<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON DECEMBER 1, 1998
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
POST-EFFECTIVE AMENDMENT NO. 12 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 [X]
(CHECK APPROPRIATE BOX OR BOXES)
---------------------
PACIFIC CAPITAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(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:
MICHAEL GLAZER, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] ON (DATE) 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
<PAGE> 2
QUESTIONS?
Call 800-258-9232 or your
investment representative.
[PACIFIC CAPITAL FUNDS LOGO]
Managed by
Pacific Century Trust
a Division of
Bank of Hawaii
------------------------
Growth Stock Fund
Growth and Income Fund
Value Fund
Small Cap Fund
New Asia Growth Fund
International Stock Fund
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
Diversified Fixed Income Fund
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
Balanced Fund
------------------------
Class Y
Institutional Shares
December 1, 1998
<PAGE> 3
PACIFIC CAPITAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
Carefully review this 3 Growth Stock Fund
important section, which 6 Growth and Income Fund
summarizes each Fund's 9 Value Fund
investments, risks, past 11 Small Cap Fund
performance, and fees. 13 New Asia Growth Fund
16 International Stock Fund
18 Tax-Free Securities Fund
21 Tax-Free Short Intermediate Securities Fund
24 Diversified Fixed Income Fund
27 U.S. Treasury Securities Fund
30 Short Intermediate U.S. Treasury Securities Fund
33 Balanced Fund
INVESTMENT OBJECTIVES, POLICIES AND RISKS
LOGO
LOGO
Review this section for 35 Growth Stock Fund
details on each Fund's 35 Growth and Income Fund
investment strategies and 35 Value Fund
risks. 35 Small Cap Fund
36 New Asia Growth Fund
36 International Stock Fund
37 Tax-Free Securities Fund
38 Tax-Free Short Intermediate Securities Fund
38 Diversified Fixed Income Fund
39 U.S. Treasury Securities Fund
39 Short Intermediate U.S. Treasury Securities Fund
39 Balanced Fund
40 Main Risks
FUND MANAGEMENT
LOGO
LOGO
Review this section for 44 The Investment Adviser
details on the people and 45 The Sub-Advisers
organizations who oversee 46 Portfolio Managers
the Funds. The Distributor and Administrator
SHAREHOLDER INFORMATION
LOGO
LOGO
Review this section for 47 Pricing of Fund Shares
details on how shares are 48 Purchasing and Adding to Your Shares
valued, how to purchase, 51 Selling Your Shares
sell and exchange shares, 53 General Policies on Selling Shares
related charges, and 54 Exchanging Your Shares
payments of dividends and 55 Dividends, Distributions and Taxes
distributions.
OTHER INFORMATION ABOUT THE FUNDS
LOGO
LOGO
Review this section for 57 Financial Highlights
details on selected
financial highlights of the
Funds.
</TABLE>
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
- Secondarily, dividend income
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES common stocks of U.S. and foreign companies with market
capitalizations (total market price of outstanding equity
securities) greater than $750 million, and securities that
are convertible into such common stocks. The Fund may invest
a significant portion of its assets in smaller and newer
companies. The Fund focuses on companies whose earnings are
growing substantially faster than the average for the U.S.
market.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. In addition, the performance of foreign
securities depends on different political and economic
environments and other overall economic conditions in
countries where the Fund invests. The values of the Fund's
convertible securities are also affected by movements in
interest rates; if rates rise, the values of convertible
securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - are investing for long term goals
- want potential capital appreciation and are willing to
accept the higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- regular income
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
3
- -
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
The two charts on this page
show how the Growth Stock
Fund has performed and
provides some indication of
the risks of investing in
the Fund by showing how its
performance has varied from
year to year. The bar chart
shows changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the S&P 500(R), a widely
recognized index of U.S.
common stocks.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES*
<TABLE>
<S> <C>
1988 8.22
89 31
90 2.75
91 35.36
92 2.41
93 7.26
94 -1.17
95 30.1
96 15.03
97 30.52
</TABLE>
Best quarter: Q2 1997 +18.77%
Worst quarter: Q3 1990 -14.29%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS Y 10/31/77 30.52% 15.67% 15.38% 12.98%
S&P 500(R) INDEX 10/31/77 19.35% 22.92% 18.47% 16.70%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 4.99% versus 6.01% for the S&P
500(R) Index.
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
As an investor in the Growth
Stock Fund, you will pay
the following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.80%
Other expenses 0.30%
Total Fund operating expenses 1.10%
</TABLE>
(1) The Administrator is waiving a portion
of the Administration fee so that Other
expenses are expected to be 0.26%. TOTAL
FUND OPERATING EXPENSES AFTER THIS FEE
WAIVER FOR CLASS Y SHARES ARE EXPECTED TO BE
1.06%. This expense limitation may be
revised or canceled at anytime.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $112 $350 $606 $1,340
</TABLE>
5
<PAGE> 7
LOGO
LOGO RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Current income
- Secondarily, long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES high quality, dividend paying common stocks of U.S.
companies with market capitalizations (total market price of
outstanding equity securities) greater than $750 million,
and securities that are convertible into such common stocks.
The Fund focuses on companies whose earnings are growing at
above average rates in relation to other companies in their
industries. The Fund seeks to produce a gross yield that
approximates that of the average for companies in the S&P
500(R).
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. The values of its
convertible securities are also affected by movements in
interest rates; if rates rise, the values of convertible
securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want potential capital appreciation and are willing to
accept higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
6
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME FUND
The two charts on this page
show how the Growth and
Income Fund has performed
and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the S&P 500(R), a widely
recognized index of U.S.
common stocks.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS Y SHARES*
<TABLE>
<S> <C>
1988 16.17
89 28.86
90 -1.58
91 24.23
92 1.08
93 4.90
94 0.46
95 26.48
96 18.68
97 33.87
</TABLE>
Best quarter: Q2 1997 +18.13%
Worst quarter: Q3 1990 -11.35%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS Y 10/31/77 38.87% 16.19% 14.63% 11.16%
S&P 500(R) INDEX 10/31/77 19.35% 22.92% 18.47% 16.70%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 3.56% versus 6.01% for the S&P
500(R) Index.
7
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME FUND
As an investor in the Growth
and Income Fund, you will
pay the following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.80%
Other expenses 0.32%
Total Fund operating expenses 1.12%
</TABLE>
(1) The Administrator is waiving a portion
of the Administration fee so that Other
expenses are expected to be 0.28%. TOTAL
FUND OPERATING EXPENSES AFTER THIS FEE
WAIVER FOR CLASS Y SHARES ARE EXPECTED TO BE
1.08%. This expense limitation may be
revised or canceled at any time.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $114 $356 $617 $1,363
</TABLE>
8
<PAGE> 10
LOGO
LOGO RISK/RETURN SUMMARY AND FUND EXPENSES VALUE FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
- Secondarily, current income
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES U.S. traded common stocks with market capitalizations (total
market price of outstanding equity securities) greater than
$750 million, and securities that are convertible into such
common stocks. The Fund focuses on companies whose cash flow
to price ratio exceeds that of their industry average and
whose stock price Pacific Century believes is undervalued.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. The values of its
convertible securities, if any, may be affected by movements
in interest rates; if rates rise, the values of convertible
securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
9
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES VALUE FUND
As an investor in the Value
Fund, you will pay the
following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.80%
Other expenses 0.75%
Total Fund operating expenses 1.55%
</TABLE>
(1) The Administrator is waiving a portion
of the Administration fee so that Other
expenses are expected to be 0.71%. TOTAL
FUND OPERATING EXPENSES AFTER THIS FEE
WAIVER FOR CLASS Y SHARES ARE EXPECTED TO BE
1.51%. This expense limitation may be
revised or canceled at any time.
Use this table to compare fees
and expenses of the Fund with
those of other Funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS Y SHARES $158 $490
</TABLE>
10
<PAGE> 12
LOGO
LOGO RISK/RETURN SUMMARY AND FUND EXPENSES SMALL CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES common stocks of smaller U.S. companies, and securities that
are convertible into such common stocks. The Fund focuses on
stocks its Sub-Adviser believes are undervalued,
fundamentally strong and undergoing positive change.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. The values of the Fund's convertible securities,
if any, may be affected by movements in interest rates; if
rates rise, the values of convertible securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - are investing for long term goals
- want potential capital appreciation and are willing to
accept the higher risks associated with investing in small
cap stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
- regular income
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
11
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES SMALL CAP FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 1.10%
Other expenses 0.59%
Total Fund operating expenses 1.69%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 1.00%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.55%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 1.55%. In addition, the
Adviser has agreed to limit expenses so that
Total Fund operating expenses will not
exceed 1.97%. These expense limitations may
be revised or canceled at any time.
As an investor in the Small
Cap Fund, you will pay the
following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
SMALL CAP FUND YEAR YEARS
CLASS Y SHARES $172 $533
</TABLE>
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay, assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
12
<PAGE> 14
LOGO
LOGO RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in common and preferred stocks of
INVESTMENT STRATEGIES companies located in the developing countries of Asia (Asian
countries other than Japan), and securities that are
convertible into such common stocks. The Fund may invest in
these securities directly, or indirectly through other
investment companies or trusts that invest the majority of
their assets in the developing countries of Asia. The Fund
does not limit its investments to any particular type or
size of company. The Fund focuses on companies whose
earnings the Sub-Adviser expects to grow or whose share
price it believes is undervalued.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. In addition, the performance of foreign
securities depends on different political and economic
environments and other overall economic conditions in the
countries where the Fund invests. Emerging country markets
involve greater risk and volatility then more developed
markets. The values of the Fund's convertible securities are
also affected by interest rates.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in
emerging country stocks
- are investing for long-term goals
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- regular income
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
13
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
The two charts on this page
show how the New Asia
Growth Fund has performed
and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the Fund's
yearly performance since
its inception to
demonstrate that the Fund
has gained and lost value
at differing times. The
table below it compares the
Fund's performance over
time to the Morgan Stanley
Capital International
(MSCI) Far East Index
(excluding Japan), a widely
recognized index of stock
markets in that region.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES
<TABLE>
<S> <C>
96 16.13
97 -24.5
</TABLE>
Best quarter: Q1 1996 +8.87%
Worst quarter: Q4 1997 -24.98%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)*
<TABLE>
<CAPTION>
PERFORMANCE PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
CLASS Y 2/15/95 -24.50% -0.91%
MSCI FAR EAST INDEX
(EXCLUDING JAPAN) 2/15/95 -45.17% -7.58%
</TABLE>
* For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was -23.42% versus -24.09% for
the MSCI Far East Index (excluding Japan).
14
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.90%
Other expenses 1.28%
Total Fund operating expenses 2.18%
</TABLE>
(1) The Administrator is waiving a portion
of the Administration fee so that Other
expenses are expected to be 1.23%. Total
Fund operating expenses after this waiver
for Class Y shares are expected to be 2.13%.
IN ADDITION, THE ADVISER HAS AGREED TO LIMIT
EXPENSES SO THAT TOTAL FUND OPERATING
EXPENSES WILL NOT EXCEED 1.97%. These
expenses may be revised or canceled at any
time.
As an investor in the New
Asia Growth Fund, you will
pay the following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $221 $682 $1,169 $2,513
</TABLE>
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
15
<PAGE> 17
LOGO
LOGO RISK/RETURN SUMMARY AND FUND EXPENSES INTERNATIONAL STOCK
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in common and preferred stocks of
INVESTMENT STRATEGIES foreign companies and securities that are convertible into
common stocks. The Fund may invest in these securities
directly, or indirectly through other investment companies
or trusts that invest the majority of their assets in
foreign companies. The Fund does not limit its investments
to any particular type or size of company or to any region
of the world. The Fund focuses on companies whose earnings
the Sub-Adviser expects to grow or whose share price it
believes is undervalued.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. In addition, the performance of foreign
securities depends on different political and economic
environments and other overall economic conditions in the
countries where the Fund invests. Emerging country markets
involve greater risk and volatility than more developed
markets. The values of the Fund's convertible securities are
also affected by interest rates; if rates rise, the values
of convertible securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in foreign
stocks
- are investing for long-term goals
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
- regular income
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
16
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES INTERNATIONAL STOCK FUND
As an investor in the
International Stock Fund,
you will pay the following
fees and expenses. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 1.10%
Other expenses 0.97%
Total Fund operating expenses 2.07%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 1.00%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.93%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 1.93%. In addition, the
Adviser has agreed to limit expenses so that
Total Fund operating expenses will not
exceed 1.97%. These expense limitations may
be revised or canceled at any time.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS Y SHARES $210 $649
</TABLE>
17
<PAGE> 19
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income that is exempt from federal and Hawaii
income tax
PRINCIPAL The Fund normally invests at least 80% of its net assets in
INVESTMENT STRATEGIES investment grade municipal obligations -- debt securities
that pay interest which is exempt from both federal income
tax and the federal alternative minimum tax. In addition, to
provide double tax exempt income the Fund normally invests
50-60% of its net assets in Hawaii municipal
obligations -- debt securities issued by or on behalf of the
State of Hawaii and its political subdivisions, agencies and
instrumentalities that pay interest which is exempt from
Hawaii personal income tax as well as federal income tax.
The Fund focuses on maximizing the tax exempt income
consistent with prudent investment risk, and varies the
average maturity of its investment portfolio from time to
time in response to actual and expected interest rate
movements as well as other market and economic conditions.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. A portion of the Fund's net assets
(normally not more than 20%) may be invested in securities
that pay interest which is subject to the federal
alternative minimum tax.
The Fund is non-diversified, which means that its portfolio
can be invested in fewer issuers than most mutual funds. As
a result, the value of your shares may be impacted more by
events affecting one or a few of the Fund's investments than
would otherwise be the case. Since the Fund invests
significantly in securities of issuers in Hawaii, it also
will be affected by a variety of Hawaiian economic and
political factors.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income that is exempt from federal and Hawaii
income taxes
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income that is not subject to federal alternative minimum
tax
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
18
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES FUND
The two charts on this page
show how the Tax-Free
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Lehman Brothers
Municipal Bond Index, a
widely recognized index of
municipal bonds with a
broad range of maturities.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES*
LOGO
Best quarter: Q1 1995 +7.44%
Worst quarter: Q1 1994 -6.03%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS Y 10/31/77 8.54% 6.58% 7.73% 3.28%
LEHMAN BROTHERS MUNICIPAL
BOND INDEX 10/31/77 5.99% 6.49% 8.26% 8.67%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 5.70% versus 5.85% for the Lehman
Brothers Municipal Bond Index.
19
<PAGE> 21
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES FUND
As an investor in the
Tax-Free Securities Fund,
you will pay the following
fees and expenses. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.60%
Other expenses 0.29%
Total Fund operating expenses 0.89%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 0.45%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.25%. TOTAL FUND OPERATING EXPENSES
AFTER FEE WAIVERS FOR CLASS Y SHARES ARE
EXPECTED TO BE 0.70%. These expense
limitations may be revised or canceled at
any time.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
TAX-FREE SECURITIES FUND YEAR YEARS YEARS YEARS
CLASS Y SHARES $ 91 $284 $493 $1,096
</TABLE>
20
<PAGE> 22
logo
logo
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income that is exempt from federal and Hawaii
income tax, with greater stability in the price of your
investment than a long-term bond fund
PRINCIPAL Under normal market conditions, the Fund invests at least
INVESTMENT STRATEGIES 80% of its net assets in investment grade municipal
obligations -- debt securities that pay interest, which is
exempt from both federal income tax and the federal
alternative minimum tax. In addition, to provide double tax
exempt income the Fund normally invests 50-60% of its net
assets in Hawaii municipal obligations -- debt securities
issued by or on behalf of the State of Hawaii and its
political subdivisions, agencies and instrumentalities that
pay interest which is exempt from Hawaii personal income tax
as well as federal income tax. To achieve greater price
stability than a long-term bond fund, under normal market
conditions, the average remaining maturity of the Fund's
investment portfolio (measured on a dollar-weighted basis)
will be from two to five years. The Fund focuses on
maximizing tax exempt income consistent with prudent
investment risk within this maturity range.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. A portion of the Fund's net assets
(normally not more than 20%) may be invested in securities
that pay interest which is subject to the federal
alternative minimum tax.
The Fund is non-diversified, which means that its portfolio
can be invested in fewer issuers than most mutual funds. As
a result, the value of your shares may be impacted more by
events affecting one or a few of the Fund's investments than
would otherwise be the case. Since the Fund invests
significantly in securities of issuers in Hawaii, it also
will be affected by a variety of Hawaiian economic and
political factors.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income that is exempt from federal and Hawaii
income taxes
- want less fluctuation in the value of your investment than
a long-term bond fund
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income that is not subject to federal alternative minimum
tax
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
21
<PAGE> 23
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
The two charts on this page
show how the Tax-Free Short
Intermediate Securities
Fund has performed and
provides some indication of
the risks of investing in
the Fund by showing how its
performance has varied from
year to year. The bar chart
shows changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Lehman Brothers
5-Year Municipal Bond
Index, a widely recognized
index of bonds with a
maturity range of four to
six years.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES*
<TABLE>
<S> <C>
1988 0.00
89 5.77
90 5.71
91 8.52
92 5.31
93 5.78
94 -1.05
95 7.56
96 3.20
97 5.08
</TABLE>
Best quarter: Q1 1991 +2.52%
Worst quarter: Q1 1994 -1.89%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 SINCE
INCEPTION* YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
CLASS Y 3/31/88 5.08% 4.07% 4.87%
LEHMAN BROTHERS 5-YEAR
MUNICIPAL BOND INDEX 3/31/88 4.79% 5.35% 6.83%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to March 31, 1988,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 3.85% versus 4.98% for the Lehman
Brothers 5-Year Municipal Bond Index.
22
<PAGE> 24
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
As an investor in the
Tax-Free Short
Intermediate Securities
Fund, you will pay the
following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.50%
Other expenses 0.39%
Total Fund operating expenses 0.89%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 0.40%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.34%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 0.74%. These expense
limitations may be revised or canceled at
any time.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $ 91 $284 $493 $1,096
</TABLE>
23
<PAGE> 25
logo
logo
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income
PRINCIPAL The Fund invests primarily in debt securities issued or
INVESTMENT STRATEGIES guaranteed by the U.S. Government, its agencies and
instrumentalities and in investment grade corporate debt
securities rated A or better by Standard & Poor's. It may
invest up to 20% of its total assets in investment grade
debt securities rated BBB issued by U.S. companies and state
and local government issuers. It may invest up to 25% of its
total assets in investment grade dollar-denominated debt
securities of foreign companies and government issuers. The
Fund focuses on maximizing income consistent with prudent
investment risk, and varies the average maturity of its
investment portfolio from time to time in response to actual
and expected market and economic changes.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. The performance of foreign securities
depends on different political and economic environments and
other overall economic conditions in countries where the
Fund invests.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- income exempt from federal and state taxes
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
24
<PAGE> 26
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
The two charts on this page
show how the Diversified
Fixed Income Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Merrill Lynch
Corporate & Government
Master Index, a widely
recognized index of U.S.
corporate and U.S.
Government bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES*
<TABLE>
<S> <C>
1988 7.55
89 13.72
90 6.59
91 18.16
92 6.46
93 13.91
94 -7.99
95 23.54
96 -0.66
97 8.74
</TABLE>
Best quarter: Q2 1989 +8.69%
Worst quarter: Q1 1994 -5.79%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS Y 10/31/77 8.74% 6.94% 8.66% 4.41%
MERRILL LYNCH CORPORATE &
GOVERNMENT MASTER INDEX 10/31/77 8.15% 6.83% 9.20% 9.49%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1988 through September 30, 1998, the aggregate
(non-annualized) total return for the Fund was 9.93% versus 9.28% for the
Merrill Lynch Corporate & Government Master Index.
25
<PAGE> 27
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
As an investor in the
Diversified Fixed Income
Fund, you will pay the
following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.60%
Other expenses 0.31%
Total Fund operating expenses 0.91%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 0.45%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.27%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 0.72%. These expense
limitations may be revised or canceled at
any time.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
DIVERSIFIED FIXED INCOME FUND YEAR YEARS YEARS YEARS
CLASS Y SHARES $ 93 $290 $504 $1,120
</TABLE>
26
<PAGE> 28
logo
logo
U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income consistent with prudent capital risk
- Secondarily, capital appreciation
PRINCIPAL The Fund invests primarily in bonds, notes and bills issued
INVESTMENT STRATEGIES by the U.S. Treasury, and in repurchase agreements for which
those securities are held as collateral. The Fund focuses on
maximizing income consistent with prudent investment risk,
and varies the average maturity of its investment portfolio
from time to time to take advantage of expected changes in
interest rates.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income exempt from federal taxes
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
27
<PAGE> 29
U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
The two charts on this page
show how the U.S. Treasury
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Merrill Lynch U.S.
Treasuries All Maturity
Index, a widely recognized
index of short-term and
long-term U.S. Treasury
bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES*
<TABLE>
<S> <C>
1988 6.75
89 13.50
90 8.13
91 15.18
92 6.29
93 11.59
94 -7.34
95 24.47
96 -1.68
97 8.31
</TABLE>
Best quarter: Q2 1995 +8.75%
Worst quarter: Q1 1996 -5.57%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS Y 12/31/84 8.31% 6.51% 8.20% 8.96%
MERRILL LYNCH U.S. TREASURIES
ALL MATURITY INDEX 12/31/84 13.59% 7.15% 9.28% 9.90%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to December 31, 1984,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 9.91% versus 9.94% for the Merrill
Lynch U.S. Treasuries All Maturity Index.
28
<PAGE> 30
U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.60%
Other expenses 0.47%
Total Fund operating expenses 1.07%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 0.35%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.43%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 0.78%. These expense
limitations may be revised or canceled at
any time.
As an investor in the U.S.
Treasury Securities Fund,
you will pay the following
fees and expenses. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $109 $340 $590 $1,306
</TABLE>
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
29
<PAGE> 31
logo
logo
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income consistent with prudent capital risk
- Secondarily, capital appreciation
PRINCIPAL The Fund invests primarily in bonds, notes and bills issued
INVESTMENT STRATEGIES by the U.S. Treasury, and in repurchase agreements for which
those securities are held as collateral. Under normal market
conditions, the average remaining maturity of the Fund's
investment portfolio (measured on a dollar-weighted basis)
will be from two to five years. The Fund focuses on
maximizing income consistent with prudent investment risk
within this maturity range.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. Pacific Century expects the value of the Fund's
investments will generally fluctuate less than those of the
U.S. Treasury Securities Fund, because the Fund's
investments will generally have shorter maturities.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want less fluctuation in the value of your investment than
a long-term bond fund
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income exempt from federal taxes
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
30
<PAGE> 32
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
The two charts on this page
show how the Short
Intermediate U.S. Treasury
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the Fund's
yearly performance since
its inception to
demonstrate that the Fund
has gained and lost value
at differing times. The
Table below it compares the
Fund's performance over
time to the Merrill Lynch
3-5-Year U.S. Treasury
Index, a widely recognized
index of short-term
Treasury bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS Y SHARES
Best quarter: Q2 1995 +4.39%
Worst quarter: Q1 1994 -3.12%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)*
<TABLE>
<CAPTION>
PERFORMANCE PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
CLASS Y 12/31/93 6.94% 4.44%
MERRILL LYNCH 3-5-YEAR
U.S. TREASURY INDEX 12/31/93 6.94% 6.62%
</TABLE>
* For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total return of the Fund was 8.95% versus 9.10% for the
Merrill Lynch 3-5-Year U.S. Treasury Index.
31
<PAGE> 33
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.50%
Other expenses 0.47%
Total Fund operating expenses 0.97%
</TABLE>
(1) The Adviser is currently limiting the
Management fee to 0.30%. The Administrator
is waiving a portion of the Administration
fee so that Other expenses are expected to
be 0.42%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS FOR CLASS Y SHARES
ARE EXPECTED TO BE 0.72%. These expense
limitations may be revised or canceled at
any time.
As an investor in the Short
Intermediate U.S. Treasury
Securities Fund, you will
pay the following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $ 99 $309 $536 $1,190
</TABLE>
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
32
<PAGE> 34
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES BALANCED FUND
THIS FUND IS NOT CURRENTLY BEING OFFERED TO THE
PUBLIC.
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Current income
- Secondarily, long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES common stocks, bonds and securities that are convertible
into common stocks. It invests principally in U.S.
companies. The Fund may invest a significant portion of its
assets in medium and smaller-sized companies. By using a
combination of stocks and bonds, which often fluctuate in
different directions, the Fund seeks to provide above
average income, good long term growth and lower volatility
than a pure stock portfolio.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments in stocks fluctuate in
response to the activities of individual companies and
general stock market and economic conditions. Stock prices
of medium and smaller size companies fluctuate more than
larger more established companies. The values of the Fund's
bonds fluctuate in response to movements in interest rates.
If rates rise, the values of bonds generally fall; the
longer the remaining maturity of the bonds, the greater the
fluctuation. The values of the Fund's convertible securities
are also affected by interest rates.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want potential capital appreciation and are willing to
accept the higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
33
<PAGE> 35
RISK/RETURN SUMMARY AND FUND EXPENSES BALANCED FUND
THIS FUND IS NOT CURRENTLY BEING OFFERED TO THE PUBLIC.
FEES AND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(FEES PAID FROM FUND ASSETS) Y SHARES
Management fee 0.80%
Other expenses 0.46%
Total Fund operating expenses 1.26%
</TABLE>
(1) The Administrator is waiving a portion
of the Administration fee so that Other
expenses are expected to be 0.42%. TOTAL
FUND OPERATING EXPENSES AFTER THIS FEE
WAIVER FOR CLASS Y SHARES ARE EXPECTED TO BE
1.22%. This expense limitation may be
revised or canceled at any time.
As an investor in the
Balanced Fund, you will
pay the following fees and
expenses. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS Y SHARES $128 $400 $692 $1,523
</TABLE>
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
34
<PAGE> 36
logo
logo
INVESTMENT OBJECTIVES, POLICIES AND RISKS
GROWTH STOCK FUND
The Growth Stock Fund seeks to make your investment grow over the long term,
and secondarily to provide you with current income.
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of common stocks of U.S. and foreign companies with market
capitalizations (total market price of outstanding equity securities) greater
than $750 million, and in securities that are convertible into such common
stocks. It may invest in securities issued by large, well-established
companies as well as smaller companies, subject to a minimum market
capitalization of $50 million at the time of purchase. The Fund focuses on
companies whose earnings are growing substantially faster than the average
for the U.S. market.
The Fund can also invest in other types of equity and investment grade debt
instruments issued by domestic and foreign companies and governments, and can
use futures contracts, options and other investment techniques for the
purpose of cash flow management and/or risk reduction.
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to provide you with current income, and
secondarily to make your investment grow over the long term.
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of high quality, dividend paying common stocks of U.S. companies
with market capitalizations (total market price of outstanding equity
securities) greater than $750 million, and securities convertible into such
common stocks. The Fund seeks to produce a gross yield that approximates that
of the average for companies in the S&P 500. The Fund focuses on companies
whose earnings are growing at above average rates in relation to other
companies in their industries. However, to a lesser extent it may invest in
lower yielding but higher growth-oriented investments to achieve more growth
potential.
The Fund does not limit its investments to any particular type or size of
company. It can also invest in other types of equity and investment grade
debt instruments issued by domestic and foreign companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
VALUE FUND
The Value Fund seeks to provide you with long term growth, and secondarily
current income.
Normally, the Fund invests primarily in U.S. traded common stocks with market
capitalizations (total market price of outstanding equity securities) greater
than $750 million, and securities that are convertible into such common
stocks (such as warrants, convertible preferred stock, fixed rate preferred
stock, convertible fixed income securities, options and rights). It does not
limit its investments to any particular size or type of company, but focuses
on middle to large capitalization companies whose cash flow to price ratio
exceeds that of their industry average and whose stock price Pacific Century
believes is undervalued. The Fund can also invest in preferred stocks and
other types of equity and investment grade debt instruments issued by
domestic and foreign companies and governments, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
SMALL CAP FUND
The Small Cap Fund seeks to make your investment grow over the long term.
35
<PAGE> 37
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of common stocks of smaller U.S. companies, and in securities that
are convertible into such common stocks. The Fund invests primarily in stocks
from a universe of U.S. companies with market capitalizations within the
range of capitalizations included in the Russell 2000 Value Index at the time
of purchase. As of September 30, 1998, the companies in the Russell 2000
Value Index had a market capitalization of up to approximately $1.2 billion.
The Fund focuses on stocks its Sub-Adviser believes are undervalued,
fundamentally strong and undergoing positive change.
The Fund can also invest in other types of equity and investment grade debt
instruments issued by domestic and foreign companies and governments,
including securities issued by larger companies. In addition, it can use
futures contracts, options and other investment techniques for the purpose of
cash flow management and/or risk reduction.
A NEW ASIA GROWTH FUND
The New Asia Growth Fund seeks to make your investment grow over the long
term.
Normally, the Fund invests at least 70% of its total assets in common stocks,
common stock equivalents (such as preferred or debt securities convertible
into common stock), and preferred stocks of companies located in the
developing countries of Asia. The Fund invests in these securities directly,
or indirectly through other investment companies or trusts that invest the
majority of their assets in the developing countries of Asia.
For these purposes, developing countries of Asia include all countries in
Asia other than Japan, including but not limited to Hong Kong, China, India,
Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan,
Pakistan, Bangladesh, Sri Lanka and Thailand. An issuer is located in a
developing Asian country if it is organized under the laws of the country, if
it derives 50% or more of its total revenues from business in the country, or
if its equity securities are traded principally on a securities exchange in
the country.
The Fund does not limit its investments to any particular type or size of
company. It may invest in companies, large or small, whose earnings its
investment adviser believe have a relatively strong growth trend, or in
companies that it does not anticipate to grow but whose share price it
believes is undervalued. In selecting and maintaining a portfolio of
investments in any country, the Fund's investment adviser considers the
investment instruments traded in the country's stock markets and the upside
potential of such markets (including 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 does not give important
consideration to current income from dividends and interest in selecting
portfolio securities.
The Fund may invest to a lesser degree in debt securities and other
instruments if Pacific Century or its Sub-Adviser believes they would help
achieve the Fund's objective; up to 10% of its net assets may be invested in
debt securities rated below investment grade. The Fund may also invest up to
35% of its total assets in any combination of equity, investment grade debt
and convertible securities of issuers located outside the developing
countries of Asia, including the United States, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
36
<PAGE> 38
INVESTMENT OBJECTIVES, POLICIES AND RISKS
INTERNATIONAL STOCK FUND
The International Stock Fund seeks to make your investment grow over the long
term.
Normally, the Fund invests at least 65% of its total assets in common stocks,
common stock equivalents (such as preferred or debt securities convertible
into common stock), and preferred stocks of foreign companies. The Fund
invests in these securities directly, or indirectly through other investment
companies or trusts that invest the majority of their assets in foreign
companies.
The Fund does not limit its investments to any particular country or type or
size of company. It may invest in companies, large or small, whose earnings
its investment adviser believe have a relatively strong growth trend, or in
companies that it does not anticipate to grow but whose market value per
share it believes is undervalued. In selecting and maintaining a portfolio of
investments in any country, the Fund's investment adviser considers the
investment instruments traded in the country's stock markets and the upside
potential of such markets (including 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 does not give important
consideration to current income from dividends and interest in selecting
portfolio securities.
The Fund may invest to a lesser degree in investment grade debt securities
and other instruments if Pacific Century or its Sub-Adviser believes they
would help achieve the Fund's objective. The Fund may also invest up to 35%
of its total assets in any combination of equity, investment grade debt and
convertible securities of issuers located in the United States, and can use
futures contracts, options and other investment techniques for the purpose of
cash flow management and/or risk reduction.
TAX-FREE SECURITIES FUND
The Tax-Free Securities Fund seeks to provide you with high current income
that is exempt from federal and Hawaii income tax.
The Fund normally invests most of its assets as follows:
<TABLE>
<S> <C>
At least 80% of Municipal obligations -- debt securities of issuers that pay
net assets interest which, in the opinion of counsel to the issuer, is
exempt from federal income tax and is not subject to the
federal alternative minimum tax. This fundamental policy
cannot be changed without shareholder approval.
50%-60% of Hawaii municipal obligations -- debt securities issued by or
net assets 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 federal income tax.
</TABLE>
No more than 20% of the Fund's net assets will be invested in debt securities
that pay interest subject to the federal alternative minimum tax (for those
investors subject to this tax). The Fund can also invest in other kinds of
debt instruments issued by foreign and domestic companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
The Fund focuses on maximizing tax exempt income consistent with prudent
investment risk. It varies the average maturity of its investment portfolio
from time to time in response to actual and expected
37
<PAGE> 39
INVESTMENT OBJECTIVES, POLICIES AND RISKS
interest rate movements as well as other market and economic conditions. It
is non-diversified, which means that its assets may be invested in fewer
issuers than diversified funds. No maturity limitations apply to the Fund's
investment portfolio, and the average maturity of its portfolio can vary
significantly. Pacific Century monitors the Fund's portfolio performance and
reallocates the Fund's assets in response to actual and expected market and
economic changes.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
The Tax-Free Short Intermediate Securities Fund seeks to provide you with
high current income that is exempt from federal and Hawaii income tax, with
greater stability in the price of your investment than a long-term bond fund.
The Fund normally invests most of its assets as follows:
<TABLE>
<S> <C>
At least 80% of Municipal obligations -- debt securities of issuers that pay
net assets interest which, in the opinion of counsel to the issuer, is
exempt from federal income tax and is not subject to the
federal alternative minimum tax. This fundamental policy
cannot be changed without shareholder approval.
50%-60% of Hawaii municipal obligations -- debt securities issued by or
net assets 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 federal income tax.
</TABLE>
No more than 20% of the Fund's net assets will be invested in debt securities
that pay interest subject to the federal alternative minimum tax (for those
investors subject to this tax). The Fund can also invest in other kinds of
debt instruments issued by foreign and domestic companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
The Fund is non-diversified, which means that its assets may be invested in
fewer issuers than diversified funds. To achieve greater price stability than
a long-term bond fund, normally the average remaining maturity of the Fund's
portfolio (on a dollar-weighted basis) will be from two to five years. The
Fund focuses on maximizing tax exempt income consistent with prudent
investment risk within this maturity range. The Fund's share value will
likely be less volatile than the Tax-Free Securities Fund, because the Fund
generally will have a shorter average portfolio maturity.
DIVERSIFIED FIXED INCOME FUND
The Diversified Fixed Income Fund seeks to provide you with high current
income.
Normally, the Fund invests at least 80% of its total assets in high quality
fixed income securities. Most of its investments will be debt securities
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities and corporate issuers rated A or better by Standard &
Poor's. However, the Fund may invest up to 20% of its total assets in
investment grade debt securities rated BBB issued by U.S. companies and state
and local government issuers. In addition, the Fund may invest up to 25% of
its total assets in securities of foreign companies and government issuers
that are payable in U.S. dollars. The Fund can also invest in other kinds of
debt instruments issued by foreign and domestic companies
38
<PAGE> 40
INVESTMENT OBJECTIVES, POLICIES AND RISKS
and governments, and can use futures contracts, options, and other investment
techniques for the purpose of cash flow management and/or risk reduction.
The Fund focuses on maximizing income consistent with prudent investment
risk. No maturity limitations apply to the Fund's investment portfolio, and
the average maturity of its portfolio can vary significantly. Pacific Century
monitors the Fund's portfolio performance and reallocates the Fund's assets
in response to actual and expected market and economic changes.
U.S. TREASURY SECURITIES FUND
The U.S. Treasury Securities Fund seeks to provide you with high current
income consistent with prudent capital risk, and secondarily to make your
capital grow.
Normally, the Fund invests at least 65% of its total assets in U.S. Treasury
securities -- bonds, notes, and bills issued by the U.S. Treasury. It invests
the balance principally in repurchase agreements (agreements to buy U.S.
Treasury securities where the seller agrees to buy them back, usually within
a few days). The Fund can also invest in other kinds of debt instruments
issued by foreign and domestic companies and governments, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
The Fund focuses on maximizing income consistent with prudent investment
risk. No maturity limitations apply to the Fund's investment portfolio, and
the average maturity of its portfolio can vary significantly. The Fund seeks
to increase its total return by shortening the average maturity of its
portfolio securities when it expects interest rates to increase, and
lengthening the average maturity to take advantage of expected interest rate
declines.
SHORT INTERMEDIATE
U.S. TREASURY SECURITIES FUND
The Short Intermediate U.S. Treasury Securities Fund seeks to provide you
with high current income consistent with prudent capital risk, and
secondarily to make your capital grow.
Normally, the Fund invests at least 65% of its total assets in U.S. Treasury
securities -- bonds, notes, and bills issued by the U.S. Treasury. It invests
the balance principally in repurchase agreements (agreements to buy U.S.
