administrator under this
Agreement (excluding any sub-administrator appointed by Administrator as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages, to Administrator equal to the balance due
Administrator for the remainder of the term of this Agreement, assuming for
purposes of calculation of the payment that the asset level of the Trust on the
date Administrator is replaced, or a third party is added, will remain constant
for the balance of the contract term.
5. Governing Law and Matters Relating to the Trust as a
Massachusetts Business Trust
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. The names the "Pacific Capital Funds" and "Trustees of Pacific
Capital Funds" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust dated as of October 30, 1992, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of the
"Pacific Capital Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
5
<PAGE>
If the foregoing is in accordance with your understanding, kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
-------------------------
Name: Stephen G. Mintos
Title: President
Accepted:
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Kenneth B. Quintenz
--------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
6
<PAGE>
Dated: October 29, 1993
Schedule A
to the
Administration Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Compensation1/(annual rate
Name of Fund of the average daily net assets)
- ------------ --------------------------------
U.S. Treasury Securities Fund 0.20%
Short Intermediate U.S.
Treasury Securities Fund 0.20%
Diversified Fixed Income Fund 0.20%
Tax-Free Short Intermediate
Securities Fund 0.20%
Tax-Free Securities Fund 0.20%
Growth Stock Fund 0.20%
Income Stock Fund 0.20%
Balanced Fund 0.20%
; subject, in the case of each such fund that has commenced operations, to a
minimum annual fee of $75,000 (or a pro rata portion of such minimum annual fee
for any portion of a fiscal year during which a fund is in operation).
PACIFIC CAPITAL FUND
By: /s/ Stephen G. Mintos
---------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation
General Partner
By: /s/ Kenneth B. Quintenz
----------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
- ----------
1/ All fees are computed daily and paid periodically as agreed by the Trust and
Administration.
7
<PAGE>
Amended Schedule A
to the
Administration Agreement
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Compensation1/(annual rate of
Name of Fund the average daily net assets)
- ---------------------------------------------- -----------------------------
U.S. Treasury Securities Fund 0.20%
Short Intermediate U.S. Treasury Securities Fund 0.20%
Diversified Fixed Income Fund 0.20%
Tax-Free Short Intermediate Securities Fund 0.20%
Growth Stock Fund 0.20%
Growth and Income Fund 0.20%
Balanced Fund 0.20%
New Asia Growth Fund 0.20%
; subject, in the case of each such fund that has commenced operations, to a
minimum annual fee of $75,000 (or a pro-rata of such minimum annual fee for any
portion of a fiscal year during which a fund is in operation).
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
(formerly known as The Winsbury
Corporation), General Partner
By: /s/ Stephen G. Mintos
------------------------------
Name: Stephen G. Mintos
Title: Executive Vice President
Dated: January 30, 1995
- --------
1 All fees are computed daily and paid periodically as agreed by the Trust and
Administrator.
<PAGE>
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made this 17th day of August, 1993, by and between
Pacific Capital Funds, an unincorporated business trust organized under the laws
of Massachusetts (the "Trust"), 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 Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
currently offering two classes of shares (the "Shares"); and
WHEREAS, the Trust desires to retain ADM to serve as the Trust's transfer
agent, registrar and dividend disbursing agent for the funds listed in Appendix
E, 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 Trust hereby appoints ADM to serve as transfer agent,
registrar and dividend disbursing agent for the Trust, 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 Trust has furnished ADM with copies properly certified or
authenticated of each of the following:
1) Resolutions of the Trust's Board of Trustees authorizing
the execution of this Agreement;
2) Appendix B identifying and containing the signatures of
the Trust's officers and other persons authorized to
sign Written Instructions and give Oral Instructions
(referred to herein as "Authorized Persons"), each as
hereinafter defined, on behalf of the Trust;
3) The Trust'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");
4) The Trust's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from
time to time be
<PAGE>
amended, are herein called the "By Laws ');
5) The Trust'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;
6) The Trust'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 Trust with copies properly certified or
authenticated of 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 Trust.
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 Trust's officers and other
persons duly authorized by the Board of Trustees of the Trust
to give Oral and Written Instructions on behalf of the Trust
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.
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 (a
"fax"), 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.
2
<PAGE>
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 Trust, each Trust's Prospectus and the laws, rules and
regulations applicable to the Trust, 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 Trust's Prospectus or with any laws, rules or
regulations applicable to the Trust 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. The Trust shall 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 Trust 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 Trust 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:
1) issuing, transferring and redeeming Shares;
2) opening, maintaining and closing accounts of
Shareholders;
3) answering procedural and administrative inquires from
shareholders and brokers;
4) causing the reinvestment in Shareholders' accounts of
dividends and distributions declared upon shares;
5) 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;
3
<PAGE>
6) processing redemptions;
7) examining and approving legal transfers;
8) furnishing to Shareholders confirmations of transactions
relating to their Shares;
9) 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 Trust's dividends and distributions and
taking all other necessary actions in connection with
the dividend and other withholding requirements of the
Internal Revenue Code;
10) mailing to Shareholders annual and semi-annual response
prepared by or on behalf of the Trust, and mailing new
Prospectuses upon their issue to Shareholders.
11) preparation and sending such other information from the
Trust records held by ADM as may be reasonably requested
by an Authorized Person;
12) preparing and sending to the Trust such affidavits of
mailing and certifications as are reasonably requested
by an Authorized Person; and
13) 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 Trust or ADM 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.
and which is consistent with ADM's current procedures.
b. In connection with the holding of annual or special meetings of
Shareholders, ADM agrees to prepare and furnish to the Trust
certified lists of Shareholders as of such meeting date, in such
form and containing such information as may be required by the Trust
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 Trust may employ another firm to perform all or some
of the functions required by this subsection. The Trust shall pay
such additional charges as the parties may agree upon for the
services of ADM in connection with special meetings of Shareholders
of the Trust in excess of one such meeting per Trust held in any
fiscal year of the
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Trust.
c. ADM shall furnish to the Trust such information and at such
intervals as the Trust may reasonably request for the Trust 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 Trust and for such additional fees as the Trust and
ADM may from time to time agree upon, 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 Trust, provided that normally
occurring improvements in the services of such agents will be
provided without initial capital cost to the Trust 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 Trust
under this Agreement will be substantially performed in accordance
with the Activities List set forth 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 Activities List; the provisions of the Activities List
shall govern.
f. ADM agrees to provide to the Trust upon request such information as
may reasonably be required to enable the Trust to reconcile the
number of outstanding Shares of each Trust between ADM's records and
the account books of each Trust.
6. Authorized Shares. The Trust hereby represents that the Declaration
authorizes the Board of Trustees to issue an unlimited number of shares.
7. Dividends and Distributions. The Trust shall furnish ADM with the
amount of each dividend and with appropriate evidence of action by the Trust's
Board of Trustees authorizing the declaration of dividends and distributions in
respect of Shares as described in the then current Prospectus. Upon declaration
of each dividend, each capital gain distribution or other distribution by the
Board of Trustees of the Trust, the Trust 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 (at least one business day prior to
the record date) 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
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available to it for the payment thereof, the Trust will transfer, or cause the
Custodian to transfer, to ADM in its capacity as dividend disbursing agent, at
First Financial Savings Bank, S.L. or at such bank or other financial
institution as ADM with the consent of the Trust shall select, which may but
need not be an affiliate of ADM, the total amount of the remit portion of the
dividend or distribution currently payable. After deducting any amount
reasonably believed by ADM to be required to be withheldADM 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 Declaration, then current
Prospectus, and shareholder elections, 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 Trust 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 Trust 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 Trust, ADM shall pay on a timely basis to the
appropriate Federal authorities any taxes withheld on dividends and
distributions paid by the Trust.
8. Notification of ADM. The Trust 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 Trust, but in any event not later than 120
minutes after the closing of the New York Stock Exchange. ADM will process all
transactions based on the current day's net asset value price per share and the
offering price per share, provided that ADM receives such prices no later than
7:30 p.m. In the event the Trust provides such prices after 6:00 p.m., the Trust
shall pay ADM the Late Pricing Charges set forth on Appendix D. In the event
that the Trust is unable to provide ADM such prices, the Trust may elect to
instruct ADM either to process the day's transactions at an alternative price
("Alternate Price"), calculated either at (i) the previous day's prices, or (ii)
such other price determined by the Trust. In the event the Trust fails to notify
ADM of an Alternate Price before 7:30 p.m., then ADM, at its sole discretion,
may process transactions at the price last determined by the Trust. 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 Trust shall prepare, print
and provide ADM with sufficient quantities of all
communications by the Trust 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
Trust 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 Trust in a timely manner. ADM shall not
be responsible for receiving and tabulating
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the proxy cards for the meetings of the Trust's Shareholders.
ADM shall, however, upon request, provide the Trust with a
list of Shareholders as of a specific date.
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
Trust.
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:
1) name, address and United States Taxpayer Identification
Number;
2) number of Shares held and number of Shares for which
certificates, if any, have been issued, including
certificate numbers and denominations;
3) 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;
4) any stop or restraining order placed aganst a
Shareholder's account;
5) any correspondence relating to the current maintenance
of a Shareholder's account;
6) information with respect to withholding in the case of a
foreign account; and
7) information with respect to withholding in the case of
an account subject to backup withholding;
8) any information required in order for ADM to perform any
calculations contemplated or required by this Agreement.
The books and records pertaining to the Trust which are in the
possession of ADM shall be the property of the Trust. 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, and consistent
with ADM's current practices. ADM will, if so requested by the
counsel to the Trust, modify the manner in which such books
and records
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are prepared and maintained so as to comply with the
reasonable opinion of such counsel as to such laws and rules.
The Trust, or the Trust'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 Trust, copies of any such books and records shall be
provided by ADM to the Trust or the Trust's authorized
representative at the Trust's expense.
11. Reports and Other Information.
Upon reasonable request of the Trust, 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 Trust, at no additional cost
to the Trust, (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 Trust to conduct annual and special
meetings of its Shareholders; and (c) such other information, including
Shareholder lists and statistical information concerning accounts as may be
agreed upon from time to time between the Trust and ADM.
12. Cooperation with Accountants. ADM shall cooperate with the Trust'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 Trust'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 Trust and its prior, present or potential Shareholders and
relative to the Trust's Distributor and its prior, present or potential
customers. ADM will not divulge any such confidential records or information to
anyone other than the Shareholder, dealer, Trust, or other person, firm,
corporation or other entity (governmental or otherwise) which ADM reasonably
believes is entitled to such records or information, provided that it shall,
with respect to any non-routine governmental investigation or inquiry, first
provide notice thereof to the Trust.
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, use its
best efforts to minimize service interruptions. Thc foregoing obligation of ADM
shall not extend to computer terminals owned or maintained by others, and
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
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the Trust to the contrary and establishes to the satisfaction of the Trust 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 as is specified on Appendix D
attached hereto or as may from time to time be otherwise mutually 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.
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 Trust in writing.
17. Release. ADM understands that the obligations of this Agreement are
not binding upon any Shareholder of the Trust personally, but bind only the
Trust's property; ADM represents that it has notice of the provisions of the
Trust's Declaration disclaiming Shareholder liability for acts or obligations of
the Trust.
The Trust 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 Trust, its Directors, Trustees, Officers, Shareholders and
others shall look only to the separate assets of ADM.
18. Right to Receive Advice.
a. Advice of Trust. If ADM shall be in reasonable doubt as to any
action to be taken or omitted by it, it may request, and shall
receive, from the Trust 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
Trust or ADM, at the option of ADM).
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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. The Trust shall indemnify and hold harmless
ADM, each of ADM's affiliated companies, and all of the
divisions, subsidiaries, directors, officers, agents,
employees and assigns of each of the foregoing (collectively,
"Indemnified Transfer Agent Parties"), against and from any
and all demands, damages, liabilities, and losses, or any
threatened, pending or completed actions, claims, suits,
complaints, proceedings, or investigations (including
reasonable attorneys fees and other costs, including all
expenses of litigation or arbitration, judgments, fines or
amounts paid in settlement) to which any of them may be or
become subject as a result or arising out of: (i) any action
or inaction which it takes in reliance on the provisions of
the Trust's Prospectus, procedures established between ADM and
the Trust, 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 reasonably believes to be consistent with such
directions, advice or Oral or Written Instructions, as the
case may be; (ii) any negligent act or omission by the Trust
or its officers, employees or agents; (iii) the Trust's
failure to comply with any of the terms of this Agreements.