Treasury securities where the seller agrees to buy them back, usually within
a few days). The Fund can also invest in other kinds of debt instruments
issued by foreign and domestic companies and governments, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
Normally the average remaining maturity of the Fund's portfolio (on a
dollar-weighted basis) will be from two to five years. The Fund focuses on
maximizing income consistent with prudent investment risk within this
maturity range. The Fund seeks to increase its total return by shortening the
average maturity of its portfolio securities when it expects interest rates
to increase, and lengthening the average maturity to take advantage of
expected interest rate declines. The Fund's share value will likely be less
volatile than the U.S. Treasury Securities Fund, because the Fund generally
will have a shorter average portfolio maturity.
39
<PAGE> 41
INVESTMENT OBJECTIVES, POLICIES AND RISKS
BALANCED FUND
The Balanced Fund seeks to provide you with current income, and secondarily
to make your investment grow over the long term. This Fund is currently not
being offered to the public.
Normally the Fund invests primarily in common stocks and bonds of U.S.
companies, and securities that are convertible into such common stocks (such
as warrants, convertible preferred stock, fixed rate preferred stock,
convertible fixed-income securities, options and rights). By using a
combination of stocks and bonds which often fluctuate in different
directions, the Fund seeks to provide above average income, good long term
growth and lower volatility than a pure stock portfolio. It invests at least
30% of the value of its total assets in investment grade fixed-income
securities that are senior to the issuers' other debt securities. The Fund
can also invest in preferred stocks and other types of equity and investment
grade debt instruments issued by domestic and foreign companies and
governments, and can use futures contracts, options and other investment
techniques for the purpose of cash flow management and/or risk reduction.
The Fund may invest in common stocks of large companies (with market
capitalizations of more than $750 million) as well as medium and smaller
sized companies (with market capitalizations of at least $250 million but
less than $750 million). (Market capitalization is the total market price of
a company's outstanding equity securities.) It seeks to invest less than 50%
of its total assets in the securities of medium and smaller sized companies.
However, the actual percentage may vary according to changes in market
conditions and Pacific Century's judgment about how best to achieve the
Fund's investment objective.
The Fund selects common stocks on the basis of companies' strong earnings
growth trends, above-average prospects for future earnings growth, and
diversification among industries and companies. In selecting preferred
stocks, bonds and convertible securities, it also considers companies' strong
earnings and credit records and their ability to provide current income.
MAIN RISKS
The value of your investment in any of the Funds will go up and down, which
means that you could lose money. You should consider an investment in any of
the Funds as a long-term investment.
STOCKS. The values of stocks fluctuate in response to the activities of
individual companies and general stock market and economic conditions, and
stock prices may decline over short or even extended periods. Stocks are more
volatile and riskier than some other forms of investment, such as short-term
high-grade fixed income securities.
SMALL COMPANIES. Securities of smaller and newer companies may present
greater opportunities than larger and more established companies for capital
appreciation because of high potential earnings growth. But they also involve
greater risk. Such companies 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 stock 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 stock prices.
FOREIGN SECURITIES. Investments in foreign securities involve risks that are
not typically associated with domestic securities. Changes in foreign
currency exchange rates will affect the values of investments
40
<PAGE> 42
INVESTMENT OBJECTIVES, POLICIES AND RISKS
quoted or payable in currencies other than the U.S. dollar. Less information
may be publicly available about foreign issuers. They also are not generally
subject to the same accounting, auditing and financial reporting standards as
domestic issuers. Foreign stock markets have different clearance and
settlement procedures, and higher brokerage commissions and transaction
costs, than U.S. markets. In addition, foreign exchanges, brokers and issuers
generally are not supervised or regulated as closely as in the United States.
Furthermore, foreign income tax laws may require withholding of interest,
gains or dividends. Certain other adverse developments could also occur, such
as expropriation or confiscatory taxation, political or social instability,
or diplomatic developments that could adversely affect investments and the
ability to enforce contracts.
EMERGING MARKETS. The securities markets of developing countries involve
greater risks than more developed markets. These securities markets are not
as large as U.S. markets, have substantially less trading volume, and have a
high concentration of investors and financial intermediaries, resulting in a
lack of liquidity and high price volatility.
Substantial economic uncertainties exist for developing countries. They may
have overburdened infrastructures and obsolete financial systems as well as
environmental problems. Certain economies depend on exports of primary
commodities and are vulnerable to changes in commodity prices, which in turn
may be affected by a variety of factors. In addition, the governments of many
such countries have a heavy role in regulating and supervising their
economies, and their economies are heavily export oriented and dependent on
international trade. Certain developing countries are large debtors to
commercial banks and foreign governments. Some have experience substantial
and volatile rates of inflation and currency devaluations.
Substantial social and political uncertainties also exist for many developing
countries. These may result from factors such as authoritarian governments;
popular unrest associated with demands for improved political, economic and
social conditions; internal insurgencies and hostile relationships with
neighboring countries. This instability could impair the financial conditions
of issuers or disrupt their financial markets.
A number of Asian countries are currently experiencing economic difficulties
and significant declines in values in their financial markets as a result of
the convergence of a number of these social, political and economic factors.
The unsettled conditions of several Asian financial markets has also affected
emerging markets in other countries and regions. These conditions could
continue or deteriorate further in the future.
A variety of other factors may also adversely impact the Funds' investments
in countries with emerging securities markets. These include matters such as
archaic legal systems; inflation accounting rules that indirectly generate
losses or profits; less developed systems for registration, transfer and
custody of securities; restrictions on foreign investments in capital
markets; limitations on the manner in which the Funds may invest in
securities; and limitations on repatriation of income, capital, or the
proceeds of sales of securities.
CONVERTIBLE SECURITIES. 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 common stock of the same or other issuers. Convertible securities
are usually subordinated in right of payment to nonconvertible debt
securities of the same issuer, but are senior to common stocks in an issuer's
capital structure. Their prices tend to be influenced by changes in interest
rates (in the same manner as described below for debt securities) as well as
changes in the market value of the common stock into which they can be
converted.
41
<PAGE> 43
INVESTMENT OBJECTIVES, POLICIES AND RISKS
DEBT SECURITIES. The values of the debt securities held by the Funds
fluctuate in response to movements in interest rates. When rates rise, the
values generally fall, and when rates decline, the values generally increase.
In addition, the issuers of any of the debt securities held by the Fund may
fail to pay interest or principal when due, although the U.S. Treasury
securities held by the U.S. Treasury Securities Fund and Short Intermediate
U.S. Treasury Securities Fund are direct obligations of the U.S. Government.
The Funds generally will only acquire bonds that are rated investment grade
at the time of purchase, which means they are rated in one of the top four
categories by a nationally recognized statistical rating organization, or
unrated obligations that Pacific Century or its Sub-Adviser determines are
comparable. However, obligations with the lowest of these ratings have some
speculative characteristics, and changes in economic conditions are more
likely to lead to the issuer's weakened capacity to make principal and
interest payments than higher rated securities. If the rating of a security
decreases after a Fund buys it, or it is no longer rated, Pacific Century or
its Sub-Adviser will decide whether the Fund should continue to hold the
security.
U.S. government securities include not only U.S. Treasury obligations, but
also obligations of various agencies and instrumentalities of the U.S.
government. Some of these are supported by the full faith and credit of the
U.S. Treasury, but others are supported only by the issuer's right to borrow
from the U.S. Treasury, by the discretionary authority of the U.S. Government
to purchase the agency's obligations, or by the instrumentalities' own
credit. The U.S. Government might not provide financial support to
instrumentalities it sponsors if it is not legally obligated to do so.
However, the Funds will invest in the obligations of such instrumentalities
only when Pacific Century or its Sub-Adviser believes that the credit risk is
minimal.
The New Asia Growth Fund and International Stock Fund may each invest up to
10% of its net assets in securities rated below investment grade or of
comparable quality, commonly referred to as "junk bonds" or "high yield/high
risk securities." These investments are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal as
required, and generally are less liquid and have greater price volatility
that higher rated securities. The Fund may not purchase debt securities that
are in default, except that it can invest up to 5% of its total assets in
sovereign (government) debt that is in default.
MUNICIPAL OBLIGATIONS. The Tax-Free Securities Fund, Tax-Free Short
Intermediate Securities Fund, Diversified Fixed Income Fund, U.S. Treasury
Securities Fund and Short Intermediate U.S. Treasury Securities Fund may
purchase not only "general obligation" municipal bonds (which are secured by
the pledge of a municipality's faith, credit and taxing power), but also
"revenue" bonds, which depend for payment of principal and interest on the
revenues obtained from a specific project or facility. In addition, the
Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities Fund
may invest in municipal bonds covered by insurance and in "moral obligation"
bonds. Insurance minimizes the risks of payment delays or defaults, but does
not guarantee the market value of the insured bonds. Moral obligation bonds
are issued by a municipality or a state financial intermediary and backed by
the moral obligation pledge of a state government to appropriate funds in the
future if the primary issuer defaults, but the state is not legally bound to
honor the pledge.
The Tax-Free Securities Fund and Tax-Free Short Intermediate Securities Fund
may purchase municipal notes with maturities at the time of issuance of three
years or less. These generally are issued in anticipation of the receipt of
tax funds, of the proceeds of bond placements, or of other revenues. The
issuer's ability to make payments therefore depends on such receipts.
42
<PAGE> 44
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund invest significantly in municipal obligations of issuers located in
Hawaii. The values of shares of these Funds therefore will be affected by
economic and political developments in Hawaii.
YEAR 2000 AND THE PACIFIC CAPITAL FUNDS. Like other funds and business
organizations around the world, the Funds could be adversely affected if the
computer systems used by Pacific Century Trust and the Funds' other service
providers do not properly process date-related information for the year 2000
and beyond. The Funds understand that their key service providers are taking
steps to address this issue. In addition, the problem may adversely affect
the companies and other issuers in which the Funds invest. For example, they
may incur substantial costs to correct the problem and may suffer losses
caused by data processing errors. Management of the Funds and Pacific Century
will continue to monitor developments relating to this issue.
EURO INTRODUCTION. The European Union's planned introduction of a single
European currency, the Euro, on January 1, 1999 creates certain
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will be prepared for the change, the legal
treatment of certain outstanding financial contracts that refer to existing
currencies, and the creation of suitable clearing and settlement payment
systems for the new currency. These or other related factors could cause
market disruptions before or after the introduction of the Euro. The Trust
understands that Pacific Century and other key service providers are taking
steps to address Euro-related issues.
The most recent information about each Fund's portfolio holdings can be found
in its annual or semi-annual report. For information about receiving this
report, see the back cover.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
43
<PAGE> 45
logo
logo
FUND MANAGEMENT
THE INVESTMENT ADVISER
Pacific Century Trust, ("Pacific Century"), 111 S. King Street, Honolulu,
Hawaii 96813, a division of Bank of Hawaii, is the adviser for the Funds.
Pacific Century has managed the financial assets of corporations and
institutional investors for more than a century. Pacific Century, formerly
known as Hawaiian Trust Company, is among the top 50 trust firms in the
United States based on assets under management and oversees more than $14
billion in client assets. The Pacific Century investment management
team -- including portfolio managers, financial analysts and economists -- is
responsible for over $8 billion of these assets.
For these advisory services, the Funds paid Pacific Century as follows during
their last fiscal year:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
FOR YEAR ENDED 7/31/98
<S> <C>
------------------------------
Growth Stock Fund .80%
------------------------------
Growth and Income Fund .80%
------------------------------
Value Fund N/A
------------------------------
Small Cap Fund N/A
------------------------------
New Asia Growth Fund .75%*
------------------------------
International Stock Fund N/A
------------------------------
Tax-Free Securities Fund .50%*
------------------------------
Tax-Free Short Intermediate Securities Fund .43%*
------------------------------
Diversified Fixed Income Fund .51%*
------------------------------
U.S. Treasury Securities Fund .46%*
------------------------------
Short Intermediate U.S. Treasury Securities Fund .30%*
------------------------------
Balanced Fund N/A
-------------------------------------------------------------------------------------
</TABLE>
* Pacific Capital waived a portion of its fees for the fiscal year.
Contractual fees (without waivers) are: Growth Stock Fund, .80%; Growth and
Income Fund, .80%; Value Fund, .80%; Small Cap Fund, 1.10%; New Asia Growth
Fund, .90%; International Stock Fund, 1.10%; Tax-Free Securities Fund, .60%;
Tax-Free Short Intermediate Securities Fund, .50%; Diversified Fixed Income
Fund, .60%; U.S. Treasury Securities Fund, .60%; Short Intermediate U.S.
Treasury Securities Fund, .50%; and Balanced Fund, .80%.
THE SUB-ADVISERS
Nicholas-Applegate Capital Management, 600 W. Broadway, San Diego, California
92101, is the Sub-Adviser to the International Stock Fund and the Small Cap
Fund, and provides investment advisory services with respect to management of
those Funds' portfolios. Its affiliate, Nicholas-Applegate Capital Management
(Hong Kong) LLC ("NACM Hong Kong"), is the Sub-Adviser to the New Asia Growth
Fund, and provides investment advisory services with respect to management of
the foreign component of that Fund's portfolio. Their fees are paid by
Pacific Century.
44
<PAGE> 46
FUND MANAGEMENT
PORTFOLIO MANAGERS
Management of the Funds is coordinated by Pacific Century's investment unit,
which is staffed with more than 40 people, including seven Chartered
Financial Analysts and nine M.B.A.'s. All investment decisions of Pacific
Century for the Funds it advises are made by a committee, with individual
portfolio managers having day-to-day responsibility of managing the Funds.
GROWTH STOCK FUND. Roger Khlopin, CFA, serves as a Vice President and Team
Leader on the Equity Investment Team at Pacific Century and has been
primarily responsible for the day-to-day management of the Fund since 1997.
Mr. Khlopin joined Pacific Century in 1992 as a securities analyst and
Portfolio Manager. Prior to joining Pacific Century, Mr. Khlopin served as a
broker with Dean Witter from 1990 to 1991, and as a securities analyst with
Smith Barney from 1981 to 1989, and Sanford C. Bernstein & Company from 1980
to 1981.
GROWTH AND INCOME FUND. Clyde Powers, CFA serves as a Vice President and Team
Leader on the Equity Investment Team at Pacific Century and has been
primarily responsible for the management of the Fund since 1997. Mr. Powers
has 26 years of experience managing growth funds and growth oriented
portfolios for institutional investors. Prior to joining Pacific Century in
1997, Mr. Powers served as a portfolio manager for Amcore Investment Group
from 1995 to 1997, and as Managing Director-Investment Operations for Union
Capital Advisors from 1984 to 1995.
VALUE FUND. A team of Dave Zerfoss, CFA, Scott Takemoto, CFA and Derwin Osada
is responsible for the day-to-day management of the Fund. Mr. Zerfoss serves
as Vice President and Manager on the Equity Investment Team at Pacific
Century. Prior to joining Pacific Century in 1969, Mr. Zerfoss served as a
portfolio manager with First National Bank of Chicago. Mr. Takemoto serves as
Vice President on the Equity Investment Team at Pacific Century. Mr. Takemoto
has served as a sector analyst and Senior Portfolio Manager with Pacific
Century from 1992 to the present. Mr. Osada has served as a Portfolio Manager
with Pacific Century from 1994 to the present.
SMALL CAP FUND. A team headed by Catherine Somhegyi, Larry Speidell, Mark
Stuckelman and John Kane is responsible for the day-to-day management of the
Fund. Ms. Somhegyi, a Partner of Nicholas-Applegate Capital Management, is
its Chief Investment Officer for Global Equity Management and has managed
assets for clients of the firm since 1987. Mr. Speidell, a Partner of
Nicholas-Applegate Capital Management, has been Director of Global/Systematic
Portfolio Management and Research since 1994; he has 23 years prior
investment management experience with Batterymarch Financial Management and
Putnam Management Company. Mr. Stuckelman is a Portfolio Manager in the
systematic equity group. Prior to joining Nicholas-Applegate in 1995, Mr.
Stuckelman was a senior quantitative analyst with Wells Fargo Bank's
Investment Management Group and responsible for the management of
risk-controlled equity portfolios at Fidelity Management Trust Co. In
addition, he was a senior consultant with BARRA. He has seven years of
investment experience. Mr. Kane, a Partner of Nicholas-Applegate Capital
Management, is the team leader of its systematic domestic equity group. Prior
to joining the firm in 1994, he directed the investment group of ARCO
Investment Management Company. He has 29 years of economic and investment
experience.
NEW ASIA GROWTH FUND. Tim Greaton, Senior Portfolio Manager of NACM Hong
Kong, has been primarily responsible for the day-to-day management of the
Fund since 1995. Mr. Greaton joined NACM Hong Kong in 1997. Prior to joining
NACM Hong Kong, Mr. Greaton served as Senior Portfolio Manager of Credit
Lyonnais International Asset Management (HK) Limited from 1992 to 1997.
45
<PAGE> 47
FUND MANAGEMENT
PORTFOLIO MANAGERS
CONTINUED
INTERNATIONAL STOCK FUND. A team headed by Catherine Somhegyi, Larry
Speidell, Loretta Morris, Alexander Muromcew, Melisa Grigolite and John
Tribolet is responsible for the day-to-day management of the Fund. Ms.
Somhegyi, a partner of Nicholas-Applegate Capital Management, is its Chief
Investment Officer for Global Equity Management and has managed assets for
clients of the firm since 1987. Mr. Speidell, a Partner of Nicholas-Applegate
Capital Management, has been Director of Global/ Systematic Portfolio
Management and Research since 1994; he has 23 years prior investment
management experience with Batterymarch Financial Management and Putnam
Management Company. Ms. Morris, a Partner of Nicholas-Applegate Capital
Management, focuses on the management of international and global portfolios.
She has managed assets for clients of the firm since 1990 and has 18 years
investment experience. Mr. Muromcew is a Portfolio Manager on the
Global/Systematic International team. Prior to joining Nicholas-Applegate in
1996, Mr. Muromcew was an analyst with Teton Partners, L.P., Emerging Markets
Investors Corp. and Jardine Fleming Securities. He has eight years of
investment experience. Ms. Grigolite is a Portfolio Manager responsible for
international and global portfolio management and research. She joined the
firm in 1991 and has seven years investment experience. Mr. Tribolet is a
Portfolio Manager responsible for portfolio management and research for
international portfolios. Mr. Tribolet joined the firm in 1997 and has four
years prior investment banking experience with Paine Webber and Kemper
Securities. He has six years of investment experience.
TAX-FREE SECURITIES FUND AND TAX-FREE SHORT INTERMEDIATE SECURITIES
FUND. Yvonne Lim, Vice President and Team Leader on the Tax-Exempt Fixed
Income Investment Team at Pacific Century, has been primarily responsible for
the day-to-day management of the Funds since 1993. Prior to managing the
Funds, Ms. Lim served as Cash Manager for Pacific Resources from 1989 to
1992.
DIVERSIFIED FIXED INCOME FUND. Janet E. Katakura, Vice President, Team Leader
and Manager of the Taxable Fixed Income Investment Team for Pacific Century,
has been primarily responsible for the day-to-day management of the Fund
since its inception. Ms. Katakura joined Pacific Century in 1983.
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND AND U.S. TREASURY SECURITIES
FUND. David Todani, CFA, Vice President and Team Leader on the Taxable
Fixed-Income Investment Team at Pacific Century, has been primarily
responsible for the day-to-day management of the Funds since 1995. Prior to
joining the Fixed-Income Investment Team, Mr. Todani served as a fixed income
portfolio manager and treasury officer for Bank of Hawaii from 1983 to 1994.
BALANCED FUND. The Balanced Fund has not commenced operations as of the date
of this prospectus.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
A THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ("BISYS") is the Funds' distributor and BISYS Fund
Services Ohio, Inc. is the Funds' administrator. The address of each is 3435
Stelzer Road, Columbus, Ohio 43219.
46
<PAGE> 48
logo
logo
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of a
Fund's investments and
other assets attributable
to Class Y shares,
subtracting its liabilities
attributable to Class Y
shares, and then dividing
that figure by the number
of outstanding Class Y
shares of the Fund:
NAV =
Total Assets - Liabilities
----------------------------
Number of Shares
Outstanding
Locate your Fund's NAV
daily in The Wall Street
Journal and other
newspapers or call
800-258-9232 for
information.
---------------------------
The price of each Fund's shares is based on its per share net asset value
("NAV"). The NAV for Class Y shares is
determined and its shares are priced
at the close of regular trading on the
New York Stock Exchange ("NYSE")
(normally at 4 p.m. Eastern time) on
days the Exchange is open. Your order
will be priced at the next NAV
calculated after your order is
accepted by the Fund (plus any
applicable sales charge).
The Fund's securities are valued at current market prices except for debt
obligations with remaining maturities
of 60 days or less (which are valued
at amortized cost). If market
quotations are not available,
securities will be valued by a method
that the Board of Trustees believes
accurately reflects fair value.
47
<PAGE> 49
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
Shares are sold by the Distributor, BISYS. 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 Institutions are eligible to
invest in Class Y shares. Class Y shares may not be purchased by individual
investors, either directly or through brokerage accounts.
Class Y shares purchased through qualifying accounts may be held in separate
accounts in the name of the person or persons who purchased the shares, but
dividends and distributions relating to such shares may not be reinvested and
no additional Class Y shares may be purchased for such separate accounts
unless the account holder qualifies to purchase additional Class Y shares. If
you have purchased Class Y shares of any Fund and do not qualify to purchase
additional Class Y shares, you may make an additional investment in the Fund
by purchasing Class A or Class B shares, which are offered in a separate
prospectus. If you have purchased Class Y shares, but no longer qualify to
make an additional investment, we will convert your holdings to Class A
shares of the same Fund. As a shareholder of Class A shares, you will be
permitted to reinvest dividends and distributions relating to your share
holdings, but your investment will be subject to the higher expenses
associated with Class A shares. See "Exchange Privileges and Conversion
Feature" below.
Qualified accounts maintained by or on behalf of certain persons
("Customers") by an Institution may purchase Class Y shares of the Funds
through procedures established by BISYS. These procedures may include
instructions under which a Customer's account is automatically "swept" at
least once a week 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.
No sales charge (load) is imposed at the time you purchase or sell Class Y
shares. Depending upon the terms of your Customer account, an Institution may
charge your account fees for services provided in connection with investment
in the Funds. The Institution will provide you with information concerning
these services and any charges.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
A Fund must withhold 31% of your taxable dividends, capital gains
distributions and redemptions if you have not provided the Fund with your
taxpayer identification number in compliance with IRS rules. To avoid this,
make sure you provide your correct tax identification number (social security
number for most investors) on your account application.
-----------------------------------------------------------------------------
48
<PAGE> 50
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
BY REGULAR MAIL
Initial Investment:
1. Contact BISYS at 800-258-9232 to request an application.
2. Make check, bank draft or money order payable to "Pacific Capital Funds."
3. Mail to: Pacific Capital Funds, PO Box 182130, Columbus, OH 43218-2130
Subsequent Investments:
1. Use the investment slip attached to your account statement.
Or, if unavailable
2. Include the following information on a piece of paper:
- Fund name
- share class
- amount invested
- account name
- account number
Include your account number on your check.
3. Mail investment slip and check to:
Pacific Capital Funds,
PO Box 182130,
Columbus, OH 43218-2130
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
3. Send to: Pacific Capital Funds, c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219
BY ELECTRONIC PURCHASE
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
800-258-9232. Your account can generally be set up for electronic purchases
within 15 days.
Call 800-258-9232 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an electronic purchase or sale, your bank makes the
transaction through the Automated Clearing House (ACH), which may take up to
eight days to clear. There is generally no fee for ACH transactions.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
49
<PAGE> 51
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
For initial investment:
Contact BISYS at 800-258-9232 to request an application and for instructions
for returning your completed application.
Follow instructions below after receiving your confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA #044000024
DDA #01891797644
Include:
Your name
Your confirmation number, your account number and the name of the Fund.
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 800-258-9232 TO TELL US
THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK.
You can add to your account by using the convenient options described above.
The Funds reserve the right to change or eliminate these privileges at any
time with 60 days notice. The Funds also reserve the right to reject any
purchase or to suspend or modify the continuous offering of their shares.
50
<PAGE> 52
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You can sell your shares
at any time. Your sales
price will be the next NAV
after your sell order is
received by the Fund or
your investment
representative. Normally
you will receive your
proceeds within a week
after your request is
received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also
known as redeeming shares or a redemption of
shares.
BY TELEPHONE (unless you have declined telephone sales privileges)
1. Call 800-258-9232 with instructions as to how you want to receive your
funds
(mail, wire, electronic transfer). See "General Policies on Selling
Shares" below.
BY MAIL See "General Policies on Selling Shares-Redemptions in Writing
Required" below.
1. Call 1-800-258-9232 to request redemption forms, or write a letter of
instruction indicating:
- your Fund and account number
- amount you want to redeem
- address where your check should be sent
- account owner signature
2. Mail to: Pacific Capital Funds, PO Box 182160, Columbus, OH 43218-2160
BY OVERNIGHT SERVICE
SEE INSTRUCTION 1 ABOVE.
2. Send to: Pacific Capital Funds, c/o BISYS Fund Services, Attn: T.A.
Operations, 3435 Stelzer Road, Columbus, OH 43219
51
<PAGE> 53
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must select this option on your account application.
The Fund may charge a wire transfer fee. Note: Your financial institution may
also charge a separate fee.
Call 800-258-9232 to request a wire transfer. If you call by 4 p.m. Eastern
time, your payment will normally be wired to your bank on the next business
day. Otherwise it will normally be wired on the second business day after
your call.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Note: Your bank may charge for this service.
Call 800-258-9232 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds will normally be credited within
8 days. Otherwise, it will normally take up to 9 days.
52
<PAGE> 54
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. All requests for redemptions from individual retirement accounts ("IRA's")
must be in writing.
2. Redemption requests require a signature guarantee when:
- You ask us to make the check payable to someone who is not the owner of
the account
- You ask us to mail the check to an address that is not the address on
your account
- You ask us to wire the proceeds to a commercial bank account that is not
designated on your account application
- The redemption proceeds exceed $50,000
You must obtain a signature guarantee from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program) or SEMP (Stock Exchanges Medallion Program). Members are
subject to dollar limitations which must be considered when requesting their
guarantee. The Transfer Agent may reject any signature guarantee if it
believes the transaction would otherwise be improper.
TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Because of these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Funds, the Transfer Agent, Pacific Century and/or
the Distributor may be liable for losses due to unauthorized transactions.
At times of peak activity it may be difficult to place requests by phone.
During these times, consider sending your request in writing.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made an investment by check, you cannot receive any portion of
the redemption proceeds on the same investment until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 business
days). You can avoid this delay by purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission ("SEC") in order to
protect remaining shareholders.
REDEMPTION IN KIND
We reserve the right to make your redemption payment in securities rather
than cash, known as "redemption in kind." This could occur under
extraordinary circumstances, such as a very large redemption that could
affect a Fund's operations (for example, more than 1% of the Fund's net
assets). If we deem it advisable for the benefit of all shareholders, you
will receive securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
UNDELIVERABLE REDEMPTION CHECKS
If you choose to receive distributions in cash and if distribution checks are
returned and marked as "undeliverable" or remain uncashed for six months,
your account will be changed automatically so that all future distributions
are reinvested in your account. Checks that remain uncashed for six months
will be canceled and the money reinvested in the Fund. No interest is paid
during the time the check is outstanding.
53
<PAGE> 55
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
The Exchange Privilege
permits a shareholder to
exchange Class Y shares of
one Fund for Class Y shares
of another Fund. Class Y
shareholders may also
exchange their shares for
other investment companies
for which Pacific Century
serves as investment
adviser. These are the
Pacific Capital Cash Assets
Trust, the Pacific Capital
Tax-Free Cash Assets Trust,
the Pacific Capital U.S.
Government Securities Cash
Assets Trust. No
transaction fees are
charged for exchanges.
Exchanges from one Fund to another are taxable.
You can make exchanges by sending a written request to Pacific Capital Funds, PO
Box 182130, Columbus OH 43218-2130,
or by calling 800-258-9232. Please
provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your social security number)
- Dollar value or number of shares you are exchanging
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling Your Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
- The registration and tax
identification numbers of the
two accounts must be
identical.
- The Exchange Privilege may be
changed or eliminated at any
time after a 60-day notice to
shareholders.
- Be sure to read carefully the
Prospectus of any Fund or
other investment company into
which you wish to exchange
shares.
54
<PAGE> 56
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The 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. The Balanced Fund, Growth and Income Fund, Growth Stock Fund and
Value Fund will declare and pay dividends of substantially all of their net
income monthly. The New Asia Growth Fund, Small Cap Fund and International
Stock Fund will declare and pay dividends of substantially all of their net
income quarterly. Each Fund distributes any capital gains annually.
We automatically reinvest all income dividends and capital gains
distributions on Fund shares in additional shares of the same Fund and Class
on the ex-dividend date unless you request otherwise in writing to the
Transfer Agent (at least 15 days prior to the distribution). The Distributor
does not charge any fees or sales charges on reinvestments. You may elect to
receive your dividends/distributions in cash either by check sent to your
address or by wire to your bank account.
The value of your shares will be reduced by the amount of dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or the distribution of capital gains, you will pay the full price
for the shares and receive some portion of the price back as a taxable
dividend or distribution.
TAXES
Dividends generally are taxable as ordinary income. Taxes on capital gains
distributed by the Funds vary with the length of time the Fund has held the
security -- not how long you have been invested in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear
on your account statement the following year. Dividends and distributions are
treated the same for federal income tax purposes whether you receive them in
cash or in additional shares.
The Funds may incur foreign income taxes in connection with some of their
foreign investments. Certain of these taxes may be credited to shareholders.
You will be notified in January each year about the federal tax status of
distributions made by the Funds. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes,
including withholding taxes.
An exchange of shares is considered a sale, and any related gains may be
subject to federal and state taxes.
Foreign shareholders may be subject to special withholding requirements. A
penalty is charged on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
55
<PAGE> 57
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
CONTINUED
HAWAII TAX INFORMATION
The Funds expect that some dividends paid by the Tax-Free Securities Fund and
the Tax-Free Short Intermediate Securities Fund to Hawaii residents will be
exempt from Hawaii personal income tax to the extent attributable to Hawaii
municipal obligations. Under Hawaii law, interest derived from obligations of
other states (and their political subdivisions) will not be exempt from
Hawaii income taxation.
Dividends and distributions made by the Funds (and to the extent attributable
to Hawaii municipal obligations for the Tax-Free Securities Fund and the
Tax-Free Short Intermediate Securities Fund) to Hawaii residents will
generally be treated for Hawaii income tax purposes in the same manner as
they are treated for federal income tax purposes.
If you are not a Hawaii resident you should not be subject to Hawaii income
taxation on dividends and distributions made by the Funds, but you will be
subject to taxes of other states and localities.
OTHER SHARE CLASSES
The Funds also offer Class A and B shares. These shares have different sales
charges and other expenses which will result in different performance than
Class Y shares. Shares of all Classes of a Fund otherwise have identical
rights, and vote together except for matters affecting only a specific Class.
56
<PAGE> 58
logo
logo
OTHER INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The Financial Highlights in the following table set forth certain financial
data and investment results of the Class Y shares of the Funds since
inception, expressed in one share of each Fund 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 Funds' annual report
contains additional performance information relating to the Funds and is
available upon request, without charge.
57
<PAGE> 59
OTHER INFORMATION ABOUT THE FUNDS GROWTH STOCK FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(e)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.44 $ 11.89 $ 11.71 $ 9.89
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) -- 0.07 0.10 0.11
Net realized and unrealized gain (loss) on
investments 3.01 5.55 0.89 1.83
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.01 5.62 0.99 1.94
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- (0.07) (0.10) (0.12)
In excess of net investment income (0.02) -- -- --
In excess of net realized gains -- -- (0.49) --
Net realized gains (2.62) -- (0.22) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (2.64) (0.07) (0.81) (0.12)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.81 $ 17.44 $ 11.89 $ 11.71
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 19.96% 47.39% 8.53% 20.64%(f)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $375,117 $198,407 $172,565 $136,837
Ratio of expenses to average net assets 1.07% 1.07% 1.09% 1.13%(c)
Ratio of net investment income (loss) to
average net assets (0.08)% 0.45% 0.86% 1.30%(c)
Ratio of expenses to average net assets* 1.11% 1.11% 1.13% 1.21%(c)
Ratio of net investment income (loss) to
average net assets* (0.12)% 0.41% 0.82% 1.23%(c)
Portfolio Turnover(d) 97.03% 32.20% 61.30% 32.40%
</TABLE>
See footnotes on page 65.
58
<PAGE> 60
OTHER INFORMATION ABOUT THE FUNDS GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.27 $ 12.32 $ 11.43 $ 10.00
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.07 0.11 0.17 0.20
Net realized and unrealized gain (loss) on
investments 3.01 5.58 1.21 1.42
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.08 5.69 1.38 1.62
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.07) (0.11) (0.17) (0.19)
In excess of net investment income -- -- (0.01) --
In excess of net realized gains -- -- -- --
Net realized gains (1.53) (0.63) (0.31) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (1.60) (0.74) (0.49) (0.19)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.75 $ 17.27 $ 12.32 $ 11.43
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 19.37% 47.96% 12.29% 16.41%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $164,706 $123,821 $ 74,427 $ 41,771
Ratio of expenses to average net assets 1.08% 1.07% 1.11% 1.14%(c)
Ratio of net investment income (loss) to
average net assets 0.38% 0.79% 1.43% 2.47%(c)
Ratio of expenses to average net assets* 1.12% 1.12% 1.15% 1.22%(c)
Ratio of net investment income (loss) to
average net assets* 0.34% 0.75% 1.39% 2.39%(c)
Portfolio Turnover(d) 75.92% 74.83% 80.83% 12.78%
</TABLE>
See footnotes on page 65.
59
<PAGE> 61
OTHER INFORMATION ABOUT THE FUNDS NEW ASIA GROWTH FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FEBRUARY 15, 1995
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.94 $ 11.14 $ 11.22 $ 10.00
----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.12 0.06 (0.01) 0.04
Net realized and unrealized gain (loss) on
investments (6.63) 2.87 0.22 1.18
----------------------------------------------------------------------------------------------------------------
Total from Investment Activities (6.51) 2.93 0.21 1.22
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.02) (0.01) -- --
In excess of net investment income -- -- (0.03) --
In excess of net realized gains -- -- -- --
Net realized gains (1.04) (0.12) (0.26) --
----------------------------------------------------------------------------------------------------------------
Total Distributions (1.06) (0.13) (0.29) --
----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.37 $ 13.94 $ 11.14 $ 11.22
----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) (48.76)% 26.50% 1.99% 12.20%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $14,569 $18,376 $ 8,469 $ 2,861
Ratio of expenses to average net assets 1.93% 1.72% 1.98% 1.97%(c)
Ratio of net investment income (loss) to
average net assets 1.32% 0.46% (0.02)% 1.18%(c)
Ratio of expenses to average net assets* 2.13% 1.82% 2.84% 2.74%(c)
Ratio of net investment income (loss) to
average net assets* 1.12% 0.36% (0.88)% 0.42%(c)
Portfolio Turnover(d) 129.77% 134.89% 86.53% 55.62%
</TABLE>
See footnotes on page 65.
60
<PAGE> 62
OTHER INFORMATION ABOUT THE FUNDS TAX-FREE SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.86 $ 10.46 $ 10.56 $ 10.00
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.51 0.51 0.52 0.42
Net realized and unrealized gain (loss) on
investments 0.08 0.46 0.07 0.51
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.59 0.97 0.59 0.93
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.51) (0.51) (0.52) (0.37)
In excess of net investment income -- -- (0.04) --
In excess of net realized gains -- -- (0.04) --
Net realized gains (0.06) (0.06) (0.09) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.57) (0.69) (0.37)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.88 $ 10.86 $ 10.46 $ 10.56
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 5.63% 9.58% 5.73% 9.54%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $416,544 $296,764 $288,934 $281,646
Ratio of expenses to average net assets 0.77% 0.87% 0.89% 0.89%(c)
Ratio of net investment income (loss) to
average net assets 4.74% 4.86% 4.92% 5.16%(c)
Ratio of expenses to average net assets* 0.90% 0.91% 0.93% 0.98%(c)
Ratio of net investment income (loss) to
average net assets* 4.61% 4.82% 4.88% 5.07%(c)
Portfolio Turnover(d) 10.73% 11.07% 24.78% 49.17%
</TABLE>
See footnotes on page 65.
61
<PAGE> 63
TAX-FREE SHORT INTERMEDIATE
OTHER INFORMATION ABOUT THE FUNDS SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 10.08 $ 10.14 $ 10.00
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.38 0.39 0.40 0.32
Net realized and unrealized gain (loss) on
investments -- 0.14 (0.03) 0.11
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.53 0.37 0.43
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.38) (0.39) (0.40) (0.29)
In excess of net investment income -- -- (0.03) --
In excess of net realized gains -- -- -- --
Net realized gains (0.06) (0.01) -- --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.44) (0.40) (0.43) (0.29)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 10.21 $ 10.08 $ 10.14
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 3.83% 5.36% 3.67% 4.36%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $52,185 $37,410 $39,472 $39,993
Ratio of expenses to average net assets 0.76% 0.84% 0.83% 0.85%(c)
Ratio of net investment income (loss) to
average net assets 3.75% 3.82% 3.90% 4.03%(c)
Ratio of expenses to average net assets* 0.87% 0.89% 0.88% 0.94%(c)
Ratio of net investment income (loss) to
average net assets* 3.64% 3.77% 3.85% 3.94%(c)
Portfolio Turnover(d) 47.55% 29.46% 54.70% 89.98%
Average Commission Rate Paid(e) -- -- -- --
</TABLE>
See footnotes on page 65.
62
<PAGE> 64
DIVERSIFIED FIXED
OTHER INFORMATION ABOUT THE FUNDS INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.78 $ 10.53 $ 10.84 $ 10.00
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.61 0.60 0.58 0.55
Net realized and unrealized gain (loss) on
investments 0.22 0.34 (0.16) 0.78
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.83 0.94 0.42 1.33
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.61) (0.60) (0.61) (0.49)
In excess of net investment income -- -- (0.02) --
In excess of net realized gains -- (0.09) (0.10) --
Net realized gains -- -- -- --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.69) (0.73) (0.49)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.00 $ 10.78 $ 10.53 $ 10.84
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.94% 9.30% 3.85% 13.70%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $158,909 $132,583 $161,742 $ 54,827
Ratio of expenses to average net assets 0.77% 0.90% 0.88% 0.93%(c)
Ratio of net investment income (loss) to
average net assets 5.61% 5.67% 5.56% 6.71%(c)
Ratio of expenses to average net assets* 0.90% 0.94% 0.92% 1.01%(c)
Ratio of net investment income (loss) to
average net assets* 5.48% 5.63% 5.52% 6.63%(c)
Portfolio Turnover(d) 57.58% 80.98% 58.86% 60.47%
</TABLE>
See footnotes on page 65.
63
<PAGE> 65
U.S. TREASURY
OTHER INFORMATION ABOUT THE FUNDS SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(e)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.38 $ 9.14 $ 9.43 $ 8.66
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.54 0.53 0.59 0.44
Net realized and unrealized gain (loss) on
investments 0.21 0.26 (0.24) 0.76
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.75 0.79 0.35 1.20
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.54) (0.54) (0.55) (0.43)
In excess of net investment income -- (0.01) (0.09) --
In excess of net realized gains -- -- -- --
Net realized gains -- -- -- --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.55) (0.64) (0.43)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.59 $ 9.38 $ 9.14 $ 9.43
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 8.24% 8.92% 3.71% 10.49%(f)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $22,178 $23,832 $23,248 $51,264
Ratio of expenses to average net assets 0.82% 0.91% 0.95% 1.02%(c)
Ratio of net investment income (loss) to
average net assets 5.70% 5.85% 5.81% 5.78%(c)
Ratio of expenses to average net assets* 1.01% 0.95% 0.99% 1.09%(c)
Ratio of net investment income (loss) to
average net assets* 5.51% 5.81% 5.77% 5.71%(c)
Portfolio Turnover(d) 11.82% 44.90% 15.75% 80.98%
</TABLE>
See footnotes on page 65.
64
<PAGE> 66
SHORT INTERMEDIATE U.S.
OTHER INFORMATION ABOUT THE FUNDS TREASURY SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(e)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.56 $ 9.42 $ 9.61 $ 9.30
--------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) 0.51 0.52 0.53 0.44
Net realized and unrealized gain (loss) on
investments 0.10 0.14 (0.13) 0.31
--------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.61 0.66 0.40 0.75
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.51) (0.52) (0.53) (0.44)
In excess of net investment income -- -- (0.04) --
In excess of net realized gains -- -- (0.02) --
Net realized gains -- -- -- --
--------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.52) (0.59) (0.44)
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.66 $ 9.56 $ 9.42 $ 9.61
--------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 6.62% 7.19% 4.18% 6.57%(f)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $24,843 $26,722 $23,545 $16,214
Ratio of expenses to average net assets 0.64% 0.62% 0.67% 0.75%(c)
Ratio of net investment income (loss) to
average net assets 5.36% 5.47% 5.40% 5.84%(c)
Ratio of expenses to average net assets* 0.89% 0.87% 0.92% 0.99%(c)
Ratio of net investment income (loss) to
average net assets* 5.11% 5.22% 5.15% 5.61%(c)
Portfolio Turnover(d) 17.33% 51.56% 47.17% 62.73%
</TABLE>
* 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) On October 13, 1994, the Trust identified those Institutional
shareholders that were part of Class A and transferred these shareholders
into Class Y at the prevailing net asset value effective October 14,
1994. The Financial Highlights presented for Class Y reflects operations
and distributions for the period from October 14, 1994 through July 31,
1995.
(f) 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 Class Y
shares for the period from October 14, 1994 through July 31, 1995.
65
<PAGE> 67
For more information about the Pacific Capital Funds, the following documents
are available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain detailed
information on each Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including operations
and investment policies. It is incorporated by reference and is legally
considered a part of this prospectus.
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the Funds, by contacting the Bank of Hawaii or a
broker that sells the Funds. Or contact us at:
PACIFIC CAPITAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-258-9232
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can also get text-only copies:
- -- For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- -- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7454.
PCP 0028
<PAGE> 68
QUESTIONS?
Call 800-258-9232 or your
investment representative.
[PACIFIC CAPITAL FUNDS LOGO]
Managed by
Pacific Century Trust
a Division of
Bank of Hawaii
------------------------
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
Diversified Fixed Income Fund
U.S. Treasury Securities Fund
Short Intermediate U.S. Treasury Securities Fund
------------------------
Class A and Class B
Retail Shares
December 1, 1998
<PAGE> 69
PACIFIC CAPITAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
Carefully review this 3 Tax-Free Securities Fund
important section, which 7 Tax-Free Short Intermediate Securities Fund
summarizes each Fund's 11 Diversified Fixed Income Fund
investments, risks, past 15 U.S. Treasury Securities Fund
performance, and fees. 19 Short Intermediate U.S. Treasury Securities Fund
INVESTMENT OBJECTIVES, POLICIES AND RISKS
LOGO
LOGO
Review this section for 23 Tax-Free Securities Fund
details on each Fund's 23 Tax-Free Short Intermediate Securities Fund
investment strategies and 24 Diversified Fixed Income Fund
risks. 24 U.S. Treasury Securities Fund
25 Short Intermediate U.S. Treasury Securities Fund
25 Main Risks
FUND MANAGEMENT
LOGO
LOGO
Review this section for 27 The Investment Adviser
details on the people and 27 Portfolio Managers
organizations who oversee 28 The Distributor and Administrator
the Funds.
SHAREHOLDER INFORMATION
LOGO
LOGO
Review this section for 29 Pricing of Fund Shares
details on how shares are 30 Purchasing and Adding to Your Shares
valued, how to purchase, 33 Selling Your Shares
sell and exchange shares, 37 Distribution Arrangements/Sales Charges
related charges, and 43 Exchanging Your Shares
payments of dividends and 44 Dividends, Distributions and Taxes
distributions.
OTHER INFORMATION ABOUT THE FUNDS
LOGO
LOGO
Review this section for 45 Financial Highlights
details or related financial
highlights of the Funds.
</TABLE>
2
<PAGE> 70
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income that is exempt from federal and Hawaii
income tax
PRINCIPAL The Fund normally invests at least 80% of its net assets in
INVESTMENT STRATEGIES investment grade municipal obligations -- debt securities
that pay interest which is exempt from both federal income
tax and the federal alternative minimum tax. In addition, to
provide double tax exempt income the Fund normally invests
50-60% of its net assets in Hawaii municipal
obligations -- debt securities issued by or on behalf of the
State of Hawaii and its political subdivisions, agencies and
instrumentalities that pay interest which is exempt from
Hawaii personal income tax as well as federal income tax.
The Fund focuses on maximizing tax exempt income consistent
with prudent investment risk, and varies the average
maturity of its investment portfolio from time to time in
response to actual and expected interest rate movements as
well as other market and economic conditions.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. A portion of the Fund's net assets
(normally not more than 20%) may be invested in securities
that pay interest which is subject to the federal
alternative minimum tax.
The Fund is non-diversified, which means that its portfolio
can be invested in fewer issuers than most mutual funds. As
a result, the value of your shares may be impacted more by
events affecting one or a few of the Fund's investments than
would otherwise be the case. Since the Fund invests
significantly in securities of issuers in Hawaii, it also
will be affected by a variety of Hawaiian economic and
political factors.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income that is exempt from federal and Hawaii
income taxes
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income that is not subject to federal alternative minimum
tax
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
3
<PAGE> 71
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES FUND
The two charts on this page
show how the Tax-Free
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Lehman Brothers
Municipal Bond Index, a
widely recognized index of
municipal bonds with a
broad range of maturities.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
LOGO
<TABLE>
<S> <C>
1988 9.21
89 9.30
90 5.72
91 11.70
92 7.21
93 11.87
94 -7.46
95 17.46
96 3.04
97 8.10
</TABLE>
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares differ from the Class A
returns shown in the bar chart because of
differences in each Class' expenses. The
table assumes that Class B shareholders
redeem all their Fund shares at the end of
the period indicated.
Best quarter: Q1 1995 +7.42%
Worst quarter: Q1 1994 -6.10%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A
(with 4.00% sales charge) 10/31/77 3.77% 5.39% 6.99% 2.80%
CLASS B
(with applicable CDSC)** 10/31/77 4.10% 6.10% 7.43% 3.01%
LEHMAN BROTHERS MUNICIPAL BOND
INDEX 10/31/77 5.99% 6.49% 8.26% 8.67%
</TABLE>
*The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Class B shares of the Fund commenced operations on March 2, 1998.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 4.00% sales charge) and
Class B shares (with applicable CDSC), were 1.31% and 0.42%, respectively,
versus 5.85% for the Lehman Brothers Municipal Bond Index.
4
<PAGE> 72
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES FUND
As an investor in the
Tax-Free Securities Fund,
you will pay the following
fees and expenses.
Shareholder transaction
fees are paid from your
account. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 0.60% 0.60%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.29% 0.29%
Total Fund operating expenses* 1.64% 1.89%
</TABLE>
* The Adviser is currently limiting the
Management fee to 0.45%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25%, and the Administrator is waiving
a portion of the Administration fee so that
Other expenses are expected to be 0.25%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 0.95% AND
1.70% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations may
be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
5
<PAGE> 73
RISK/RETURN SUMMARY AND FUND EXPENSES TAX-FREE SECURITIES FUND
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $560 $897 $1,256 $2,266
CLASS B SHARES
Assuming redemption $692 $894 $1,221 $2,117
Assuming no redemption $192 $594 $1,021 $2,117
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
6
<PAGE> 74
logo
logo
TAX-FREE SHORT INTERMEDIATE
SECURITIES FUND
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income that is exempt from federal and Hawaii
income tax, with greater stability in the price of your
investment than a long-term bond fund
PRINCIPAL Under normal market conditions, the Fund invests at least
INVESTMENT STRATEGIES 80% of its net assets in investment grade municipal
obligations -- debt securities that pay interest which is
exempt from both federal income tax and the federal
alternative minimum tax. In addition, to provide double tax
exempt income the Fund normally invests 50-60% of its net
assets in Hawaii municipal obligations -- debt securities
issued by or on behalf of the State of Hawaii and its
political subdivisions, agencies and instrumentalities that
pay interest which is exempt from Hawaii personal income tax
as well as federal income tax. To achieve greater price
stability than a long-term bond fund, under normal market
conditions, the average remaining maturity of the Fund's
investment portfolio (measured on a dollar-weighted basis)
will be from two to five years. The Fund focuses on
maximizing tax-exempt income consistent with prudent
investment risk within this maturity range.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. A portion of the Fund's net assets
(normally not more than 20%) may be invested in securities
that pay interest which is subject to the federal
alternative minimum tax.
The Fund is non-diversified, which means that its portfolio
can be invested in fewer issuers than most mutual funds. As
a result, the value of your shares may be impacted more by
events affecting one or a few of the Fund's investments than
would otherwise be the case. Since the Fund invests
significantly in securities of issuers in Hawaii, it also
will be affected by a variety of Hawaiian economic and
political factors.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income that is exempt from federal and Hawaii
income taxes
- want less fluctuation in the value of your investment than
a long-term bond fund
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income that is not subject to federal alternative minimum
tax
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
7
<PAGE> 75
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
The two charts on this page
show how the Tax-Free Short
Intermediate Securities
Fund has performed and
provides some indication of
the risks of investing in
the Fund by showing how its
performance has varied from
year to year. The bar chart
shows changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Lehman Brothers
5-Year Municipal Bond
Index, a widely recognized
index of municipal bonds
with a maturity range of
four to six years.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
LOGO
<TABLE>
<S> <C>
1989 5.42
90 5.52
91 8.20
92 5.05
93 5.54
94 -1.59
95 7.32
96 2.91
97 4.60
</TABLE>
The bar chart below does not reflect the
impact of any applicable sales charges. The
returns for Class B shares will differ from
the Class A returns shown in the bar chart
because of differences in each Class'
expenses. The table assumes that Class B
shareholders redeem all of their Fund shares
at the end of the period indicated.
Best quarter: Q2 1991 +2.50%
Worst quarter: Q1 1994 -1.88%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 SINCE
INCEPTION YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
CLASS A
(with 2.25% sales charge) 3/31/88 2.25% 3.24% 4.31%
CLASS B
(with applicable CDSC)** 3/31/88 0.62% 3.54% 4.56%
LEHMAN BROTHERS 5-YEAR
MUNICIPAL BOND INDEX 3/31/88 4.79% 6.49% 8.17%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to March 31, 1988,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Currently, the Class B shares of the Fund are not being offered to the
public.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 2.25% sales charge) and
Class B shares (with applicable CDSC), were 1.45% and -1.24%, respectively,
versus 4.98% for the Lehman Brothers 5-Year Municipal Bond Index.
8
<PAGE> 76
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
As an investor in the
Tax-Free Short
Intermediate Securities
Fund, you will pay the
following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 2.25%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 0.50% 0.50%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.39% 0.39%
Total Fund operating expenses* 1.64% 1.89%
</TABLE>
* The Adviser is currently limiting the
Management fee to 0.40%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25%, and the Administrator is waiving
a portion of the Administration fee so that
Other expenses are expected to be 0.34%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 0.99% AND
1.74% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations may
be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
9
<PAGE> 77
TAX-FREE SHORT INTERMEDIATE
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
Use this table to compare fees
and expenses with those of
other funds. It illustrates
the amount of fees and
expenses you would pay
assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $388 $731 $1,097 $2,125
CLASS B SHARES
Assuming redemption $692 $894 $1,221 $2,117
Assuming no redemption $192 $594 $1,021 $2,117
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
10
<PAGE> 78
logo
logo
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income
PRINCIPAL The Fund invests primarily in debt securities issued or
INVESTMENT STRATEGIES guaranteed by the U.S. Government, its agencies and
instrumentalities and in investment grade corporate debt
securities rated A or better by Standard & Poor's. It may
invest up to 20% of its total assets in investment grade
debt securities rated BBB issued by U.S. companies and state
and local government issuers. It may invest up to 25% of its
total assets in investment grade dollar-denominated debt
securities of foreign companies and government issuers. The
Fund focuses on maximizing income consistent with prudent
investment risk, and varies the average maturity of its
investment portfolio from time to time in response to actual
and expected market and economic changes.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating. The performance of foreign securities
depends on different political and economic environments and
other overall economic conditions in countries where the
Fund invests.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- income exempt from federal and state taxes
- capital appreciation
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
11
<PAGE> 79
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
The two charts on this page
show how the Diversified
Fixed Income Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Merrill Lynch
Corporate & Government
Master Index, a widely
recognized index of U.S.
corporate and U.S.
Government bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
LOGO
<TABLE>
<S> <C>
1988 7.25
89 9.30
90 6.23
91 17.99
92 6.19
93 13.63
94 -8.90
95 23.24
96 -0.75
97 8.43
</TABLE>
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares differ from the Class A
returns shown in the bar chart because of
differences in each Class' expenses. The
table assumes that Class B shareholders
redeem all their Fund shares at the end of
the period indicated.
Best quarter: Q2 1989 +8.72%
Worst quarter: Q1 1994 -5.86%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A
(with 4.00% sales charge) 10/31/77 4.10% 5.68% 7.88% 3.92%
CLASS B
(with applicable CDSC)** 10/31/77 4.43% 6.39% 8.33% 4.12%
MERRILL LYNCH CORPORATE &
GOVERNMENT MASTER INDEX 10/31/77 8.15% 6.83% 9.20% 9.49%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Class B shares of the Fund commenced operations on March 2, 1998.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 4.00% sales charge) and
Class B shares (with applicable CDSC), were 5.41% and 4.43%, respectively,
versus 9.28% for the Merrill Lynch Corporate & Government Master Index.
12
<PAGE> 80
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
As an investor in the
Diversified Fixed Income
Fund, you will pay the
following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 0.60% 0.60%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.31% 0.31%
Total Fund operating expenses* 1.66% 1.91%
</TABLE>
* The Adviser is currently limiting the
Management fee to 0.45%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25%, and the Administrator is waiving
a portion of the Administration fee so that
Other expenses are expected to be 0.27%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 0.97% AND
1.72% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations may
be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
13
<PAGE> 81
DIVERSIFIED FIXED
RISK/RETURN SUMMARY AND FUND EXPENSES INCOME FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $562 $902 $1,266 $2,287
CLASS B SHARES
Assuming redemption $694 $900 $1,232 $2,138
Assuming no redemption $194 $600 $1,032 $2,138
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
14
<PAGE> 82
logo
logo
U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income consistent with prudent capital risk
- Secondarily, capital appreciation
PRINCIPAL INVESTMENT The Fund invests primarily in bonds, notes and bills issued
STRATEGIES by the U.S. Treasury, and in repurchase agreements for which
those securities are held as collateral. The Fund focuses on
maximizing income consistent with prudent investment risk,
and varies the average maturity of its investment portfolio
from time to time to take advantage of expected changes in
interest rates.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments will fluctuate
with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income exempt from federal taxes
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
15
<PAGE> 83
U.S. TREASURY
SECURITIES FUND
RISK/RETURN SUMMARY AND FUND EXPENSES
The two charts on this page
show how the U.S. Treasury
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the Merrill Lynch U.S.
Treasuries All Maturity
Index, a widely recognized
index of short-term and
long-term U.S. Treasury
bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
LOGO
<TABLE>
<S> <C>
1988 6.50
89 13.22
90 7.93
91 15.12
92 6.02
93 11.46
94 -7.39
95 24.07
96 -1.92
97 8.17
</TABLE>
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares will differ from the
Class A returns shown in the bar chart
because of differences in each Class'
expenses. The table assumes that Class B
shareholders redeem all of their Fund shares
at the end of the period indicated.
Best quarter: Q2 1995 +8.69%
Worst quarter: Q1 1996 -5.53%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A
(with 4.00% sales charge) 12/31/84 3.81% 5.45% 7.56% 8.42%
CLASS B
(with applicable CDSC)** 12/31/84 4.17% 6.17% 8.00% 8.77%
MERRILL LYNCH U.S. TREASURIES
ALL MATURITY INDEX 12/31/84 13.59% 7.15% 9.28% 9.90%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to December 31, 1984,
and prior to the Fund's commencement of operations on November 1, 1993, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Currently, the Class B shares of the Fund are not being offered to the
public.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 4.00% sales charge) and
Class B shares (with applicable CDSC), were 5.18% and 4.60%, respectively,
versus 9.94% for the Merrill Lynch U.S. Treasuries All Maturity Index.
16
<PAGE> 84
U.S. TREASURY
SECURITIES FUND
RISK/RETURN SUMMARY AND FUND EXPENSES
As an investor in the U.S.
Treasury Securities Fund,
you will pay the following
fees and expenses.
Shareholder transaction
fees are paid from your
account. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 0.60% 0.60%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.47% 0.47%
Total Fund operating expenses* 1.82% 2.07%
</TABLE>
* The Adviser is currently limiting the
Management fee to 0.35%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25%, and the Administrator is waiving
a portion of the Administration fee so that
Other expenses are expected to be 0.43%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 1.03% AND
1.78% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations may
be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
17
<PAGE> 85
U.S. TREASURY
RISK/RETURN SUMMARY AND FUND EXPENSES SECURITIES FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $577 $950 $1,346 $2,452
CLASS B SHARES
Assuming redemption $710 $949 $1,314 $2,307
Assuming no redemption $210 $649 $1,114 $2,307
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
18
<PAGE> 86
logo
logo
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - High current income consistent with prudent capital risk
- Secondarily, capital appreciation
PRINCIPAL The Fund invests primarily in bonds, notes and bills issued
INVESTMENT STRATEGIES by the U.S. Treasury, and in repurchase agreements for which
those securities are held as collateral. Under normal market
conditions, the average remaining maturity of the Fund's
investment portfolio (measured on a dollar-weighted basis)
will be from two to five years. The Fund focuses on
maximizing income consistent with prudent investment risk
within this maturity range.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to movements in interest rates. If rates rise, the values of
debt securities generally fall. The longer the average
maturity of the Fund's investment portfolio, the greater the
fluctuation. Pacific Century expects the values of the
Fund's investments will generally fluctuate less than those
of the U.S. Treasury Securities Fund, because the Fund's
investments will generally have shorter maturities.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- want current income
- want less fluctuation in the value of your investment than
a long-term bond fund
- want a high level of liquidity
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- guaranteed safety of principal
- income exempt from federal taxes
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
19
<PAGE> 87
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
The two charts on this page
show how the Short
Intermediate U.S. Treasury
Securities Fund has
performed and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the Fund's
yearly performance since
its inception to
demonstrate that the Fund
has gained and lost value
at differing times. The
table below it compares the
Fund's performance over
time to the Merrill Lynch
3-5-Year U.S. Treasury
Index, a widely recognized
index of short-term
Treasury bonds.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<CAPTION>
1994 -4.94
<S> <C>
1000
95 13.9
1000
96 1.92
1000
97 6.66
'1000
'
</TABLE>
LOGO
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares will differ from the
Class A returns shown in the bar chart
because of differences in each Class'
expenses. The table assumes that Class B
shareholders redeem all of their Fund shares
at the end of the period indicated.
Best quarter: Q2 1995 +4.33%
Worst quarter: Q1 1994 -3.12%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
CLASS A
(with 2.25% sales charge) 12/13/93 4.26% 4.14%
CLASS B
(with applicable CDSC)* 12/13/93 2.69% 3.73%
MERRILL LYNCH 3-5-YEAR
U.S. TREASURY INDEX 12/13/93 6.94% 6.08%
</TABLE>
* Currently, the Class B shares of the Fund are not being offered to the public.
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 2.25% sales charge) and
Class B shares (with applicable CDSC), were 6.33% and 3.76%, respectively,
versus 9.10% for the Merrill Lynch 3-5-Year U.S. Treasury Index.
20
<PAGE> 88
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
As an investor in the Short
Intermediate U.S. Treasury
Securities Fund, you will
pay the following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 2.25%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 0.50% 0.50%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.47% 0.47%
Total Fund operating expenses* 1.72% 1.97%
</TABLE>
* The Adviser is currently limiting the
Management fee to 0.30%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25%, and the Administrator is waiving
a portion of the Administration fee so that
Other expenses are expected to be 0.42%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 0.97% AND
1.72% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations may
be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
21
<PAGE> 89
SHORT INTERMEDIATE U.S.
RISK/RETURN SUMMARY AND FUND EXPENSES TREASURY SECURITIES FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $396 $755 $1,137 $2,209
CLASS B SHARES
Assuming redemption $700 $918 $1,262 $2,202
Assuming no redemption $200 $618 $1,062 $2,202
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
22
<PAGE> 90
logo
logo
INVESTMENT OBJECTIVES, POLICIES AND RISKS
TAX-FREE SECURITIES FUND
The Tax-Free Securities Fund seeks to provide you with high current income
that is exempt from federal and Hawaii income tax.
The Fund normally invests most of its assets as follows:
<TABLE>
<S> <C>
At least 80% of Municipal obligations -- debt securities of issuers that pay
net assets interest which, in the opinion of counsel to the issuer, is
exempt from federal income tax and is not subject to the
federal alternative minimum tax. This fundamental policy
cannot be changed without shareholder approval.
50%-60% of Hawaii municipal obligations -- debt securities issued by or
net assets 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 federal income tax. Subject to the
80% requirement above, the interest on some of these
investments may be subject to the federal alternative
minimum tax.
</TABLE>
No more than 20% of the Fund's net assets will be invested in debt securities
that pay interest subject to the federal alternative minimum tax (for those
investors subject to this tax). The Fund can also invest in other kinds of
debt instruments issued by foreign and domestic companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
The Fund focuses on maximizing tax exempt income consistent with prudent
investment risk. It varies the average maturity of its investment portfolio
from time to time in response to actual and expected interest rate movements
as well as other market and economic conditions. It is non-diversified, which
means that its assets may be invested in fewer issuers than diversified
funds. No maturity limitations apply to the Fund's investment portfolio, and
the average maturity of its portfolio can vary significantly. Pacific Century
monitors the Fund's portfolio performance and reallocates the Fund's assets
in response to actual and expected market and economic changes.
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
The Tax-Free Short Intermediate Securities Fund seeks to provide you with
high current income that is exempt from federal and Hawaii income tax, with
greater stability in the price of your investment than a long-term bond fund.
The Fund normally invests most of its assets as follows:
<TABLE>
<S> <C>
At least 80% of Municipal obligations -- debt securities of issuers that pay
net assets interest which, in the opinion of counsel to the issuer, is
exempt from federal income tax and is not subject to the
federal alternative minimum tax. This fundamental policy
cannot be changed without shareholder approval.
50%-60% of Hawaii municipal obligations -- debt securities issued by or
net assets 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 federal income tax. Subject to the
80% requirement above, the interest on some of these
investments may be subject to the federal alternative
minimum tax.
</TABLE>
23
<PAGE> 91
INVESTMENT OBJECTIVES, POLICIES AND RISKS
No more than 20% of the Fund's net assets will be invested in debt securities
that pay interest subject to the federal alternative minimum tax (for those
investors subject to this tax). The Fund can also invest in other kinds of
debt instruments issued by foreign and domestic companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
The Fund is non-diversified, which means that its assets may be invested
among fewer issuers than diversified funds. To achieve greater price
stability than a long-term bond fund, normally the average remaining maturity
of the Fund's portfolio (on a dollar-weighted basis) is from two to five
years. The Fund focuses on maximizing tax exempt income consistent with
prudent investment risk within this maturity range. The Fund's share value
will likely be less volatile than the Tax-Free Securities Fund, because the
Fund generally will have a shorter average portfolio maturity.
DIVERSIFIED FIXED INCOME FUND
The Diversified Fixed Income Fund seeks to provide you with high current
income.
Normally, the Fund invests at least 80% of its total assets in fixed income
securities. Most of its investments are debt securities issued or guaranteed
by the U.S. Government and its agencies and instrumentalities and corporate
issuers rated A or better by Standard & Poor's. However, the Fund may invest
up to 20% of its total assets in investment grade debt securities rated BBB
issued by U.S. companies and state and local government issuers. The Fund can
also invest up to 25% of its total assets in securities of foreign companies
and government issuers that are payable in U.S. dollars. The Fund can also
invest in other kinds of debt instruments issued by foreign and domestic
companies and governments, and can use futures contracts, options, and other
investment techniques for the purpose of cash flow management and/or risk
reduction.
The Fund focuses on maximizing income consistent with prudent investment
risk. No maturity limitations apply to the Fund's investment portfolio, and
the average maturity of its portfolio can vary significantly. Pacific Century
monitors the Fund's portfolio performance and reallocates the Fund's assets
in response to actual and expected market and economic changes.
U.S. TREASURY SECURITIES FUND
The U.S. Treasury Securities Fund seeks to provide you with high current
income consistent with prudent capital risk, and secondarily to make your
capital grow.
Normally, the Fund invests at least 65% of its total assets in U.S. Treasury
securities -- bonds, notes, and bills issued by the U.S. Treasury. It invests
the balance principally in repurchase agreements (agreements to buy U.S.
Treasury securities where the seller agrees to buy them back, usually within
a few days). The Fund can also invest in other kinds of debt instruments
issued by foreign and domestic companies and governments, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
The Fund focuses on maximizing income consistent with prudent investment
risk. No maturity limitations apply to the Fund's investment portfolio, and
the average maturity of its portfolio can vary significantly. The Fund seeks
to increase its total return by shortening the average maturity of its
portfolio securities when it expects interest rates to increase, and
lengthening the average maturity to take advantage of expected interest rate
declines.
24
<PAGE> 92
INVESTMENT OBJECTIVES, POLICIES AND RISKS
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
The Short Intermediate U.S. Treasury Securities Fund seeks to provide you
with high current income consistent with prudent capital risk, and
secondarily to make your capital grow.
Normally, the Fund invests at least 65% of its total assets in U.S. Treasury
securities -- bonds, notes, and bills issued by the U.S. Treasury. It invests
the balance principally in repurchase agreements (agreements to buy U.S.
Treasury securities where the seller agrees to buy them back, usually within
a few days). The Fund can also invest in other kinds of debt instruments
issued by foreign and domestic companies and governments, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
Normally the average remaining maturity of the Fund's portfolio (on a
dollar-weighted basis) is from two to five years. The Fund focuses on
maximizing income consistent with prudent investment risk within this
maturity range. The Fund seeks to increase its total return by shortening the
average maturity of its portfolio securities when it expects interest rates
to increase, and lengthening the average maturity to take advantage of
expected interest rate declines. The Fund's share value will likely be less
volatile than the U.S. Treasury Securities Fund, because the Fund generally
will have a shorter average portfolio maturity.
MAIN RISKS
The value of your investment in any of the Funds will go up and down, which
means that you could lose money. You should consider an investment in any of
the Funds as a long-term investment.
DEBT SECURITIES. The values of the debt securities held by the Funds
fluctuate in response to movements in interest rates. When rates rise, the
values generally fall, and when rates decline, the values generally increase.
In addition, the issuers of any of the debt securities held by the Funds may
fail to pay interest or principal when due, although the U.S. Treasury
securities held by the U.S. Treasury Securities Fund and Short Intermediate
U.S. Treasury Securities Fund are direct obligations of the U.S. Government.
The Funds will only acquire bonds that are rated "investment grade" at the
time of purchase, which means they are rated in one of the top four
categories by a nationally recognized statistical rating organization, or
unrated obligations that Pacific Century determines are comparable. However,
obligations with the lowest of these ratings have some speculative
characteristics, and changes in economic conditions are more likely to lead
to the issuer's weakened capacity to make principal and interest payments
than higher rated securities. If the rating of a security decreases after a
Fund buys it, or it is no longer rated, Pacific Century will decide whether
the Fund should continue to hold the security.
U.S. Government securities include not only U.S. Treasury obligations, but
also obligations of various agencies and instrumentalities of the U.S.
Government. Some of these are supported by the full faith and credit of the
U.S. Treasury, but others are supported only by the issuer's right to borrow
from the U.S. Treasury, by the discretionary authority of the U.S. Government
to purchase the agency's obligations, or by the instrumentalities' own
credit. The U.S. Government might not provide financial support to
instrumentalities it sponsors if it is not legally obligated to do so.
However, the Funds will invest in the obligations of such instrumentalities
only when Pacific Century believes that the credit risk is minimal.
25
<PAGE> 93
INVESTMENT OBJECTIVES, POLICIES AND RISKS
MAIN RISKS
CONTINUED
MUNICIPAL OBLIGATIONS. The Funds may purchase not only "general obligation"
municipal bonds (which are secured by the pledge of a municipality's faith,
credit and taxing power), but also "revenue" bonds, which depend for payment
of principal and interest on the revenues obtained from a specific project or
facility. In addition, the Tax-Free Securities Fund and the Tax-Free Short
Intermediate Securities Fund may invest in municipal bonds covered by
insurance and in "moral obligation" bonds. Insurance minimizes the risks of
payment delays or defaults, but does not guarantee the market value of the
insured bonds. Moral obligation bonds are issued by a municipality or a state
financial intermediary and backed by the moral obligation pledge of a state
government to appropriate funds in the future if the primary issuer defaults,
but the state is not legally bound to honor the pledge.
The Tax-Free Securities Fund and Tax-Free Short Intermediate Securities Fund
may purchase municipal notes with maturities at the time of issuance of three
years or less. These generally are issued in anticipation of the receipt of
tax funds, of the proceeds of bond placements, or of other revenues. The
issuer's ability to make payments therefore depends on such receipts.
The Tax-Free Securities Fund and the Tax-Free Short Intermediate Securities
Fund invest significantly in municipal obligations of issuers located in
Hawaii. The values of shares of these Funds therefore will be affected by
economic and political developments in Hawaii.
FOREIGN SECURITIES. Investments in foreign securities involve risks that are
not typically associated with domestic securities. Less information may be
publicly available about foreign issuers. They also are not generally subject
to the same accounting, auditing and financial reporting standards as
domestic issuers. Foreign markets have different clearance and settlement
procedures and higher transaction costs than U.S. markets. In addition,
foreign income tax laws may require withholding of interest, gains or
dividends. Certain other adverse developments could also occur, such as
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments that could adversely affect investments and the
ability to enforce contracts.
YEAR 2000 AND THE PACIFIC CAPITAL FUNDS. Like other funds and business
organizations around the world, the Funds could be adversely affected if the
computer systems used by Pacific Century and the Funds' other service
providers do not properly process date-related information for the year 2000
and beyond. The Funds understand that their key service providers are taking
steps to address this issue. In addition, the problem may adversely affect
the companies and other issuers in which the Funds invest. For example, they
may incur substantial costs to correct the problem and may suffer losses
caused by data processing errors. Management of the Funds and Pacific Century
will continue to monitor developments relating to this issue.
EURO INTRODUCTION. The European Union's planned introduction of a single
European currency, the Euro, on January 1, 1999 creates certain
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will be prepared for the change, the legal
treatment of certain outstanding financial contracts that refer to existing
currencies, and the creation of suitable clearing and settlement payment
systems for the new currency. These or other related factors could cause
market disruptions before or after the introduction of the Euro. The Trust
understands that Pacific Century and other key service providers are taking
steps to address Euro-related issues.
The most recent information about each Fund's portfolio holdings can be found
in its annual or semi-annual report. For information about receiving this
report, see the back cover.
26
<PAGE> 94
logo
logo
FUND MANAGEMENT
THE INVESTMENT ADVISER
Pacific Century Trust, ("Pacific Century"), 111 S. King Street, Honolulu,
Hawaii 96813, a division of Bank of Hawaii, is the adviser for the Funds.
Pacific Century has managed the financial assets of corporations and
institutional investors for more than a century. Pacific Century, formerly
known as Hawaiian Trust Company, is among the top 50 trust firms in the
United States based on assets under management and oversees more than $14
billion in client assets. The Pacific Century investment management
team -- including portfolio managers, financial analysts and economists -- is
responsible for over $8 billion of these assets.
For these advisory services, the Funds paid Pacific Century as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
FOR YEAR ENDED 7/31/98*
<S> <C>
------------------------------
Tax-Free Securities Fund .50%
------------------------------
Tax-Free Short Intermediate Securities Fund .43%
------------------------------
Diversified Fixed Income Fund .51%
------------------------------
U.S. Treasury Securities Fund .46%
------------------------------
Short Intermediate U.S. Treasury Securities Fund .30%
-------------------------------------------------------------------------------------
</TABLE>
* Pacific Century waived a portion of its fees for the fiscal year.
Contractual fees (without waivers) are: Tax-Free Securities Fund, .60%;
Tax-Free Short Intermediate Securities Fund, .50%; Diversified Fixed Income
Fund, .60%; U.S. Treasury Securities Fund, .60%; and Short Intermediate U.S.
Treasury Securities Fund, .50%.
PORTFOLIO MANAGERS
Management of the Funds is coordinated by Pacific Century's investment unit,
which is staffed with more than 40 people, including seven Chartered
Financial Analysts and nine M.B.A.'s. All investment decisions of Pacific
Century for the Funds it advises are made by a committee, with individual
portfolio managers having day-to-day responsibility for managing the Funds.
TAX-FREE SECURITIES FUND AND TAX-FREE SHORT INTERMEDIATE SECURITIES
FUND. Yvonne Lim, Vice President and Team Leader on the Tax-Exempt Fixed
Income Investment Team at Pacific Century, has been primarily responsible for
the day-to-day management of the Funds since 1993. Prior to managing the
Funds, Ms. Lim served as Cash Manager for Pacific Resources from 1989 to
1992.