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. However, this
indemnification shall not apply to actions or omissions of ADM
in cases of its own bad faith, willful misfeasance, negligence
or from reckless disregard by it of its obligations and duties
hereunder; and provided further that prior to confessing any
claim against it which may be the subject of this
indemnification, ADM shall give the Trust written notice of
and a reasonable opportunity to defend against said claim in
its own name or in the name of ADM.
19. Compliance with Governmental Rules and Regulations. ADM shall have no
responsibility for insuring that the contents of each Prospectus of the Trust
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, or his or her 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
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or provided by or reasonably believed by ADM to have been maintained or provided
by the Trust or anyone on behalf of the Trust and the Trust 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 Trust 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 Trust
or which ADM, its affiliates or agents reasonably believes are from the Trust,
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 Trust shares; instructions from the
Trust concerning dividends and other distributions; and other matters relating
to the Trust and its shareholders.
21. Responsibilities of the Trust: The Trust hereby acknowledges and
agrees 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 Trust:
a. creating or maintaining any records on behalf of the Trust 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 Trust 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 Trust; (ii) will be
maintained by ADM for the period prescribed in Rule 3la-2 or
equivalent regulation; (iii) will be made available, upon
request to the Trust and the SEC; and (iv) will be surrendered
promptly upon the request of the Trust;
b. determining the legality of any sale, exchange, issuance or
redemption of any shares of the Trust;
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 Trust;
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 Trust or any one else
with any federal
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or state government or with any agency thereof or any
self-regulatory authority except ADM will file with the
Internal Revenue Service copies of 1099-Div, 1099-R and
1099-B, 5498 and 1042S Forms sent to shareholders of the Trust
and forms relating to withholding and non-resident alien
withholding;
f. monitoring the activities of the Trust or any one else for
their compliance with applicable law, rules and regulations or
with the provisions of the Trust's Prospectus, of Trust,
By-Laws or other governing instruments; or
g. compliance of the Trust 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 Trust or of shares of the Trust or the legality of
their sale although ADM will, in order to provide the Trust
with assistance in complying with normal Blue Sky
requirements, upon the reasonable request of the Trust provide
the Trust with a report generated from the information readily
available to ADM detailing the amount of shares of the Trust
purchased and redeemed and the states of residence of the
shareholders purchasing or redeeming such shares.
h. payment of any penalty or assessment imposed by the Internal
Revenue Service for failure to certify a shareholder's
taxpayer identification number, or for an incorrect taxpayer
identification number.
22. Information and Documents:
a. The Trust shall promptly provide ADM with the current
Prospectus for the Trust, the Annual and Semi-Annual Reports
to Shareholders of the Trust, Proxy Statement and other Trust
material, all in sufficient quantities and sufficiently in
advance to permit ADM to provide them to Shareholders of the
Trust 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 Trust
shall:
1) promptly notify ADM of all material events which affect
the Trust or any affiliate of the Trust;
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2) promptly notify ADM of any suits or other proceedings
threatened or actually instituted against the Trust or
any affiliate of the Trust 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;
3) promptly notify ADM of any consent order, stop orders or
similar orders affecting the Trust or any affiliate of
the Trust 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;
4) promptly provide ADM, with copies of the audited Annual
Financial Statements for each affiliate of the Trust
which is an Investment Advisor, Investment Sub-Advisor,
Distributor or Administrator of thc Trust;
5) promptly provide ADM, upon request, with copies of any
filings made by the Trust or any affiliate of the Trust
which is an Investment Advisor, Investment Sub-Advisor,
Distributor or Administrator of the Trust with the
federal government or any state government or any agency
thereof or with any self-regulatory authority;
6) promptly provide ADM, upon request, with copies of any
documents relating to items (2) and (3) above; and
7) discuss with ADM changes in the description of ADM and
the services which ADM provides to shareholders
contained in the Prospectus of the Trust at the time of
filing any amendments to the registration statement of
the Trust 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.
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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 Trust 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 Trust under the provisions of this 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 Trust's written consent. Notwithstanding the
previous sentence, ADM may, without the Trust's consent, assign the performance
of all or a portion of its responsibilities and duties hereunder to an affiliate
of ADM, provided that the Trust shall incur no additional cost or expense in
connection therewith.
31. Declaration and Termination. This Agreement shall continue until
termination by the Trust or ADM on ninety (90) days' advance written notice to
the other party.
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:
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a. if to ADM at:
Administrative Data Management Corp.
10 Woodbridge Center Drive
Woodbridge, New Jersey 07095
Attention: Ms. Anne Condon, Senior Vice President
or to such other address as ADM shall instruct the Trust, in
writing, from time to time;
b. if to the Trust at:
Attn. , President
or to such other address as the Trust shall instruct ADM, in
writing, from time to time; or
c. if to neither of the foregoing, at such other address as shall
have ben notified to the sender of any such Notice or other
communication.
33. Singular versus Plural. When the context so requires, "Trust" shall
mean "Trusts".
34. 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.
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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.
Attest: ADMINISTRATIVE DATA
MANAGEMENT CORP.
__________________________ By:___________________________
Anne Condon
Sr. Vice President
Attest: PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
- -------------------------- --------------------------
Name: Stephen G. Mintos
Title: President
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APPENDIX A
ACTIVITIES LIST
It is understood that the Trust, its Custodian, and other persons, firms.
corporations or other entities performing services for or on behalf of the Trust
shall provide ADM and the Trust with such services, information, or other
assistance as may be necessary or appropriate to permit ADM to properly perform
the services hereunder.
A. SHAREHOLDER ACCOUNTING SERVICES
1. General Scope. In accordance with the terms of the Agreement, ADM
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 ADM, the
rapid and efficient transfer of investment monies between
various accounts as follows: (i) Federal funds will be
available immediately and (ii) monies generated from checks
deposited will be available on the second business day
subsequent to the date of deposit.
d. to the extent that it is reasonably within the control of, or
can reasonably be arranged without additional cost incurred by
ADM, the effective and controlled processing of expedited
redemptions and exchanges by telegraphic and telephonic means.
2. Computer Accounting and Record Keeping.
a. ADM will perform daily maintenance and routine file update.
b. ADM 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. ADM will establish new and adjust or close
existing Shareholder accounts if necessary on or as of each
business day.
c. ADM will take reasonable precautions for safeguarding of all
Shareholder accounts during these computer runs.
d. ADM will provide continuous proof to the outstanding Shares
maintained
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by the Trust on a daily basis, and off-line availability of
all file data pertaining to Shareholder accounts.
e. ADM 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 Trust due to nonreceipt of funds, improper
registration, or other sufficient reason.
3. Establishing and Servicing Accounts. ADM will, as set forth in the
Trust's Prospectus, or substantially in conformity with procedures
established by or on behalf of the Trust, 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 Trust
or its Custodian when they are properly delivered to ADM;
b. Accept applications in proper form sent directly to it when
they are received by ADM;
c. Transfer Shares accompanied by apparent proper instructions;
d. Audit and verify payment items for apparent compliance with
the requirements established by the Trust, e.g. minimum
investment amount. apparent proper endorsements and other
particulars as prescribed in the prospectus. The Trust will
provide ADM, 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. Process W-9 or similar forms received by ADM; and compare upon
receipt of a computer tape from the Internal Revenue Service
taxpayer identification numbers contained in such tape against
those maintained by ADM.
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 Trust 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 ADM and the Trust shall agree upon);
h. Tune stamp all incoming mail;
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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;
1. Open new accounts per telephone instructions from dealers or
fiduciaries pending receipt of funds transmitted by bank wire
or other means and new account applications, including
duplicates where requested, when funds are received by ADM or
the Trust's Custodian; process redemption orders on such new
accounts, provided that new account applications have been
completed by the Shareholder and received by ADM before any
redemption orders are processed.
m. Prepare confirmations in such form as may be agreed between
the Trust and ADM 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) Stops or holds on 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 ADM will be substantially satisfied.
B. TRANSFER AGENT SERVICES
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<PAGE>
In accordance with the Agreement, and in particular Section 5(d) thereof,
ADM 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 ADM may deem
advisable but not inconsistent with the rules and regulations
of appropriate governmental authorities applicable to ADM or
as may otherwise be agreed from time to time in writing
between the Trust and ADM;
b. Process transfers as requested by Shareholders or persons.
firms. corporations or other entities ADM 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 Trust will, upon request of ADM, advise ADM of the
transfer requirements of ADM, and ADM will be fully protected
by the Trust if it is following such transfer requirements:
c. Process initial and subsequent investments from Shareholders;
d. Process payments into shareholder accounts through the
Automated Clearing House ("ACH") system;
e. Upon receipt of proper telephone instructions, initiate debits
from shareholders' bank accounts for investment into their
Trust accounts, provided that ADM has received written
authorization on from each such shareholder in a form approved
by ADM;
f. Transmit dividends to shareholders' checking or savings
accounts through the ACH system, provided that ADM has
received written authorization from each shareholders in a
form approved in a from approved by ADM;
g. Process and record redemption of Shares to satisfy ordinary
redemptions;
h. Proportionally allocated dividends, which are provided to ADM
by the Trust in gross dollar amount, to the benefit of the
Trust Shareholders entitled to receive them. The procedure
used must show that the amount allocated daily substantially
balance to the gross dollar amount provided by the Trust to
ADM.
2. Custody and Control of Shares. Shares will be credited to the
Shareholder's account in non-certificate form. ADM will
examine requests for transfer or redemption of shares for
apparent genuineness or alterations; pass upon the apparent
validity thereof including endorsements,
20
<PAGE>
signature guarantees and (if applicable) tax stamps or
waivers, provided that ADM 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 Trust.
C. SUBSCRIPTION AGENT SERVICES
ADM will act as Subscription Agent for the Trust. In addition to
subscription functions described elsewhere in this Agreement, the Transfer Agent
will maintain a subscription account not titled in ADM's name.
a. The account shall be provided by First Financial Savings Bank,
S.L.A. at the costs set forth in Appendix D-1;
b. The account shall serve as the sole depository for
subscription monies intended for the purchase of Shares until
such funds are transferred to the Custody Account;
c. ADM shall be prepared to receive and efficiently process
incoming cash, checks, Federal Reserve Drafts and bank wire
transfers of funds;
d. Withdrawals from the account shall be for the purpose of
transferring funds into the Custody Account or, where
appropriate, the crediting or payment of commissions including
dealer's commissions; withdrawals are also permitted to
accommodate net settlements with the Custodian, or required
refunds to broker due to cancelled trades;
e. No dividend or redemption or any other payments shall be made
to Trust Shareholders from the Subscription Account;
f. ADM will cashier all items presented in payment as
expeditiously as possible.
1. In connection with managing the Subscription Account, ADM 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 ADM and approved by an
Authorized Person for the purpose of providing assurance that
good (collected) funds were received from Shareholders prior
to paying out any redemption proceeds (as a result of one or
more specific redemption requests). Such procedures are to
deal with:
(1) Establishing and maintaining procedures reasonably
designed to
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assure the clearance and collection of checks which are
otherwise properly drawn.
(a) ADM shall not honor any redemption payment until
it 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;
(2) Returned Checks. Shareholder checks returned for account
closures or check stops will be promptly processed.
Shares purchase will be reversed as of the original
purchase date. Upon receipt of returned checks for other
reasons, ADM will send a letter notifying the
shareholder and allow 10 business days for response
before the item will be processed for liquidation.
Returned checks will be cleared promptly and processed
through a the Subscription Account in conjunction with
the following actions:
(a) Place a hold on the account to prevent redemption
of the amount of such returned check or such
lesser amount as is in the affected account;
(b) Determine how many shares are to be liquidated due
to the investment attributable to such returned
check:
(c) Calculate and back out accrued dividends, if any,
attributable to such investment;
(d) Process the liquidation for the appropriate
amount;
(e) Mail the Shareholder confirmation of the
liquidation and the check with a letter of
explanation;
(f) 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 ADM and approved by an Authorized Person 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
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<PAGE>
appropriate a wire control number, establish Shareholder
pending file, and if appropriate alert the bank wire
department;
(2) Confirm to the Trust actual bank wire receipts at
selected cutoff times during the course of each business
day;
(3) Close out pending Shareholder files if bank wire
receipts are not received as of the date agreed upon;
and
(4) Open new or credit existing Shareholder account in
accordance with the provisions of the current prospectus
upon receipt of bank wire funds.
D. DIVIDEND DISBURSING AND REDEMPTION AGENT SERVICES
In performance of the Dividend Disbursing and Redemption Agent functions.
ADM will provide the Trust 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 Trust shall advise ADM of dividend amounts which shall
then be applied as described in the Prospectus or as directed
by the Trust, 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 Trust to
ADM shall then be provided to Shareholders upon written
request.
2. Redemption Procedures. ADM with the approval of the Trust shall
establish procedures reasonably designed to insure that redemption
requirements established by ADM and agreed to by the Trust have been
met, including signature guarantees and obtaining any needed papers
or documents, including properly completed Applications, where
lacking. More specifically:
a. ADM will accept redemption requests in written, telegraphic,
facsimile ("Fax") or telephonic form provided the necessary
instructions and authorizations are reasonably believed by ADM
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 received without
signature
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<PAGE>
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. ADM will provide a means to record, retrieve, and display on a
monitor 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 signature guarantees shall be acceptable unless
they reasonably appear to have been provided by a
commercial bank, a member of the Securities Transfer
Agent Medallion Program ("STAMP") Stock Exchange
Medallion Program ("SEMP") or the New York Stock
Exchange, Inc. Medallion Signature Program ("MSP"), 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 an Authorized Person.
e. Check replacement:
Furnish a replacement check to the Shareholder, after
verifying that the check to be replaced has not been cashed,
and placing a stop payment order on such check, replacement
dividend and redemption checks alleged to have been lost,
stolen, destroyed, or not received.
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<PAGE>
3. Disbursement Account. ADM will maintain a Disbursement Account for
the Trust. This account shall be established and operated so as to
satisfy the following criteria:
a. This account shall be used to disburse cash in payment of
dividends, capital gain distributions and returns of capital.
b. All withdrawals from the Disbursement Account shall be for the
exclusive purpose of making payments to Trust Shareholders.
These payments are to be made only to satisfy automatic or
other account liquidation payment requirements. ADM will
advise the Trust on the following day of all subscriptions and
redemptions.
c. No deposits or subscription receipts shall be made directly
into the Disbursement Account.
d. The Trust agrees to fund, or cause the Custodian to fund, the
Disbursement Account sufficiently. The Trust and ADM agree
that a goal of this procedure is to allow for the maximum
employment of Trust assets while still adequately funding the
Disbursement 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 Authorized Person.
e. Employ due diligence in servicing redemption requests as
promptly as possible.
E. EXCHANGE AGENT SERVICES
ADM will provide services as are required to implement the exchange
privileges described from time to time in the prospectus of the Trust. ADM will
install and utilize a telephonic system that is designed to afford the
Shareholder the opportunity to exchange Shares among the eligible Trusts and
that will record the telephone request for such exchange. It is understood that
ADM is only able to effect exchanges among Trusts or funds for which ADM has
entered into an agreement similar to this Agreement for provision of transfer
agency services.
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<PAGE>
F. PROXY AGENT SERVICES
If agreed to by the Trust and ADM, ADM, for compensation mutually
agreeable to the parties hereto, shall 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
Trust the results of such tabulation accompanied by appropriate certificates,
and preparing and communicating to the Trust certified lists of Shareholders as
of such date, and in such form and containing such information as may be
required by the Trust to comply with any applicable provisions relating to such
meetings. ADM may at its expense employ another firm to provide all or a portion
of such services.
Regardless of whether the parties agree to appoint ADM as Proxy Agent, ADM
shall, upon written request of an Authorized Person, provide certified lists of
Shareholders, in such form and containing such information as requested by the
Trust .
G. REPORTS TO BE PROVIDED BY ADM:
1. Daily.
a. Copies of confirmations to dealers.
b. "Stats at a Glance", showing numbers of accounts, number of
outstanding shares and changes in shares.
c. Wire purchases and redemptions.
d. Paid or unpaid trade reports.
e. 10-day notices required by the NASD.
2. Monthly.
a. Sales By State and Dividends Reinvested
b. Withdrawals and Dividends Paid in Cash List
c. Record of Out-of-Pocket Costs Incurred
3. Annual Reports. Provide the Trust upon request with all reports
reasonably required to conduct an annual review of ADM's functions
relating to the Trust, including but not limited to performance,
volume, error ratios, costs and other matters relating to the Trust.
ADM shall also provide to the Trust general information concerning
its operations which might be believed to affect adversely the
future services to the Trust.
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<PAGE>
4. Periodic Marketing Reports. Provided these reports are readily
available from existing information and can be produced without
unreasonable effort or expense by ADM, including, e.g.,
a. Geographic Distribution Data
b. Size of Holdings Data
H. OTHER SERVICES
ADM will provide the following additional services:
1. Security
a. Design and maintain security procedures reasonably designed to
guard against the possible theft and/or use by others of the
names and addresses of Trust Shareholders.
b. Periodically duplicate 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 ADM's
facilities, including:
(1) significant voltage drop;
(2) power blackout;
(3) major destruction of ADM's central facilities.
c. ADM will maintain equipment reasonably designed or represented
to assure an uninterrupted power supply of at least 10 minutes
at the offices of ADM 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 ADM's choosing;
and will provide redundancy capacity in accordance with the
Agreement.
2. Statements.
a. Provide for up to two extra lines of print on Shareholder
statements which may be employed by the Trust to advise
Shareholders of such information as yield or other explanatory
account information. The Trust will advise ADM of such
information no less than two business days in advance to
permit it to properly insert such information in a timely and
orderly manner.
b. Provide a combined dividend check and statement to
Shareholders electing
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<PAGE>
cash distributions.
3. Processing Routine Shareholder Inquiries.
a. 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.
b. Exercise due care to protect confidential information in
responding to inquiries.
c. Request AT&T or such other telephone company as may be
appropriate to provide, at the Distributor's expense, for a
dedicated transmission line between The Winsbury Company, 1900
East Dublin-Granville Road, Columbus, Ohio 43299 and ADM, 10
Woodbridge Center Drive, Woodbridge, New Jersey 07095 for
inquiry via a dedicated or P.C.
terminal.
d. Provide adequate personnel for live telephone response
generally until 6:00 PM. New York time on normal business
days.
e. Provide for the automated tracking of all Shareholder/Dealer
telephone inquiries with on line update status.
4. Other Mailings
a. 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 ADM utilizes the services of another firm to
accomplish this for any First Investors Fund, it shall be
permitted to do so for the Trust, at ADM's expense.
b. All routine mailings to Shareholder/Dealers will, where
appropriate, utilize pre-sorted zip codes.
c. All month-end reinvestment statements, with any month-end
dividend check attached, will generally be mailed to
Shareholders, with duplicates to dealer and representative.
d. Commission checks and statements will generally be mailed to
brokerage firms on at least a weekly basis for direct
investments of prior weeks.
5. Other Services.
a. Refer all Shareholders, dealer or governmental inquiries of a
policy or non-
28
<PAGE>
routine nature to the Trust.
b. Provide an Account Officer to serve as the primary point of
contact between the Trust and ADM. ADM will exercise due care
in assigning an individual who is both conversant with
standard investment company practices and of sufficient
signature to deal quickly and efficiently with problems
peculiar to placing a new investment company on line.
6. Messenger Service. Upon request, provide messenger pick-up and
delivery as necessary between the Trust's offices provided they are
located within the borough of Manhattan and the offices of ADM. The
party requesting messenger service shall bear the cost of such
service.
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<PAGE>
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/ J. David Huber J. David Huber
----------------------
/s/ Stephen G. Mintos Stephen G. Mintos
----------------------
/s/ William J. Tomko William J. Tomko
----------------------
/s/ Roy E. Rogers Roy E. Rogers
----------------------
/s/ C. David Bunstine C. David Bunstine
----------------------
/s/ Cindy Linsey Cindy Linsey
----------------------
/s/ Charles L. Booth Charles L. Booth
----------------------
/s/ Robert Futrell Robert Futrell
----------------------
/s/ James G. Osborne James G. Osborne
----------------------
----------------------
----------------------
30
<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.
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<PAGE>
APPENDIX E
PACIFIC CAPITAL FUNDS
Short Term Intermediate U.S. Treasury
U.S. Treasury Securities Fund
Growth Stock Fund
DATED: 11/1/93
33
<PAGE>
AMENDED APPENDIX E
to the
TRANSFER AGENCY AGREEMENT
between
PACIFIC CAPITAL FUNDS
and
ADMINISTRATIVE DATA MANAGEMENT CORP.
Short Term Intermediate U.S. Treasury
U.S. Treasury Securities Fund
Growth Stock Fund
Balanced Fund
Growth and Income Fund
Diversified Fixed Income Fund
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
New Asia Growth Fund
Dated: January 30, 1995
-38-
<PAGE>
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 29th day of October, 1993, between Pacific
Capital Funds (the "Trust"), a Massachusetts business trust having its principal
place of business at 1900 East Dublin-Granville Road, Columbus, Ohio 43229, and
THE WINSBURY SERVICE CORPORATION ("Winsbury"), a corporation organized under the
laws of the State of Ohio and having its principal place of business at 1900
East Dublin-Granville Road. Columbus. Ohio 43229.
WHEREAS, the Trust desires that Winsbury perform certain fund
accounting services for each investment portfolio of the Trust identified on
Schedule A hereto, as such Schedule shall be amended from time to time
(individually referred to herein as the "Fund" and collectively as the "Funds");
and
WHEREAS, Winsbury is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein set forth, the parties agree as follows:
1. Services as Fund Accountant. Winsbury will keep and maintain the
following books and records of each Fund pursuant to Rule 31a-1 (the "Rule")
under the Investment Company Act of 1940 (the "1940 Act"):
(a) Journals containing an itemized daily record in detail
of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
(b) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(i) of the
Rule.
(c) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(d) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
In addition to the maintenance of the books and records specified
above, Winsbury shall perform the following accounting services daily for each
Fund:
(a) Calculate the net asset value per Share;
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<PAGE>
(b) Calculate the dividend and capital gain distribution, if
any;
(c) Calculate the yield;
(d) Reconcile cash movements with the Fund's custodian:
(e) Affirm to the Fund's custodian all portfolio trades and
cash movements;
(f) Verify and reconcile with the Fund's custodian all daily
trade activity;
(g) Provide the following reports:
i. A current security position report;
ii A summary report of transactions and pending
maturities (including the principal, cost, and
accrued interest on each portfolio security in
maturity date order); and
iii. A current cash position report (including cash
available from portfolio sales and maturities and
sales of a Fund's Shares less cash needed for
redemptions and settlement of portfolio
purchases);
(h) Such other similar services with respect to a Fund as
may be reasonably requested by the Trust.
Winsbury shall perform the following accounting services for each
Fund:
(a) Obtain at least daily for variable net asset value funds
and weekly for money market funds actual dealer
quotations, prices from a pricing service, or matrix
prices on all portfolio securities (including those with
less than 60 days to maturity) in order to mark the
entire portfolio to the market; and
(b) Prepare an interim balance sheet, statement of income
and expense, and statement of changes in net assets for
the Fund as of each month-end.
2. Subcontracting. Winsbury may, at its expense, subcontract with
any entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Winsbury shall not be relieved of any of its
obligations under this Agreement by the
2
<PAGE>
appointment of such subcontractor and provided further, that Winsbury shall be
responsible, to the extent provided in Section 7 hereof, for all acts of such
subcontractor as if such acts were its own.