27
<PAGE> 95
FUND MANAGEMENT
DIVERSIFIED FIXED INCOME FUND. Janet E. Katakura, Vice President, Team Leader
and Manager of the Taxable Fixed Income Investment Team for Pacific Century,
has been primarily responsible for the day-to-day management of the Fund
since its inception. Ms. Katakura joined Pacific Century as a portfolio
manager in 1983.
U.S. TREASURY SECURITIES FUND AND SHORT INTERMEDIATE U.S. TREASURY SECURITIES
FUND. David Todani, CFA, Vice President and Team Leader on the Taxable
Fixed-Income Investment Team at Pacific Century, has been primarily
responsible for the day-to-day management of the Funds since 1995. Prior to
joining the Fixed-Income Investment Team, Mr. Todani served as a fixed income
portfolio manager and treasury officer for Bank of Hawaii from 1983 to 1994.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ("BISYS") is the Funds' distributor and BISYS Fund
Services Ohio, Inc. is the Funds' administrator. The address of each is 3435
Stelzer Road, Columbus, Ohio 43219.
28
<PAGE> 96
logo
logo
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NAV IS CALCULATED
NAV is calculated by adding
the total value of a Fund's
investments and other
assets attributable to
Class A or B shares,
subtracting its liabilities
attributable to Class A or
B shares, and then dividing
that figure by the number
of outstanding Class A or B
shares of the Fund:
NAV =
--------------------------
Total Assets - Liabilities
----------------------------
Number of Shares
Outstanding
Locate your Fund's NAV
daily in The Wall Street
Journal and other
newspapers or call
800-258-9232 for
information.
---------------------------
The price of each Fund's shares is
based on its per share net asset value
("NAV"). The NAV for Class A and B
shares of each Fund is determined and
its shares are priced at the close of
regular trading on the New York Stock
Exchange (normally at 4 p.m. Eastern
time) on days the Exchange is open.
Your order will be priced at the next
NAV calculated after your order is
accepted by the Fund (plus any
applicable sales charge).
The Fund's securities are valued at
current market prices except for debt
obligations with remaining maturities
of 60 days or less (which are valued
at amortized cost). If market
quotations are not available,
securities will be valued by a method
that the Board of Trustees believes
accurately reflects fair value.
29
<PAGE> 97
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
You can purchase Funds
through the Pacific
Capital Funds'
Distributor or through
brokers and other
investment
representatives,
including an affiliate
of Pacific Century,
which may charge
additional fees and may
require higher minimum
investments or impose
other limitations on
buying and selling
shares. If you purchase
shares through an
investment
representative, it is
responsible for
transmitting orders to
the Distributor by the
Fund's close of business
and may have an earlier
cut-off time for
purchase and sale
requests. Consult your
investment
representative or
institution for specific
information.
<TABLE>
<CAPTION>
MINIMUM INVESTMENTS INITIAL INVESTMENT SUBSEQUENT
<S> <C> <C>
Regular
(non-retirement) $1,000 $50
----------------------------------------------------------
Retirement (IRA) $250 $50
----------------------------------------------------------
Auto Investment Plan $100 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that do
not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement, and the Distributor may reject
a purchase order, if the Distributor
decides this is in the best interest of the
Fund's shareholders. The Funds reserve the
right to suspend or modify the continuous
offering of their shares.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
A Fund must withhold 31% of your taxable dividends, capital gains
distributions and redemptions if you have not provided the Fund with your
taxpayer identification number in compliance with IRS rules. To avoid this,
make sure you provide your correct tax identification number (social security
number for most investors) on your account application.
-----------------------------------------------------------------------------
QUESTIONS?
Call 800-258-9232 or your
investment representative.
30
<PAGE> 98
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
BY REGULAR MAIL
Initial Investment:
If purchasing through your financial adviser or brokerage account, simply
tell your adviser or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases follow the instructions below.
1. Carefully read, complete and sign the account application. Establishing
your account privileges now saves you the inconvenience of having to add
them later.
2. Make check, bank draft or money order payable to "Pacific Capital Funds"
and include the name of the appropriate Fund(s) on the check.
3. Mail to: Pacific Capital Funds, PO Box 182130, Columbus, OH 43218-2130
Subsequent Investments:
1. Use the investment slip attached to your account statement.
Or, if unavailable
2. Include the following information on a piece of paper:
- Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail investment slip and check to: Pacific Capital Funds,
PO Box 182130, Columbus, OH 43218-2130
BY OVERNIGHT SERVICE
See instructions 1-2 above.
3. Send to: Pacific Capital Funds,
c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.
BY ELECTRONIC PURCHASE
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
800-258-9232. Your account can generally be set up for electronic purchases
within 15 days.
Call 800-258-9232 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an electronic purchase or sale, your bank makes the
transaction through the Automated Clearing House (ACH), which may take up to
eight days to clear. There is generally no fee for ACH transactions.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
31
<PAGE> 99
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Please call 800-258-9232 for a confirmation number and instructions for
returning your completed application.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA #044000024
DDA #01891797644
Include:
Your name
Your confirmation number, your account number and the name of the Fund.
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 800-258-9232 TO TELL US
THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK.
AUTO INVEST PLAN
You can make automatic investments in the Funds from your bank account,
through payroll deduction, or from your federal employment, social security
or other regular government checks. Automatic investments can be as little as
$50, once you've invested the $100 minimum required to open the account.
To invest regularly from your bank account:
1) Complete the Auto Invest Plan portion of your Account Application. Make
sure you note:
[ ] your bank name, address, and account number
[ ] the amount you want to invest automatically (minimum $50)
[ ] how often you want to invest (monthly or quarterly)
2) Attach a voided personal check.
To invest regularly from your pay check or government check:
Call 800-258-9232 for an enrollment form.
The Fund reserves the right to change or eliminate these privileges at any
time with 60 days notice. The Funds also reserve the right to reject any
purchase or to suspend or modify the continuous offering of their shares.
32
<PAGE> 100
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You can sell your shares
at any time. Your sales
price will be the next NAV
after your sell order is
received by the Fund or
your investment
representative. Normally
you will receive your
proceeds within a week
after your request is
received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also
known as redeeming shares or a redemption of
shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B shares, you will be charged a fee for any shares that have
not been held for a sufficient length of time.
(You will also pay a fee for Class A shares
sold within one year of a purchase of $1
million or more.) These fees will be deducted
from the money paid to you. See the section on
"Distribution Arrangements/Sales Charges"
below for details.
If selling shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times which will affect your redemption. For all
other sales transactions, follow the instructions below.
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
Call 800-258-9232 with instructions as to how you want to receive your funds
(mail, wire, electronic transfer). See "General Policies on Selling Shares"
below.
BY MAIL (SEE "GENERAL POLICIES ON SELLING SHARES -- REDEMPTION IN WRITING
REQUIRED" BELOW.)
1. Call 800-258-9232 to request redemption forms, or write a letter of
instruction indicating:
- your Fund and account number
- amount you want to redeem
- address where your check should be sent
- account owner signature
2. Mail to: Pacific Capital Funds PO Box 182130 Columbus, OH 43218-2130
BY OVERNIGHT SERVICE
1. See instruction 1 above.
2. Send to: Pacific Capital Funds, c/o BISYS Fund Services Attn: T.A.
Operations, 3435 Stelzer Road Columbus, OH 43219
33
<PAGE> 101
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must select this option on your account application.
The Fund may charge a wire transfer fee. Note: Your financial institution may
also charge a separate fee.
Call 800-258-9232 to request a wire transfer. If you call by 4 p.m. Eastern
time, your payment will normally be wired to your bank on the next business
day. Otherwise, it will normally be wired on the second business day after
your call.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank. Note: Your bank may charge for this service.
Call 800-258-9232 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds will normally be credited within
8 days. Otherwise, it will normally take up to 9 days.
AUTO WITHDRAWAL PLAN
You can receive automatic payments from your Class A shares account on a
monthly or quarterly basis. The minimum withdrawal is $100. To activate this
feature:
- Make sure you've checked the appropriate box on the account application.
Or call 800-258-9232.
- Include a voided personal check.
- Your account must have a value of $5,000 or more to start withdrawals.
- If the value of your account falls below $1,000, you may be asked to
invest more to bring the account back to $1,000, or we may close your
account and mail the proceeds to you.
34
<PAGE> 102
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN
WRITING REQUIRED
You must request redemption in writing in the following situations:
1. All requests for redemptions from individual retirement accounts ("IRA's")
must be in writing.
2. Redemption requests require a signature guarantee when:
- You ask us to make the check payable to someone who is not the owner of
the account
- You ask us to mail the check to an address that is not the address on
your account
- You ask us to wire the proceeds to a commercial bank account that is not
designated on your account application
- The redemption proceeds exceed $50,000
You must obtain a signature guarantee from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program) or SEMP (Stock Exchanges Medallion Program). Members are
subject to dollar limitations which must be considered when requesting their
guarantee. The Transfer Agent may reject any signature guarantee if it
believes the transaction would otherwise be improper.
TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Because of these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Funds, the Transfer Agent, Pacific Century and/or
the Distributor may be liable for losses due to unauthorized transactions.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made an investment by check, you cannot receive any portion of
the redemption proceeds on the same investment until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 business
days). You can avoid this delay by purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission ("SEC") in order to
protect remaining shareholders.
REDEMPTION IN KIND
We reserve the right to make your redemption payment in securities rather
than cash, known as "redemption in kind." This could occur under
extraordinary circumstances, such as a very large redemption that could
affect a Fund's operations (for example, more than 1% of the Fund's net
assets). If we deem it advisable for the benefit of all shareholders, you
will receive securities equal in market value to your redemption price, net
of any CDSC. When you convert these securities to cash, you will pay
brokerage charges.
35
<PAGE> 103
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
CONTINUED
CLOSING OF SMALL ACCOUNTS
If your account falls below $250, we may ask you to increase your balance to
the minimum investment amount. If it is still below $250 after 60 days, we
may close your account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
If you choose to receive distributions in cash and distribution checks are
returned and marked as "undeliverable" or remain uncashed for six months,
your account will be changed automatically so that all future distributions
are reinvested in your account. Checks that remain uncashed for six months
will be canceled and the money reinvested in the Fund. No interest is paid
during the time the check is outstanding.
36
<PAGE> 104
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor
in different share classes offered by the Fund and ways to qualify for
reduced sales charges*. Certain qualified institutional buyers are eligible
to purchase Class Y shares of the Funds. Class Y shares are offered by
another prospectus which is available by calling 800-258-9232.
<TABLE>
<S> <C> <C>
TYPES OF CHARGES CLASS A CLASS B
Sales Charge (Load) Front-end sales charge (at the No front-end sales charge. You may
time of your purchase); reduced incur a contingent deferred sales
sales charges are available.(1) charge on shares redeemed within
six years after purchase; shares
automatically convert to Class A
shares after 8 years.
Distribution (12b-1) Fees Subject to annual distribution Subject to annual distribution
fees of up to .75% of the Fund's fees of up to 1.00% of the Fund's
net assets. net assets.
Fund Expenses Lower annual expenses than Class B Higher annual expenses than Class
shares. A shares.
</TABLE>
(1) You may incur a contingent deferred sales charge on shares sold within
one year of a purchase of $1 million or more.
*Currently, the Class B shares of the U.S. Treasury Securities Fund, Short
Intermediate U.S. Treasury Securities Fund and Tax-Free Short Intermediate
Securities Fund are not being offered to the public.
37
<PAGE> 105
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CALCULATION OF SALES CHARGES
CLASS A SHARES
The Distributor sells Class A shares at their public offering price. This
price includes the initial sales charge. Therefore, part of the money you pay
for shares will be used to pay the sales charge. The remainder is invested in
Fund shares. The sales charge decreases with larger purchases. There is no
sales charge on reinvested dividends and distributions.
The current sales charge rates and commissions paid to investment
representatives are as follows:
FOR THE TAX-FREE SECURITIES FUND, DIVERSIFIED FIXED INCOME FUND AND U.S.
TREASURY SECURITIES FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER PAYMENT
YOUR AS A % OF AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
Up to $25,000 4.00% 4.17% 3.60%
----------------------------------------------------------------------------------
$25,000 up to $50,000 3.75% 3.90% 3.38%
----------------------------------------------------------------------------------
$50,000 up to $100,000 3.50% 3.63% 3.15%
----------------------------------------------------------------------------------
$100,000 up to $250,000 3.25% 3.36% 2.93%
----------------------------------------------------------------------------------
$250,000 up to $500,000 3.00% 3.09% 2.70%
----------------------------------------------------------------------------------
$500,000 up to $1,000,000 2.50% 2.56% 2.25%
----------------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00% 0.00%
</TABLE>
(1) You will pay a contingent deferred sales charge (CDSC) on these shares of
up to 1.00% of the purchase price if you redeem them in the first year after
purchase. The Distributor will base this charge on the lower of your cost for
the shares or their NAV at the time of sale. The CDSC does not apply to
reinvested distributions.
38
<PAGE> 106
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
FOR THE TAX-FREE SHORT INTERMEDIATE SECURITIES FUND AND SHORT INTERMEDIATE
U.S. TREASURY SECURITIES FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER PAYMENT
YOUR AS A % OF AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
Up to $100,000 2.25% 2.30% 2.03%
----------------------------------------------------------------------------------
$100,000 up to $250,000 1.75% 1.78% 1.58%
----------------------------------------------------------------------------------
$250,000 up to $500,000 1.25% 1.27% 1.13%
----------------------------------------------------------------------------------
$500,000 up to $1,000,000 1.00% 1.01% 0.90%
----------------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00% 0.00%
</TABLE>
(1) You will pay a contingent deferred sales charge (CDSC) on these shares of
up to 1.00% of the purchase price if you redeem them in the first year after
purchase. The Distributor will base this charge on the lower of your cost for
the shares or their NAV at the time of sale. The CDSC does not apply to
reinvested distributions.
The Distributor pays securities dealers from its own resources up to 1.00% of
the offering price of Class A shares of the Funds for individual sales of $1
million to $5 million and .50% of the offering price of Class A shares of the
Funds for individual sales over $5 million.
The Distributor reserves the right to pay the entire sales charge to dealers.
In addition to the compensation paid to investment representatives, the
Distributor may provide promotional incentives in the form of travel
expenses, lodging and bonuses to licensed individuals who sell shares of the
Funds, as well as vacation trips (including lodging at luxury resorts),
tickets to entertainment events and merchandise. In some instances, the
Distributor will make this compensation available only to certain dealers
whose representatives have sold a significant amount of such shares. None of
the Funds or their shareholders pay this promotional compensation.
39
<PAGE> 107
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The Distributor sells Class B
shares at NAV, without any
up-front sales charge.
Therefore, all the money you
invest is used to purchase
Fund shares. However, if you
sell your Class B shares of
the Fund before the sixth
anniversary of purchase, you
will have to pay a contingent
deferred sales charge at the
time of sale. The CDSC will be
based on the lower of the NAV
at the time of purchase or the
NAV at the time of sale
according to the schedule to
the right. There is no CDSC on
reinvested dividends or
distributions. Imposition of
the CDSC and the distribution
fee on Class B shares is
limited by the NASD
asset-based sales charge rule.
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
If you sell some but not all of your Class B shares, we will first redeem
certain shares not subject to the CDSC (i.e., shares purchased with
reinvested dividends) followed by shares subject to the lowest CDSC
(typically shares you have held for the longest time).
CONVERSION FEATURE -- CLASS B SHARES
- Your Class B shares automatically convert to Class A shares of the same
Fund eight years after the end of the month of purchase. The dollar value
of Class A shares you receive will equal the dollar value of the B shares
converted.
- After conversion, your shares will be subject to the lower distribution
fees charged on Class A shares, which will increase your investment
return.
- You will not pay any sales charge, fees or taxes when your shares convert.
- If you purchased Class B shares of one Fund which you exchanged for Class
B shares of another Fund, we will calculate your holding period from the
time of your original purchase of Class B shares.
40
<PAGE> 108
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
SALES CHARGE REDUCTIONS
You may qualify for reduced sales charges under the following circumstances.
- LETTER OF INTENT. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 3% of the total amount you
intend to purchase with your letter of intent.
- RIGHTS OF ACCUMULATION. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- COMBINATION PRIVILEGE. You can combine accounts of multiple Funds or
accounts of immediate family household members (spouse and children under
21) to reduce sales charges. Reduced prices are also available for
investors who are members of certain qualified groups.
SALES CHARGE WAIVERS
CLASS A SHARES
The following qualify for waivers of sales charges:
- Current and retired trustees, directors, employees, and family members of
the Trust, Pacific Century and its affiliates or any other organization
that provides services to the Trust.
- Investors for whom Pacific Century or one of its affiliates acts in a
fiduciary, advisory, custodial, agency or similar capacity (except those
investors for whom Pacific Century Investment Services provides custodial
services).
- 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.
- Other investment companies distributed by the Distributor.
- Investors who purchase shares with the proceeds from the recent redemption
of shares of any non-money market mutual fund with a front-end or back-end
sales charge of equal or greater value.
REINSTATEMENT PRIVILEGE
If you have sold Class A or B shares of a Fund and decide to reinvest in
the same Fund within a 120 day period, you will not be charged the
applicable sales load on amounts up to the value of the shares you sold.
You must provide a written reinstatement request and payment within 120
days of the date your instructions to sell were processed.
41
<PAGE> 109
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The Distributor will waive the CDSC under certain circumstances, including
the following:
- If the redemption follows the death or disability of a shareholder (or
both shareholders in the case of joint accounts).
- If the redemption is made under an automatic withdrawal plan after the
participant reaches age 59 1/2, as long as the payments are no more than
10% of the account value annually (measured from the date the Transfer
Agent receives the request).
- If the redemption represents the minimum required distribution from a
retirement plan.
- If the shares being redeemed were purchased with reinvested dividends and
distributions.
DISTRIBUTION (12B-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of a Fund's shares and for providing shareholder services and
may cost you more than paying other types of sales charges. 12b-1 fees are
paid from Fund assets on an ongoing basis, and over time will increase the
cost of your investment.
- The 12b-1 fees paid by a Fund vary by share class as follows:
1. Class A shares pay a 12b-1 fee of up to .75% of the average daily
net assets of the Fund.
2. Class B shares pay a 12b-1 fee of up to 1.00% of the average daily
net assets of the Fund. This will cause expenses for Class B shares
to be higher and dividends to be lower than for Class A shares.
- The higher 12b-1 fee on Class B shares, together with the CDSC, help the
Distributor sell Class B shares without an "up-front" sales charge. In
particular, these fees help the Distributor cover the cost of advancing
brokerage commissions to investment representatives.
- The Distributor may use up to .25% of the 12b-1 fee for shareholder
servicing and up to .75% for distribution.
Until further notice, the Distributor voluntarily intends to waive a portion
of its 12b-1 fee, so that the fee payable by each Fund will not exceed 0.25%
of the average daily net asset value attributable to the Fund's Class A
shares on an annual basis.
42
<PAGE> 110
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your
shares in one Fund for
shares of the same class of
another Fund, usually
without paying additional
sales charges (see "Notes"
below). Class A
shareholders may also
exchange their shares for
service class shares of
other investment companies
for which Pacific Century
serves as investment
adviser. These are the
Pacific Capital Cash Assets
Trust, the Pacific Capital
Tax-Free Cash Assets Trust
and the Pacific Capital
U.S. Government Securities
Cash Assets Trust. No
transaction fees are
charged for exchanges.
You must meet the minimum
investment requirements for
the Fund into which you are
exchanging.
Exchanges from one Fund to another are taxable.
You can make exchanges by sending a written request to Pacific Capital Funds, PO
Box 182130, Columbus OH 43218-2130, or by calling 800-258-9232. Please provide
the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your social security number)
- Dollar value or number of shares you are exchanging
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling Your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited to four substantive exchanges
within one calendar year period. A Fund may also refuse any exchange order.
NOTES ON EXCHANGES
- When exchanging from a Fund
that has no sales charge or a
lower sales charge to a fund
with a higher sales charge,
you will pay the difference.
- The registration and tax
identification numbers of the
two accounts must be
identical.
- The Exchange Privilege may be
changed or eliminated at any
time after a 60-day notice to
shareholders.
- Be sure to read carefully the
Prospectus of any Fund or
other investment company into
which you wish to exchange
shares.
43
<PAGE> 111
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Each Fund pays out any income it receives in the form of dividends, less
expenses, to its shareholders monthly. The Funds distribute net capital gains
to shareholders annually. Dividends payable on Class A shares of a Fund are
more than on Class B shares because Class B shares have higher distribution
expenses.
We automatically reinvest all income dividends and capital gains
distributions on Fund shares in additional shares of the same Fund and Class
on the ex-dividend date unless you request otherwise in writing to the
Transfer Agent (at least 15 days prior to the distribution). The Distributor
does not charge any fees or sales charges on reinvestments. You may elect to
receive your dividends/distributions in cash either by check sent to your
address or by wire to your bank account.
The value of your shares will be reduced by the amount of dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or the distribution of capital gains, you will pay the full price
for the shares and receive some portion of the price back as a taxable
dividend or distribution.
TAXES
Dividends generally are taxable as ordinary income. Taxes on capital gains
distributed by the Funds will vary with the length of time the Fund has held
the security -- not how long you have been invested in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear
on your account statement the following year. Dividends and distributions are
treated the same for federal income tax purposes whether you receive them in
cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Funds. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes,
including withholding taxes.
An exchange of shares is considered a sale, and any related gains may be
subject to federal and state taxes.
Foreign shareholders may be subject to special withholding requirements. A
penalty is charged on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
HAWAII TAX INFORMATION
The Funds expect that some dividends paid by the Tax-Free Securities Fund and
the Tax-Free Short Intermediate Securities Fund to Hawaii residents will be
exempt from Hawaii personal income tax to the extent attributable to Hawaii
municipal obligations. Interest derived from obligations of other states (and
their political subdivisions) will not be exempt from Hawaii income taxation.
Dividends and distributions made by the Funds (and to the extent attributable
to Hawaii municipal obligations for the Tax-Free Securities Fund and the
Tax-Free Short Intermediate Securities Fund) to Hawaii residents will
generally be treated for Hawaii income tax purposes in the same manner as
they are treated for federal income tax purposes.
If you are not a Hawaii resident you should not be subject to Hawaii income
taxation on dividends and distributions made by the Funds, but you will be
subject to taxes of other states and localities.
44
<PAGE> 112
OTHER INFORMATION ABOUT THE FUNDS
Logo logo
FINANCIAL HIGHLIGHTS
The Financial Highlights in the following table set forth certain financial
data and investment results of the Funds since their inception, expressed in
one share of each Fund 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 Funds' annual report contains
additional performance information relating to the Funds and is available
upon request, without charge.
45
- -
<PAGE> 113
OTHER INFORMATION ABOUT THE FUNDS TAX-FREE SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 July 31, 1995 (a)
A CLASS B CLASS (e) A CLASS A CLASS A CLASS
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.84 $ 10.84 $ 10.44 $ 10.53 $ 10.00
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.48 0.21 0.49 0.50 0.39
Net realized and unrealized gain (loss)
from investments 0.06 (0.01) 0.46 0.07 0.50
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.54 0.20 0.95 0.57 0.89
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.48) (0.21) (0.49) (0.49) (0.36)
In excess of net investment income -- -- -- (0.04) --
Net realized gains (0.06) -- (0.06) (0.09) --
In excess of net realized gains -- -- -- (0.04) --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.21) (0.55) (0.66) (0.36)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.84 $ 10.83 $ 10.84 $ 10.44 $ 10.53
-----------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 5.17% 1.82%(b) 9.35% 5.54% 9.06%(b)
ANNUALIZED RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 3,054 $ 272 $ 2,545 $ 569 $ 563
Ratio of expenses to average net assets 1.02% 1.71%(c) 1.12% 1.14% 1.15%(c)
Ratio of net investment income to average
net assets 4.49% 3.75%(c) 4.60% 4.66% 4.93%(c)
Ratio of expenses to average net assets* 1.65% 1.90%(c) 1.66% 1.68% 1.74%(c)
Ratio of net investment income to average
net assets* 3.86% 3.56%(c) 4.06% 4.12% 4.34%(c)
Portfolio Turnover(d) 10.73% 10.73% 11.07% 24.78% 49.17%
</TABLE>
* 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) Period from commencement of operations on March 2, 1998.
46
<PAGE> 114
TAX-FREE SHORT INTERMEDIATE
OTHER INFORMATION ABOUT THE FUNDS SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
A CLASS A CLASS A CLASS A CLASS
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.17 $10.05 $10.11 $10.00
---------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.35 0.37 0.37 0.30
Net realized and unrealized gain (loss)
from investments (0.02) 0.13 (0.03) 0.08
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.33 0.50 0.34 0.38
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.35) (0.37) (0.37) (0.27)
In excess of net investment income -- -- (0.03) --
Net realized gains (0.06) (0.01) -- --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (0.38) (0.40) (0.27)
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.09 $10.17 $10.05 $10.11
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 3.36% 5.06% 3.41% 3.90%(b)
ANNUALIZED RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 478 $ 724 $ 451 $ 308
Ratio of expenses to average net assets 1.01% 1.09% 1.08% 1.05%(c)
Ratio of net investment income to average
net assets 3.50% 3.57% 3.64% 3.82%(c)
Ratio of expenses to average net assets* 1.62% 1.64% 1.63% 1.64%(c)
Ratio of net investment income to average
net assets* 2.89% 3.02% 3.09% 3.23%(c)
Portfolio Turnover(d) 47.55% 29.46% 54.70% 89.98%
</TABLE>
* 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.
47
<PAGE> 115
OTHER INFORMATION ABOUT THE FUNDS DIVERSIFIED FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(a)
A CLASS B CLASS(e) A CLASS A CLASS A CLASS
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.71 $10.79 $10.45 $10.75 $10.00
----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.58 0.23 0.57 0.59 0.49
Net realized and unrealized gain (loss)
from investments 0.21 0.12 0.35 (0.19) 0.74
----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.79 0.35 0.92 0.40 1.23
----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.58) (0.23) (0.57) (0.58) (0.48)
In excess of net investment income -- -- -- (0.02) --
In excess of net realized gains -- -- (0.09) (0.10) --
----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.23) (0.66) (0.70) (0.48)
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.92 $10.91 $10.71 $10.45 $10.75
----------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 7.61% 3.25%(b) 9.20% 3.69% 12.66%(b)
ANNUALIZED RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,497 $ 236 $1,103 $1,093 $ 27
Ratio of expenses to average net assets 1.02% 1.71%(c) 1.15% 1.15% 1.18%(c)
Ratio of net investment income to average
net assets 5.36% 4.54%(c) 5.44% 5.31% 6.25%(c)
Ratio of expenses to average net assets* 1.65% 1.90%(c) 1.69% 1.69% 1.77%(c)
Ratio of net investment income to average
net assets* 4.73% 4.35%(c) 4.90% 4.77% 5.66%(c)
Portfolio Turnover(d) 57.58% 57.58% 80.98% 58.86% 60.47%
</TABLE>
* 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) Period from commencement of operations on March 2, 1998.
48
<PAGE> 116
OTHER INFORMATION ABOUT THE FUNDS U.S. TREASURY SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE NOVEMBER 1,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995 JULY 31,
A CLASS A CLASS A CLASS A CLASS(b) 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.37 $ 9.13 $ 9.42 $ 9.04 $ 10.00
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.52 0.52 0.53 0.50 0.51
Net realized and unrealized gain (loss)
from investments 0.21 0.25 (0.20) 0.38 (1.00)
--------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.73 0.77 0.33 0.88 (0.69)
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.52) (0.46) (0.53) (0.50) (0.27)
In excess of net investment income -- (0.07) (0.09) -- --
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.53) (0.62) (0.50) (0.27)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.58 $ 9.37 $ 9.13 $ 9.42 $ 9.04
--------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 7.98% 8.68% 3.43% 10.18% (6.95)%(d)
ANNUALIZED RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,090 $1,087 $ 979 $1,035 $60,125
Ratio of expenses to average net assets 1.07% 1.16% 1.20% 1.19% 1.15%(c)
Ratio of net investment income to average
net assets 5.45% 5.60% 5.55% 5.57% 4.62%(c)
Ratio of expenses to average net assets* 1.76% 1.70% 1.74% 1.81% 2.09%(c)
Ratio of net investment income to average
net assets* 4.76% 5.06% 5.01% 4.96% 3.68%(c)
Portfolio Turnover(e) 11.82% 44.90% 15.75% 80.98% 11.36%
</TABLE>
* 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) The Financial Highlights presented for the A 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 A Class only for the period from October 14, 1994
through July 31, 1995.
(c) Annualized.
(d) Not annualized.
(e) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
49
<PAGE> 117
SHORT INTERMEDIATE U.S.
OTHER INFORMATION ABOUT THE FUNDS TREASURY SECURITIES FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE DECEMBER 13,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995 JULY 31,
A CLASS A CLASS A CLASS A CLASS(b) 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.55 $ 9.41 $ 9.60 $ 9.52 $ 10.00
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.49 0.49 0.48 0.52 0.24
Net realized and unrealized gain (loss)
from investments 0.09 0.14 (0.11) 0.05 (0.52)
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.58 0.63 0.37 0.57 (0.28)
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.49) (0.49) (0.50) (0.49) (0.20)
In excess of net investment income -- -- (0.04) -- --
In excess of net realized gains -- -- (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.49) (0.56) (0.49) (0.20)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.64 $ 9.55 $ 9.41 $ 9.60 $ 9.52
---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 6.27% 6.92% 3.90% 6.28% (2.76)%(d)
ANNUALIZED RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 654 $ 618 $1,156 $ 489 $ 3,419
Ratio of expenses to average net assets 0.89% 0.87% 0.92% 0.99% 1.00%(c)
Ratio of net investment income to average
net assets 5.11% 5.22% 5.14% 5.51% 3.96%(c)
Ratio of expenses to average net assets* 1.64% 1.62% 1.67% 1.78% 5.39%(c)
Ratio of net investment income to average
net assets* 4.36% 4.47% 4.39% 4.72% (0.43)%(c)
Portfolio Turnover(e) 17.33% 51.56% 47.17% 62.73% 0.00%
</TABLE>
* 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) The Financial Highlights presented for the A 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 A Class only for the period from October 14, 1994
through July 31, 1995.
(c) Annualized.
(d) Not annualized.
(e) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
50
<PAGE> 118
APPLICATION FOR PACIFIC CAPITAL FUNDS
PLEASE COMPLETE STEPS 1 THROUGH 5 AND MAIL TO:
PACIFIC CAPITAL FUNDS
P.O. BOX 182130, COLUMBUS, OH 43218-2130
1-800-258-9232 PACIFIC CAPITAL FUNDS
- --------------------------------------------------------------------------------
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/Transfers to Minors
Act
(Only one Custodian's First Name Middle Initial Last
custodian Name State
and one minor Custodian For ----------------------------------------------------------------------------------
are Minor's First Name Middle Initial Last Name Minor's Social Security No.
permitted.)
[ ] For Trust, 4. ----------------------------------------------------------------------------------------------
Corporation, (Name of Corporation or Partnership; PLEASE INDICATE TYPE OF ORGANIZATION. If a Trust, include the
Partnership or 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
<TABLE>
<S> <C>
( )
- --------------------------------------------------------------------------------------------------------------
Area Code Daytime Telephone Number Occupation Employer's Name/Employer's Address City State
</TABLE>
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 5.
- --------------------------------------------------------------------------------
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> <C> <C> <C> <C> <C>
A. B. A. B.
[ ] N/A U.S. Treasury Securities Fund $ --------- [ ] N/A Tax-Free Short Intermediate Securities $ ---------
Fund
[ ] N/A Short Intermediate U.S. Treasury $ --------- [ ] [ ] Growth Stock Fund $ ---------
Securities Fund
[ ] [ ] Diversified Fixed Income Fund $ --------- [ ] N/A Balanced Fund $ ---------
[ ] [ ] Tax-Free Securities Fund $ --------- [ ] [ ] Growth and Income Fund $ ---------
[ ] [ ] New Asia Growth Fund $ --------- [ ] [ ] International Stock Fund $ ---------
[ ] [ ] Small Cap Fund $ --------- [ ] [ ] Value 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> 119
- --------------------------------------------------------------------------------
C. LETTER OF INTENT
(See Terms of Escrow
for Letter
of Intent at the end of
this
application).
- -----------------------
Check appropriate box
[ ] YES [ ] NO
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:*
[ ] $ 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
- -----------------------
Check appropriate box
[ ] YES [ ] NO
This option provides you with a convenient way to have amounts automatically
drawn on your financial institution account and invested in
your Pacific Capital Fund account. To establish this program,
please complete Step 5, 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
----------- Fund $ --------- Please select how often you would like to have the amount(s)
shown above withdrawn from your checking account and invested
----------- Fund $ --------- into the above selected Fund(s).
----------- Fund $ --------- [ ] Once each month -- on [ ] Twice each month on the 1st
the 1st and the 16th
Total $ --------- [ ] Once each month -- on [ ] Once each quarter on the 1st
the 16th beginning in the month of
-----------------.
</TABLE>
- --------------------------------------------------------------------------------
B. TELEPHONE INVESTMENT
- -----------------------
Check appropriate box
[ ] YES [ ] NO
This option provides you with a convenient way to add to your account at any
time you wish by simply calling the Pacific Capital Funds
toll-free at 1-800-258-9232. To establish this program,
please complete Step 5, Sections A & B of this Application.
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
- --------------------------------------------------------------------------------
C. AUTOMATIC WITHDRAWAL PLAN
Application must be
received in good order
at least two weeks
prior
to 1st actual
liquidation date.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
Please establish an Automatic Withdrawal Plan for this account, subject to the
terms of the Automatic Withdrawal Plan Provisions set forth
below. To realize the amount stated below, BISYS Fund
Services, Inc. (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.
<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> 120
- --------------------------------------------------------------------------------
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>
<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 Initial Last Name Name of Financial Institution
---------------------------------------------- ---------------------------------------------
First Name Middle Initial Last Name Street
---------------------------------------------- ---------------------------------------------
Street City State Zip Code
---------------------------------------------- ---------------------------------------------
City State Zip Code Financial Institution Account Number
</TABLE>
<PAGE> 121
- --------------------------------------------------------------------------------
STEP 4 CLIENT AGREEMENT
CLIENT AGREEMENT After reading this section, please sign in Step 5, Section B.
To: BISYS Fund Services Limited Partnership (the "Distributor"), and BISYS
Fund Services, Inc. (the "Transfer Agent") and Pacific Century Trust (the
"Investment Adviser").
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the investment
portfolios ("Funds") of the Pacific Capital Funds (the "Fund Company"). I (we)
affirm that I (we) have received and read the current prospectus(es) of the
Fund(s) selected and agree to be bound by its terms.
A. THE MEANING OF WORDS IN THIS AGREEMENT: The words "I," "me" and "my" refer to
the person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
B. REPRESENTATIONS. I understand that you provide no investment, tax, or legal
advice, and I have relied on my independent judgement with respect to the
suitability or potential value of any security or order.
C. DEBIT AUTHORIZATION AND SETTLEMENT. If I authorize, and if the Transfer Agent
approves, the use of my bank account designated in Step 3. Section E of this
Account Registration Form (the "designated account") as the settlement account
in connection with this account. I understand and agree that the Transfer Agent
may debit the designated account for payment of securities purchased by me
either by way of this Account Registration Form and order, by signing up for the
Automatic Investment Plan, or for subsequent purchases in any Funds as I may
direct. If I have instructed that a purchase be settled through a debit of my
account, I certify that I have the power and authority to debit the account. I
agree to have sufficient collected funds available in the designated account to
cover the amounts due on purchase of securities at the time of placing my order.
If I have designated another method of payment, I agree to deliver sufficient
collected funds to cover the amount due by 9:00 a.m. (Eastern Time) on the
settlement date. I understand that if sufficient collected funds are not
available, my purchase will be rejected and I will be liable for any resulting
loss.
If the Transfer Agent executes a transaction but fails to receive sufficient
payment for such shares, the Transfer Agent may, without prior notice, redeem
any Pacific Capital shares. I agree to reimburse the Fund or BISYS Fund
Services, Inc. on demand for any costs, losses or liabilities incurred by such
party in collection of the debit balance.
I understand and agree that the Transfer Agent may credit the designated
account with dividend distributions, Automatic Withdrawal Plan, and other
distributions that are payable to me (us) by the Fund Company.
I further understand that the Automatic Withdrawal Plan and the Automatic
Investment Plan may be terminated or modified at any time without notice.
D. FORCE MAJEURE. You shall not be liable for any loss or delay caused directly
or indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond your control.
E. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
F. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to rules,
regulations, customs and usages of the exchange, market or clearinghouse where
executed, all applicable federal and state laws and regulations, and the
policies and procedures as determined by the Fund Company set forth in its then
current prospectus(es).
G. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
H. RELIANCE ON REPRESENTATIONS. I understand that you shall rely on the
information that I have set forth in this Agreement. I agree that all changes to
this information shall be promptly provided to the Transfer Agent in writing.
The Transfer Agent is entitled to rely on this information until I change it by
subsequent written notice.
I. DELIVERY AND RECEIPT. Any orders for transactions in the Funds under this
Agreement will NOT be effective until received and approved by the Distributor
and the Transfer Agent at their offices in Columbus, Ohio. The Distributor and
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
J. INSTRUCTIONS. Neither the Distributor, the Transfer Agent nor the Fund
Company shall be liable for any loss, damages, expense or cost arising out of
any telephone redemption effected in accordance with the Fund Company's
telephone redemption procedures, upon instructions reasonably believed to be
genuine. The Fund Company and its agents will employ procedures designated to
provide reasonable assurance that instructions by telephone are genuine. These
procedures include recording all phone conversations, sending confirmations to
shareholders within 72 hours of the telephone transaction, verification of
account name and account number or tax identification number and sending
redemption proceeds only to the address of record or to a previously authorized
bank account.
K. ARBITRATION. This paragraph contains what is sometimes referred to as a
predispute arbitration clause. In this regard, I am aware of the following:
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) All agreements shall include a statement that "No person shall bring a
putative or certified class action to arbitration, nor seek to enforce any
predispute arbitration agreement against any person who has initiated in court a
putative class action; or who is a member of a putative class who has not opted
out of the class with respect to any claims encompassed by the putative class
action until: (i) the class certification is denied, or (ii) the class is
decertified, or (iii) the person against whom the arbitration agreement would be
enforced is excluded from the class by the court. Such forbearance to enforce an
agreement to arbitrate shall not constitute a waiver of any rights under this
agreement except to the extent stated herein."
It is agreed that any controversy between me and the Fund Company and/or any
of its service providers (including the Investment Adviser) arising out of this
Agreement or my business with you, shall be settled by arbitration conducted in
accordance with the rules of the National Association of Securities Dealers,
Inc. or the American Arbitration Association, as I may elect. Failure to notify
you of such election in writing within five (5) days after receipt from you of a
request for arbitration shall be deemed to be authorization to make such
election on my behalf. Judgement upon the award of the arbitrators may be
entered by any court having jurisdiction.
L. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Investment Adviser, with regard to this
Account, I agree to indemnify and hold each of them, the Fund Company, and their
officers, directors, employees and agents harmless from and against any and all
losses, demands, claims, actions, expenses and attorney's fees arising out of or
in connection with this Agreement which are not caused by their negligence or
willful misconduct. The provisions of this Section shall survive termination of
this Agreement; the provisions of this Section shall be binding on my successors
and assigns.
M. I understand that if disbursements out of this account are to anyone other
than the applicant or the applicant's joint tenant, a signature guarantee will
be required.
N. With respect to Step 3, I understand that if the 1st or 16th should fall on a
non-business day, the transaction will be effective on the next business day.
O. I UNDERSTAND THAT MUTUAL FUND SHARES ARE NOT DEPOSITS OF ANY BANK, ARE NOT
INSURED BY THE FDIC, ARE NOT OBLIGATIONS OF ANY BANK OR THE U.S. GOVERNMENT AND
ARE NOT ENDORSED OR GUARANTEED IN ANY WAY BY ANY BANK.
<PAGE> 122
- --------------------------------------------------------------------------------
STEP 5 DEPOSITORS AUTHORIZATION TO HONOR DEBITS
SECTION A IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT YOU
MUST ALSO COMPLETE STEP 5,
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, BISYS
Fund Services, Inc., and to pay such sums in accordance therewith, provided
my/our account has sufficient funds to cover such drafts or debits. I/We further
agree that your treatment of such orders will be the same as if I/we personally
signed or initiated the drafts or debits.
I/we understand that this authority will remain in effect until you receive
my/our written instructions to cancel this service. I/We also agree that if any
such drafts or debits are dishonored, for any reason, you shall have no
liabilities.
FINANCIAL INSTITUTION ACCOUNT NUMBER
<TABLE>
<S> <C>
NAME AND ADDRESS ------------------------------------------------------------
WHERE MY/OUR NAME OF FINANCIAL INSTITUTION
ACCOUNT IS ------------------------------------------------------------
MAINTAINED STREET ADDRESS
------------------------------------------------------------
CITY STATE ZIP CODE
</TABLE>
<TABLE>
<S> <C> <C>
NAME(S) AND ---------------------------------------------------- ------------------
SIGNATURE(S) OF PLEASE PRINT DATE
DEPOSITOR(S) AS ---------------------------------------------------- ------------------
THEY APPEAR WHERE SIGNATURE DATE
ACCOUNT IS ----------------------------------------------------
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*
THIS AGREEMENT CONTAINS A PREDISPUTE ARBITRATION CLAUSE IN STEP 4, LETTER K.
<TABLE>
<S> <C> <C>
- -------------------------------------------- ------------------------------------------ ------------------
INDIVIDUAL (OR CUSTODIAN) JOINT REGISTRANT, IF ANY DATE
- -------------------------------------------- ------------------------------------------ ------------------
CORPORATE OFFICER, PARTNER, TRUSTEE(S), ETC. TITLE DATE
*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>
<PAGE> 123
SPECIAL INFORMATION
- Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after this
form is received in good order by the 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.
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> 124
For more information about the Pacific Capital Funds, the following documents
are available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain detailed
information on each Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including operations
and investment policies. It is incorporated by reference and is legally
considered a part of this prospectus.
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the Funds, by contacting the Bank of Hawaii or a
broker that sells the Funds. Or contact us at:
PACIFIC CAPITAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-258-9232
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can also get copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act File no. 811-7454.
PCP 0027
<PAGE> 125
QUESTIONS?
Call 800-258-9232 or your
investment representative.
[PACIFIC CAPITAL FUNDS LOGO]
Managed by
Pacific Century Trust
a Division of
Bank of Hawaii
------------------------
Growth Stock Fund
Growth and Income Fund
Value Fund
Small Cap Fund
New Asia Growth Fund
International Stock Fund
Balanced Fund
------------------------
Class A and Class B
Retail Shares
December 1, 1998
<PAGE> 126
PACIFIC CAPITAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
LOGO
LOGO
Carefully review this 3 Growth Stock Fund
important section, which 7 Growth and Income Fund
summarizes each Fund's 11 Value Fund
investments, risks, past 14 Small Cap Fund
performance, and fees. 17 New Asia Growth Fund
21 International Stock Fund
24 Balanced Fund
INVESTMENT OBJECTIVES, POLICIES AND RISKS
LOGO
LOGO
Review this section for 27 Growth Stock Fund
details on each Fund's 27 Growth and Income Fund
investment strategies and 27 Value Fund
risks. 27 Small Cap Fund
28 New Asia Growth Fund
28 International Stock Fund
29 Balanced Fund
30 Main Risks
FUND MANAGEMENT
LOGO
LOGO
Review this section for 33 The Investment Adviser
details on the people and 33 The Sub-Advisers
organizations who oversee 33 Portfolio Managers
the Funds. 35 The Distributor and Administrator
SHAREHOLDER INFORMATION
LOGO
LOGO
Review this section for 36 Pricing of Fund Shares
details on how shares are 37 Purchasing and Adding to Your Shares
valued, how to purchase, 40 Selling Your Shares
sell and exchange shares, 44 Distribution Arrangements/Sales Charges
related charges, and 50 Exchanging Your Shares
payments of dividends and 51 Dividends, Distributions and Taxes
distributions.
OTHER INFORMATION ABOUT THE FUNDS
LOGO
LOGO
Review this section for 52 Financial Highlights
details on selected
financial highlights of the
Funds.
</TABLE>
2
<PAGE> 127
logo
logo Q
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES - Long term capital appreciation
- Secondarily, dividend income
PRINCIPAL INVESTMENT The Fund invests primarily in a diversified portfolio of common stocks of
STRATEGIES U.S. and foreign companies with market capitalizations (total market price
of equity securities) greater than $750 million, and securities that are
convertible into such common stocks. The Fund may invest a significant
portion of its assets in smaller and newer companies. The Fund focuses on
companies whose earnings are growing substantially faster than the average
for the U.S. market.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments will fluctuate with market
conditions, so will the value of your investment in the Fund. You could lose
money on your investment in the Fund, or the Fund could underperform other
investments.
The values of the Fund's investments fluctuate in response to the activities
of individual companies and general stock market and economic conditions.
Stock prices of smaller and newer companies fluctuate more than larger more
established companies. In addition, the performance of foreign securities
depends on different political and economic environments and other overall
economic conditions in countries where the Fund invests. The values of the
Fund's convertible securities are also affected by movement in interest
rates; if rates rise, the values of convertible securities may fall.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- are investing for long term goals
- want potential capital appreciation and are willing to accept the higher
risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- regular income
- a short term investment
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
</TABLE>
3
- -
<PAGE> 128
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
The two charts on this page
show how the Growth Stock
Fund has performed and
provides some indication of
the risks of investing in
the Fund by showing how its
performance has varied from
year to year. The bar chart
shows changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the S&P 500(R), a widely
recognized index of U.S.
common stocks.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
<TABLE>
<S> <C>
1988 7.64%
89 30.77%
90 2.26%
91 35.25%
92 2.07%
93 6.91%
94 -1.22%
95 29.79%
96 14.75%
97 30.19%
</TABLE>
LOGO
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares differ from the Class A
returns shown in the bar chart because of
differences in each Class' expenses. The
table assumes that Class B shareholders
redeem all their Fund shares at the end of
the period indicated.
Best quarter: Q2
1997 +18.67%
Worst quarter: Q3
1990 -14.29%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A 10/31/77 25.02% 14.47% 14.59% 12.44%
(with 4.00% sales charge)
CLASS B** 10/31/77 26.19% 15.30% 15.07% 12.67%
(with applicable CDSC)
S&P 500(R) INDEX 10/31/77 19.35% 22.92% 18.47% 16.70%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on November 1, 1993, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Class B shares of the Fund commenced operations on March 2, 1998.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 4.00% sales charge) and
Class B shares (with applicable CDSC), were 0.70% and -0.53%, respectively,
versus 6.01% for the S&P 500(R) Index.
4
<PAGE> 129
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
As an investor in the Growth
Stock Fund, you will pay
the following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee 0.80% 0.80%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.30% 0.30%
Total Fund operating expenses* 1.85% 2.10%
</TABLE>
* The Distributor is limiting the 12b-1 fee
for Class A shares to 0.25%. The
Administrator is waiving a portion of the
Administration fee so that Other expenses
are expected to be 0.26%. TOTAL FUND
OPERATING EXPENSES AFTER THESE FEE WAIVERS
ARE EXPECTED TO BE 1.31% AND 2.06% FOR
CLASS A AND B SHARES, RESPECTIVELY. These
expense limitations may be revised or
canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
5
<PAGE> 130
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH STOCK FUND
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $580 $958 $1,361 $2,482
CLASS B SHARES
Assuming redemption $713 $958 $1,329 $2,338
Assuming no redemption $213 $658 $1,129 $2,338
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class
A shares.
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
6
- -
<PAGE> 131
logo
logo Q
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME
FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES - Current income
- Secondarily, long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES high quality, dividend paying common stocks of U.S.
companies with market capitalizations (total market price of
outstanding equity securities) greater than $750 million,
and securities that are convertible into such common stocks.
The Fund focuses on companies whose earnings are growing at
above average rates in relation to other companies in their
industries. The Fund seeks to produce a gross yield that
approximates that of the average for companies in the S&P
500(R).
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. The values of its
convertible securities are also affected by movements in
interest rates; if rates rise, the values of convertible
securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want potential capital appreciation and are willing to
accept higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
7
- -
<PAGE> 132
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME FUND
The two charts on this page
show how the Growth and
Income Fund has performed
and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the yearly
performance of the Fund and
its predecessor over a
period of ten years to
demonstrate that they have
gained and lost value at
differing times. The table
below it compares the
performance of the Fund and
its predecessor over time
to the S&P 500(R) Index, a
widely recognized index of
U.S. common stocks.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES*
LOGO
<TABLE>
<S> <C>
1988 15.89%
89 28.43%
90 -1.82%
91 24.01%
92 0.75%
93 4.67%
94 0.23%
95 26.30%
96 18.39%
97 33.58%
</TABLE>
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares differ from the Class A
returns shown in the bar chart because of
differences in each Class' expenses. The
table assumes that Class B shareholders
redeem all their Fund shares at the end of
the period indicated.
Best quarter: Q2
1997 +18.02%
Worst quarter: Q3
1990 -11.48%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)***
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST 5 PAST 10 SINCE
INCEPTION* YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
CLASS A 10/31/77 28.28% 15.01% 13.90% 10.68%
(with 4.00% sales charge)
CLASS B** 10/31/77 29.58% 15.84% 14.36% 10.90%
(with applicable CDSC)
S&P 500(R) INDEX 10/31/77 19.35% 22.92% 18.47% 16.70%
</TABLE>
* The quoted performance of the Fund includes the performance of a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to October 31, 1977,
and prior to the Fund's commencement of operations on October 14, 1994, as
adjusted to reflect the expenses associated with the Fund. The Commingled
account was not registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
** Class B shares of the Fund commenced operations on March 2, 1998.
*** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 4.00% sales charge) and
Class B shares (with applicable CDSC), were -0.59% and -2.02%, respectively
versus 6.01% for the S&P 500(R) Index.
8
<PAGE> 133
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME FUND
As an investor in the Growth
and Income Fund, you will
pay the following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee 0.80% 0.80%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.32% 0.32%
Total Fund operating expenses* 1.87% 2.12%
</TABLE>
* The Distributor is limiting the 12b-1 fee
for Class A shares to 0.25%. The
Administrator is waiving a portion of the
Administration fee so that Other expenses
are expected to be 0.28%. TOTAL FUND
OPERATING EXPENSES AFTER THESE FEE WAIVERS
ARE EXPECTED TO BE 1.33% AND 2.08% FOR
CLASS A AND B SHARES, RESPECTIVELY. These
expense limitations may be revised or
canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
9
<PAGE> 134
RISK/RETURN SUMMARY AND FUND EXPENSES GROWTH AND INCOME FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $582 $964 $1,371 $2,503
CLASS B SHARES
Assuming redemption $715 $964 $1,339 $2,359
Assuming no redemption $215 $664 $1,139 $2,359
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class
A shares.
10
<PAGE> 135
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES VALUE FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES - Long term capital appreciation
- Secondarily, current income
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES U.S. traded common stocks with market capitalizations (total
market price of outstanding equity securities) greater than
$750 million, and securities that are convertible into such
common stocks. The Fund focuses on companies whose cash flow
to price ratio exceeds that of their industry average and
whose stock price Pacific Century believes is undervalued.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. The values of its
convertible securities, if any, may be affected by movements
in interest rates; if rates rise, the values of convertible
securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
11
<PAGE> 136
RISK/RETURN SUMMARY AND FUND EXPENSES VALUE FUND
As an investor in the Value
Fund, you will pay the
following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee 0.80% 0.80%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.75% 0.75%
Total Fund operating expenses* 2.30% 2.55%
</TABLE>
* The Distributor is limiting the 12b-1 fee
for Class A shares to 0.25%. The
Administrator is waiving a portion of the
Administration fee so that Other expenses
are expected to be 0.71%. TOTAL FUND
OPERATING EXPENSES AFTER THESE FEE WAIVERS
ARE EXPECTED TO BE 1.76% AND 2.51% FOR
CLASS A AND B SHARES, RESPECTIVELY. These
expense limitations may be revised or
canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
12
<PAGE> 137
RISK/RETURN SUMMARY AND FUND EXPENSES VALUE FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $624 $1,090
CLASS B SHARES
Assuming redemption $758 $1,093
Assuming no redemption $258 $ 793
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class
A shares.
13
<PAGE> 138
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES SMALL CAP FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES common stocks of smaller U.S. companies, and securities that
are convertible into such common stocks. The Fund focuses on
stocks its Sub-Adviser believes are undervalued,
fundamentally strong and undergoing positive change.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. The values of the Fund's convertible securities,
if any, may be affected by movements in interest rates; if
rates rise, the values of convertible securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - are investing for long term goals
- want potential capital appreciation and are willing to
accept the higher risks associated with investing in small
cap stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
- regular income
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
14
<PAGE> 139
RISK/RETURN SUMMARY AND FUND EXPENSES SMALL CAP FUND
As an investor in the Small
Cap Fund, you will pay the
following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 5.25%(1, 4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
</TABLE>
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee* 1.10% 1.10%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 0.59% 0.59%
Total Fund operating expenses* 2.44% 2.69%
</TABLE>
* The Adviser is currently limiting the
Management fee to 1.00%, the Distributor is
limiting the 12b-1 fee for Class A shares to
0.25% and the Administrator is waiving a
portion of the Administration fee so that
Other expenses are expected to be 0.55%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 1.80% AND
2.55% FOR CLASS A AND B SHARES,
RESPECTIVELY. In addition, the Adviser has
agreed to limit expenses so that Total Fund
operating expenses will not exceed 2.22% and
2.97% for A and B shares, respectively.
These expense limitations may be revised or
canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
15
<PAGE> 140
RISK/RETURN SUMMARY AND FUND EXPENSES SMALL CAP FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $759 $1,246
CLASS B SHARES
Assuming redemption $772 $1,135
Assuming no redemption $272 $ 835
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
16
<PAGE> 141
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in common and preferred stocks of
INVESTMENT STRATEGIES companies located in the developing countries of Asia (Asian
countries other than Japan), and securities that are
convertible into such common stocks. The Fund may invest in
these securities directly, or indirectly through other
investment companies or trusts that invest the majority of
their assets in the developing countries of Asia. The Fund
does not limit its investments to any particular type or
size of company. The Fund focuses on companies whose
earnings the Sub-Adviser expects to grow or whose share
price it believes is undervalued.
PRINCIPAL INVESTMENT RISKS Because the value of the Fund's investments will fluctuate
with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. In addition, the performance of foreign
securities depends on different political and economic
environments and other overall economic conditions in the
countries where the Fund invests. Emerging country markets
involve greater risk and volatility then more developed
markets. The values of the Fund's convertible securities are
also affected by interest rates.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in
emerging country stocks
- are investing for long-term goals
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- regular income
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
17
<PAGE> 142
LOGO
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
The two charts on this page
show how the New Asia
Growth Fund has performed
and provides some
indication of the risks of
investing in the Fund by
showing how its performance
has varied from year to
year. The bar chart shows
changes in the Fund's
yearly performance since
its inception to
demonstrate that the Fund
has gained and lost value
at differing times. The
table below it compares the
Fund's performance over
time to the Morgan Stanley
Capital International
(MSCI) Far East Index
(excluding Japan), a widely
recognized index of stock
markets in that region.
Both charts assume
reinvestment of dividends
and distributions. Of
course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31
FOR CLASS A SHARES
<TABLE>
<CAPTION>
<S> <C>
96 97
16.00% -24.64%
</TABLE>
The bar chart does not reflect the impact of
any applicable sales charges. The returns
for Class B shares differ from the Class A
returns shown in the bar chart because of
differences in each Class' expenses. The
table assumes that Class B shareholders
redeem all their Fund shares at the end of
the period indicated.
Best quarter: Q2
1996 +8.98%
Worst quarter: Q4
1997 -25.01%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1997)**
<TABLE>
<CAPTION>
PERFORMANCE SINCE
INCEPTION PAST YEAR INCEPTION
<S> <C> <C> <C>
-------------------------------------------
CLASS A
(with 5.25% sales charge) 2/15/95 -28.60% -2.95%
-------------------------------------------
CLASS B*
(with applicable CDSC) 2/15/95 -27.34% -2.01%
-------------------------------------------
MSCI FAR EAST INDEX
(excluding Japan) 2/15/95 -45.17% -7.58%
- ------------------------------------------------------------------------------
</TABLE>
* Class B shares of the Fund commenced operations on March 2, 1998
** For the period January 1, 1998 through September 30, 1998, the aggregate
(non-annualized) total returns of Class A shares (with 5.25% sales charge)
and Class B shares (with applicable CDSC), were -27.47% and -27.53%,
respectively versus -24.09% for the MSCI Far East Index (excluding Japan).
18
<PAGE> 143
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
As an investor in the New
Asia Growth Fund, you will
pay the following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 5.25%(1, 4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee 0.90% 0.90%
Distribution (12b-1) fee 0.75%* 1.00%
Other expenses* 1.28% 1.28%
Total Fund operating expenses* 2.93% 3.18%
</TABLE>
* The Distributor is limiting the 12b-1 fee
for Class A shares to 0.25%. The
Administrator is waiving a portion of the
Administration fee so that Other expenses
are expected to be 1.23%. THE ADVISER HAS
AGREED TO LIMIT EXPENSES SO THAT TOTAL
FUND OPERATING EXPENSES WILL NOT EXCEED
2.22% AND 2.97% FOR CLASS A AND B SHARES,
RESPECTIVELY. These expense limitations
may be revised or canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
19
<PAGE> 144
RISK/RETURN SUMMARY AND FUND EXPENSES NEW ASIA GROWTH FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $805 $1,384 $1,987 $3,606
CLASS B SHARES
Assuming redemption $821 $1,280 $1,864 $3,401
Assuming no redemption $321 $ 980 $1,664 $3,401
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class A
shares.
20
<PAGE> 145
logo
logo Q
RISK/RETURN SUMMARY AND FUND EXPENSES INTERNATIONAL STOCK
FUND
- -
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Long term capital appreciation
PRINCIPAL The Fund invests primarily in common and preferred stocks of
INVESTMENT STRATEGIES foreign companies and securities that are convertible into
common stocks. The Fund may invest in these securities
directly, or indirectly through other investment companies
or trusts. The Fund does not limit its investments to any
particular type or size of company or to any region of the
world. The Fund focuses on companies whose earnings the Sub
Adviser expects to grow or whose share price it believes is
undervalued.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's investments fluctuate in response
to the activities of individual companies and general stock
market and economic conditions. Stock prices of smaller and
newer companies fluctuate more than larger more established
companies. In addition, the performance of foreign
securities depends on different political and economic
environments and other overall economic conditions in the
countries where the Fund invests. Emerging country markets
involve greater risk and volatility than more developed
markets. The values of the Fund's convertible securities are
also affected by interest rates; if rates rise, the values
of convertible securities may fall.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want potential capital appreciation and are willing to
accept the higher risks associated with investing in foreign
stocks
- are investing for long-term goals
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
- regular income
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
21
<PAGE> 146
RISK/RETURN SUMMARY AND FUND EXPENSES INTERNATIONAL STOCK FUND
As an investor in the
International Stock Fund,
you will pay the following
fees and expenses.
Shareholder transaction
fees are paid from your
account. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 5.25%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee(*) 1.10% 1.10%
Distribution (12b-1) fee 0.75%(*) 1.00%
Other expenses(*) 0.97% 0.97%
Total Fund operating expenses(*) 2.82% 3.07%
</TABLE>
* The Adviser is currently limiting the
Management fee to 1.00%, the Distributor is
limiting the 12b-1 fee for Class A shares
to 0.25% and the Administrator is waiving a
portion of the Administration fee so that
Other expenses are expected to be 0.93%.
TOTAL FUND OPERATING EXPENSES AFTER THESE
FEE WAIVERS ARE EXPECTED TO BE 2.18% AND
2.93% FOR CLASS A AND B SHARES,
RESPECTIVELY. In addition, the Adviser has
agreed to limit expenses so that Total Fund
operating expenses will not exceed 2.22%
and 2.97% for A and B shares, respectively.
These expense limitations may be revised or
canceled at any time.
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
22
<PAGE> 147
RISK/RETURN SUMMARY AND FUND EXPENSES INTERNATIONAL STOCK FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $795 $1,353
CLASS B SHARES
Assuming redemption $810 $1,248
Assuming no redemption $310 $ 948
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class
A shares.
PERFORMANCE INFORMATION
This is a new Fund for which
performance information is
not yet available.
23
<PAGE> 148
logo
logo
RISK/RETURN SUMMARY AND FUND EXPENSES BALANCED FUND
THIS FUND IS NOT CURRENTLY BEING OFFERED TO THE
PUBLIC.
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE - Current income
- Secondarily, long term capital appreciation
PRINCIPAL The Fund invests primarily in a diversified portfolio of
INVESTMENT STRATEGIES common stocks, bonds and securities that are convertible
into common stocks. It invests principally in U.S.
companies. The Fund may invest a significant portion of its
assets in medium and smaller-sized companies. By using a
combination of stocks and bonds, which often fluctuate in
different directions, the Fund seeks to provide above
average income, good long term growth and lower volatility
than a pure stock portfolio.
PRINCIPAL Because the value of the Fund's investments will fluctuate
INVESTMENT RISKS with market conditions, so will the value of your investment
in the Fund. You could lose money on your investment in the
Fund, or the Fund could underperform other investments.
The values of the Fund's stock investments fluctuate in
response to the activities of individual companies and
general stock market and economic conditions. Stock prices
of medium and smaller size companies fluctuate more than
larger more established companies. The values of the Fund's
bond investments fluctuate in response to movements in
interest rates. If rates rise, the values of bonds generally
fall; the longer the remaining maturity of the bonds, the
greater the fluctuation. The values of the Fund's
convertible securities are also affected by interest rates.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - want current income
- want potential capital appreciation and are willing to
accept the higher risks associated with investing in stocks
- want professional portfolio management
This Fund is not appropriate for anyone seeking:
- safety of principal
- a short term investment
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
24
<PAGE> 149
RISK/RETURN SUMMARY AND FUND EXPENSES BALANCED FUND
THIS FUND IS NOT CURRENTLY BEING OFFERED TO THE
PUBLIC.
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES
Maximum sales charge (load) on
Purchases (as a % of offering
price) 4.00%(1,4) None(4)
Maximum deferred sales charge
(load) None(2) 5.00%(3)
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES
Management fee(*) 0.80% 0.80%
Distribution (12b-1) fee 0.75%(*) 1.00%
Other expenses(*) 0.46% 0.46%
Total Fund operating expenses* 2.01% 2.26%
</TABLE>
* The Distributor is limiting the 12b-1 fee
for Class A shares to 0.25%. The
Administrator is waiving a portion of the
Administration fee so that Other expenses
are expected to be 0.42%. TOTAL FUND
OPERATING EXPENSES AFTER THESE FEE WAIVERS
ARE EXPECTED TO BE 1.47% AND 2.22% FOR
CLASS A AND B SHARES, RESPECTIVELY. These
expense limitations may be revised or
canceled at any time.
As an investor in the
Balanced Fund, you will
pay the following fees and
expenses. Shareholder
transaction fees are paid
from your account. Annual
Fund operating expenses
are paid out of Fund
assets, and are reflected
in the share price. If you
purchase shares through a
broker or other investment
representative, including
an affiliate of Pacific
Century, they may charge
you an account-level fee
for additional services
provided to you in
connection with your
investment in the Fund.
CONTINGENT DEFERRED
SALES CHARGE
Class B shares impose a back
end sales charge (load) if
you sell your shares
before a certain period of
time has elapsed. This is
called a Contingent
Deferred Sales Charge
("CDSC").
(1) Lower sales charges are available depending upon the amount invested.
(2) For investments of $1 million or more, a Contingent Deferred Sales Charge
is applicable to redemptions within one year of purchase.
(3) A Contingent Deferred Sales Charge applies to your redemption of Class B
shares before the sixth anniversary of your purchase, declining from 5%
within the first year to 0% after the sixth year.
(4) Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
fees.
25
<PAGE> 150
RISK/RETURN SUMMARY AND FUND EXPENSES BALANCED FUND
Use this table to compare fees
and expenses of the Fund with
those of other funds. It
illustrates the amount of
fees and expenses you would
pay assuming the following:
- $10,000 investment in the
Fund
- 5% annual return
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your actual
costs will be different.
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A SHARES $596 $1,005 $1,440 $2,644
CLASS B SHARES
Assuming redemption $729 $1,006 $1,410 $2,504
Assuming no redemption $229 $ 706 $1,210 $2,504
</TABLE>
After approximately eight years, Class B
shares will automatically convert to Class
A shares.
26
<PAGE> 151
logo
logo
INVESTMENT OBJECTIVES, POLICIES AND RISKS
GROWTH STOCK FUND
The Growth Stock Fund seeks to make your investment grow over the long term,
and secondarily to provide you with current income.
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of common stocks of U.S. and foreign companies with market
capitalizations (total market price of outstanding equity securities) greater
than $750 million, and in securities that are convertible into such common
stocks. It may invest in securities issued by large, well-established
companies as well as smaller companies, subject to a minimum market
capitalization of $50 million at the time of purchase The Fund focuses on
companies whose earnings are growing substantially faster than the average
for the U.S. market.
The Fund can also invest in other types of equity and investment grade debt
instruments issued by domestic and foreign companies and governments, and can
use futures contracts, options and other investment techniques for the
purpose of cash flow management and/or risk reduction.
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to provide you with current income, and
secondarily to make your investment grow over the long term.
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of high quality, dividend paying common stocks of U.S. companies
with market capitalizations (total market price of outstanding equity
securities) greater than $750 million, and securities convertible into such
common stocks. The Fund seeks to produce a gross yield that approximates that
of the average for companies in the S&P 500. The Fund focuses on companies
whose earnings are growing at above average rates in relation to other
companies in their industries. However, to a lesser extent it may invest in
lower yielding but higher growth-oriented investments to achieve more growth
potential.
The Fund does not limit its investments to any particular type or size of
company. It can also invest in other types of equity and investment grade
debt instruments issued by domestic and foreign companies and governments,
and can use futures contracts, options and other investment techniques for
the purpose of cash flow management and/or risk reduction.
VALUE FUND
The Value Fund seeks to provide you with long term growth, and secondarily
current income.
Normally, the Fund invests primarily in U.S. traded common stocks with market
capitalizations (total market price of outstanding equity securities) greater
than $750 million, and securities that are convertible into such common
stocks (such as warrants, convertible preferred stock, fixed rate preferred
stock, convertible fixed-income securities, options and rights). The Fund
focuses on middle to large capitalization companies whose cash flow to price
ratio exceeds that of their industry average and whose stock price Pacific
Century believes is undervalued. The Fund can also invest in other types of
equity and investment grade debt instruments issued by domestic and foreign
companies and governments, and can use futures contracts, options and other
investment techniques for the purpose of cash flow management and/or risk
reduction.
SMALL CAP FUND
The Small Cap Fund seeks to make your investment grow over the long term.
Normally, the Fund invests at least 65% of its total assets in a diversified
portfolio of common stocks of primarily smaller U.S. companies, and in
securities that are convertible into such common stocks. The Fund invests
primarily in stocks from a universe of U.S. companies with market
capitalizations within
27
<PAGE> 152
INVESTMENT OBJECTIVES, POLICIES AND RISKS
the range of capitalizations included in the Russell 2000 Value Index at the
time of purchase. As of September 30, 1998, the companies in the Russell 2000
Value Index had a market capitalization of up to approximately $1.2 billion.
The Fund focuses on stocks its Sub-Adviser believes are undervalued,
fundamentally strong and undergoing positive change.
The Fund can also invest in other types of equity and investment grade debt
instruments issued by domestic and foreign companies and governments,
including securities issued by larger companies. In addition, it can use
futures contracts, options and other investment techniques for the purpose of
cash flow management and/or risk reduction.
NEW ASIA GROWTH FUND
The New Asia Growth Fund seeks to make your investment grow over the long
term.
Normally, the Fund invests at least 70% of its total assets in common stocks,
common stock equivalents (such as preferred or debt securities convertible
into common stock), and preferred stocks of companies located in the
developing countries of Asia. The Fund invests in these securities directly,
or indirectly through other investment companies or trusts that invest the
majority of their assets in the developing countries of Asia.
For these purposes, developing countries of Asia include all countries in
Asia other than Japan. This includes but is not limited to Hong Kong, China,
India, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan,
Pakistan, Bangladesh, Sri Lanka and Thailand. An issuer is located in a
developing Asian country if it is organized under the laws of the country, if
it derives 50% or more of its total revenues from business in the country, or
if its equity securities are traded principally on a securities exchange in
the country.
The Fund does not limit its investments to any particular type or size of
company. It may invest in companies, large or small, whose earnings its
investment adviser believe have a relatively strong growth trend, or in
companies that it does not anticipate to grow but whose share price it
believes is undervalued. In selecting and maintaining a portfolio of
investments in any country, the Fund's investment adviser considers the
investment instruments traded in the country's stock markets and the upside
potential of such markets (including 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 does not give important
consideration to current income from dividends and interest in selecting
portfolio securities.
The Fund may invest to a lesser degree in debt securities and other
instruments if Pacific Century or its Sub-Adviser believes they would help
achieve the Fund's objective; up to 10% of its net assets may be invested in
debt securities rated below investment grade. The Fund may also invest up to
35% of its total assets in any combination of equity, investment grade debt
and convertible securities of issuers located outside the developing
countries of Asia, including the United States, and can use futures
contracts, options and other investment techniques for the purpose of cash
flow management and/or risk reduction.
INTERNATIONAL STOCK FUND
The International Stock Fund seeks to make your investment grow over the long
term.
28
<PAGE> 153
INVESTMENT OBJECTIVES, POLICIES AND RISKS
Normally, the Fund invests at least 65% of its total assets in common stocks,
common stock equivalents (such as preferred or debt securities convertible
into common stock), and preferred stocks of foreign companies. The Fund
invests in these securities directly, or indirectly through other investment
companies or trusts that invest the majority of their assets in foreign
companies.
The Fund does not limit its investments to any particular country or type or
size of company. It may invest in companies, large or small, whose earnings
its investment adviser believe have a relatively strong growth trend, or in
companies that it does not anticipate to grow but whose market value per
share it believes is undervalued. In selecting and maintaining a portfolio of
investments in any country, the Fund's investment adviser considers the
investment instruments traded in the country's stock markets and the upside
potential of such markets (including 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 does not give important consideration to current income from
dividends and interest in selecting portfolio securities.
The Fund may invest to a lesser degree in investment grade debt securities
and other instruments if Pacific Century or its Sub-Adviser believes they
would help achieve the Fund's objective. The Fund may also invest up to 35%
of its total assets in any combination of equity, investment grade debt and
convertible securities of issuers located in the United States, and can use
futures contracts, options and other investment techniques for the purpose of
cash flow management and/or risk reduction.
A BALANCED FUND
The Balanced Fund seeks to provide you with current income, and secondarily
to make your investment grow over the long term. This Fund is currently not
being offered to the public.
Normally, the Fund invests primarily in common stocks and bonds of U.S.
companies, and securities that are convertible into such common stocks (such
as warrants, convertible preferred stock, fixed rate preferred stock,
convertible fixed-income securities, options and rights). By using a
combination of stocks and bonds which often fluctuate in different
directions, the Fund seeks to provide above average income, good long term
growth and lower volatility than a pure stock portfolio. It invests at least
30% of the value of its total assets in investment grade fixed-income
securities that are senior to the issuers' other debt securities. The Fund
can also invest in non-convertible preferred stocks and other types of equity
and investment grade debt instruments issued by domestic and foreign
companies and governments, and can use futures contracts, options and other
investment techniques for the purpose of cash flow management and/or risk
reduction.
The Fund may invest in common stocks of large companies (with market
capitalizations of more than $750 million at the time of purchase) as well as
medium and smaller sized companies (with market capitalizations of at least
$250 million but less than $750 million at the time of purchase). (Market
capitalization is the total market price of a company's outstanding equity
securities.) It seeks to invest no more than 50% of its total assets in the
securities of medium and smaller sized companies. However, the actual
percentage may vary according to changes in market conditions and Pacific
Century's judgment about how best to achieve the Fund's investment objective.
The Fund selects common stocks on the basis of companies' strong earnings
growth trends, above-average prospects for future earnings growth, and
diversification among industries and companies.
29
- -
<PAGE> 154
INVESTMENT OBJECTIVES, POLICIES AND RISKS
In selecting preferred stocks, bonds and convertible securities, it also
considers companies' strong earnings and credit records and their ability to
provide current income.
MAIN RISKS
The value of your investment in any of the Funds will go up and down, which
means that you could lose money. You should consider an investment in any of
the Funds as a long-term investment.
STOCKS. The values of stocks fluctuate in response to the activities of
individual companies and general stock market and economic conditions, and
stock prices may decline over short or even extended periods. Stocks are more
volatile and riskier than some other forms of investment, such as short-term
high-grade fixed income securities.
SMALL COMPANIES. Securities of smaller and newer companies may present
greater opportunities than larger and more established companies for capital
appreciation because of high potential earnings growth. But they also may
involve greater risk. Such companies 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 stock 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 stock prices.