3. Compensation. The Trust shall pay fees to Winsbury for the
services to be provided by Winsbury under this Agreement in accordance with, and
in the manner set forth in, Schedule B hereto.
4. Reimbursement of Expenses. In addition to paying Winsbury the
fees described in Section 3 hereof, the Trust agrees to reimburse Winsbury for
Winsbury's out-of pocket expenses in providing services hereunder, including
without limitation the following:
(a) All freight and other delivery and bonding charges
incurred by Winsbury in delivering materials to and from
the Trust;
(b) All direct telephone, telephone transmission and
telecopy or other electronic transmission expenses
incurred by Winsbury in communication with the Trust,
the Trust's investment advisor or custodian, dealers or
others as required for Winsbury to perform the services
to be provided hereunder;
(c) Costs of pricing the portfolio securities of each Fund;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses Winsbury shall incur at the written
direction of an officer of the Trust thereunto duly
authorized.
5. Effective Date. This Agreement shall become effective with
respect to a Fund as of the date first written above (or, if a particular Fund
is not in existence on that date, on the date an amendment to Schedule A to this
Agreement relating to the Fund is executed) (the "Effective Date").
6. Term. This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
for two years from the date hereof, and thereafter shall be renewed
automatically for successive one-year terms unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days prior to
the expiration of the then-current term; provided, however, that after such
termination for so long as Winsbury, with the written consent of the Trust, in
fact continues to perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this Agreement,
including without limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due Winsbury and unpaid by the
Trust upon such
3
<PAGE>
termination shall be immediately due and payable upon and notwithstanding such
termination. Winsbury shall be entitled to collect from the Trust, in addition
to the compensation described under Section 3 hereof, the amount of all of
Winsbury's reasonable cash disbursements for services in connection with
Winsbury's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination Winsbury will provide the Trust with reasonable access to
any Trust documents or records remaining in its possession. This Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties hereto or for "cause" (as defined below) by the party alleging "cause,"
in either case on not less than 60 days' notice by the Trust's Board of Trustees
or by Winsbury.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of it business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United State Code, as from time to time is in effect, or any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors; or (d) any circumstance which substantially impairs the performance
of the obligations and duties of the party to be terminated, or the ability to
perform those obligations and duties as contemplated herein.
If, for any reason other than "cause" as defined above, Winsbury is
replaced as Fund Accountant, or if a third party is added to perform all or a
part of the services provided by Winsbury under this Agreement (excluding any
sub-accountant appointed by Winsbury as provided in Section 2 hereof), then the
Trust shall make a one-time cash payment, as liquidated damages, to Winsbury
equal to the balance due Winsbury for the remainder of the term of this
Agreement, assuming for purposes of calculation of the payment that the asset
level of the Trust on the date Winsbury is replaced, or a third party is added,
will remain constant for the balance of the contract term.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification. Winsbury shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Trust for any action taken or omitted by Winsbury in the absence of bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. A Fund agrees to indemnify and hold harmless Winsbury,
its employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to Winsbury's actions taken or nonactions with
respect to the performance of services under this Agreement with respect to such
Fund or based, if applicable,
4
<PAGE>
upon reasonable reliance on information, records, instructions or requests with
respect to such Fund given or made to Winsbury by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of Winsbury in cases of its own bad faith, willful
misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, Winsbury shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of Winsbury.
8. Record Retention and Confidentiality. Winsbury shall keep and
maintain on behalf of the Trust all books and records which the Trust and
Winsbury is, or may be, required to keep and maintain pursuant to any applicable
statutes, rules and regulations, including without limitation the Rule, Winsbury
further agrees that all such books and records shall be the property of the
Trust and to make such books and records available for inspection by the Trust
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all books and records and other information relative to the
Trust and its shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
9. Uncontrollable Events. Winsbury assumes no responsibility
hereunder, and shall not be liable, for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable control.
10. Reports. Winsbury will furnish to the Trust and to its properly
authorized auditors, investment advisors, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by
Winsbury, or as subsequently agreed upon by the parties pursuant to an amendment
hereto. The Trust agrees to examine each such report or copy promptly and will
report or cause to be reported any errors or discrepancies therein no later than
three business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within three days after conducting a
diligent examination, are not so reported within the aforesaid period of time, a
report will for all purposes be accepted by and binding upon the Trust and any
other recipient, and Winsbury shall have no liability for errors or
discrepancies therein and shall have no further responsibility with respect to
such report except to perform reasonable corrections of such errors and
discrepancies within a reasonable time after requested to do so by the Trust.
11. Rights of Ownership. All computer programs and procedures
developed to perform services required to be provided by Winsbury under this
Agreement are the property of Winsbury. All records and other data except such
computer programs and procedures are the exclusive property of the Trust and all
such other records and data will be furnished to the Trust in appropriate form
as soon as practicable after termination of this Agreement for any reason.
12. Return of Records. Winsbury may at its option at any time, and
shall
5
<PAGE>
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Winsbury's files, records and documents created and maintained by Winsbury
pursuant to this Agreement which are no longer needed by Winsbury in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by Winsbury for six
years from the year of creation. At the end of such six year period, such
records and documents will be turned over to the Trust unless the Trust
authorizes in writing the destruction of such records and documents.
13. Representations of the Trust. The Trust certifies to Winsbury
that: (1) as of the close of business on the Effective Date, each Fund that is
in existence as of the Effective Date has authorized unlimited shares, and (2)
this Agreement has been duly authorized by the Trust and, when executed and
delivered by the Trust, will constitute a legal, valid and binding obligation of
the Trust, enforceable against the Trust in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
14. Representations of Winsbury. Winsbury represents and warrants
that: (1) the various procedures and systems which Winsbury has implemented with
regard to safeguarding from loss or damage attributable to fire, theft, or any
other cause the records, and other data of the Trust and Winsbury's records,
data, equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of it obligations
hereunder, and (2) this Agreement has been duly authorized by Winsbury and, when
executed and delivered by Winsbury, will constitute a legal, valid and binding
obligation of Winsbury, enforceable against Winsbury in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties.
15. Insurance. Winsbury shall notify the Trust should any of its
insurance coverage be cancelled or reduced. Such notification shall include the
date of change and the reasons therefor. Winsbury shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Winsbury under its insurance coverage.
16. Information to be Furnished by the Trust and Funds. The Trust
has furnished to Winsbury a list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized to instruct Winsbury in
all matters.
17. Amendments to Documents. The Trust shall furnish Winsbury
written copies of any amendments to, or changes in, the list referred to in
Section 16 hereof forthwith. In addition, the Trust agrees that no amendments
will be made to the Prospectuses or Statements of Additional Information of the
Trust which might have the effect of changing the procedures
6
<PAGE>
employed by Winsbury in providing the services agreed to hereunder or which
amendment might affect the duties of Winsbury hereunder unless the Trust first
notifies Winsbury of such amendments or changes.
18. Compliance with Law. Except for the obligations of Winsbury set
forth in Section 8 hereof, the Trust assumes full responsibility for the
preparation, contents and distribution of each prospectus of the Trust as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the 1940 Act and any other laws, rules and
regulations of governmental authorities having jurisdiction. Winsbury shall have
no obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
19. Notices. Any notice provided hereunder shall be sufficiently
given when sent by registered or certified mail to the party required to be
served with such notice, at the following address: 1900 East Dublin-Granville
Road, Columbus, Ohio 43229, or at such other address as such party may from time
to time specify in writing to the other party pursuant to this Section.
20. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
21. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties hereto
except by the specific written consent of the other party.
22. Governing Law. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
23. Limitation of Liability of the Trustees and Shareholders. The
names "Pacific Capital Funds" and "Trustees of Pacific Capital Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of October 30, 1992, to which reference is hereby made and a copy
of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "Pacific Capital Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims against the
Trust.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
Yours very truly,
PACIFIC CAPITAL FUND
By: /s/ Stephen G. Mintos
-----------------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Kenneth B. Quintenz
-----------------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
8
<PAGE>
Dated: October 29, 1993
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
THE WINSBURY COMPANY LIMITED PARTNERSHIP
Name of Fund
- ------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
-----------------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY LIMITED
PARTNERSHIP
By: The Winsbury Corporation
General Partner
By: /s/ Kenneth B. Quintenz
-----------------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
A-1
<PAGE>
Dated: October 29, 1993
SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
THE WINSBURY SERVICE CORPORATION
FEES
Winsbury shall be entitled to receive a fee from each Fund at the
annual rate of three one-hundredths of one percent (.03%) of such Fund's average
daily net assets plus Winsbury's reasonable out-of-pocket expenses incurred in
the performance of its services as provided in Section 4 of the Fund Accounting
Agreement to which this Schedule B is attached, with a minimum annual fee of
$30,000 per taxable Fund and $40,000 per tax-exempt Fund.
PACIFIC CAPITAL FUND
By: /s/ Stephen G. Mintos
--------------------------------------
Name: Stephen G. Mintos
Title: President
THE WINSBURY COMPANY
LIMITED PARTNERSHIP
By: The Winsbury Corporation,
General Partner
By: /s/ Kenneth B. Quintenz
--------------------------------------
Name: Kenneth B. Quintenz
Title: Sr. Vice President
B-1
<PAGE>
AMENDED SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
(FORMERLY KNOWN AS THE WINSBURY SERVICE CORPORATION)
Name of Fund
- --------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Growth and Income Fund
New Asia Growth Fund
PACIFIC CAPITAL FUNDS
By: /s/ Stephen G. Mintos
----------------------------------
Name: Stephen G. Mintos
Title: President
HAWAIIAN TRUST COMPANY, LTD.
By: /s/ Stephen G. Mintos
----------------------------------
Name: Stephen G. Mintos
Title: Executive Vice President
Dated: January 30, 1995
<PAGE>
SAN FRANCISCO MORRISON & FOERSTER NEW YORK
LOS ANGELES ATTORNEYS AT LAW DENVER
SACRAMENTO LONDON
ORANGE COUNTY 2000 PENNSYLVANIA AVENUE, N.W. BRUSSELS
PALO ALTO WASHINGTON, D.C. 20006-1888 HONG KONG
WALNUT CREEK TELEPHONE (202) 887-1500 TOKYO
SEATTLE TELEFACSIMILE (202) 887-0763
TELEX 90-4030 MRSN FOERS WSH
February 25, 1994
Pacific Capital Funds
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Re: Shares of Capital Stock of the Portfolios of
Pacific Capital Funds
Gentlemen:
We refer to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (the "Registration Statement") of Pacific Capital Funds
(the "Trust") relating to the registration of an indefinite number of Shares of
Capital Stock of the Trust's eight portfolios, namely the U.S. Treasury
Securities Fund, the Short Intermediate U.S. Treasury Securities Fund, the
Diversified Fixed Income Fund, the Tax-Free Short Intermediate Securities Fund,
the Tax-Free Securities Fund, the Growth Stock Fund, the Income Stock Fund and
the Balanced Fund (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined such records, documents, instruments, certificates
of public officials and of the Trust, made such inquiries of the Trust, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have assumed the genuineness of all
signatures and the authenticity of all items submitted to us as originals and
the conformity with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Trust have been duly and
validly authorized by all appropriate action and, upon delivery thereof and
payment therefor in accordance with the Registration Statement and the
Declaration of Trust of the Trust, and the By-
<PAGE>
Pacific Capital Funds
February 25, 1994
Page 2
Laws of the Trust, the Shares will be duly authorized, validly issued, fully
paid and nonassessable by the Trust.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we consent to the reference to our Firm and description
of advice rendered by our Firm under the heading "Management" in the Statement
of Additional Information, which is included as part of the Registration
Statement.
Very truly yours,
/s/ MORRISON & FOERSTER
MORRISON & FOERSTER
<PAGE>
August 20, 1993
Pacific Capital Funds
1900 East Dublin-Granville Road
Columbus, Ohio 43229
Gentlemen:
With respect to our purchase from you of $100,000 in units of
beneficial interest of the Retail Class of Shares ("Shares") of Pacific Capital
Funds (the "Trust"), consisting of $64,660 in Shares of the U.S. Treasury
Securities Fund, $860 in Shares of the Short Intermediate U.S. Treasury
Securities Fund and $34,480 in Shares of the Growth Stock Fund, we hereby advise
you that we are purchasing Shares with no intention to dispose of such Shares
either through resale to others or redemption to the Trust.
Very truly yours,
The Winsbury Company
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes the distribution and shareholder
service plan of Pacific Capital Funds, a Massachusetts business trust (the
"Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"). The Plan relates to those investment portfolios ("Funds")
identified on Appendix A hereto as amended from time to time (the "Distribution
Plan Funds").
Section 1. Each Distribution Plan Fund shall pay to the distributor
(the "Distributor") of the Retain Class of the Trust's units of beneficial
interest (the "Shares"), a fee in an amount not to exceed on an annual basis
0.75% of the average daily net asset value of such Fund attributable to the
Shares of such Fund (the "Distribution Fee") to compensate or reimburse the
Distributor for the following: (a) payments the Distributor makes to banks and
other institutions and industry professionals, such as broker/dealers, including
the Adviser, Distributor and their affiliates or subsidiaries (collectively
referred to as "Participating Organization(s)"), pursuant to an agreement in
connection with providing sales and/or administrative support services to the
holders of a Fund's Shares; or (b) payments to financial institutions and
industry professional (such as insurance companies, investment counselors, and
the Distributor's affiliates and subsidiaries) in consideration for the
distribution services provided and expenses assumed in connection with
distribution assistance, including but not limited to printing and distributing
Prospectuses to persons other than current Retail Class Shareholders of a Fund,
printing and distributing advertising and sales literature and reports to Retail
Class Shareholders used in connection with the sale of a Fund's Shares, and
personnel and communication equipment used in servicing shareholder accounts and
prospective Retail Class Shareholder inquires.
Section 2. The Distribution Fee shall be paid by the Distribution
Plan Funds to the Distributor only to compensate or to reimburse the Distributor
for payments or expenses incurred pursuant to Section 1. Notwithstanding
anything herein to the contrary, the Distribution Plan Funds shall not be
obligated to make any payments under this Plan that exceed the maximum amounts
payable under Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
Section 3. The Plan shall not take effect with respect to a
Distribution Plan Fund until it has been approved by a vote of at least a
majority of the outstanding voting securities of the Retail Class of such Fund.
Section 4. The Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Trustees of the Trust, and (b) the Independent Trustees of the Trust cast in
person at a meeting called for the purpose of voting on the Plan or such
agreement.
1
<PAGE>
Section 5. The Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Section 4.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Distribution Plan Funds pursuant to the Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding voting securities of the Retail Class of such Fund.
Section 8. All agreements with any person relating to implementation
of the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of
the Independent Trustees or by vote of a majority of the
outstanding voting securities of the Retail Class of
Distribution Plan Fund, on not more than 60 days'
written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
Section 9. The Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to the Plan shall be approved in the manner provided for approval of the Plan in
Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
Adopted: September 16, 1993
2
<PAGE>
Dated: As of October 29, 1993
Appendix A
to the
Distribution and Shareholder Service Plan
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Distribution Plan Fund
- -------------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
1
<PAGE>
Dated: As of October 29, 1993
Amended Appendix A
to the
Distribution and Shareholder Service Plan
between Pacific Capital Funds and
The Winsbury Company Limited Partnership
Name of Distribution Plan Fund
- ----------------------------------------------------
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Diversified Fixed Income Fund
Tax-Free Short Intermediate Securities Fund
Tax-Free Securities Fund
Growth Stock Fund
Balanced Fund
Income Stock Fund
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
DIVERSIFIED FIXED INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 10/14/94 TO 01/31/95 ):
( 975.2 /1,000) - 1 = -2.48%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 980.4 /1,000) - 1 = -1.96%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 987.6 /1,000) - 1 = -1.24%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 980.4 /1,000) - 1 = -1.96%
1
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
DIVERSIFIED FIXED INCOME FUND
(a-b)
--------------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 4.00% LOAD:
( 36.05 - 5.27 )
-------------------------
= 2*{[( +1)^6]-1} = 6.62%
( 542.279 * 10.43 )
WITHOUT LOAD:
( 36.05 - 5.27 )
-------------------------
= 2*{[( +1)^6]-1} = 6.90%
( 542.279 * 10.01 )
The performance was computed based on the thirty day period ending January 31,
1995.
2
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
GROWTH AND INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 10/14/94 TO 01/31/95 ):
( 974.5 /1,000) - 1 = -2.55%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 985.3 /1,000) - 1 = -1.37%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 975.4 /1,000) - 1 = -2.46%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 986.3 /1,000) - 1 = -1.37%
3
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
GROWTH AND INCOME FUND
(a-b)
-----------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 4.00% LOAD:
( 327.94 - 114.64 )
-----------------------------
= 2*{[( +1)^6]-1} = 2.38%
( 10,279.547 * 10.52 )
WITHOUT LOAD:
( 327.94 - 114.64 )
-----------------------------
= 2*{[( +1)^6]-1} = 2.48%
( 10,279.547 * 10.52 )
The performance was computed based on the thirty day period ending January 31,
1995.
4
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
GROWTH STOCK FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 10/14/93 TO 01/31/95 ):
( 938.8 /1,000) - 1 = -2.62%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 985.3 /1,000) - 1 = -1.47%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 964.2 /1,000) - 1 = -3.58%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 985.3 /1,000) - 1 = -1.47%
5
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
GROWTH STOCK FUND
(a-b)
---------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per share
on the last day of the period
WITH 4.00% LOAD:
( 7,265.14 - 3,695.57 )
-----------------------------
= 2*{[( +1)^6]-1} = 1.25%
( 329,880.908 * 10.45 )
WITHOUT LOAD:
( 7,265.14 - 3,695.57 )
-----------------------------
= 2*{[( +1)^6]-1} = 1.30%
( 329,880.908 * 10.03 )
The performance was computed based on the thirty day period ending January 31,
1995.
6
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 2.25%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 12/13/93 TO 01/31/95 ):
( 945.9 /1,000) - 1 = -5.41%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 993.5 /1,000) - 1 = -0.65%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 988.6 /1,000) - 1 = -1.14%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 993.6 /1,000) - 1 = -0.65%
7
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
(a-b)
---------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITH 2.25% LOAD:
( 2,872.65 - 378.69 )
---------------------------------
= 2*{[( +1)^6]-1} = 6.45%
( 49,723.668 * 9.45 )
WITHOUT LOAD:
( 2,872.65 - 378.69 )
---------------------------------
= 2*{[( +1)^6]-1} = 6.60%
( 49,723.668 * 9.24 )
The performance was computed based on the thirty day period ending January 31,
1995.
8
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
TAX-FREE SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOANS OF: 4.00%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 10/14/94 TO 01/31/95 ):
( 974.5 /1,000) - 1 = -2.31%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 985.3 /1,000) - 1 = -0.89%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 975.4 /1,000) - 1 = -0.49%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 986.3 /1,000) - 1 = -0.89%
9
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
TAX-FREE SECURITIES FUND
(a-b)
--------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per share
on the last day of the period
WITH 4.00% LOAD:
( 2,768.92 - 481.38 )
--------------------------
= 2*{[( +1)^6]-1} = 5.03%
( 52,521.230 * 10.49 )
WITHOUT LOAD:
( 2,768.92 - 481.38 )
--------------------------
= 2*{[( +1)^6]-1} = 5.25%
( 52,521.230 * 10.07 )
The performance was computed based on the thirty day period ending January 31,
1995.
10
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 2.25%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 10/14/94 TO 01/31/95 ):
( 973.6 /1,000) - 1 = -2.64%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 980.2 /1,000) - 1 = -1.98%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 980.3 /1,000) - 1 = -1.97%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 980.2 /1,000) - 1 = -1.98%
11
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
(a-b)
--------------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per share
on the last day of the period
WITH 2.25% LOAD:
( 12.36 - 2.73 )
---------------------------
= 2*{[( +1)^6]-1} = 3.75%
( 307.182* 10.11 )
WITHOUT LOAD:
( 12.36 - 2.73 )
---------------------------
= 2*{[( +1)^6]-1} = 3.75%
( 307.182* 9.88 )
The performance was computed based on the thirty day period ending January 31,
1995.
12
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) -1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 11/01/93 TO 01/31/95 ):
( 890.9 /1,000) - 1 = -10.91%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 981.0 /1,000) - 1 = -1.90%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 992.1 /1,000) - 1 = -0.79%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 981.0 /1,000) - 1 = -1.90%
13
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
U.S. TREASURY SECURITIES FUND
(a-b)
----------
30-Day S.E.C. Yield Equation = 2*{[( (cd) +)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per share on the
last day of the period
WITH 4.00% LOAD:
( 5,874.99 - 915.13 )
------------------------------
= 2*{[( +1)^6]-1} = 6.29%
( 104,895.570 * 9.14 )
WITHOUT LOAD:
( 5,874.99 - 915.13 )
------------------------------
= 2*{[( +1)^6]-1} = 6.56%
( 104,895.570 * 8.77 )
The performance was computed based on the thirty day period ending January 31,
1995.
14
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) -1
WHERE: T= TOTAL RETURN
ERV= ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 11/01/93 TO 01/31/95 ):
( 890.9 /1,000)-1= 457/365))-1)= -8.81%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 981.0 /1,000)-1= -1.90%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 992.1 /1,000)-1= -0.79%
MONTHLY: ( 01/01/94 TO 01/31/95 ):
( 981.0 /1,000) -1= -1.90%
1 YEAR: ( 02/01/94 TO 01/31/95 ):
( 893.3 /1,000) -1= 365/365))-1= -10.67%
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 2.25%
T = (ERV/P) -1
WHERE: T= TOTAL RETURN
ERV= ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 12/13/93 TO 01/31/95 ):
( 945.9 /1,000-1= 415 /365))-1= -4.77%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 993.5 /1,000)-1= -0.65%
QUARTERLY: ( 11/01/94 TO 01/31/95 ):
( 988.6 /1,000)-1= -1.14%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 993.5 /1,000) -1= -0.65%
1 YEAR: ( 02/01/94 TO 01/31/95 ):
( 937.1 /1,000) -1= 365/365))-1= -6.29%
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
GROWTH STOCK FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.00%
T = (ERV/P) - 1
WHERE: T= TOTAL RETURN
ERV= ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 11/01/93 TO 01/31/95 ):
( 973.8 /1,000^(1/( 457/365))-1)= -2.10%
YEAR TO DATE: ( 01/01/95 TO 01/31/95 ):
( 985.3 /1,000^(1/( -1.47%
QUARTERLY: ( 11/01/95 TO 01/31/95 ):
( 964.2 /1,000)-1= -3.58%
MONTHLY: ( 01/01/94 TO 01/31/95 ):
( 985.3 /1,000) -1= -1.47%
1 YEAR: ( 02/01/94 TO 01/31/95 ):
( 958.4 /1,000) -1= 365/365))-1= -4.16%
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
DIVERSIFIED FIXED INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (10/14/94 TO 01/31/95):
( 1,023.4/1,000) - 1 = 2.34%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,021.3/1,000) - 1 = 2.13%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,033.8/1,000) - 1 = 3.38%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,021.3/1,000) - 1 = 2.13%
1
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
DIVERSIFIED FIXED INCOME FUND
(a-b)
----------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 273,792.08 - 31,127.70 )
-----------------------------
= 2 *{[( +1)^6]-1}= 7.17%
( 4,087,082.168* 10.08 )
The performance was computed based on the thirty day period ending January 31,
1995.
2
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
GROWTH AND INCOME FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (10/14/94 TO 01/31/95):
( 1,014.7/1,000) - 1 = 1.47%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,026.5/1,000) - 1 = 2.65%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,015.7/1,000) - 1 = 1.57%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,026.5/1,000) - 1 = 2.65%
3
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
GROWTH AND INCOME FUND
(a-b)
-------------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 102.485.47 - 29,356.88 )
--------------------------------
= 2 *{[( +1)^6]-1}= 2.72%
( 3,212,504.222* 10.09 )
The performance was computed based on the thirty day period ending January 31,
1995.