FOREIGN SECURITIES. Investments in foreign securities involve risks that are
not typically associated with domestic securities. Changes in foreign
currency exchange rates will affect the values of investments quoted or
payable in currencies other than the U.S. dollar. Less information may be
publicly available about foreign issuers. They also are not generally subject
to the same accounting, auditing and financial reporting standards as
domestic issuers. Foreign stock markets have different clearance and
settlement procedures, and higher brokerage commissions and transaction
costs, than U.S. markets. In addition, foreign exchanges, brokers and issuers
generally are not supervised or regulated as closely as in the United States.
Furthermore, foreign income tax laws may require withholding of interest,
gains or dividends. Certain other adverse developments could also occur, such
as expropriation or confiscatory taxation, political or social instability,
or diplomatic developments that could adversely affect investments and the
ability to enforce contracts.
EMERGING MARKETS. The securities markets of developing countries involve
greater risks than more developed markets. These securities markets are not
as large as U.S. markets, have substantially less trading volume, and have a
high concentration of investors and financial intermediaries, resulting in a
lack of liquidity and high price volatility.
Substantial economic uncertainties exist for developing countries. They may
have overburdened infrastructures and obsolete financial systems as well as
environmental problems. Certain economies depend on exports of primary
commodities and are vulnerable to changes in commodity prices, which in turn
may be affected by a variety of factors. In addition, the governments of many
such countries have a heavy role in regulating and supervising their
economies, and their economies are heavily export oriented and dependent on
international trade. Certain developing countries are large debtors to
commercial banks and foreign governments. Some have experienced substantial
and volatile rates of inflation and currency devaluations.
Substantial social and political uncertainties also exist for many developing
countries. These may result from factors such as authoritarian governments;
popular unrest associated with demands for improved
30
- -
<PAGE> 155
INVESTMENT OBJECTIVES, POLICIES AND RISKS
political, economic and social conditions; internal insurgencies and hostile
relationships with neighboring countries. This instability could impair the
financial conditions of issuers or disrupt their financial markets.
A number of Asian countries are currently experiencing economic difficulties
and significant declines in values in their financial markets as a result of
the convergence of a number of these social, political and economic factors.
The unsettled condition of several Asian financial markets has also affected
emerging markets in other countries and regions. These conditions could
continue or deteriorate further in the future.
A variety of other factors may also adversely impact the Funds' investments
in countries with emerging securities markets. These include matters such as
archaic legal systems; inflation accounting rules that indirectly generate
losses or profits; less developed systems for registration, transfer and
custody of securities; restrictions on foreign investments in capital
markets; limitations on the manner in which the Funds may invest in
securities; and limitations on repatriation of income, capital, or the
proceeds of sales of securities.
CONVERTIBLE SECURITIES. 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 common stock of the same or other issuers. Convertible securities
are usually subordinated in right of payment to nonconvertible debt
securities of the same issuer, but are senior to common stocks in an issuer's
capital structure. Their prices tend to be influenced by changes in interest
rates (in the same manner as described below for debt securities) as well as
changes in the market value of the common stock into which they can be
converted.
DEBT SECURITIES. The values of the debt securities held by the Funds
fluctuate in response to movements in interest rates. When rates rise, the
values generally fall, and when rates decline, the values generally increase.
In addition, the issuers of any of the debt securities held by the Funds may
fail to pay interest or principal when due.
The Funds generally will only acquire bonds that are rated investment grade
at the time of purchase, which means they are rated in one of the top four
categories by a nationally recognized statistical rating organization, or
unrated obligations that Pacific Century or its Sub-Adviser determines are
comparable. However, obligations with the lowest of these ratings have some
speculative characteristics, and changes in economic conditions are more
likely to lead to the issuer's weakened capacity to make principal and
interest payments than higher rated securities. If the rating of a security
decreases after a Fund buys it, or it is no longer rated, Pacific Century or
its Sub-Adviser will decide whether the Fund should continue to hold the
security.
The New Asia Growth Fund and International Stock Fund may each invest up to
10% of its net assets in securities rated below investment grade or of
comparable quality, commonly referred to as "junk bonds" or "high yield/high
risk securities." These investments are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal as
required, and generally are less liquid and have greater price volatility
than higher rated securities. The Fund may not purchase debt securities that
are in default, except that it can invest up to 5% of its total assets in
sovereign (government) debt that is in default.
YEAR 2000 AND THE PACIFIC CAPITAL FUNDS. Like other funds and business
organizations around the world, the Funds could be adversely affected if the
computer systems used by Pacific Century and the Funds' other service
providers do not properly process date-related information for the year 2000
and beyond. The Funds understand that their key service providers are taking
steps to address this issue. In
31
- -
<PAGE> 156
INVESTMENT OBJECTIVES, POLICIES AND RISKS
addition, the problem may adversely affect the companies and other issuers in
which the Funds invest. For example, they may incur substantial costs to
correct the problem and may suffer losses caused by data processing errors.
Management of the Funds and Pacific Century will continue to monitor
developments relating to this issue.
EURO INTRODUCTION. The European Union's planned introduction of a single
European currency, the Euro, on January 1, 1999 creates certain
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will be prepared for the change, the legal
treatment of certain outstanding financial contracts that refer to existing
currencies, and the creation of suitable clearing and settlement payment
systems for the new currency. These or other related factors could cause
market disruptions before or after the introduction of the Euro. The Trust
understands that Pacific Century and other key service providers are taking
steps to address Euro-related issues.
The most recent information about each Fund's portfolio holdings can be found
in its annual or semi-annual report. For information about receiving this
report, see the back cover.
32
<PAGE> 157
logo
logo Q
FUND MANAGEMENT
- -
THE INVESTMENT ADVISER
Pacific Century Trust, ("Pacific Century"), 111 S. King Street, Honolulu,
Hawaii 96813, a division of Bank of Hawaii, is the adviser for the Funds.
Pacific Century has managed the financial assets of corporations and
institutional investors for more than a century. Pacific Century, formerly
known as Hawaiian Trust Company, is among the top 50 trust firms in the
United States based on assets under management and oversees more than $14
billion in client assets. The Pacific Century investment management
team -- including portfolio managers, financial analysts and economists -- is
responsible for over $8 billion of these assets.
For these advisory services, the Funds paid Pacific Century as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS FOR
YEAR ENDED 7/31/98
<S> <C>
------------------------------
Growth Stock Fund .80%
------------------------------
Growth and Income Fund .80%
------------------------------
Value Fund N/A
------------------------------
Small Cap Fund N/A
------------------------------
New Asia Growth Fund .75%*
------------------------------
International Stock Fund N/A
------------------------------
Balanced Fund N/A
---------------------------------------------------------------------
</TABLE>
* Pacific Capital waived a portion of its fees for the fiscal year.
Contractual fees (without waivers) are: Growth Stock Fund, .80%; Growth and
Income Fund, .80%; Value Fund, .80%; Small Cap Fund, 1.10%; New Asia Growth
Fund, .90%; International Stock Fund, 1.10% and Balanced Fund, .80%.
THE SUB-ADVISERS
Nicholas-Applegate Capital Management, 600 W. Broadway, San Diego, California
92101, is the Sub-Adviser to the International Stock Fund and the Small Cap
Fund, and provides investment advisory services with respect to management of
those Funds' portfolios. Its affiliate, Nicholas-Applegate Capital Management
(Hong Kong) LLC ("NACM Hong Kong"), is the Sub-Adviser to the New Asia Growth
Fund and provides investment advisory services with respect to management of
the foreign component of that Fund's portfolio. Their fees are paid by
Pacific Century.
PORTFOLIO MANAGERS
Management of the Funds is coordinated by Pacific Century's investment unit,
which is staffed with more than 40 people, including seven Chartered
Financial Analysts and nine M.B.A.'s. All investment decisions of Pacific
Century for the Funds it advises are made by a committee, with individual
portfolio managers having day-to-day responsibility for managing the Funds.
GROWTH STOCK FUND. Roger Khlopin, CFA, serves as a Vice President and Team
Leader on the Equity Investment Team at Pacific Century and has been
primarily responsible for the day-to-day management of the Fund since 1997.
Mr. Khlopin joined Pacific Century in 1992 as a securities analyst and
portfolio manager. Prior to joining Pacific Century, Mr. Khlopin served as a
broker with Dean Witter from 1990 to 1991, and as a securities analyst with
Smith Barney from 1981 to 1989, and Sanford C. Bernstein & Company from 1980
to 1981.
33
- -
<PAGE> 158
FUND MANAGEMENT
THE INVESTMENT ADVISER
CONTINUED
GROWTH AND INCOME FUND. Clyde Powers, CFA, serves as a Vice President and
Team Leader on the Equity Investment Team at Pacific Century and has been
primarily responsible for the management of the Fund since 1997. Mr. Powers
has 26 years of experience managing growth funds and growth oriented
portfolios for institutional investors. Prior to joining Pacific Century in
1997, Mr. Powers served as a portfolio manager for Amcore Investment Group
from 1995 to 1997, and as Managing Director -- Investment Operations for
Union Capital Advisors from 1984 to 1995.
VALUE FUND. A team of Dave Zerfoss, CFA, Scott Takemoto, CFA and Derwin Osada
is responsible for the day-to-day management of the Fund. Mr. Zerfoss serves
as Vice President and Manager on the Equity Investment Team at Pacific
Century. Prior to joining Pacific Century in 1969, Mr. Zerfoss served as a
portfolio manager with First National Bank of Chicago. Mr. Takemoto serves as
Vice President on the Equity Investment Team at Pacific Century. Mr. Takemoto
has served as a sector analyst and Senior Portfolio Manager with Pacific
Century from 1992 to the present. Mr. Osada has served as a Portfolio Manager
with Pacific Century from 1994 to the present.
SMALL CAP FUND. A team headed by Catherine Somhegyi, Larry Speidell, Mark
Stuckelman and John Kane is responsible for the day-to-day management of the
Fund. Ms. Somhegyi, a Partner of Nicholas-Applegate Capital Management, is
its Chief Investment Officer for Global Equity Management and has managed
assets for clients of the firm since 1987. Mr. Speidell, a Partner of
Nicholas-Applegate Capital Management, has been Director of Global/Systematic
Portfolio Management and Research since 1994; he has 23 years prior
investment management experience with Batterymarch Financial Management and
Putnam Management Company. Mr. Stuckelman is a Portfolio Manager in the
systematic equity group. Prior to joining Nicholas-Applegate in 1995, Mr.
Stuckelman was a senior quantitative analyst with Wells Fargo Bank's
Investment Management Group and responsible for the management of
risk-controlled equity portfolios at Fidelity Management Trust Co. In
addition, he was a senior consultant with BARRA. He has seven years of
investment experience. Mr. Kane, a Partner of Nicholas-Applegate Capital
Management, is the team leader of its systematic domestic equity group. Prior
to joining the firm in 1994, he directed the investment group at ARCO
Investment Management Company. He has 29 years of economic and investment
experience.
NEW ASIA GROWTH FUND. Tim Greaton, Senior Portfolio Manager of NACM Hong
Kong, has been primarily responsible for the day-to-day management of the
Fund since 1995. Mr. Greaton joined NACM Hong Kong in 1997. Prior to joining
NACM Hong Kong, Mr. Greaton served as Senior Portfolio Manager of Credit
Lyonnais International Asset Management (HK) Limited from 1992 to 1997.
INTERNATIONAL STOCK FUND. A team headed by Catherine Somhegyi, Larry Speidell
Loretta Morris, Alexander Muromcew, Melisa Grigolite and John Tribolet is
responsible for the day-to-day management of the Fund. Ms. Somhegyi, a
Partner of Nicholas-Applegate Capital Management, is its Chief Investment
Officer for Global Equity Management and has managed assets for clients of
the firm since 1987. Mr. Speidell, a Partner of Nicholas-Applegate Capital
Management, has been Director of Global/Systematic Portfolio Management and
Research since 1994; he has 23 years prior investment management experience
with Batterymarch Financial Management and Putnam Management Company. Ms.
Morris, a Partner of Nicholas-Applegate Capital Management, focuses on the
management of
34
- -
<PAGE> 159
FUND MANAGEMENT
international and global portfolios. She has managed assets for clients of
the firm since 1990 and has 18 years investment experience. Mr. Muromcew is a
Portfolio Manager on the Global/Systematic International team. Prior to
joining Nicholas-Applegate in 1996, Mr. Muromcew was an analyst with Teton
Partners, L.P., Emerging Markets Investors Corp. and Jardine Fleming
Securities. He has eight years of investment experience. Ms. Grigolite is a
Portfolio Manager responsible for international and global portfolio
management and research. She joined the firm in 1991 and has seven years
investment experience. Mr. Tribolet is a Portfolio Manager responsible for
portfolio management and research for international portfolios. Mr. Tribolet
joined the firm in 1997 and has four years prior investment banking
experience with Paine Webber and Kemper Securities. He has six years of
investment experience.
BALANCED FUND. The Balanced Fund has not commenced operations as of the date
of this prospectus.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ("BISYS") is the Funds' distributor and BISYS Fund
Services Ohio, Inc. is the Funds' administrator. The address of each is 3435
Stelzer Road, Columbus, Ohio 43219.
35
<PAGE> 160
logo
logo Q
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NAV IS CALCULATED
NAV is calculated by adding
the total value of a Fund's
investments and other
assets attributable to
Class A or B shares,
subtracting its liabilities
attributable to Class A or
B shares, and then dividing
that figure by the number
of outstanding Class A or B
shares of the Fund:
NAV =
Total Assets - Liabilities
------------------------------------------------------------------------------
Number of Shares
Outstanding
Locate your Fund's NAV
daily in The Wall Street
Journal and other
newspapers or call
800-258-9232 for
information.
---------------------------
The price of each Fund's shares is based on its per share net asset value
("NAV"). The NAV for Class A and B
shares of each Fund is determined and
its shares are priced at the close of
regular trading on the New York Stock
Exchange (normally at 4 p.m. Eastern
time) on days the Exchange is open.
Your order will be priced at the next
NAV calculated after your order is
accepted by the Fund (plus any
applicable sales charge).
The Fund's securities are valued at current market prices except for debt
obligations with remaining maturities
of 60 days or less (which are valued
at amortized cost). If market
quotations are not available,
securities will be valued by a method
that the Board of Trustees believes
accurately reflects fair value.
36
<PAGE> 161
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
You can purchase Funds
through the Pacific
Capital Funds'
Distributor or through
brokers and other
investment
representatives,
including an affiliate
of Pacific Century,
which may charge
additional fees and may
require higher minimum
investments or impose
other limitations on
buying and selling
shares. If you purchase
shares through an
investment
representative, it is
responsible for
transmitting orders to
the Distributor by the
Fund's close of business
and may have an earlier
cut-off time for
purchase and sale
requests. Consult your
investment
representative or
institution for specific
information.
<TABLE>
<CAPTION>
MINIMUM INVESTMENTS INITIAL INVESTMENT SUBSEQUENT
<S> <C> <C>
Regular
(non-retirement) $1,000 $50
----------------------------------------------------------
Retirement (IRA) $250 $50
----------------------------------------------------------
Auto Invest Plan $100 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that do
not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement, and the Distributor may reject
a purchase order, if the Distributor
decides this is in the best interest of the
Fund's shareholders. The Funds reserve the
right to suspend or modify the continuous
offering of their shares.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
A Fund must withhold 31% of your taxable dividends, capital gains
distributions and redemptions if you have not provided the Fund your taxpayer
identification number in compliance with IRS rules. To avoid this, make sure
you provide your correct tax identification number (social security number
for most investors) on your account application.
-----------------------------------------------------------------------------
37
<PAGE> 162
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
BY REGULAR MAIL
Initial Investment:
If purchasing through your financial advisor or brokerage account, simply
tell your adviser or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases follow the instructions below.
1. Carefully read, complete and sign the account application. Establishing
your account privileges now saves you the inconvenience of having to add
them later.
2. Make check, bank draft or money order payable to "Pacific Capital Funds"
and include the name of the appropriate Fund(s) on the check.
3. Mail to: Pacific Capital Funds, PO Box 182130, Columbus, OH 43218-2130
Subsequent Investments:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
- Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail investment slip and check to: Pacific Capital Funds,
PO Box 182130, Columbus, OH 43218-2130
BY OVERNIGHT SERVICE
See instructions 1-2 above.
3. Send to: Pacific Capital Funds,
c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.
BY ELECTRONIC PURCHASE
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank. Your bank or broker may charge for this service.
Establish the electronic purchase option on your account application or call
800-258-9232. Your account can generally be set up for electronic purchases
within 15 days.
Call 800-258-9232 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an
electronic purchase or
sale, the transaction is
made through the
Automated Clearing House
(ACH), which may take up
to eight days to clear.
There is generally no fee
for ACH transactions.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
38
<PAGE> 163
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Please call 800-258-9232 for a confirmation number and instructions for
returning your completed application. Follow the instructions below after
receiving your confirmation number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA #044000024
DDA #01891797644
Include:
Your name
Your confirmation number, your account number and the name of the Fund.
AFTER INSTRUCTING YOUR BANK TO WIRE THE FUNDS, CALL 800-258-9232 TO TELL US
THE AMOUNT BEING TRANSFERRED AND THE NAME OF YOUR BANK.
AUTO INVEST PLAN
You can make automatic investments in the Funds from your bank account,
through payroll deduction, or from your federal employment, social security
or other regular government checks. Automatic investments can be as little as
$50, once you've invested the $100 minimum required to open the account.
To invest regularly from your bank account:
1) Complete the Auto Invest Plan portion of your Account Application. Make
sure you note:
J your bank name, address, and account number
J the amount you want to invest automatically (minimum $50)
J how often you want to invest (monthly or quarterly)
2) Attach a voided personal check.
To invest regularly from your pay check or government check:
Call 800-258-9232 for an enrollment form.
The Fund reserves the right to change or eliminate these privileges at any
time with 60 days notice. The Funds also reserve the right to reject any
purchase or to suspend or modify the continuous offering of their shares.
39
<PAGE> 164
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You can sell your shares at
any time. Your sales price
will be the next NAV after
your sell order is
received by the Fund or
your investment
representative. Normally
you will receive your
proceeds within a week
after your request is
received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request
a withdrawal in cash. This is also known as
redeeming shares or a redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B shares, you will be
charged a fee for any shares that have not
been held for a sufficient length of time.
(You will also pay a fee for Class A shares
sold within one year of a purchase of $1
million or more.) These fees will be deducted
from the money paid to you. See the section on
"Distribution Arrangements/Sales Charges"
below for details.
If selling shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times which will affect your redemption. For all
other sales transactions, follow the instructions below.
BY TELEPHONE (UNLESS YOU HAVE DECLINED TELEPHONE SALES PRIVILEGES)
Call 800-258-9232 with instructions as to how you want to receive your funds
(mail, wire, electronic transfer). See "General Policies on Selling Shares"
below.
BY MAIL (SEE "GENERAL POLICIES ON SELLING SHARES -- REDEMPTIONS IN WRITING
REQUIRED" BELOW.)
1. Call 800-258-9232 to request redemption forms, or write a letter of
instruction indicating:
- your Fund and account number
- amount you want to redeem
- address where your check should be sent
- account owner signature
2. Mail to: Pacific Capital Funds, PO Box 182130, Columbus, OH 43218-2130
BY OVERNIGHT SERVICE
1. See instruction 1 above.
2. Send to: Pacific Capital Funds, c/o BISYS Fund Services, Attn: T.A.
Operations, 3435 Stelzer Road, Columbus, OH 43219
40
<PAGE> 165
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must select this option on your account application
The Fund may charge a wire transfer fee. Note: Your financial institution may
also charge a separate fee.
Call 800-258-9232 to request a wire transfer. If you call by 4 p.m. Eastern
time, your payment will normally be wired to your bank on the next business
day. Otherwise, it will normally be wired on the second business day after
your call.
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Note: Your bank may charge for this service.
Call 800-258-9232 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds will normally be credited within
8 days. Otherwise, it will normally take up to 9 days.
AUTO WITHDRAWAL PLAN
You can receive automatic payments from your Class A shares account on a
monthly or quarterly basis. The minimum withdrawal is $100. To activate this
feature:
- Make sure you've checked the appropriate box on the account application.
Or call 800-258-9232.
- Include a voided personal check.
- Your account must have a value of $5,000 or more to start withdrawals.
- If the value of your account falls below $1,000, you may be asked to
invest more to bring the account back to $1,000, or we may close your
account and mail the proceeds to you.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
41
<PAGE> 166
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN
WRITING REQUIRED
You must request redemption in writing in the following situations:
1. All requests for redemptions from individual retirement accounts ("IRAs")
must be in writing.
2. Redemption requests require a signature guarantee when:
- You ask us to make the check payable to someone who is not the owner of
the account
- You ask us to mail the check to an address that is not the address on
your account
- You ask us to wire the proceeds to a commercial bank account that is not
designated on your account application
- The redemption proceeds exceed $50,000
You must obtain a signature guarantee from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program) or SEMP (Stock Exchanges Medallion Program). Members are
subject to dollar limitations which must be considered when requesting their
guarantee. The Transfer Agent may reject any signature guarantee if it
believes the transaction would otherwise be improper.
TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Because of these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Funds, the Transfer Agent, Pacific Century and/or
the Distributor may be liable for losses due to unauthorized transactions.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made an investment by check, you cannot receive any portion of
the redemption proceeds on the same investment until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 business
days). You can avoid this delay by purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission ("SEC") in order to
protect remaining shareholders.
REDEMPTION IN KIND
We reserve the right to make your redemption payment in securities rather
than cash, known as "redemption in kind." This could occur under
extraordinary circumstances, such as a very large redemption that could
affect a Fund's operations (for example, more than 1% of the Fund's net
assets). If we deem it advisable for the benefit of all shareholders, you
will receive securities equal in market value to your redemption price, net
of any CDSC. When you convert these securities to cash, you will pay
brokerage charges.
42
<PAGE> 167
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
CONTINUED
CLOSING OF SMALL ACCOUNTS
If your account falls below $250, we may ask you to increase your balance to
the minimum investment amount. If it is still below $250 after 60 days, we
may close your account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
If you choose to receive distributions in cash and distribution checks are
returned and marked as "undeliverable" or remain uncashed for six months,
your account will be changed automatically so that all future distributions
are reinvested in your account. Checks that remain uncashed for six months
will be canceled and the money reinvested in the Fund. No interest is paid
during the time the check is outstanding.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
43
<PAGE> 168
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor
in different share classes offered by the Fund and ways to qualify for
reduced sales charges. Certain qualified institutional buyers are eligible to
purchase Class Y shares of the Funds. Class Y shares are offered by another
prospectus which is available by calling 800-258-9232.
<TABLE>
<S> <C> <C>
TYPES OF CHARGES CLASS A CLASS B
Sales Charge (Load) Front-end sales charge (at the No front-end sales charge. You may
time of your purchase); reduced incur a contingent deferred sales
sales charges are available.(1) charge on shares redeemed within
six years after purchase; shares
automatically convert to Class A
shares after 8 years.
Distribution (12b-1) Fees Subject to annual distribution Subject to annual distribution
fees of up to .75% of the Fund's fees of up to 1.00% of the Fund's
net assets. net assets.
Fund Expenses Lower annual expenses then Class B Higher annual expenses than Class
shares. A shares.
</TABLE>
(1) You may incur a contingent deferred sales charge on shares sold within
one year of a purchase of $1 million or more.
SHAREHOLDER INFORMATION
44
- -
<PAGE> 169
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CALCULATION OF SALES CHARGE
CLASS A SHARES
The Distributor sells Class A shares at their public offering price. This
price includes the initial sales charge. Therefore, part of the money you pay
for shares will be used to pay the sales charge. The remainder is invested in
Fund shares. The sales charge decreases with larger purchases. There is no
sales charge on reinvested dividends and distributions.
The current sales charge rates and commissions paid to investment
representatives are as follows:
FOR ALL FUNDS EXCEPT THE SMALL CAP FUND, NEW ASIA GROWTH FUND AND
INTERNATIONAL STOCK FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER PAYMENT
YOUR AS A % OF AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
Up to $25,000 4.00% 4.17% 3.60%
----------------------------------------------------------------------------------
$25,000 up to $50,000 3.75% 3.90% 3.38%
----------------------------------------------------------------------------------
$50,000 up to $100,000 3.50% 3.63% 3.15%
----------------------------------------------------------------------------------
$100,000 up to $250,000 3.25% 3.36% 2.93%
----------------------------------------------------------------------------------
$250,000 up to $500,000 3.00% 3.09% 2.70%
----------------------------------------------------------------------------------
$500,000 up to $1,000,000 2.50% 2.56% 2.25%
----------------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00% 0.00%
</TABLE>
(1) You will pay a contingent deferred sales charge (CDSC) on these shares of
up to 1.00% of the purchase price if you redeem them in the first year after
purchase. The Distributor will base this charge on the lower of your cost for
the shares or their NAV at the time of sale. The CDSC does not apply to
reinvested distributions.
45
<PAGE> 170
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
FOR THE SMALL CAP FUND, NEW ASIA GROWTH FUND AND INTERNATIONAL STOCK FUND
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER PAYMENT
YOUR AS A % OF AS A % OF AS A % OF
INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE
<S> <C> <C> <C>
Up to $25,000 5.25% 5.54% 4.73%
----------------------------------------------------------------------------------
$25,000 up to $50,000 4.75% 4.99% 4.28%
----------------------------------------------------------------------------------
$50,000 up to $100,000 4.25% 4.44% 3.83%
----------------------------------------------------------------------------------
$100,000 up to $250,000 3.75% 3.90% 3.38%
----------------------------------------------------------------------------------
$250,000 up to $500,000 3.25% 3.36% 2.93%
----------------------------------------------------------------------------------
$500,000 up to $1,000,000 2.75% 2.83% 2.48%
----------------------------------------------------------------------------------
$1,000,000 and above(1) 0.00% 0.00% 0.00%
</TABLE>
(1) You will pay a contingent deferred sales charge (CDSC) on these shares of
up to 1.00% of the purchase price if you redeem them in the first year after
purchase. The Distributor will base this charge on the lower of your cost for
the shares or their NAV at the time of sale. The CDSC does not apply to
reinvested distributions.
The Distributor pays securities dealers from its own resources up to 1.00% of
the offering price of Class A shares of the Funds for individual sales of $1
million to $5 million and 0.50% of the offering price of Class A shares of
the Funds for individual sales over $5 million.
The Distributor reserves the right to pay the entire sales charge to dealers.
In addition to the compensation paid to investment representatives, the
Distributor may provide promotional incentives in the form of travel
expenses, lodging and bonuses to licensed individuals who sell shares of the
Funds, as well as vacation trips (including lodging at luxury resorts),
tickets to entertainment events and merchandise. In some instances, the
Distributor will make this compensation available only to certain dealers
whose representatives have sold a significant amount of such shares. None of
the Funds or their shareholders pay this promotional compensation.
46
<PAGE> 171
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CALCULATION OF SALES CHARGES
CLASS B SHARES
The Distributor sells Class B
shares at NAV, without any
up-front sales charge.
Therefore, all the money you
invest is used to purchase
Fund shares. However, if you
sell your Class B shares of
the Fund before the sixth
anniversary of purchase, you
will have to pay a contingent
deferred sales charge at the
time of sale. The CDSC will be
based on the lower of the NAV
at the time of purchase or the
NAV at the time of sale
according to the schedule to
the right. There is no CDSC on
reinvested dividends or
distributions. Imposition of
the CDSC and the distribution
fee on Class B shares is
limited by the NASD
asset-based sales charge rule.
<TABLE>
<CAPTION>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
If you sell some but not all of your Class B shares, we will first redeem
certain shares not subject to the CDSC (i.e., shares purchased with
reinvested dividends) followed by shares subject to the lowest CDSC
(typically shares you have held for the longest time).
CONVERSION FEATURE -- CLASS B SHARES
- Your Class B shares automatically convert to Class A shares of the same
Fund eight years after the end of the month of purchase. The dollar value
of Class A shares you receive will equal the dollar value of the B shares
converted.
- After conversion, your shares will be subject to the lower distribution
fees charged on Class A shares, which will increase your investment
return.
- You will not pay any sales charge, fees or taxes when your shares convert.
- If you purchased Class B shares of one Fund which you exchanged for Class
B shares of another Fund, we will calculate your holding period from the
time of your original purchase of Class B shares.
47
<PAGE> 172
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
SALES CHARGE
REDUCTIONS
You may qualify for reduced sales charges under the following circumstances.
- LETTER OF INTENT. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 3% of the total amount you
intend to purchase with your letter of intent.
- RIGHTS OF ACCUMULATION. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- COMBINATION PRIVILEGE. You can combine accounts of multiple Funds or
accounts of immediate family household members (spouse and children under
21) to reduce sales charges. Reduced prices are also available for
investors who are members of certain qualified groups.
SALES CHARGE WAIVERS
CLASS A SHARES
The following qualify for waivers of sales charges:
- Current and retired trustees, directors, employees, and family members of
the Trust, Pacific Century and its affiliates or any other organization
that provides services to the Trust.
- Investors for whom Pacific Century or one of its affiliates acts in a
fiduciary, advisory, custodial, agency or similar capacity (except those
investors for whom Pacific Century Investment Services provides custodial
services).
- 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.
- Other investment companies distributed by the Distributor.
- Investors who purchase shares with the proceeds from the recent redemption
of shares of any non-money market mutual fund with a front-end or back-end
sales charge of equal or greater value.
REINSTATEMENT PRIVILEGE
If you have sold Class A or B shares of a Fund and decide to reinvest in
the same Fund within a 120 day period, you will not be charged the
applicable sales load on amounts up to the value of the shares you sold.
You must provide a written reinstatement request and payment within 120
days of the date your instructions to sell were processed.
48
<PAGE> 173
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
The Distributor will waive the CDSC under certain circumstances, including
the following:
- If the redemption follows the death or disability of a shareholder (or
both shareholders in the case of joint accounts).
- If the redemption is made under an automatic withdrawal plan after the
participant reaches age 59 1/2, as long as the payments are no more than
10% of the account value annually (measured from the date the Transfer
Agent receives the request).
- If the redemption represents the minimum required distribution from a
retirement plan.
- If the shares being redeemed were purchased with reinvested dividends and
distributions.
DISTRIBUTION (12B-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of a Fund's shares and for providing shareholder services. 12b-1
fees are paid from Fund assets on an ongoing basis, and over time will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
- The 12b-1 fees paid by a Fund vary by share class as follows:
1. Class A shares pay a 12b-1 fee of up to .75% of the average daily net
assets of the Fund.
2. Class B shares pay a 12b-1 fee of up to 1.00% of the average daily net
assets of the Fund. This will cause expenses for Class B shares to be
higher and dividends to be lower than for Class A shares.
- The higher 12b-1 fee on Class B shares, together with the CDSC, help the
Distributor sell Class B shares without an "up-front" sales charge. In
particular, these fees help the Distributor cover the cost of advancing
brokerage commissions to investment representatives.
- The Distributor may use up to .25% of the 12b-1 fee for shareholder
servicing and up to .75% for distribution.
Until further notice, the Distributor voluntarily intends to waive a portion
of its 12b-1 fee, so that the fee payable by each Fund will not exceed .25%
of the average daily net asset value attributable to the Fund's Class A
shares on an annual basis.
49
<PAGE> 174
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your
shares in one Fund for
shares of the same class of
another Fund, usually
without paying additional
sales charges (see "Notes"
below). Class A
shareholders may also
exchange their shares for
service class shares of
other investment companies
for which Pacific Century
serves as investment
adviser. These are the
Pacific Capital Cash Assets
Trust, the Pacific Capital
Tax-Free Cash Assets Trust
and the Pacific Capital
U.S. Government Securities
Cash Assets Trust. No
transaction fees are
charged for exchanges.
You must meet the minimum
investment requirements for
the Fund into which you are
exchanging.
Exchanges from one Fund to another are taxable. You can make exchanges by
sending a written request to Pacific Capital Funds, PO Box 182130,
Columbus OH 43218-2130, or by calling 800-258-9232. Please provide
the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your social security number)
- Dollar value or number of shares you are exchanging
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made
See "Selling Your Shares" for important information about telephone
transactions.
To prevent disruption in the management of the Funds due to market timing
strategies, exchange activity may be limited to four substantive
exchanges within one calendar year period. A Fund may also refuse any
exchange order.
NOTES ON EXCHANGES
- When exchanging from a Fund
that has no sales charge or a
lower sales charge to a fund
with a higher sales charge,
you will pay the difference.
- The registration and tax
identification numbers of the
two accounts must be
identical.
- The Exchange Privilege may be
changed or eliminated at any
time after a 60-day notice to
shareholders.
- Be sure to read carefully the
Prospectus of any Fund or
other investment company into
which you wish to exchange
shares.
50
<PAGE> 175
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Any income the Funds receive in the form of dividends is paid out, less
expenses, to its shareholders monthly, except for the New Asia Growth Fund,
Small Cap Fund and International Stock Fund, which pay out their dividends
quarterly. Net capital gains for all Funds are distributed to shareholders
annually. Dividends payable on Class A shares of a Fund are more than on
Class B shares because Class B shares have higher distribution expenses.
We automatically reinvest all income dividends and capital gains
distributions on Fund shares in additional shares of the same Fund and Class
on the ex-dividend date unless you request otherwise in writing to the
Transfer Agent (at least 15 days prior to the distribution). The Distributor
does not charge any fees or sales charges on reinvestments. You may elect to
receive your dividends/distributions in cash either by check sent to your
address or by wire to your bank account.
The value of your shares will be reduced by the amount of dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or the distribution of capital gains, you will pay the full price
for the shares and receive some portion of the price back as a taxable
dividend or distribution.
TAXES
Dividends are taxable as ordinary income. Taxes on capital gains distributed
by the Funds vary with the length of time the Fund has held the
security -- not how long you have been invested in the Fund.
Dividends generally are taxable in the year in which they are paid, even if
they appear on your account statement the following year. Dividends and
distributions are treated the same for federal income tax purposes whether
you receive them in cash or in additional shares.
You will be notified in January each year about the federal tax status of
distributions made by the Funds. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes,
including withholding taxes.
An exchange of shares is considered a sale, and any related gains may be
subject to federal and state taxes.
Foreign shareholders may be subject to special withholding requirements. A
penalty is charged on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
The Funds may incur foreign income taxes in connection with some of their
foreign investments. Certain of these taxes may be credited to shareholders.
HAWAII TAX INFORMATION
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 for federal income tax purposes.
If you are not a Hawaii resident you should not be subject to Hawaii income
taxation on dividends and distributions made by the Funds, but you will be
subject to taxes of other states and localities.
51
<PAGE> 176
logo
logo Q
OTHER INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The Financial Highlights in the following table set forth certain financial
data and investment results of the Growth Stock Fund, Growth and Income Fund
and New Asia Growth Fund since the commencement of operations of these Funds,
and are expressed in one share of each Fund 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 Funds'
annual report contains additional performance information relating to the
Funds and is available upon request, without charge.
52
<PAGE> 177
OTHER INFORMATION ABOUT THE FUNDS GROWTH STOCK FUND
\\
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE NOVEMBER 1,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995 JULY 31,
A CLASS B CLASS(F) A CLASS A CLASS A CLASS(B) 1994(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.43 $ 16.36 $ 11.89 $ 11.71 $ 9.83 $ 10.00
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.04) (0.05) 0.03 0.07 0.12 0.07
Net realized and unrealized gain
(loss) from investments 2.99 1.41 5.55 0.89 1.87 (0.18)
--------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.95 1.36 5.58 0.96 1.99 (0.11)
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- (0.03) (0.07) (0.11) (0.06)
In excess of net investment income (0.01) -- (0.01) -- -- --
Net realized gains (2.62) -- -- (0.22) -- --
In excess of net realized gains -- -- -- (0.49) -- --
--------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.63) -- (0.04) (0.78) (0.11) (0.06)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.75 $ 17.72 $ 17.43 $ 11.89 $ 11.71 $ 9.83
--------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charge) 19.58% 8.31%(d) 47.02% 8.25% 20.43% (1.05)%(d)
ANNUALIZED RATIOS/ SUPPLEMENTARY
DATA:
Net Assets at end of period (000) $ 13,777 $ 1,459 $ 9,742 $ 5,261 $ 3,905 $ 56,121
Ratio of expenses to average net
assets 1.32% 2.07%(c) 1.32% 1.34% 1.36% 1.41%(c)
Ratio of net investment income to
average net assets (0.30)% (1.31)%(c) 0.16% 0.60% 1.12% 0.98%(c)
Ratio of expenses to average net
assets* 1.86% 2.11%(c) 1.86% 1.88% 1.98% 2.31%(c)
Ratio of net investment income to
average net assets* (0.84)% (1.35)%(c) (0.38)% 0.06% 0.50% 0.07%(c)
Portfolio Turnover (e) 97.03% 97.03% 32.20% 61.30% 32.40% 25.89%
</TABLE>
* 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) The Financial Highlights presented for the A 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 A Class only for the period from October 14, 1994
through July 31, 1995.
(c) Annualized.
(d) Not annualized.