4
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
GROWTH STOCK FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (11/01/93 TO 01/31/95):
( 1,016.3/1,000) - 1 = 1.63%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,027.6/1,000) - 1 = 2.76%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,006.1/1,000) - 1 = 0.61%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,027.6/1,000) - 1 = 2.76%
5
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
GROWTH STOCK FUND
(a-b)
----------------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 250,991.99 - 105,309.19)
--------------------------------
= 2 *{[( +1)^6]-1}= 1.52%
( 11,483,457.351* 10.04 )
The performance was computed based on the thirty day period ending January 31,
1995.
6
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (12/13/93 TO 01/31/95):
( 969.2/1,000) - 1 = -3.08%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,016.5/1,000) - 1 = 1.65%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,011.5/1,000) - 1 = 1.15%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,016.5/1,000) - 1 = 1.65%
7
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
(a-b)
-------------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 89,127.14 - 8,847.88)
-----------------------------
= 2 *{[( +1)^6]-1}= 6.85%
( 1,540,997.498* 9.25)
The performance was computed based on the thirty day period ending January 31,
1995.
8
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
TAX-FREE SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (10/14/94 TO 01/31/95):
( 1,021.3/1,000) - 1 = 2.13%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,032.7/1,000) - 1 = 3.27%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,036.9/1,000) - 1 = 3.69%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,032.7/1,000) - 1 = 3.27%
9
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
TAX-FREE SECURITIES FUND
(a-b)
---------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 1,395,342.63 - 188,781.29)
----------------------------
= 2 *{[( +1)^6]-1}= 5.49%
( 26,392,157.849* 10.10)
The performance was computed based on the thirty day period ending January 31,
1995.
10
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (10/14/94 TO 01/31/95):
( 999.4/1,000) - 1 = -0.06%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,003.0/1,000) - 1 = 0.30%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,004.4/1,000) - 1 = 0.44%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,003.0/1,000) - 1 = 0.30%
11
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
(a-b)
-------------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 149,516.92 - 28,220.34)
----------------------------
= 2 *{[( +1)^6]-1}= 4.00%
( 3,704,338.623* 9.91)
The performance was computed based on the thirty day period ending January 31,
1995.
12
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT
THE BEGINNING OF THE PERIOD
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
EXAMPLE:
SINCE INCEPTION: (11/01/93 TO 01/31/95):
( 928.8/1,000) - 1 = -7.12%
YEAR TO DATE: (01/01/95 TO 01/31/95):
( 1,022.1/1,000) - 1 = 2.21%
QUARTERLY: (11/01/94 TO 01/31/95):
( 1,034.1/1,000) - 1 = 3.41%
MONTHLY: (01/01/95 TO 01/31/95):
( 1,022.1/1,000) - 1 = 2.21%
13
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
U.S. TREASURY SECURITIES FUND
(a-b)
----------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1}=
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
WITHOUT LOAD:
( 367,632.02 - 45,624.91)
----------------------------
= 2 *{[( +1)^6]-1}= 6.81%
( 6,561,979.178* 8.77 )
The performance was computed based on the thirty day period ending January 31,
1995.
14
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
GROWTH STOCK FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE
PERIOD OF A HYPOTHETICAL $1,000 INVESTMENT
MADE AT THE BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 11/01/93 TO 01/31/95):
( 1,016.3 /1,000^(1/( 457 / 365))-1= 1.30%
YEAR TO DATE: ( 01/01/95 TO 01/31/95):
( 1,027.6 /1,000) - 1 = 2.76%
QUARTERLY: ( 11/01/94 TO 01/31/95):
( 1,006.1 /1,000) - 1 = 0.61%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 1,027.6 /1,000) - 1 = 2.76%
1 YEAR: ( 02/01/94 TO 01/31/95):
( 999.5 /1,000^(1/( 365 /365))-1) = -0.05%
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE
PERIOD OF A HYPOTHETICAL $1,000 INVESTMENT
MADE AT THE BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 12/13/93 TO 01/31/95):
( 969.2 /1,000^(1/( 415 / 365))-1 = -2.72%
YEAR TO DATE: ( 01/01/95 TO 01/31/95):
( 1,016.5 /1,000) - 1 = 1.65%
QUARTERLY: ( 11/01/94 TO 01/31/95):
( 1,011.5 /1,000) - 1 = 1.15%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 1,016.5 /1,000) - 1 = 1.65%
1 YEAR: ( 02/01/94 TO 01/31/95):
( 960.0 /1,000^(1/( 365 /365))-1) = -4.00%
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
U.S TREASURY SECURITIES FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE
PERIOD OF A HYPOTHETICAL $1,000 INVESTMENT
MADE AT THE BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 11/01/93 TO 01/31/95):
( 928.8 /1,000^(1/( 457 / 365))-1= -5.73%
YEAR TO DATE: ( 01/01/95 TO 01/31/95):
( 1,022.1 /1,000) - 1 = 2.21%
QUARTERLY: ( 11/01/94 TO 01/31/95):
( 1,034.1 /1,000) - 1 = 3.41%
MONTHLY: ( 01/01/95 TO 01/31/95 ):
( 1,022.1 /1,000) - 1 = 2.21%
1 YEAR: ( 02/01/94 TO 01/31/95):
( 930.7 /1,000^(1/( 365 /365))-1) = -6.93%
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
NEW ASIA GROWTH FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 5.25%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/95 TO 05/31/95 ):
( 1,027.5 / 1,000) - 1 = 2.75%
QUARTERLY: ( 03/01/95 TO 05/31/95 ):
( 1,026.5 / 1,000) - 1 = 2.65%
MONTHLY: ( 05/01/95 TO 05/31/95 ):
( 1,005.6 / 1,000) - 1 = 0.56%
<PAGE>
PACIFIC CAPITAL FUNDS
RETAIL (A) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
NEW ASIA GROWTH FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/95 TO 05/31/95 ):
( 1,084.0 / 1,000) - 1 = 8.40%
QUARTERLY: ( 03/01/95 TO 05/31/95 ):
( 1,082.9 / 1,000) - 1 = 8.29%
MONTHLY: ( 05/01/95 TO 05/31/95 ):
( 1,061.7 / 1,000) - 1 = 6.17%
<PAGE>
PACIFIC CAPITAL FUNDS
INSTITUTIONAL (B) SHARES
EXHIBIT 16
TOTAL RETURN
NO LOAD CALCULATIONS
NEW ASIA GROWTH FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD OF
A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/95 TO 05/31/95 ):
( 1,085.0 / 1,000) - 1 = 8.50%
QUARTERLY: ( 03/01/95 TO 05/31/95 ):
( 1,082.8 / 1,000) - 1 = 8.28%
MONTHLY: ( 05/01/95 TO 05/31/95 ):
( 1,062.7 / 1,000) - 1 = 6.27%
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent i) to the reference to our firm under the caption "Independent
Auditors" in the Statement of Additional Information incorporated by reference
in Post-Effective Amendment No. 8 to the Registration Statement (Form N-1A No.
33-57684) of Pacific Capital Funds; ii) to the use of our report dated September
13, 1996 appearing in the Statement of Additional Information incorporated by
reference in the Registration Statement; and, iii) to the references to our firm
under the captions "Financial Highlights" and "Other Service Arrangements" in
each of the Retail Class Prospectuses and in the Institutional Class Prospectus
incorporated by reference in the Registration Statement.
/s/ Ernst & Young LLP
Columbus, Ohio
November 19, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 6
<NAME> DIVERSIFIED FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 162770301
<INVESTMENTS-AT-VALUE> 159036837
<RECEIVABLES> 4028479
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163065379
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 231155
<TOTAL-LIABILITIES> 231155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 165226478
<SHARES-COMMON-STOCK> 104506<F1>
<SHARES-COMMON-PRIOR> 2539<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1341210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3733464)
<NET-ASSETS> 162834224
<DIVIDEND-INCOME> 111905
<INTEREST-INCOME> 8655304
<OTHER-INCOME> 0
<EXPENSES-NET> 1202908
<NET-INVESTMENT-INCOME> 7564301
<REALIZED-GAINS-CURRENT> 1793439
<APPREC-INCREASE-CURRENT> (6350290)
<NET-CHANGE-FROM-OPS> 3007450
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 30926<F1>
<DISTRIBUTIONS-OF-GAINS> 5216<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 107934<F1>
<NUMBER-OF-SHARES-REDEEMED> 9260<F1>
<SHARES-REINVESTED> 3293<F1>
<NET-CHANGE-IN-ASSETS> 107980104
<ACCUMULATED-NII-PRIOR> 271927
<ACCUMULATED-GAINS-PRIOR> 741453
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 814802
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1260991
<AVERAGE-NET-ASSETS> 582211<F1>
<PER-SHARE-NAV-BEGIN> 10.75<F1>
<PER-SHARE-NII> 0.59<F1>
<PER-SHARE-GAIN-APPREC> (0.19)<F1>
<PER-SHARE-DIVIDEND> 0.60<F1>
<PER-SHARE-DISTRIBUTIONS> 0.10<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.45<F1>
<EXPENSE-RATIO> 1.15<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 61
<NAME> DIVERSIFIED FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 162770301
<INVESTMENTS-AT-VALUE> 159036837
<RECEIVABLES> 4028479
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163065379
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 231155
<TOTAL-LIABILITIES> 231155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 165226478
<SHARES-COMMON-STOCK> 15364087<F1>
<SHARES-COMMON-PRIOR> 5059403<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1341210
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3733464)
<NET-ASSETS> 162834224
<DIVIDEND-INCOME> 111905
<INTEREST-INCOME> 8655304
<OTHER-INCOME> 0
<EXPENSES-NET> 1202908
<NET-INVESTMENT-INCOME> 7564301
<REALIZED-GAINS-CURRENT> 1793439
<APPREC-INCREASE-CURRENT> (6350290)
<NET-CHANGE-FROM-OPS> 3007450
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7805302<F1>
<DISTRIBUTIONS-OF-GAINS> 1188466<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 18085880<F1>
<NUMBER-OF-SHARES-REDEEMED> 7857921<F1>
<SHARES-REINVESTED> 76725<F1>
<NET-CHANGE-IN-ASSETS> 107980104
<ACCUMULATED-NII-PRIOR> 271927
<ACCUMULATED-GAINS-PRIOR> 741453
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 814802
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1260991
<AVERAGE-NET-ASSETS> 135393435<F1>
<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> 0.58<F1>
<PER-SHARE-GAIN-APPREC> (0.16)<F1>
<PER-SHARE-DIVIDEND> 0.63<F1>
<PER-SHARE-DISTRIBUTIONS> 0.10<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.53<F1>
<EXPENSE-RATIO> 0.88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 7
<NAME> GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 70381459
<INVESTMENTS-AT-VALUE> 76207067
<RECEIVABLES> 1237696
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77444771
<PAYABLE-FOR-SECURITIES> 1764988
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92710
<TOTAL-LIABILITIES> 1857698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66385781
<SHARES-COMMON-STOCK> 94173<F1>
<SHARES-COMMON-PRIOR> 28695<F1>
<ACCUMULATED-NII-CURRENT> 22307
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3353377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5825608
<NET-ASSETS> 75587073
<DIVIDEND-INCOME> 1436098
<INTEREST-INCOME> 162495
<OTHER-INCOME> 0
<EXPENSES-NET> 701395
<NET-INVESTMENT-INCOME> 897198
<REALIZED-GAINS-CURRENT> 4517339
<APPREC-INCREASE-CURRENT> 1140677
<NET-CHANGE-FROM-OPS> 6555214
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6859<F1>