(e) Portfolio turnover is calculated on the basis of the Fund, as a whole,
without distinguishing between the classes of shares issued.
(f) Period from commencement of operations on March 2, 1998.
53
- -
<PAGE> 178
OTHER INFORMATION ABOUT THE FUNDS GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE OCTOBER 14, 1994
YEAR ENDED YEAR ENDED YEAR ENDED TO
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 JULY 31, 1995(A)
A CLASS B CLASS(E) A CLASS A CLASS A CLASS
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $17.25 $17.58 $12.32 $11.44 $10.00
-----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.03 (0.02) 0.08 0.16 0.17
Net realized and unrealized gain
from investments 3.01 1.12 5.57 1.19 1.44
-----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.04 1.10 5.65 1.35 1.61
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income (0.04) -- (0.08) (0.15) (0.17)
In excess of net investment income -- (0.01) (0.01) --
Net realized gains (1.53) -- (0.63) (0.31) --
-----------------------------------------------------------------------------------------------------------------
Total Distributions (1.57) -- (0.72) (0.47) (0.17)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $18.72 $18.68 $17.25 $12.32 $11.44
-----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charges) 19.10%(b) 6.27%(b) 47.59% 11.96% 16.35%(b)
ANNUALIZED RATIOS/ SUPPLEMENTARY
DATA:
Net Assets at end of period (000) $6,730 $2,184 $3,726 $1,160 $ 328
Ratio of expenses to average net
assets 1.33% 2.08%(c) 1.32% 1.37% 1.40%(c)
Ratio of net investment income to
average net assets 0.13% (0.73)%(c) 0.48% 1.03% 2.08%(c)
Ratio of expenses to average net
assets* 1.87% 2.12%(c) 1.86% 1.91% 1.99%(c)
Ratio of net investment income to
average net assets* (0.41)% (0.77)%(c) (0.06)% 0.49% 1.49%
Portfolio Turnover(d) 75.92% 75.92% 74.83% 80.83% 12.78%
</TABLE>
* 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) Period from commencement of operations on March 2, 1998.
54
- -
<PAGE> 179
OTHER INFORMATION ABOUT THE FUNDS NEW ASIA GROWTH FUND
FINANCIAL HIGHLIGHTS
CONTINUED
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FEBRUARY 15, 1995
YEAR ENDED YEAR ENDED YEAR ENDED TO JULY 31,
JULY 31, 1998 JULY 31, 1997 JULY 31, 1996 1995(A)
A CLASS B CLASS(E) A CLASS A CLASS A CLASS
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.89 $ 9.09 $11.11 $11.21 $10.00
---------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income (loss) 0.09 0.04 0.03 (0.02) 0.02
Net realized and unrealized gain
(loss) from investments (6.59) (2.79) 2.88 0.20 1.19
---------------------------------------------------------------------------------------------------------------
Total from Investment Activities (6.50) (2.75) 2.91 0.18 1.21
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income -- -- (0.01) -- --
In excess of net investment income -- -- -- (0.02) --
Net realized gains (1.04) -- (0.12) (0.26) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (1.04) -- (0.13) (0.28) --
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.35 $ 6.34 $13.89 $11.11 $11.21
---------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charges) (48.84)% (30.25)%(b) 26.31% 1.71% 12.10%(b)
ANNUALIZED RATIOS/ SUPPLEMENTAL DATA:
Net Assets at end of period (000) $1,614 $ 66 $3,459 $1,990 $ 330
Ratio of expenses to average net
assets 2.18% 2.89%(c) 1.98% 2.22% 2.24%(c)
Ratio of net investment income
(loss) to average net assets 0.98% 1.70%(c) 0.20% (0.28)% 0.80%(c)
Ratio of expenses to average net
assets* 2.86% 3.35%(c) 2.58% 3.58% 3.51%(c)
Ratio of net investment income
(loss) to average net assets* 0.30% 1.24%(c) (0.40)% (1.64)% (0.47)%(c)
Portfolio Turnover(d) 129.77% 129.77% 134.89% 86.53% 55.62%
</TABLE>
* 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) Period from commencement of operations on March 2, 1998.
55
- -
<PAGE> 180
APPLICATION FOR PACIFIC CAPITAL FUNDS
PLEASE COMPLETE STEPS 1 THROUGH 5 AND MAIL TO:
PACIFIC CAPITAL FUNDS
P.O. BOX 182130, COLUMBUS, OH 43218-2130
1-800-258-9232 PACIFIC CAPITAL FUNDS
- --------------------------------------------------------------------------------
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/Transfers to Minors
Act
(Only one Custodian's First Name Middle Initial Last
custodian Name State
and one minor Custodian For ----------------------------------------------------------------------------------
are Minor's First Name Middle Initial Last Name Minor's Social Security No.
permitted.)
[ ] For Trust, 4. ----------------------------------------------------------------------------------------------
Corporation, (Name of Corporation or Partnership; PLEASE INDICATE TYPE OF ORGANIZATION. If a Trust, include the
Partnership or 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 5.
- --------------------------------------------------------------------------------
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> <C> <C> <C> <C> <C>
A. B. A. B.
[ ] N/A U.S. Treasury Securities Fund $ --------- [ ] N/A Tax-Free Short Intermediate Securities $ ---------
Fund
[ ] N/A Short Intermediate U.S. Treasury $ --------- [ ] [ ] Growth Stock Fund $ ---------
Securities Fund
[ ] [ ] Diversified Fixed Income Fund $ --------- [ ] N/A Balanced Fund $ ---------
[ ] [ ] Tax-Free Securities Fund $ --------- [ ] [ ] Growth and Income Fund $ ---------
[ ] [ ] New Asia Growth Fund $ --------- [ ] [ ] International Stock Fund $ ---------
[ ] [ ] Small Cap Fund $ --------- [ ] [ ] Value 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> 181
- --------------------------------------------------------------------------------
C. LETTER OF INTENT
(See Terms of Escrow
for Letter
of Intent at the end of
this
application).
- -----------------------
Check appropriate box
[ ] YES [ ] NO
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:*
[ ] $ 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
- -----------------------
Check appropriate box
[ ] YES [ ] NO
This option provides you with a convenient way to have amounts automatically
drawn on your financial institution account and invested in
your Pacific Capital Fund account. To establish this program,
please complete Step 5, 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
----------- Fund $ --------- Please select how often you would like to have the amount(s)
shown above withdrawn from your checking account and invested
----------- Fund $ --------- into the above selected Fund(s).
----------- Fund $ --------- [ ] Once each month -- on [ ] Twice each month on the 1st
the 1st and the 16th
Total $ --------- [ ] Once each month -- on [ ] Once each quarter on the 1st
the 16th beginning in the month of
-----------------.
</TABLE>
- --------------------------------------------------------------------------------
B. TELEPHONE INVESTMENT
- -----------------------
Check appropriate box
[ ] YES [ ] NO
This option provides you with a convenient way to add to your account at any
time you wish by simply calling the Pacific Capital Funds
toll-free at 1-800-258-9232. To establish this program,
please complete Step 5, Sections A & B of this Application.
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
- --------------------------------------------------------------------------------
C. AUTOMATIC WITHDRAWAL PLAN
Application must be
received in good order
at least two weeks
prior
to 1st actual
liquidation date.
- -----------------------
Check appropriate box
[ ] YES [ ] NO
Please establish an Automatic Withdrawal Plan for this account, subject to the
terms of the Automatic Withdrawal Plan Provisions set forth
below. To realize the amount stated below, BISYS Fund
Services, Inc. (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.
<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> 182
- --------------------------------------------------------------------------------
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
----------------------------------------------
Name of Financial Institution
----------------------------------------------
Street
---------------------------------------------- ---------------------------------------
---------------------------------------------- ---------------------------------------
Financial Institution Transit/Routing
---------------------------------------------- ---------------------------------------
City State Zip
Street 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>
<CAPTION>
<S> <C>
----------------------------------------------
First Name Middle Initial Last Name
----------------------------------------------
First Name Middle Initial Last Name
----------------------------------------------
Street
----------------------------------------------
City State Zip Code
---------------------------------------------- ---------------------------------------
---------------------------------------------- ---------------------------------------
---------------------------------------------- ---------------------------------------
City State Zip
---------------------------------------------- ---------------------------------------
City State Zip Code Financial Institution Account Number
</TABLE>
<PAGE> 183
- --------------------------------------------------------------------------------
STEP 4 CLIENT AGREEMENT
CLIENT AGREEMENT After reading this section, please sign in Step 5, Section B.
To: BISYS Fund Services Limited Partnership (the "Distributor"), and BISYS
Fund Services, Inc. (the "Transfer Agent") and Pacific Century Trust (the
"Investment Adviser").
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the investment
portfolios ("Funds") of the Pacific Capital Funds (the "Fund Company"). I (we)
affirm that I (we) have received and read the current prospectus(es) of the
Fund(s) selected and agree to be bound by its terms.
A. THE MEANING OF WORDS IN THIS AGREEMENT: The words "I," "me" and "my" refer to
the person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
B. REPRESENTATIONS. I understand that you provide no investment, tax, or legal
advice, and I have relied on my independent judgement with respect to the
suitability or potential value of any security or order.
C. DEBIT AUTHORIZATION AND SETTLEMENT. If I authorize, and if the Transfer Agent
approves, the use of my bank account designated in Step 3. Section E of this
Account Registration Form (the "designated account") as the settlement account
in connection with this account. I understand and agree that the Transfer Agent
may debit the designated account for payment of securities purchased by me
either by way of this Account Registration Form and order, by signing up for the
Automatic Investment Plan, or for subsequent purchases in any Funds as I may
direct. If I have instructed that a purchase be settled through a debit of my
account, I certify that I have the power and authority to debit the account. I
agree to have sufficient collected funds available in the designated account to
cover the amounts due on purchase of securities at the time of placing my order.
If I have designated another method of payment, I agree to deliver sufficient
collected funds to cover the amount due by 9:00 a.m. (Eastern Time) on the
settlement date. I understand that if sufficient collected funds are not
available, my purchase will be rejected and I will be liable for any resulting
loss.
If the Transfer Agent executes a transaction but fails to receive sufficient
payment for such shares, the Transfer Agent may, without prior notice, redeem
any Pacific Capital shares. I agree to reimburse the Fund or BISYS Fund
Services, Inc. on demand for any costs, losses or liabilities incurred by such
party in collection of the debit balance.
I understand and agree that the Transfer Agent may credit the designated
account with dividend distributions, Automatic Withdrawal Plan, and other
distributions that are payable to me (us) by the Fund Company.
I further understand that the Automatic Withdrawal Plan and the Automatic
Investment Plan may be terminated or modified at any time without notice.
D. FORCE MAJEURE. You shall not be liable for any loss or delay caused directly
or indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond your control.
E. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
F. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to rules,
regulations, customs and usages of the exchange, market or clearinghouse where
executed, all applicable federal and state laws and regulations, and the
policies and procedures as determined by the Fund Company set forth in its then
current prospectus(es).
G. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
H. RELIANCE ON REPRESENTATIONS. I understand that you shall rely on the
information that I have set forth in this Agreement. I agree that all changes to
this information shall be promptly provided to the Transfer Agent in writing.
The Transfer Agent is entitled to rely on this information until I change it by
subsequent written notice.
I. DELIVERY AND RECEIPT. Any orders for transactions in the Funds under this
Agreement will NOT be effective until received and approved by the Distributor
and the Transfer Agent at their offices in Columbus, Ohio. The Distributor and
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
J. INSTRUCTIONS. Neither the Distributor, the Transfer Agent nor the Fund
Company shall be liable for any loss, damages, expense or cost arising out of
any telephone redemption effected in accordance with the Fund Company's
telephone redemption procedures, upon instructions reasonably believed to be
genuine. The Fund Company and its agents will employ procedures designated to
provide reasonable assurance that instructions by telephone are genuine. These
procedures include recording all phone conversations, sending confirmations to
shareholders within 72 hours of the telephone transaction, verification of
account name and account number or tax identification number and sending
redemption proceeds only to the address of record or to a previously authorized
bank account.
K. ARBITRATION. This paragraph contains what is sometimes referred to as a
predispute arbitration clause. In this regard, I am aware of the following:
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) All agreements shall include a statement that "No person shall bring a
putative or certified class action to arbitration, nor seek to enforce any
predispute arbitration agreement against any person who has initiated in court a
putative class action; or who is a member of a putative class who has not opted
out of the class with respect to any claims encompassed by the putative class
action until: (i) the class certification is denied, or (ii) the class is
decertified, or (iii) the person against whom the arbitration agreement would be
enforced is excluded from the class by the court. Such forbearance to enforce an
agreement to arbitrate shall not constitute a waiver of any rights under this
agreement except to the extent stated herein."
It is agreed that any controversy between me and the Fund Company and/or any
of its service providers (including the Investment Adviser) arising out of this
Agreement or my business with you, shall be settled by arbitration conducted in
accordance with the rules of the National Association of Securities Dealers,
Inc. or the American Arbitration Association, as I may elect. Failure to notify
you of such election in writing within five (5) days after receipt from you of a
request for arbitration shall be deemed to be authorization to make such
election on my behalf. Judgement upon the award of the arbitrators may be
entered by any court having jurisdiction.
L. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Investment Adviser, with regard to this
Account, I agree to indemnify and hold each of them, the Fund Company, and their
officers, directors, employees and agents harmless from and against any and all
losses, demands, claims, actions, expenses and attorney's fees arising out of or
in connection with this Agreement which are not caused by their negligence or
willful misconduct. The provisions of this Section shall survive termination of
this Agreement; the provisions of this Section shall be binding on my successors
and assigns.
M. I understand that if disbursements out of this account are to anyone other
than the applicant or the applicant's joint tenant, a signature guarantee will
be required.
N. With respect to Step 3, I understand that if the 1st or 16th should fall on a
non-business day, the transaction will be effective on the next business day.
O. I UNDERSTAND THAT MUTUAL FUND SHARES ARE NOT DEPOSITS OF ANY BANK, ARE NOT
INSURED BY THE FDIC, ARE NOT OBLIGATIONS OF ANY BANK OR THE U.S. GOVERNMENT AND
ARE NOT ENDORSED OR GUARANTEED IN ANY WAY BY ANY BANK.
<PAGE> 184
- --------------------------------------------------------------------------------
STEP 5 DEPOSITORS AUTHORIZATION TO HONOR DEBITS
SECTION A IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT YOU
MUST ALSO COMPLETE STEP 5,
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, BISYS
Fund Services, Inc., and to pay such sums in accordance therewith, provided
my/our account has sufficient funds to cover such drafts or debits. I/We further
agree that your treatment of such orders will be the same as if I/we personally
signed or initiated the drafts or debits.
I/we understand that this authority will remain in effect until you receive
my/our written instructions to cancel this service. I/We also agree that if any
such drafts or debits are dishonored, for any reason, you shall have no
liabilities.
FINANCIAL INSTITUTION ACCOUNT NUMBER
<TABLE>
<S> <C>
NAME AND ADDRESS ------------------------------------------------------------
WHERE MY/OUR NAME OF FINANCIAL INSTITUTION
ACCOUNT IS ------------------------------------------------------------
MAINTAINED STREET ADDRESS
------------------------------------------------------------
CITY STATE ZIP
CODE
</TABLE>
<TABLE>
<S> <C> <C>
NAME(S) AND ---------------------------------------------------- ------------------
SIGNATURE(S) OF PLEASE PRINT DATE
DEPOSITOR(S) AS ---------------------------------------------------- ------------------
THEY APPEAR WHERE SIGNATURE DATE
ACCOUNT IS ----------------------------------------------------
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*
THIS AGREEMENT CONTAINS A PREDISPUTE ARBITRATION CLAUSE IN STEP 4, LETTER K.
<TABLE>
<S> <C> <C>
- ------------------------------------------ ------------------------------------------ ------------------
INDIVIDUAL (OR CUSTODIAN) JOINT REGISTRANT, IF ANY DATE
- ------------------------------------------
CORPORATE OFFICER, PARTNER, TRUSTEE(S), ------------------------------------------ ------------------
ETC. TITLE DATE
*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>
<PAGE> 185
SPECIAL INFORMATION
- Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after this
form is received in good order by the 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.
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> 186
For more information about the Pacific Capital Funds, the following documents
are available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain detailed
information on each Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including operations
and investment policies. It is incorporated by reference and is legally
considered a part of this prospectus.
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the Funds, by contacting the Bank of Hawaii or a
broker that sells the Funds. Or contact us at:
PACIFIC CAPITAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-258-9232
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can also get copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7454.
PCP 0026
<PAGE> 187
PACIFIC CAPITAL FUNDS
Telephone: 800-258-9232
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 1, 1998
BALANCED FUND
DIVERSIFIED FIXED INCOME FUND
GROWTH AND INCOME FUND
GROWTH STOCK FUND
INTERNATIONAL STOCK FUND
NEW ASIA GROWTH FUND
SMALL CAP FUND
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
TAX-FREE SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
U.S. TREASURY SECURITIES FUND
VALUE 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 the Class A, Class B and Class Y shares of all twelve of the
Trust's investment portfolios (each a "Fund" and collectively the "Funds"). The
various Funds and Classes of shares of the Funds are offered through separate
Prospectuses.
All Funds except Tax-Free Securities Fund and Tax-Free
Short-Intermediate Securities Fund (the "Tax Free Funds") are diversified
portfolios. Balanced Fund has not commenced operations as of the date of this
Statement of Additional Information.
This SAI is not a prospectus. You should read this SAI in
conjunction with the applicable Prospectus, dated December 1, 1998. All terms
defined in the applicable Prospectus have the same meanings in this SAI. In
addition, the Trust's 1998 Annual Report to Shareholders is incorporated by
reference into this SAI. You can order copies of the Prospectuses and Annual
Report without charge by writing to BISYS Fund Services ("BISYS") at 3435
Stelzer Road, Columbus, Ohio 43219-3035 or calling the Transfer Agent at the
telephone number indicated above.
<PAGE> 188
TABLE OF CONTENTS
Page
----
Investment Restrictions....................................................... 3
Additional Information on Fund Investments and Risks.......................... 6
Management ...................................................................37
Distribution and Shareholder Service Plans....................................46
Calculation of Yield and Total Return.........................................47
Purchase of Shares............................................................62
Redemption of Shares..........................................................63
Federal and Hawaiian Tax Information..........................................67
General Information...........................................................72
Custodian.....................................................................77
Independent Auditors and Counsel..............................................77
Financial Information.........................................................77
Registration Statement........................................................77
-2-
<PAGE> 189
INVESTMENT RESTRICTIONS
Each Fund's investment objectives are fundamental and 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 "General Information --
Voting." 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 change
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.
The following investment restrictions also apply to the Funds.
The restrictions designated as fundamental policies may not be changed without
approval by the holders of a majority of the relevant Fund's outstanding shares.
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 reorganizations, consolidations,
payments out of assets of the Fund or redemption of shares will not constitute a
violation of such limitation, except for investment restriction (3) below.
INVESTMENT RESTRICTIONS FOR ALL FUNDS EXCEPT NEW ASIA
GROWTH FUND AND INTERNATIONAL STOCK FUND
None of these Funds may:
(1) Purchase securities of any issuer (except debt obligations
of issuers that pay interest which, in the opinions of counsel to such issuers,
is exempt from federal income tax and is not subject to the federal alternative
minimum tax ("Municipal Obligations") and securities issued or guaranteed by the
U.S. Government, its agencies and instrumentalities ("U.S. Government
Obligations")) 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
any one issuer. This restriction does not apply to 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 the 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, Municipal Obligations do not include private activity bonds
that are backed only by the assets and revenues of a non-governmental user).
(3) Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), except (a) with
regard to senior securities, as permitted pursuant to an order and/or a rule
issued by the Securities and Exchange Commission (the "Commission"), and (b)
that each 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 any such outstanding
borrowing in excess of 5% of its net assets exists).
-3-
<PAGE> 190
(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
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.
(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 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.
(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 these Funds 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 securities of unseasoned issuers,
including their predecessors, that have been in operation for less than three
years, if as a result 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) No Fund will invest more than 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 do not include securities which maybe resold under Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act") that the Board of
Trustees or its delegate determines to be liquid based upon the trading markets
for such securities.
(4) No Fund will purchase put and call options or write covered
put and call options on securities unless (a) it may invest directly in such
securities, (b) such options are traded on registered domestic securities
exchanges or result from separate, privately negotiated transactions with
primary U.S. Government securities dealers recognized by the Board of Governors
of the Federal Reserve System, and (c) the total assets subject to such options
does not exceed 5% of the Fund's net assets.
-4-
<PAGE> 191
INVESTMENT RESTRICTIONS FOR NEW ASIA GROWTH FUND AND
INTERNATIONAL STOCK FUND
New Asia Growth Fund and International Stock Fund are subject to
the following investment restrictions, all of which are fundamental policies.
Neither Fund may:
(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 any one 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 (a) with regard to senior securities, as permitted pursuant to
an order and/or a rule issued by the Commission, and (b) that the Fund may
borrow from banks up to 33-1/3% 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 maybe secured by the pledge of up to 33-1/3% 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 investing real
estate or interests therein).
(5) Purchase commodities or commodity contracts, except that the
Fund may deal in forward foreign exchange contracts 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 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. Investments by the Fund in wholly-owned investment entities created
-5-
<PAGE> 192
under the laws of certain countries will not be deemed the making of investments
for the purpose of exercising control of management.
(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 and International Stock Fund
will each comply with the following non fundamental restrictions, which may be
changed by the Board of Trustees without shareholder approval:
(1) Each Fund will not purchase securities of unseasoned
issuers, including their predecessors, that have been in operation for less than
three years, if as a result the value of the Fund's investment in such classes
of securities would exceed 15% of such Fund's total assets.
(2) Each Fund will not invest more than 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 do 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.
(3) To the extent required by the Commission or its staff, each
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.
(4) Each Fund will not invest more than 10% of its net assets in
warrants.
(5) The aggregate value of the exercise price or strike price of
call options written by each Fund will not exceed 25% of the Fund's net asset
value.
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND RISKS
FOREIGN SECURITIES
Each of the Funds may invest in foreign securities. Each 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 also 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.
DEPOSITORY RECEIPTS
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
-6-
<PAGE> 193
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. 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 the market value of the Depositary Receipts may not be correlated
with such information.
RISKS AND SPECIAL CONSIDERATIONS OF
INVESTING IN FOREIGN SECURITIES
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 have different settlement and clearance
procedures, and in certain markets settlements have at times 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.
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
-7-
<PAGE> 194
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 and International Stock Fund will invest 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. New Asia Growth Fund and
International Stock Fund may also 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 Funds' custodian bank or by an
approved foreign subcustodian.
INVESTING IN COUNTRIES WITH SMALLER CAPITAL MARKETS
Because New Asia Growth Fund intends to invest primarily in
securities of companies located in developing Asian countries, and International
Stock Fund may invest in securities of companies located in developing countries
in Asia and elsewhere, investors in those Funds should be aware of certain risk
factors and special considerations relating to investing in developing
economies. Consequently, these Funds should be considered as a means of
diversifying an investment portfolio and not in themselves as a balanced
investment program.
Securities Markets
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
their region, such as in Japan. Developing country 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
International Stock Fund in such countries and may have an adverse impact on the
investment performance of those Funds.
Political and Social Uncertainties
Political and social uncertainties exist for some developing
countries. In addition, the governments of many of such countries have a heavy
role in regulating and supervising the economy. Certain developing Asian
countries, such as the Philippines and India, are especially large debtors to
commercial banks and foreign governments. Another risk common to most such
countries is that the economy is heavily export
-8-
<PAGE> 195
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 economics 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 countries also may
have an adverse impact on New Asia Growth Fund and International Stock 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 countries. Similarly, the rights of investors in
developing companies may be more limited than those of shareholders of U.S.
corporations.
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.
Restrictions on Foreign Investments.
Some developing countries prohibit or impose substantial
restrictions on investments in their capital markets, particularly their equity
markets, by foreign entities such as the Funds. 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 countries, as well as limitations on such investments, also
may have an adverse impact on the operations of the Funds. For example, the
Funds 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 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 a 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 Funds 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 Funds. 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.
-9-
<PAGE> 196
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. The Funds' investment in these companies will be subject to certain
percentage limitations of the 1940 Act. This restriction on investments in
securities of investment companies may limit opportunities for the Funds 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 the Funds' 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 Funds' investments in certain foreign banks and
other financial institutions.
Other Matters
Inflation accounting rules in some developing 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 companies in developing countries.
Satisfactory custodial services for investment securities may
not be available in some developing countries, which may result in the Funds
incurring additional costs and delays in providing transportation and custody
services for such securities outside such countries.
Regional Risk Considerations
In addition to the risk of investments in foreign securities and
in emerging markets described above, investments in issuers of securities in
particular regions may be subject to certain additional regional risks.
Asia. Many Asian countries may be subject to a greater degree of
social, political and economic instability than is the case in the United States
and western European countries. Such instability may result from (i)
authoritarian governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic and social conditions; (iii) internal insurgencies; (iv)
hostile relations with neighboring countries; and (iv) ethnic, religious and
racial disaffection.
The economies of most of the Asian countries are heavily
dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners,
principally the United States, Japan, China and the European Community. The
enactment by the United States or other significant trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities markets of these Asian
countries. Of
-10-
<PAGE> 197
significant immediate concern, the current recession in the Japanese economy,
which has been complicated by substantial problems in its banking system, could
substantially worsen the economic difficulties a number of Asian countries are
presently experiencing.
Latin America. Investing in securities of Latin American issuers
may entail risks relating to the potential political and economic instability of
certain Latin American countries and a consequent resurgence of the historical
risk in Latin America of expropriation, nationalization, confiscation or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of expropriation, nationalization or other confiscation
by any country, a Fund could lose its entire investment in any such country. In
addition, there is risk that certain Latin American countries may restrict the
free conversion of their currencies into other currencies. Certain Latin
American countries such as Argentina, Brazil and Mexico are among the world's
largest debtors to commercial banks and foreign governments. At times, certain
Latin American countries have declared moratoria on the payment of principal
and/or interest on outstanding debt.
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.
DEBT SECURITIES
Each of the Funds may invest in debt securities issued by
domestic and foreign corporations, financial institutions, and governments.
The debt securities in which the Funds will invest (including
convertible securities, as applicable) generally will be of investment grade
(i.e., rated in the top four rating categories by a nationally recognized
securities rating organization ("NRSRO"), or, if unrated, determined to be of
comparable quality by the investment adviser). However, up to 10% of 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 Pacific Century
or its Sub-Adviser.
Balanced Fund, Diversified Fixed Income Fund, Growth and Income
Fund, Growth Stock Fund, Small Cap Fund, Value 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.
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
-11-
<PAGE> 198
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 Pacific Century or
its Sub-Adviser believes that the credit risk with respect to the
instrumentality is minimal.
Each Fund may also make limited investments (not exceeding 5% of
its 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.
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. Pacific Century or its Sub-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, Pacific Century or its
Sub-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.
SOVEREIGN DEBT
New Asia Growth Fund may invest in debt securities or
obligations issued or guaranteed by foreign governments, including their
agencies, instrumentalities and political subdivisions ("sovereign debt") and by
supernational entities (such as the World Bank, The European Community, and the
Asian Development Bank), and the other Funds may invest in Yankee Bonds
(dollar-denominated obligations issued by foreign governments).
Investment in sovereign debt involves a high degree of risk.
Certain developing countries, such as the Philippines, owe significant amounts
of debt to commercial banks and foreign governments. 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,
-12-
<PAGE> 199
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 depend 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.
Issuers of sovereign debt may request the holders, including the
Fund, to participate in the rescheduling of such debt and to extend further
loans to governmental entities. No bankruptcy proceeding exists for collection
in whole or in part of sovereign debt on which a governmental entity has
defaulted.
The sovereign debt instruments in which New Asia Growth Fund may
invest in some cases are 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. The 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 respective total assets
in sovereign debt, including sovereign debt which is in default.
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 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 issuer's capacity to pay interest and repay principal in accordance with the
terms of the security and generally involve greater price volatility 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 Sub-Adviser's judgment, analysis and experience in evaluating the
creditworthiness of the issuer. The Sub-Adviser will take into consideration,
among other things, the issuer's
-13-
<PAGE> 200
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 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 maybe 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. An issuer's ability to service its debt obligations also
may be adversely affected by specific issuer developments, 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 other 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 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 selling 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 sell
particular issues 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 or prices for actual sales. The Sub-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. New Asia
Growth Fund may incur additional expenses if it is required to seek recovery
upon a default on a portfolio holding or participate in the restructuring of the
obligation.
-14-
<PAGE> 201
CREDIT RATINGS
Credit ratings evaluate the safety of principal and interest
payments, not market value risk. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. Also, since credit rating agencies may fail to timely
change credit ratings to reflect subsequent events, Pacific Century or a
Sub-Adviser must monitor the issuers of bonds in the Funds' portfolios to
determine if the issuers will have sufficient cash flow and profits to meet
required principal and interest payments, and to assure the bonds' liquidity so
the Funds can meet redemption requests.
To the extent the rating of a debt security by an NRSRO changes
as a result of changes in such organization or its 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 NRSROs currently used by
the Funds are more fully described in Appendix A to this Statement of Additional
Information.
OTHER DEBT OBLIGATIONS
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
Pacific Century, are of investment quality comparable to other permitted
investments of such Fund, may be used for letter of credit and liquidity
agreement backed investments.
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, Value Fund, Small Cap 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 Pacific Century or its Sub-Adviser to be of comparable quality.
New Asia Growth Fund and International Stock Fund may invest in commercial paper
that is rated at the time
-15-
<PAGE> 202
of purchase in the two highest short-term rating categories by an NRSRO or
unrated if considered by Pacific Capital or its Sub-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.
MUNICIPAL SECURITIES
The Tax-Free Funds invest primarily in Municipal Obligations,
and Diversified Fixed Income Fund may also do so. Municipal Obligations includes
Municipal Bonds, Municipal Notes and Municipal Commercial Paper. Under normal
market conditions, each of the Tax-Free Funds invests at least 80% of its net
assets in investment grade municipal obligations. For purposes of this
restriction, the Tax-Free Funds' investments in other investment companies
which invest exclusively in municipal securities are considered 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.
General obligation securities are secured by the issuer's pledge
of its full faith, credit, and taxing power for the payment of principal and
interest. Characteristics and methods of enforcement of general obligation bonds
vary according to the law applicable to a particular issuer, and the taxes that
can be levied for the payment of debt service may be limited or unlimited as to
rates or amounts of special assessments. Revenue securities are payable only
from the revenues derived from a particular facility, a class of facilities or,
in some cases, from the proceeds of a special excise tax. Although the principal
security behind these bonds may vary, many provide additional security in the
form of a debt service reserve fund the assets of which may be used to make
principal and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully insured
mortgages, rent subsidized and collateralized mortgages, and the net revenues
from housing or other public projects. Somme authorities are provided further
security in the form of a state's assistance (although without obligation) to
make up deficiencies in the debt service reserve fund.
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
-16-
<PAGE> 203
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.
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, issued by a specially created district or project
area which levies 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. 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 Pacific Century 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 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.
TANs
-17-
<PAGE> 204
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 primarily depends on the issuer's adequate access to the longer term
municipal bond market and the likelihood that the proceeds of such bond sales
will be used to pay the principal of, and interest on, BANs.
RANs
A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect an
issuer's ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
MUNICIPAL 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 Pacific Century
to be of comparable quality.
GENERAL CONSIDERATIONS
The values of outstanding municipal securities 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 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 generally 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.
Securities of issuers of municipal obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition,
the obligations of such issuers may become subject to laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. Furthermore, as
a result of legislation or other conditions, the power or ability of any
-18-
<PAGE> 205
issuer to pay, when due, the principal of and interest on its municipal
obligations may be materially affected.
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.
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.
WARRANTS AND CONVERTIBLE SECURITIES
Each of Balanced Fund, Growth and Income Fund, Growth Stock
Fund, Small Cap Fund, Value Fund, International 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. No Fund may invest more than 10% of its net assets in
warrants. 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.
Each of Balanced Fund, Growth and Income Fund, Growth Stock
Fund, Small Cap Fund, Value Fund, International 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
-19-
<PAGE> 206
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 above under "Debt Securities," except
when they are purchased primarily for their equity characteristics.
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. 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.
The Funds 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 Pacific
Century. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary marketing
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 to be illiquid investments and are subject to the Funds' 15%
limitation on investment in illiquid 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.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid before dividends are paid on the
issuer's common stock or non-cumulative, participating, or auction rate. If
interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Preferred stock does not ordinarily carry voting rights.
-20-
<PAGE> 207
OPTIONS, FUTURES AND OTHER HEDGING STRATEGIES
GENERAL
The Funds may use a variety of derivative financial instruments
to hedge their investments and to enhance their income or manage their cash flow
("Hedging Instruments"). In addition to the Hedging Instruments described below
Pacific Century and its Sub-Advisers may discover additional opportunities in
connection with options, future contracts, foreign currency forward contracts
and other hedging techniques. These new opportunities may become available as
Pacific Century and its Sub-Advisers develop 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. Pacific Century and its Sub-Advisers 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.
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 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.
Foreign Currency Options
A put or call option on a foreign currency gives the purchaser
of the option the right to sell or purchase a foreign currency at the exercise
price until the option expires. New Asia Growth Fund and International Stock
Fund use foreign currency options separately or in combination to control
currency volatility. Among the strategies employed to control currency
volatility is an option collar. An option collar involves the purchase of a put
option and the simultaneous sale of call option on the same currency with the
same expiration date but with different exercise (or "strike") prices. Generally
the put option will have an out-of-the-money strike price, while the call option
will have either an at-the-money strike price or an in-the-money strike price.
Currency options
-21-
<PAGE> 208
traded on U.S. or other exchanges may be subject to position limits which may
limit the ability of the Funds to reduce foreign currency risk using such
options.
Interest Rate Futures Contracts
An interest rate futures contract is a bilateral agreement
pursuant to which one party agrees to make, and the other party agrees to
accept, delivery of a specified type of debt security at as 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.
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.
Options on Future Contracts
Put and call options on futures contracts give the purchaser the
right (but not the obligation), for a specified price, to sell or to purchase
the underlying futures contract, respectively, 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.
HEDGING STRATEGIES
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 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
-22-
<PAGE> 209
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").
(See "Limitations on the Use of Futures.") In addition, a Fund's ability to use
Hedging Instruments will be limited by tax considerations. See "Federal and
Hawaiian Tax Information."
OPTIONS
Each of the Funds other than New Asia Growth Fund and
International Stock Fund may purchase put and call options and write covered put
and call options on securities in which such Fund may invest, provided the value
of the securities underlying 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 and International Stock Fund may each
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 these Funds 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. Each such 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. Each such Fund
may also purchase put and call options to offset previously written put and call
options of the same series. The aggregate value of the exercise price or strike
price of call options written by each such Fund may not exceed 25% of the Fund's
net asset value.
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
-23-
<PAGE> 210
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 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 and
International Stock 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 the
reappears to be a liquid secondary
-24-
<PAGE> 211
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 anytime prior to its expiration.
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 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 and International Stock Fund may 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 out standing, 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 Fund and
International Stock Fund, 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
-25-
<PAGE> 212
thereon on U.S. and foreign exchanges, New Asia Growth Fund and International
Stock 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, a 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 and International Stock 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, a 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 a 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
the Funds. For example, Pacific Century or its Sub-Adviser may wish to be fully
invested in a particular asset class. Through the use of futures, it can achieve
this objective immediately while temporarily deferring industry and security
selection, in the interest of timeliness.
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 a 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 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
-26-
<PAGE> 213
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 Pacific Century's or its Sub-Adviser'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 and securities markets involving arbitrage, program trading and
other investment strategies might result in temporary price distortions.
LIMITATIONS ON THE USE OF FUTURES
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
-27-
<PAGE> 214
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 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 its obligations under futures, or to cover its
obligations by owning the assets underlying open futures contracts. 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 Pacific Century'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."
FOREIGN CURRENCY HEDGING STRATEGIES -- SPECIAL CONSIDERATIONS
New Asia Growth Fund and International Stock 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 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.
A 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, the Fund may hedge against price movements in that
currency by entering into transactions using Hedging Instruments on other
currencies, the values of which its Sub-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, a Fund could be
-28-
<PAGE> 215
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 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, a 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 and International Stock 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. Each such Fund also
may use foreign currency forward contracts for cross-hedging. Under this
strategy, a 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 a 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 a Fund from 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 a Fund enters into a foreign currency
forward contract, it relies on the other party to the transaction to make or
take delivery of the underlying currency at the maturity of the contract.
Failure by the other 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 other
party. Thus, there can be no assurance that a 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 other party, a Fund might be
unable to close out a foreign
-29-
<PAGE> 216
currency forward contract at any time prior to maturity. In either event, the
Fund would 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, a
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 and International Stock Fund may enter into
foreign currency forward contracts or maintain a net exposure to such contracts
only if (1) completion 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) the Fund maintains cash,
U.S. Government securities or liquid debt or equity 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 currency
fluctuations will be incorporated into the longer term investment decisions made
with regard to over all 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 a Fund will be
served.