<DISTRIBUTIONS-OF-GAINS> 10087<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 74394<F1>
<NUMBER-OF-SHARES-REDEEMED> 10325<F1>
<SHARES-REINVESTED> 1409<F1>
<NET-CHANGE-IN-ASSETS> 33487774
<ACCUMULATED-NII-PRIOR> 48954
<ACCUMULATED-GAINS-PRIOR> 276982
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 503952
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 730128
<AVERAGE-NET-ASSETS> 621075<F1>
<PER-SHARE-NAV-BEGIN> 11.44<F1>
<PER-SHARE-NII> 0.16<F1>
<PER-SHARE-GAIN-APPREC> 1.19<F1>
<PER-SHARE-DIVIDEND> 0.16<F1>
<PER-SHARE-DISTRIBUTIONS> 0.31<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.32<F1>
<EXPENSE-RATIO> 1.37<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 71
<NAME> GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 70381459
<INVESTMENTS-AT-VALUE> 76207067
<RECEIVABLES> 1237696
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77444771
<PAYABLE-FOR-SECURITIES> 1764988
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92710
<TOTAL-LIABILITIES> 1857698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66385781
<SHARES-COMMON-STOCK> 6043467<F1>
<SHARES-COMMON-PRIOR> 3654388<F1>
<ACCUMULATED-NII-CURRENT> 22307
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3353377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5825608
<NET-ASSETS> 75587073
<DIVIDEND-INCOME> 1436098
<INTEREST-INCOME> 162495
<OTHER-INCOME> 0
<EXPENSES-NET> 701395
<NET-INVESTMENT-INCOME> 897198
<REALIZED-GAINS-CURRENT> 4517339
<APPREC-INCREASE-CURRENT> 1140677
<NET-CHANGE-FROM-OPS> 6555214
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 916986<F1>
<DISTRIBUTIONS-OF-GAINS> 1430857<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4232718<F1>
<NUMBER-OF-SHARES-REDEEMED> 1948216<F1>
<SHARES-REINVESTED> 104577<F1>
<NET-CHANGE-IN-ASSETS> 33487774
<ACCUMULATED-NII-PRIOR> 48954
<ACCUMULATED-GAINS-PRIOR> 276982
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 503952
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 730128
<AVERAGE-NET-ASSETS> 62404637<F1>
<PER-SHARE-NAV-BEGIN> 11.43<F1>
<PER-SHARE-NII> 0.17<F1>
<PER-SHARE-GAIN-APPREC> 1.21<F1>
<PER-SHARE-DIVIDEND> 0.18<F1>
<PER-SHARE-DISTRIBUTIONS> 0.31<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.32<F1>
<EXPENSE-RATIO> 1.11<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 149647144
<INVESTMENTS-AT-VALUE> 178920521
<RECEIVABLES> 1845321
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180765842
<PAYABLE-FOR-SECURITIES> 2732781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 207665
<TOTAL-LIABILITIES> 2940446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 152835520
<SHARES-COMMON-STOCK> 442493<F1>
<SHARES-COMMON-PRIOR> 333626<F1>
<ACCUMULATED-NII-CURRENT> 49694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4333195
<ACCUM-APPREC-OR-DEPREC> 29273377
<NET-ASSETS> 177825396
<DIVIDEND-INCOME> 2741023
<INTEREST-INCOME> 563003
<OTHER-INCOME> 0
<EXPENSES-NET> 1859696
<NET-INVESTMENT-INCOME> 1444330
<REALIZED-GAINS-CURRENT> 2853413
<APPREC-INCREASE-CURRENT> 9013715
<NET-CHANGE-FROM-OPS> 13311458
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26967<F1>
<DISTRIBUTIONS-OF-GAINS> 242871<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 181079<F1>
<NUMBER-OF-SHARES-REDEEMED> 94879<F1>
<SHARES-REINVESTED> 22667<F1>
<NET-CHANGE-IN-ASSETS> 37083216
<ACCUMULATED-NII-PRIOR> 1414887
<ACCUMULATED-GAINS-PRIOR> 2291705
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1359262
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1952031
<AVERAGE-NET-ASSETS> 4666906<F1>
<PER-SHARE-NAV-BEGIN> 11.71<F1>
<PER-SHARE-NII> 0.07<F1>
<PER-SHARE-GAIN-APPREC> 0.89<F1>
<PER-SHARE-DIVIDEND> 0.07<F1>
<PER-SHARE-DISTRIBUTIONS> 0.22<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89<F1>
<EXPENSE-RATIO> 1.34<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 11
<NAME> GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 149647144
<INVESTMENTS-AT-VALUE> 178920521
<RECEIVABLES> 1845321
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180765842
<PAYABLE-FOR-SECURITIES> 2732781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 207665
<TOTAL-LIABILITIES> 2940446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 152835520
<SHARES-COMMON-STOCK> 14508629<F1>
<SHARES-COMMON-PRIOR> 11684763<F1>
<ACCUMULATED-NII-CURRENT> 49694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4333195
<ACCUM-APPREC-OR-DEPREC> 29273377
<NET-ASSETS> 177825396
<DIVIDEND-INCOME> 2741023
<INTEREST-INCOME> 563003
<OTHER-INCOME> 0
<EXPENSES-NET> 1859696
<NET-INVESTMENT-INCOME> 1444330
<REALIZED-GAINS-CURRENT> 2853413
<APPREC-INCREASE-CURRENT> 9013715
<NET-CHANGE-FROM-OPS> 13311458
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1401180<F1>
<DISTRIBUTIONS-OF-GAINS> 9131280<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 10917906<F1>
<NUMBER-OF-SHARES-REDEEMED> 8612823<F1>
<SHARES-REINVESTED> 518783<F1>
<NET-CHANGE-IN-ASSETS> 37083216
<ACCUMULATED-NII-PRIOR> 1414887
<ACCUMULATED-GAINS-PRIOR> 2291705
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1359262
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1952031
<AVERAGE-NET-ASSETS> 165160722<F1>
<PER-SHARE-NAV-BEGIN> 11.71<F1>
<PER-SHARE-NII> 0.10<F1>
<PER-SHARE-GAIN-APPREC> 0.89<F1>
<PER-SHARE-DIVIDEND> 0.10<F1>
<PER-SHARE-DISTRIBUTIONS> 0.71<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89<F1>
<EXPENSE-RATIO> 1.09<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 8
<NAME> NEW ASIA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-31-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 9467465
<INVESTMENTS-AT-VALUE> 9029235
<RECEIVABLES> 120246
<ASSETS-OTHER> 1381950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10531431
<PAYABLE-FOR-SECURITIES> 52561
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20467
<TOTAL-LIABILITIES> 73028
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10778400
<SHARES-COMMON-STOCK> 179099<F1>
<SHARES-COMMON-PRIOR> 29461<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 25243
<ACCUMULATED-NET-GAINS> 187744
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (438381)
<NET-ASSETS> 10458403
<DIVIDEND-INCOME> 120313
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 118930
<NET-INVESTMENT-INCOME> (4037)
<REALIZED-GAINS-CURRENT> 187718
<APPREC-INCREASE-CURRENT> (603577)
<NET-CHANGE-FROM-OPS> (472400)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1121<F1>
<DISTRIBUTIONS-OF-GAINS> 15201<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 156856<F1>
<NUMBER-OF-SHARES-REDEEMED> 8592<F1>
<SHARES-REINVESTED> 1284<F1>
<NET-CHANGE-IN-ASSETS> 7267639
<ACCUMULATED-NII-PRIOR> 10915
<ACCUMULATED-GAINS-PRIOR> 78817
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52972
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175241
<AVERAGE-NET-ASSETS> 1072821<F1>
<PER-SHARE-NAV-BEGIN> 11.21<F1>
<PER-SHARE-NII> (0.02)<F1>
<PER-SHARE-GAIN-APPREC> 0.20<F1>
<PER-SHARE-DIVIDEND> 0.02<F1>
<PER-SHARE-DISTRIBUTIONS> 0.26<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.11<F1>
<EXPENSE-RATIO> 2.22<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 81
<NAME> NEW ASIA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-31-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 9467465
<INVESTMENTS-AT-VALUE> 9029235
<RECEIVABLES> 120246
<ASSETS-OTHER> 1381950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10531431
<PAYABLE-FOR-SECURITIES> 52561
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20467
<TOTAL-LIABILITIES> 73028
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10778400
<SHARES-COMMON-STOCK> 760450<F1>
<SHARES-COMMON-PRIOR> 254879<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 25243
<ACCUMULATED-NET-GAINS> 187744
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (438381)
<NET-ASSETS> 10458403
<DIVIDEND-INCOME> 120313
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 118930
<NET-INVESTMENT-INCOME> (4037)
<REALIZED-GAINS-CURRENT> 187718
<APPREC-INCREASE-CURRENT> (603577)
<NET-CHANGE-FROM-OPS> (472400)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7846<F1>
<DISTRIBUTIONS-OF-GAINS> 63590<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 754031<F1>
<NUMBER-OF-SHARES-REDEEMED> 252790<F1>
<SHARES-REINVESTED> 4330<F1>
<NET-CHANGE-IN-ASSETS> 7267639
<ACCUMULATED-NII-PRIOR> 10915
<ACCUMULATED-GAINS-PRIOR> 78817
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52972
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175241
<AVERAGE-NET-ASSETS> 4812922<F1>
<PER-SHARE-NAV-BEGIN> 11.22<F1>
<PER-SHARE-NII> (0.01)<F1>
<PER-SHARE-GAIN-APPREC> 0.22<F1>
<PER-SHARE-DIVIDEND> 0.03<F1>
<PER-SHARE-DISTRIBUTIONS> 0.26<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.14<F1>
<EXPENSE-RATIO> 1.98<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 24650387
<INVESTMENTS-AT-VALUE> 24444242
<RECEIVABLES> 277389
<ASSETS-OTHER> 12307
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24733938
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32530
<TOTAL-LIABILITIES> 32530
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25006372
<SHARES-COMMON-STOCK> 122898<F1>
<SHARES-COMMON-PRIOR> 50986<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 98819
<ACCUM-APPREC-OR-DEPREC> (206145)
<NET-ASSETS> 24701408
<DIVIDEND-INCOME> 15129
<INTEREST-INCOME> 1230870
<OTHER-INCOME> 0
<EXPENSES-NET> 139916
<NET-INVESTMENT-INCOME> 1106083
<REALIZED-GAINS-CURRENT> (66180)
<APPREC-INCREASE-CURRENT> (370513)
<NET-CHANGE-FROM-OPS> 669390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 47546<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 76883<F1>
<NUMBER-OF-SHARES-REDEEMED> 9947<F1>
<SHARES-REINVESTED> 4976<F1>
<NET-CHANGE-IN-ASSETS> 7997823
<ACCUMULATED-NII-PRIOR> 78218
<ACCUMULATED-GAINS-PRIOR> 5127
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102679
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195608
<AVERAGE-NET-ASSETS> 868100<F1>
<PER-SHARE-NAV-BEGIN> 9.60<F1>
<PER-SHARE-NII> 0.48<F1>
<PER-SHARE-GAIN-APPREC> (0.11)<F1>
<PER-SHARE-DIVIDEND> 0.54<F1>
<PER-SHARE-DISTRIBUTIONS> 0.02<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.41<F1>
<EXPENSE-RATIO> 0.92<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 31
<NAME> SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 24650387
<INVESTMENTS-AT-VALUE> 24444242
<RECEIVABLES> 277389
<ASSETS-OTHER> 12307
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24733938
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32530
<TOTAL-LIABILITIES> 32530
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25006372
<SHARES-COMMON-STOCK> 2498684<F1>
<SHARES-COMMON-PRIOR> 1687574<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 98819
<ACCUM-APPREC-OR-DEPREC> (206145)
<NET-ASSETS> 24701408
<DIVIDEND-INCOME> 15129
<INTEREST-INCOME> 1230870
<OTHER-INCOME> 0
<EXPENSES-NET> 139916
<NET-INVESTMENT-INCOME> 1106083
<REALIZED-GAINS-CURRENT> (66180)
<APPREC-INCREASE-CURRENT> (370513)
<NET-CHANGE-FROM-OPS> 669390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1136755<F1>
<DISTRIBUTIONS-OF-GAINS> 35758<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1805630<F1>
<NUMBER-OF-SHARES-REDEEMED> 1006064<F1>
<SHARES-REINVESTED> 11544<F1>
<NET-CHANGE-IN-ASSETS> 7997823
<ACCUMULATED-NII-PRIOR> 78218
<ACCUMULATED-GAINS-PRIOR> 5127
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102679
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195608
<AVERAGE-NET-ASSETS> 19667439<F1>
<PER-SHARE-NAV-BEGIN> 9.61<F1>
<PER-SHARE-NII> 0.53<F1>
<PER-SHARE-GAIN-APPREC> (0.13)<F1>
<PER-SHARE-DIVIDEND> 0.57<F1>
<PER-SHARE-DISTRIBUTIONS> 0.02<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.42<F1>
<EXPENSE-RATIO> 0.67<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 4
<NAME> TAX-FREE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 274682887
<INVESTMENTS-AT-VALUE> 286298801
<RECEIVABLES> 3556991
<ASSETS-OTHER> 487
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 289856279
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 353615
<TOTAL-LIABILITIES> 353615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 276300982
<SHARES-COMMON-STOCK> 54465<F1>
<SHARES-COMMON-PRIOR> 53465<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1585768
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11615914
<NET-ASSETS> 289502664
<DIVIDEND-INCOME> 44333
<INTEREST-INCOME> 16628597
<OTHER-INCOME> 0
<EXPENSES-NET> 2559115
<NET-INVESTMENT-INCOME> 14113815
<REALIZED-GAINS-CURRENT> 2578744
<APPREC-INCREASE-CURRENT> (505505)
<NET-CHANGE-FROM-OPS> 16187054
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 39417<F1>
<DISTRIBUTIONS-OF-GAINS> 7583<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 58332<F1>
<NUMBER-OF-SHARES-REDEEMED> 58984<F1>
<SHARES-REINVESTED> 1652<F1>
<NET-CHANGE-IN-ASSETS> 7293938
<ACCUMULATED-NII-PRIOR> 1169467
<ACCUMULATED-GAINS-PRIOR> 2569877
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1724513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2679914
<AVERAGE-NET-ASSETS> 813284<F1>
<PER-SHARE-NAV-BEGIN> 10.53<F1>
<PER-SHARE-NII> 0.50<F1>
<PER-SHARE-GAIN-APPREC> 0.07<F1>
<PER-SHARE-DIVIDEND> 0.53<F1>
<PER-SHARE-DISTRIBUTIONS> 0.13<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.44<F1>
<EXPENSE-RATIO> 1.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 41
<NAME> TAX-FREE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 274682887
<INVESTMENTS-AT-VALUE> 286298801
<RECEIVABLES> 3556991
<ASSETS-OTHER> 487
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 289856279
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 353615
<TOTAL-LIABILITIES> 353615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 276300982
<SHARES-COMMON-STOCK> 27610200<F1>
<SHARES-COMMON-PRIOR> 26671349<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1585768
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11615914
<NET-ASSETS> 289502664
<DIVIDEND-INCOME> 44333
<INTEREST-INCOME> 16628597
<OTHER-INCOME> 0
<EXPENSES-NET> 2559115
<NET-INVESTMENT-INCOME> 14113815
<REALIZED-GAINS-CURRENT> 2578744
<APPREC-INCREASE-CURRENT> (505505)
<NET-CHANGE-FROM-OPS> 16187054
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15243865<F1>
<DISTRIBUTIONS-OF-GAINS> 3555270<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2708891<F1>
<NUMBER-OF-SHARES-REDEEMED> 2101754<F1>
<SHARES-REINVESTED> 331714<F1>
<NET-CHANGE-IN-ASSETS> 7293938
<ACCUMULATED-NII-PRIOR> 1169467
<ACCUMULATED-GAINS-PRIOR> 2569877
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1724513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2679914
<AVERAGE-NET-ASSETS> 286298311<F1>
<PER-SHARE-NAV-BEGIN> 10.56<F1>
<PER-SHARE-NII> 0.52<F1>
<PER-SHARE-GAIN-APPREC> 0.07<F1>
<PER-SHARE-DIVIDEND> 0.56<F1>
<PER-SHARE-DISTRIBUTIONS> 0.13<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.46<F1>
<EXPENSE-RATIO> 0.89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 5
<NAME> TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 38846656
<INVESTMENTS-AT-VALUE> 39138168
<RECEIVABLES> 2901055
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42039244
<PAYABLE-FOR-SECURITIES> 2042120
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73983
<TOTAL-LIABILITIES> 2116103
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39648587
<SHARES-COMMON-STOCK> 44881<F1>
<SHARES-COMMON-PRIOR> 30434<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (16958)
<ACCUM-APPREC-OR-DEPREC> 291512
<NET-ASSETS> 39923141
<DIVIDEND-INCOME> 10960
<INTEREST-INCOME> 1902245
<OTHER-INCOME> 0
<EXPENSES-NET> 336082
<NET-INVESTMENT-INCOME> 1577123
<REALIZED-GAINS-CURRENT> 247802
<APPREC-INCREASE-CURRENT> (381865)
<NET-CHANGE-FROM-OPS> 1443060
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13555<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 19329<F1>
<NUMBER-OF-SHARES-REDEEMED> 5147<F1>
<SHARES-REINVESTED> 265<F1>
<NET-CHANGE-IN-ASSETS> (376935)
<ACCUMULATED-NII-PRIOR> 134419
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (264760)
<GROSS-ADVISORY-FEES> 202701
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 357998
<AVERAGE-NET-ASSETS> 347826<F1>
<PER-SHARE-NAV-BEGIN> 10.11<F1>
<PER-SHARE-NII> 0.37<F1>
<PER-SHARE-GAIN-APPREC> (0.03)<F1>
<PER-SHARE-DIVIDEND> 0.40<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.05<F1>
<EXPENSE-RATIO> 1.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 51
<NAME> TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 38846656
<INVESTMENTS-AT-VALUE> 39138168
<RECEIVABLES> 2901055
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42039244
<PAYABLE-FOR-SECURITIES> 2042120
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73983
<TOTAL-LIABILITIES> 2116103
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39648587
<SHARES-COMMON-STOCK> 3915452<F1>
<SHARES-COMMON-PRIOR> 3943942<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (16958)
<ACCUM-APPREC-OR-DEPREC> 291512
<NET-ASSETS> 39923141
<DIVIDEND-INCOME> 10960
<INTEREST-INCOME> 1902245
<OTHER-INCOME> 0
<EXPENSES-NET> 336082
<NET-INVESTMENT-INCOME> 1577123
<REALIZED-GAINS-CURRENT> 247802
<APPREC-INCREASE-CURRENT> (381865)
<NET-CHANGE-FROM-OPS> 1443060
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1697987<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 754274<F1>
<NUMBER-OF-SHARES-REDEEMED> 783406<F1>
<SHARES-REINVESTED> 642<F1>
<NET-CHANGE-IN-ASSETS> (376935)
<ACCUMULATED-NII-PRIOR> 134419
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (264760)
<GROSS-ADVISORY-FEES> 202701
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 357998
<AVERAGE-NET-ASSETS> 40145245<F1>
<PER-SHARE-NAV-BEGIN> 10.14<F1>
<PER-SHARE-NII> 0.40<F1>
<PER-SHARE-GAIN-APPREC> (0.03)<F1>
<PER-SHARE-DIVIDEND> 0.43<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.08<F1>
<EXPENSE-RATIO> 0.83<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> U.S. TREASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 23093188
<INVESTMENTS-AT-VALUE> 23694556
<RECEIVABLES> 572461
<ASSETS-OTHER> 3246
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24270263
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42815
<TOTAL-LIABILITIES> 42815
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27535547
<SHARES-COMMON-STOCK> 107197<F1>
<SHARES-COMMON-PRIOR> 109846<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3909467
<ACCUM-APPREC-OR-DEPREC> 601368
<NET-ASSETS> 24227448
<DIVIDEND-INCOME> 10605
<INTEREST-INCOME> 1930202
<OTHER-INCOME> 0
<EXPENSES-NET> 275640
<NET-INVESTMENT-INCOME> 1665167
<REALIZED-GAINS-CURRENT> 610897
<APPREC-INCREASE-CURRENT> (980793)
<NET-CHANGE-FROM-OPS> 1295271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 68563<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 12543<F1>
<NUMBER-OF-SHARES-REDEEMED> 21534<F1>
<SHARES-REINVESTED> 6342<F1>
<NET-CHANGE-IN-ASSETS> 28071863<F1>
<ACCUMULATED-NII-PRIOR> 272381
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4520364)
<GROSS-ADVISORY-FEES> 172954
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 292632
<AVERAGE-NET-ASSETS> 1050634<F1>
<PER-SHARE-NAV-BEGIN> 9.42<F1>
<PER-SHARE-NII> 0.53<F1>
<PER-SHARE-GAIN-APPREC> (0.20)<F1>
<PER-SHARE-DIVIDEND> 0.62<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.13<F1>
<EXPENSE-RATIO> 1.20<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Retail Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 21
<NAME> U.S. TREASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 23093188
<INVESTMENTS-AT-VALUE> 23694556
<RECEIVABLES> 572461
<ASSETS-OTHER> 3246
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24270263
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42815
<TOTAL-LIABILITIES> 42815
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27535547
<SHARES-COMMON-STOCK> 2543733<F1>
<SHARES-COMMON-PRIOR> 5438425<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3909467
<ACCUM-APPREC-OR-DEPREC> 601368
<NET-ASSETS> 24227448
<DIVIDEND-INCOME> 10605
<INTEREST-INCOME> 1930202
<OTHER-INCOME> 0
<EXPENSES-NET> 275640
<NET-INVESTMENT-INCOME> 1665167
<REALIZED-GAINS-CURRENT> 610897
<APPREC-INCREASE-CURRENT> (980793)
<NET-CHANGE-FROM-OPS> 1295271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1868985<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 161323<F1>
<NUMBER-OF-SHARES-REDEEMED> 3250486<F1>
<SHARES-REINVESTED> 194471<F1>
<NET-CHANGE-IN-ASSETS> 28071863
<ACCUMULATED-NII-PRIOR> 272381
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4520364)
<GROSS-ADVISORY-FEES> 172954
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 292632
<AVERAGE-NET-ASSETS> 27661426<F1>
<PER-SHARE-NAV-BEGIN> 9.43<F1>
<PER-SHARE-NII> 0.59<F1>
<PER-SHARE-GAIN-APPREC> (0.24)<F1>
<PER-SHARE-DIVIDEND> 0.64<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.14<F1>
<EXPENSE-RATIO> 0.95<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Institutional Class
</FN>
</TABLE>
<PAGE> 1
Exhibit 19
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose name
appears below hereby nominates, constitutes and appoints Irimga McKay, Gregory
Maddox and Eileen Walther (with full power to each of them to act alone) his or
her true and lawful attorney-in-fact and agent, for him or her and on his or her
behalf and in his or her place and stead in any and all capacities, to make,
execute and sign all amendments and supplements to the Registration Statement
under the Securities Act of 1933 and the Investment Company Act of 1940 of
Pacific Capital Funds (the "Fund"), and to file the same with the Securities and
Exchange Commission, and any other regulatory authority having jurisdiction over
the offer and sale of shares of common stock of the Fund, and any and all
exhibits and other documents requisite in connection therewith, granting unto
said attorneys and each of them, full power and authority to perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as each of the undersigned officers or
Trustees himself or herself might or could do.
IN WITNESS WHEREOF, the undersigned officers and Trustees have hereunto
set their hands this 27th day of September, 1996.
/s/ Douglas Philpotts /s/ Russell K. Okata
- -----------------------------------------------------------------
Douglas Philpotts Russell K. Okata
Trustee Trustee
/s/ Richard W. Gushman, II /s/ Deborah G. Patterson
- -----------------------------------------------------------------
Richard W. Gushman, II Deborah G. Patterson
Trustee Trustee and Chairman
/s/ Stanley W. Hong /s/ Oswald K. Stender
- -----------------------------------------------------------------
Stanley W. Hong Oswald K. Stender
Trustee Trustee
/s/ Irimga McKay /s/ Craig Warren
- -----------------------------------------------------------------
Irimga McKay Craig Warren
Trustee and President Treasurer