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 (1) owns an
offsetting covered position insecurities or other options or futures contracts
or (2) segregates liquid assets 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.
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.
SPECIAL RISKS OF HEDGING STRATEGIES
The use of Hedging Instruments involves special considerations
and risks, including those described below.
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
-30-
<PAGE> 217
securities. There can be no assurance that any particular hedging strategy
adopted will succeed.
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.
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 13
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.
As described above, 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 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.
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. Interests 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
-31-
<PAGE> 218
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 generally slow, increasing the security's
average life and its potential for price depreciation.
MORTGAGE BACKED SECURITIES
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.
Mortgage Backed Securities include GNMA Certificates, FNMA
Certificates and FHLMC Participation Certificates. GNMA Certificates are backed
as to the timely payment of principal and interest by the full faith and credit
of the U.S. Government. The principal and interest of FNMA Certificates are
guaranteed only by FNMA itself, not by the full faith and credit of the U.S.
Government. An FHLMC Participation Certificate 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 Pacific Century or its
Sub-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, and 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.
The estimated average life of Mortgage-Backed Securities will be
determined by Pacific Century or its Sub-Adviser and used for the purpose of
determining the average weighted maturity of the Funds' portfolios. Various
independent mortgage backed securities dealers publish average remaining life
data using proprietary models and, in making such determinations for the Funds,
Pacific Century or its Sub-
-32-
<PAGE> 219
Adviser might deem such data unreasonable if such data appears 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.
NON-MORTGAGE BACKED SECURITIES
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 any such obligation 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) that is not
affiliated with the issuer of the obligation. 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, are considered by Pacific Century or its
Sub-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.
The purchase of non-mortgage backed securities involves
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 the underlying obligations only by filing a financing statement and
by having the servicer of the obligations, which is usually the originator, take
custody of them. 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 the 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, recoveries on repossessed collateral might not, in some
cases, be available to support payments on those securities. In addition,
various state and Federal laws give the motor vehicle owner the right to assert
against the holder of the owner's obligation certain defenses the owner would
have against the seller of the motor vehicle. The assertion of such defenses
could reduce payments on the related Asset Backed Securities.
Similarly, in the case of Asset-Backed Securities relating to
credit card receivables, credit card holders are entitled to the protection of a
number of state and Federal consumer credit laws, many of which give such
holders the right to set off certain amounts against balances owed on the credit
cards, thereby reducing the amounts paid on
-33-
<PAGE> 220
such receivables. In addition, unlike most other Asset Backed Securities, credit
card receivables are unsecured obligations of the cardholders.
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 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 Pacific Century, 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 Pacific
Century 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 Fund (except New Asia Growth Fund and International Stock
Fund) may borrow from banks up to 20% of the current value of its prospectus 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 and International Stock Fund may borrow an
amount equal to no more than 33% 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. Each such Fund may pledge up to 33% of its total
assets to secure these borrowings. If a Fund's asset coverage for borrowings
falls below 300%, the Fund will
-34-
<PAGE> 221
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, a 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), it will place in a segregated custodial account cash or liquid assets
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 liquid
assets 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, Pacific Century or its
Sub-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 Pacific Century or its Sub-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% with respect to New Asia Growth
Fund and International Stock 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, Pacific Century, BISYS, or, the Sub-Advisers.
-35-
<PAGE> 222
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 Pacific Century or its Sub-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,
each Fund may also invest in securities issued by other investment companies,
including (to the extent permitted by the 1940 Act) other investment companies
managed by Pacific Century. New Asia Growth Fund and International Stock 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 countries.
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, Pacific
Century 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 or International Stock 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
-36-
<PAGE> 223
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).
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.
MANAGEMENT
TRUSTEES AND OFFICERS
The business of the Trust is managed under the direction and
control of its Board of Trustees. The name, age and principal occupations 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. Trustees deemed to be "interested persons"
of the Trust for purposes of the 1940 Act are indicated by an asterisk (*).
Walter J. Laskey* (57), Trustee and Chairperson - Executive Vice
President of Bank of Hawaii - Private Client and Institutional
Services(1993-present).
Irimga McKay* (38), 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).21
Douglas Philpotts* (67), 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
Pacific Century Trust; Director of Victoria Ward; Trustee of The Strong
Foundation and Seabury Hall; Trustee of Cash
-37-
<PAGE> 224
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 (52), Trustee - 700 Bishop Street, Suite
200, Honolulu, Hawaii 96813. President and Chief Executive Officer of OKOA,
INC., a 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 (62), 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 Theo Davies & Co., Ltd., a multiple
business company (1973-1984); formerly Legislative Assistant to U.S. Senator
Hiram L. Fong; Member of the Boards of Directors of several community
organizations; Trustee of 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 (54), 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 (66), 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 (36), Treasurer - 111 South King Street, Honolulu,
Hawaii 96813. Vice President of Bank of Hawaii - Product and Asset Acquisition
(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 (30), Secretary - 1230 Columbia Street, San
Diego, California 92101. Director of BISYS Fund Services (1991-present).
-38-
<PAGE> 225
Alaina Metz (31), Vice President - Chief Administrative Officer
of BISYS Fund Services - Blue Sky Compliance (1995-present); Alliance Capital
Management, L.P. (1989-1995).
William J. Tomko (40), Vice President - Senior Vice President of
BISYS Fund Services (1987-present).
Nancy Wiser (31), Vice President - Vice President of Fund
Accounting of BISYS Fund Services (1998-present); Manager of Investment
Accounting of AEFA (1994-1998). Senior Operations Analyst for IBT (1990-1994).
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, with the exception of Douglas Philpotts, who owned beneficially
approximately 11% of the outstanding shares of the Tax-Free Securities Fund.
Trustees of the Trust who are not officers or employees of the
Trust, BISYS, Pacific Century or its Sub-Advisers 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,
1998:
Aggregate Trustees' Fees and
Expenses for the Fiscal Year
Fund Ended July 31, 1998
- ---- ----------------------------
Diversified Fixed Income Fund $ 8,886
Growth and Income Fund 9,858
Growth Stock Fund 22,034
New Asia Growth Fund 1,313
Short Intermediate U.S. Treasury Securities Fund 2,076
Tax-Free Securities Fund 25,247
Tax-Free Short Intermediate Securities Fund 3,303
U.S. Treasury Securities Fund 1,287
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, Pacific Century or its Sub-Advisers and the aggregate compensation paid
to such Trustees by all investment companies (including the Trust) advised by
Pacific Century for the periods indicated.
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Estimated from Trust and
Compensation Accrued as Benefits Other Funds
From Part of Fund Upon Advised by
Name of Trustee Trust (1) Expenses Retirement Pacific Century (2)
- --------------- ------------ ------------ ---------- -------------------
<S> <C> <C> <C> <C>
Richard W. $ 14,500 None None $50,050
Gushman II
Stanley W. Hong $ 14,500 None None $52,126
Russell K. Okata $ 14,500 None None $47,964
</TABLE>
-39-
<PAGE> 226
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Douglas Philpotts $ 12,000 None None $45,560
Oswald K. Stender $ 12,000 None None $48,350
</TABLE>
(1) Provided for the fiscal year ended July 31, 1998.
(2) Provided for the calendar year ended December 31, 1997. In addition to
the Trust, each of the Trustees served on the boards of one other
investment company advised by Pacific Century, comprising four separate
funds.
Officers, trustees, directors, employees and retired employees
of the Trust, Pacific Century and its affiliates, and BISYS and its affiliates,
and their spouses and children, may purchase Class A shares of the Funds with no
sales charge, as the Board of Trustees believes that sales to such persons do
not involve the normal types of sales efforts associated with distribution of
the Trust's shares. In addition, from time to time Bank of Hawaii may enter into
normal investment management, commercial banking and lending arrangements with
one or more of the Trustees of the Trust and their affiliates. It currently has
such arrangements with Mr. Gushman and certain of his affiliated companies.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), each of the Funds is advised by Pacific Century. Subject to the
supervision of the Board of Trustees (and, in the case of the New Asia Growth
Fund, Small Cap Fund and International Stock Fund, the delegation of certain of
its duties to Sub-Advisers), Pacific Century provides 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. Pacific
Century provides services under the Advisory Agreement in accordance with each
of the Funds' investment objectives, policies, and restrictions.
For its services under the Advisory Agreement, Pacific Century
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 Pacific
Century is set forth in the prospectus. The following table sets forth the
aggregate fees paid by each Fund pursuant to its Advisory Agreement for the
fiscal years ended July 31, 1998, July 31, 1997, and July 31, 1996:
-40-
<PAGE> 227
<TABLE>
<CAPTION>
Compensation Paid to Pacific Century
Under the Advisory Agreement
For the Fiscal Year Ended For the Fiscal Year Ended For the Fiscal Year Ended
July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- -------------
Aggregate Aggregate Aggregate
Advisory Fee Advisory Fee Advisory Fee
Paid (After Paid (After Paid (After
Waiver as Aggregate Waiver as Aggregate Waiver as Aggregate
Fund applicable) Fee Waived applicable) Fee Waived applicable) Fee Waived
- ---- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Diversified $ 761,240 $135,988 $ 867,869 N/A $ 814,802 N/A
Fixed Income
Fund
Growth and $1,153,390 N/A $ 768,642 N/A $ 503,952 N/A
Income Fund
Growth Stock $2,468,860 N/A $1,499,559 N/A $1,359,262 N/A
Fund
New Asia $ 137,423 $ 27,534 $ 141,522 $ 7,778 $ 52,972 N/A
Growth Fund
Short $ 89,917 $ 59,920 $ 71,646 $ 47,940 $ 61,600 $ 41,079
Intermediate
U.S. Treasury
Securities Fund
Tax-Free $1,872,274 $365,137 $1,756,304 N/A $1,724,513 N/A
Securities Fund
Tax-Free Short $ 207,167 $ 31,564 $ 195,480 N/A $ 202,701 N/A
Intermediate
Securities Fund
U.S. Treasury $ 104,486 $ 33,161 $ 145,470 N/A $ 172,954 N/A
Securities Fund
</TABLE>
The Advisory Agreement provides that Pacific Century will 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 a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations and duties under the Advisory Agreement.
The Advisory Agreement will continue in effect with respect to
each Fund provided the continuance is approved annually (i) by the holders of a
majority of the 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 with respect to any
Fund on 60 days' written notice by either party and will terminate automatically
if assigned.
Pacific Century has advised the Trust that Pacific Century
should be able to perform the services contemplated by the Advisory Agreement
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 Pacific Century from continuing to
perform, in whole or in part, such services. If Pacific Century were prohibited
from performing any
-41-
<PAGE> 228
of such services, the Trust expects that new agreements would be entered into
with another entity or entities qualified to perform such services.
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 Pacific Century has a lending relationship.
SUB-ADVISERS
Nicholas Applegate Capital Management serves as Sub-Adviser to
International Stock Fund and Small Cap Fund, and its affiliate
Nicholas-Applegate Capital Management (Hong Kong) LLC serves as Sub-Adviser to
New Asia Growth Fund, pursuant to separate sub-advisory agreements with Pacific
Century (each a "Sub-Advisory Agreement"). Under the Sub-Advisory Agreement for
International Stock Fund and Small Cap Fund, the Sub-Adviser provides a
continuous investment program for those Funds, including investment research and
management with respect to all securities and investments and cash equivalents
in the Funds, subject to supervision of Pacific Century and the Board of
Trustees. Under the Sub-Advisory Agreement for New Asia Growth Fund, the
Sub-Adviser provides investment advisory services with respect to management of
the foreign component of that Fund's portfolio, including investment research
with respect to all foreign securities, currencies and cash equivalents in the
Fund.
For its services, Pacific Century pays the Sub-Advisers a fee,
computed daily and payable quarterly, equal on an annual basis, to 0.65% of the
average daily net assets of International Stock Fund, 0.60% of the average daily
net assets of Small Cap Fund and 0.50% of New Asia Growth Fund's average daily
net assets. The Sub-Advisers' fees are paid by Pacific Century, and the Funds
do not pay any incremental fees for the services of the Sub-Advisers. For the
fiscal years ended July 31, 1998, July 31, 1997 and July 31, 1996, Pacific
Century paid sub-advisory fees to the Sub-Adviser and its predecessor in the
amount of $91,615, $141,522, and $29,567, respectively, for services provided
to New Asia Growth Fund.
Each Sub-Advisory Agreement has provisions limiting the
liability of the Sub-Adviser similar to those in the Advisory Agreement. The
Sub-Advisory Agreement with respect to International Stock Fund and Small Cap
Fund will continue in effect beyond its initial two year term, and the
Sub-Advisory Agreement with respect to the New Asia Growth Fund will continue in
effect beyond its current one-year term, provided its continuance is approved
annually in the same manner as the Advisory Agreement. Each Sub-Advisory
Agreement may be terminated at any time with respect to a Fund without penalty
on 60 days' written notice by either party, by the Board of Trustees or by the
vote of a majority of the Fund's outstanding voting securities. Each
Sub-Advisory Agreement will terminate automatically if assigned.
ADMINISTRATOR AND DISTRIBUTOR
Under its Administration Agreement with the Trust, BISYS Fund
Services Ohio, Inc. ("BISYS Ohio") furnishes the Trust with office facilities,
together with those ordinary clerical and bookkeeping services that are not
being furnished by Pacific Century. BISYS and BISYS Ohio are each a wholly-owned
subsidiary of The BISYS Group, Inc. For expenses assumed and services provided
as administrator pursuant to the Administration Agreement, BISYS Ohio is
entitled to receive a fee from each Fund, computed daily and paid monthly, at
an annual rate equal to 0.20% of the average daily net assets of the Fund.
BISYS served the Trust as administrator under the predecessor to the current
Administration Agreement. The following table sets forth the aggregate fees
paid, after giving effect to fee waivers, by each Fund to BISYS for services
provided pursuant to the predecessor to the current Administration Agreement
for the fiscal years ended July 31, 1998, July 31, 1997, and July 31, 1996:
-42-
<PAGE> 229
Compensation Paid to BISYS
Under the Administration Agreement
(after waivers)
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
Fund July 31, 1998 July 31, 1997 July 31, 1996
- ---- -------------- ------------- -------------
Diversified Fixed Income $239,145 $231,432 $216,788
Fund
Growth and Income Fund $230,680 $153,729 $100,430
Growth Stock Fund $493,777 $299,912 $270,656
New Asia Growth Fund $ 27,517 $ 24,883 $ 8,807
Short Intermediate U.S. $ 44,959 $ 35,823 $ 30,800
Treasury Securities Fund
Tax-Free Securities Fund $596,120 $468,348 $457,502
Tax-Free Short Intermediate $ 71,559 $ 58,644 $ 60,810
Securities Fund
U.S. Treasury Securities $ 36,713 $ 38,792 $ 45,683
Fund
The Administration Agreement contains provisions limiting the
liability of BISYS Ohio and requiring its indemnification by the Trust similar
to those in the Advisory Agreement. The Administration Agreement will continue
in effect until December 31, 2001, and from year to year thereafter, unless
terminated at any time by either party for cause (as defined in the Agreement),
or at the end of any such period, on 60 days' written notice. If the Agreement
is terminated by the Trust prior to the end of any such period for any reason
other than cause, the Trust is required to make a one-time liquidated damages
payment to BISYS Ohio equal to the lesser of one year's fees or the fees due for
the balance of the term.
-43-
<PAGE> 230
The Trust has also retained BISYS Ohio to provide the Trust with
certain fund accounting services pursuant to a Fund Accounting Agreement. For
services provided under the Agreement, BISYS Ohio is entitled to receive a fee
from each Fund, computed and paid monthly, at an annual rate equal to 0.03% of
the average daily net assets of the Fund up to $300 million, 0.025% of the next
$250 million of average daily net assets, and 0.02% of the Fund's average daily
net assets in excess of $550 million. The term of the Agreement, and its
provisions regarding termination, limitation of liability, and indemnification,
are similar to those of the Trust's Administration Agreement with BISYS Ohio.
The following table sets forth the aggregate fees paid by each
Fund to BISYS Ohio for fund accounting services for the fiscal years ended
July 31, 1998, July 31, 1997 and July 31, 1996 under the predecessor to the
current Fund Accounting Agreement.
<TABLE>
<CAPTION>
Compensation Paid to BISYS Ohio
Under the Fund Accounting Agreement
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
Fund July 31, 1998 July 31, 1997 July 31, 1996
- ---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Diversified Fixed $50,336 $48,581 $45,603
Income Fund
Growth and Income $46,806 $31,379 $21,384
Fund
Growth Stock Fund $95,895 $58,423 $53,199
</TABLE>
-44-
<PAGE> 231
<TABLE>
<CAPTION>
Compensation Paid to BISYS Ohio
Under the Fund Accounting Agreement
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
Fund July 31, 1998 July 31, 1997 July 31, 1996
- ---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
New Asia Growth $ 15,396 $11,733 $ 1,761
Fund
Short Intermediate $ 11,124 $ 8,990 $ 7,486
U.S. Treasury
Securities Fund
Tax-Free Securities $140,761 $98,573 $106,514
Fund
Tax-Free Short $ 19,894 $17,205 $ 18,454
Intermediate
Securities Fund
U.S. Treasury $ 8,904 $ 8,369 $ 9,579
Securities Fund
</TABLE>
BISYS Fund Services Limited Partnership d/b/a/ BISYS Fund
Services ("BISYS") has also entered into a Distribution Agreement with the Trust
pursuant to which it engages in a continuous distribution of shares of the
Funds. For its services, BISYS is entitled to a distribution fee, as set forth
in the Distribution and Shareholder Service Plans for each of the Class A and
Class B shares ("Class A Distribution Plan" and "Class B Distribution Plan,"
respectively). The Class A Distribution Plan and the Class B Distribution Plan
have been adopted pursuant to Rule 12b-1 under the 1940 Act. See "Distribution
and Shareholder Service Plans" below.
Pursuant to the Distribution Agreement, BISYS has agreed to use
appropriate efforts to solicit orders for sales of shares of the Funds, but is
not obligated to sell and specified number of shares. The Distribution Agreement
contains provisions with respect to renewal and termination similar to those in
the Advisory Agreement. Pursuant to the Distribution Agreement, the Trust has
agreed to indemnify BISYS to the extent permitted by applicable law against
certain liabilities under the Securities Act and the 1940 Act.
TRANSFER AGENT
BISYS Fund Services, Inc., also a wholly-owned subsidiary of
The BISYS Group, Inc., 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 maybe), or is being
considered for purchase or sale, by a Fund. Investment personnel are
-45-
<PAGE> 232
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 PLANS
The Trust has adopted for the Class A and Class B shares of each
of the Funds the Class A Distribution Plan and the Class B Distribution Plan
under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. The Class A
Distribution Plan and the Class B Distribution Plan of each of the Funds were
adopted by the Board of Trustees, including a majority of the trustees who were
not "interested persons" (as defined in the 1940 Act) of the Funds and who had
no direct or indirect financial interest in the operation of the Distribution
Plans or in any agreement related to the Distribution Plans (the "Qualified
Trustees").
The Board of Trustees approved the Plans to stimulate sales of
shares of the Funds in the face of competition from a variety of other
investment companies and financial products, in view of the potential advantages
to shareholders of the Funds of continued growth of the asset bases of the
Funds, including greater liquidity, more investment flexibility and achievement
of greater economies of scale.
The Class A Distribution Plan provides that 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 the Fund attributable to the Fund's
Class A shares. The Class B Distribution Plan provides that BISYS is entitled to
receive from each Fund a fee in an amount not to exceed on an annual basis 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class B shares. The distribution fee compensates BISYS for the following: (a)
payments BISYS makes to banks and other institutions and industry professionals,
such as broker/dealers, including Pacific Century, BISYS and their affiliates or
subsidiaries, pursuant to agreements in connection with providing sales and/or
administrative support services to the holders of a Fund's Class A and Class B
shares; and (b) payments to financial institutions and industry professionals
(such as insurance companies, investment counselors, and BISYS' affiliates and
subsidiaries) for 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 Class A and Class B
shareholders of a Fund, printing and distributing advertising and sales
literature and reports to Class A and Class B shareholders in connection with
the sale of a Fund's shares, and providing personnel and communication equipment
used in servicing shareholder accounts and prospective Class A and Class B
shareholder inquiries.
Until further notice, BISYS voluntarily intends to waive a
portion of the Class A distribution fee for the current fiscal year to limit the
fee to 0.25% of the average daily net assets value attributed to Class A shares
on an annual basis. The distribution fees are paid to BISYS only to compensate
or 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
Class A and Class B Distribution Plans for the fiscal year ended July 31,1998,
restated to reflect fee waivers, are set forth in the table below.
Distribution Fees Paid Under the Class A and Class B Distribution Plans
-46-
<PAGE> 233
<TABLE>
<CAPTION>
Aggregate Distribution Fees Paid
for Fiscal Year Ended July 31, 1998
(after waiver)
------------------------------------
Class A Class B
------------------- --------------------
Retained Retained
by Paid to by Paid to
Fund BISYS Others BISYS Others
- ---- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Diversified Fixed Income Fund $ 3,445 - $ 380 -
Growth and Income Fund $12,489 - $3,871 -
Growth Stock Fund $27,612 - $3,029 -
New Asia Growth Fund $ 6,019 - $ 215 -
Short Intermediate U.S. Treasury $ 1,520 - N/A -
Securities Fund
Tax-Free Securities Fund $ 6,106 - $ 579 -
Tax-Free Short Intermediate Securities $ 1,442 - N/A -
Fund
U.S. Treasury Securities Fund $ 2,652 - N/A -
</TABLE>
The Class A Distribution Plan and Class B 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. Each
Distribution Plan may be terminated at any time with respect to any Fund,
without payment of any penalty, by a vote of a majority of the outstanding
voting securities of the appropriate class of the Fund. A Distribution Plan may
not be amended to increase materially the amounts payable thereunder by a Fund
without the approval of a majority of the outstanding voting securities of the
appropriate class of the Fund, and no material amendment to the Distribution
Plans may be made except by a majority of both the Trustees of the Trust and the
Qualified Trustees.
CALCULATION OF YIELD AND TOTAL RETURN
YIELD
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)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; 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
-47-
<PAGE> 234
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 on Class A shares 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 yields 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 do not provide a basis for determining future yields since
they are based on historical data. Yield is a function of portfolio quality,
composition, maturity and market conditions as well as the expenses allocated to
the Funds.
In addition, investors should recognize that changes in the net
asset values of shares of the Funds will affect the yields of such Funds for any
specified period, and such changes should be considered together with a 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 Funds 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.
TOTAL RETURN
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 a specified period ("ERV") of a hypothetical
initial investment ("P") over a period of years ("n") according to the following
formula: P(1+T)(n) = ERV. Aggregate total return will be calculated similarly to
average annual total return except that the return figure will be aggregated
over the relevant period rather than annualized. In addition, the Funds may
also, at times, calculate total return of Class A shares based on net asset
value per share (rather than the public offering price), in which case the
figures would not reflect the effects 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 for the Class A shares derived pursuant to the
calculation described above also are presented.
OTHER INFORMATION
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data to
supplement such discussions; (4) descriptions of past or anticipated portfolio
holdings for one or more of the Funds; (5) descriptions of investment strategies
for one or more of the Funds; (6) descriptions or comparisons of various savings
and investment products (including, but not limited to,
-48-
<PAGE> 235
insured bank products, annuities, qualified retirement plans and individual
stocks and bonds), which may or may not include the Funds; (7) comparisons of
investment products (including the Funds) with relevant market or industry
indices or other appropriate benchmarks; (8) discussions of Fund rankings or
ratings by recognized rating organizations; and (9) testimonials describing the
experience of persons that have invested in one or more of the Funds. The Trust
may also include calculations, such as hypothetical compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any of the Funds.
From time to time, the Trust may also quote the Funds'
performance in advertising and other types of literature as compared to the
performance of the S&P 500 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 and local newspapers
and periodicals.
The S&P 500 Index and the Dow Jones Industrial Average are
unmanaged indices of selected common stock prices. The investment results of the
Funds also may be compared, in reports and promotional literature, to the
performance of 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 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.
-49-
<PAGE> 236
PAST PERFORMANCE OF THE FUNDS
The tables below set forth total return and yield information
for the Class A, Class B and Class Y shares of the Funds, other than Balanced
Fund, Value Fund, International and Stock Fund and Small Cap Fund, which have
not commenced operations as of the date of this Statement of Additional
Information. Information for Class B shares of the Funds is based on the
information for the Class A Shares (adjusted for deferred sales loads), because
these shares were not offered until March 1998. Information for Class B shares
of the Funds has not been adjusted for expenses applicable to the Class B
shares, specifically the difference in 12b-1 fees charged to Class A and Class B
shares. Future performance for Class B shares will be affected by the difference
in 12b-1 fees charged.
DIVERSIFIED FIXED INCOME FUND
The average annual and aggregate total return for the
Diversified Fixed Income Fund includes the performance of a common trust fund
("Commingled") account advised by Pacific Century and managed the same as the
Fund in all material respects, for periods dating back to October 31, 1977, and
prior to commencement of operations of the Fund's Class A, B and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the Commission under the 1940 Act,
and therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled account had been registered, the
Commingled account's performance may have been adversely affected.
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
One year ended
July 31, 1998 3.27% $1,032.67 3.37% $1,033.74 7.94% $1,079.43
Five years ended
July 31, 1998 4.40% $1,239.98 5.04% $1,278.54 5.62% $1,314.24
</TABLE>
-50-
<PAGE> 237
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
Ten years ended
July 31, 1998 7.92% $2,142.82 8.34% $2,228.67 8.71% $2,304.32
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 3.27% $1,032.67 3.37% $1,033.74 7.94% $1,079.43
Five years ended
July 31, 1998 24.00% $1,239.98 27.85% $1,278.54 31.42% $1,314.24
Ten years ended
July 31, 1998 114.28% $2,142.82 122.87% $2,228.67 130.43% $2,304.32
Inception* to
July 31, 1998 125.56% $2,255.57 134.32% $2,343.18 148.54% $2,485.40
Yield
(including maximum applicable sales charge)**
30 Days ended
July 31, 1998 4.91% 4.51% 5.37%
- -----------------------------------------
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. The Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
</TABLE>
GROWTH AND INCOME FUND
The average annual and aggregate total return for the Growth and
Income Fund includes the performance of a common trust fund ("Commingled")
account advised by Pacific Century and managed the same as the Fund in all
material respects, for periods dating back to October 31, 1977, and prior to
commencement of operations of the Fund's Class A, B and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the Commission under the 1940 Act,
and therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled account had been registered, the
Commingled account performance may have been adversely affected.
-51-
<PAGE> 238
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Average Annual Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 14.33% $1,143.31 14.81% $1,148.14 19.37% $1,193.66
Five years ended
July 31, 1998 18.01% $2,289.06 18.82% $2,368.69 19.25% $2,411.57
Ten years ended
July 31, 1998 14.37% $3,827.79 14.81% $3,978.19 15.11% $4,084.69
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 14.33% $1,143.31 14.81% $1,148.14 19.37% $1,193.66
Five years ended
July 31, 1998 128.91% $2,289.06 136.87% $2,368.69 141.16% $2,411.57
Ten years ended
July 31, 1998 282.78% $3,827.79 297.82% $3,978.19 308.47% $4,084.69
Inception* to
July 31, 1998 797.65% $8,976.54 832.04% $9,320.40 882.05% $9,820.50
Yield
(including maximum applicable sales charge)**
30 Days ended
July 31, 1998 -0.03% -0.76% -0.23%
- -----------------------------------------
</TABLE>
-52-
<PAGE> 239
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. The Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
GROWTH STOCK FUND
The average annual and aggregate total return for the Growth
Stock Fund includes the performance of a common trust fund ("Commingled")
account advised by Pacific Century and managed the same as the Fund in all
material respects, for periods dating back to October 31, 1977, and prior to
commencement of operations of the Fund's Class A, B and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the Commission under the 1940 Act,
and therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled account had been registered, the
Commingled account's performance may have been adversely affected.
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
One year ended
July 31, 1998 14.78% $1,147.75 15.38% $1,153.80 19.96% $1,199.57
Five years ended
July 31, 1998 18.47% $2,333.34 19.30% $2,416.75 19.71% $2,458.01
Ten years ended
July 31, 1998 15.85% $4,353.17 16.30% $4,528.40 16.63% $4,656.30
</TABLE>
-53-
<PAGE> 240
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Aggregate Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
One year ended
July 31, 1998 14.78% $ 1,147.75 15.38% $ 1,153.80 19.96% $ 1,199.57
Five years ended
July 31, 1998 133.33% $ 2,333.34 141.68% $ 2,416.75 145.80% $ 2,458.01
Ten years ended
July 31, 1998 335.32% $ 4,353.17 352.84% $ 4,528.40 365.63% $ 4,656.30
Inception* to
July 31, 1998 1,160.00% $12,600.00 1,208.77% $13,087.71 1,288.41% $13,884.14
Yield
(including maximum applicable sales charge)**
30 Days ended
July 31, 1998 -0.57% -1.36% -0.33%
- -----------------------------------------
</TABLE>
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. The Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
SHORT INTERMEDIATE U.S. TREASURY SECURITIES FUND
<TABLE>
<CAPTION>
Class A* Class Y*
------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable
as a value of a as a value of a
percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000
hypothetical investment hypothetical investment
$1000 at the end $1000 at the end
Period investment of the period investment of the period
- ------ ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One year ended
July 31, 1998 3.87% $1,038.70 6.62% $1,066.24
</TABLE>
-54-
<PAGE> 241
<TABLE>
<CAPTION>
Class A* Class Y*
------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable
as a value of a as a value of a
percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000
hypothetical investment hypothetical investment
$1000 at the end $1000 at the end
Period investment of the period investment of the period
- ------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 3.87% 1,038.70 6.62% 1,066.24
Inception* to
July 31, 1998 19.22% 1,192.19 23.34% 1,233.42
Yield
(including maximum applicable sales charge)**
30 Days ended
July 31, 1998 4.49% 4.84%
- -----------------------------------------
</TABLE>
* Class A shares of the Fund commenced operation on November 1, 1993.
Class Y shares of the Fund commenced operation on October 14, 1994.
** The maximum applicable sales charge on the Class A shares of the Fund is
2.25%. The maximum deferred sales charge on the Class B shares is 5.0%.
There is no sales charge imposed in connection with the purchase of
Class Y shares of either Fund.
-55-
<PAGE> 242
NEW ASIA GROWTH FUND
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
One year ended (51.53%) $484.73 (50.75%) $492.53 (48.76%) $512.38
July 31, 1998
Inception* to
July 31, 1998 (9.88%) $698.05 (9.21%) $716.26 (8.30%) $741.42
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 (51.53%) $484.73 (50.75%) $492.53 (48.76%) $512.38
Inception* to
July 31, 1998 (30.20%) $698.05 (28.37%) $716.26 (25.86%) $741.42
- -----------------------------------------
</TABLE>
* The Class A and Class Y shares of the Fund commenced operation on
February 15, 1995. Class B shares of the Fund commenced operation on
March 2, 1998.
** The maximum applicable sales charge on the Class A shares of the Fund is
5.25%. The maximum deferred sales charge on Class B shares is 5.0%.
There is no sales charge imposed in connection with the purchase of
Class Y shares of either Fund.
TAX FREE SECURITIES FUND
The average annual and aggregate total return for the Tax Free
Securities Fund includes the performance of a common trust fund ("Commingled")
account advised by Pacific Century and managed the same as the Fund in all
material respects, for periods dating back to October 31, 1977, and prior to
commencement of operations of the Fund's Class A, B and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the
-56-
<PAGE> 243
Commission under the 1940 Act, and therefore was not subject to the investment
restrictions imposed by law on registered mutual funds. If the Commingled
account had been registered, the Commingled account's performance may have been
adversely affected.
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
One year ended
July 31, 1998 0.98% $1,009.78 1.09% $1,010.88 5.63% $1,056.30
Five years ended
July 31, 1998 4.26% $1,231.75 4.93% $1,272.05 5.44% $1,303.24
Ten years ended
July 31, 1998 6.73% $1,917.22 7.16% $1,996.69 7.47% $2,054.84
Aggregate Total Return
(including maximum applicable sales charge)**
One year
ended July
31, 1998 0.98% $1,009.78 1.09% $1,010.88 5.63% $1,056.30
Five years
ended July
31, 1998 23.17% $1,231.75 27.20% $1,272.05 30.32% $1,303.24
Ten years
ended July
31, 1998 91.72% $1,917.22 99.67% $1,996.69 105.48% $2,054.84
Inception* to
July 31, 1998 79.01% $1,790.09 86.44% $1,864.36 97.02% $1,970.20
</TABLE>
-57-
<PAGE> 244
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Yield
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
30 Days Ended
July 31, 1998 4.05% 3.48% 4.46%
- -----------------------------------------
</TABLE>
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
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 a common trust
fund ("Commingled") account advised by Pacific Century and managed the same as
the Fund in all material respects, for periods dating back to March 31, 1988,
and prior to commencement of operations of the Fund's Class A and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the Commission under the 1940 Act,
and therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled account had been registered, the
Commingled account's performance may have been adversely affected.
<TABLE>
<CAPTION>
Class A* Class Y*
------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable
as a value of a as a value of a
percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000
hypothetical investment hypothetical investment
$1000 at the end $1000 at the end
Period investment of the period investment of the period
- ------ ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One year ended
July 31, 1998 1.08% $1,010.75 3.83% $1,038.32
</TABLE>
-58-
<PAGE> 245
<TABLE>
<CAPTION>
Class A* Class Y*
------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable
as a value of a as a value of a
percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000
hypothetical investment hypothetical investment
$1000 at the end $1000 at the end
Period investment of the period investment of the period
- ------ ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
Five years ended
July 31, 1998 2.92% $1,155.02 3.76% $1,202.59
Ten years ended
July 31, 1998 4.41% $1,538.98 4.96% $1,623.25
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 1.08% $1,010.75 3.83% $1,038.32
Five years ended
July 31, 1998 15.50% $1,155.02 20.26% $1,202.59
Ten years ended
July 31, 1998 53.90% $1,538.98 62.33% $1,623.25
Inception* to
July 31, 1998 53.49% $1,534.93 61.88% $1,618.81
Yield
(including maximum applicable sales charge)**
30 days ended
July 31, 1998 3.17% 3.49%
- -----------------------------------------
</TABLE>
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
U.S. TREASURY SECURITIES FUND
The average annual and aggregate total return for the U.S.
Treasury Securities Fund includes the performance of a common trust fund
("Commingled") account advised by Pacific Century and managed the same as the
Fund in all material respects, for periods dating back to December 31, 1984, and
prior to commencement of operations of the Fund's Class A and Y shares. Such
performance is adjusted to reflect the expenses associated with the Fund. The
Commingled account was not registered with the Commission under the 1940 Act,
and therefore was not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled
-59-
<PAGE> 246
account had been registered, the Commingled account's performance may have been
adversely affected.
<TABLE>
<CAPTION>
Class A* Class Y*
------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable
as a value of a as a value of a
percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000
hypothetical investment hypothetical investment
$1000 at the end $1000 at the end
Period investment of the period investment of the period
- ------ ------------ ------------- ------------ -------------
Average Annual Total Return
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C>
One year ended
July 31, 1998 3.66% $1,036.63 8.24% $1,082.42
Five years ended
July 31, 1998 4.39% $1,239.92 5.48% $1,305.77
Ten years ended
July 31, 1998 7.54% $2,069.29 8.20% $2,199.88
Aggregate Total Return
(including maximum applicable sales charge)**
One year ended
July 31, 1998 3.66% $1,036.63 8.24% $1,082.42
Five years ended
July 31, 1998 23.99% $1,239.92 30.58% $1,305.77
Ten years ended
July 31, 1998 106.93% $2,069.29 119.99% $2,199.88
Inception* to
July 31, 1998 197.52% $2,975.23 218.01% $3,180.09
</TABLE>
-60-
<PAGE> 247
<TABLE>
<CAPTION>
Class A* Class B* Class Y*
------------------------------- ------------------------------- -------------------------------
Expressed Redeemable Expressed Redeemable Expressed Redeemable
as a value of a as a value of a as a value of a
percentage hypothetical percentage hypothetical percentage hypothetical
based on a $1000 based on a $1000 based on a $1000
hypothetical investment hypothetical investment hypothetical investment
$1000 at the end $1000 at the end $1000 at the end
Period investment of the period investment of the period investment of the period
- ------ ------------ ------------- ------------ ------------- ------------ -------------
Yield
(including maximum applicable sales charge)**
<S> <C> <C> <C> <C> <C> <C>
30 days ended
July 31, 1998 4.55% -- 5.00%
- -----------------------------------------
</TABLE>
* Class A and Class Y shares of the Fund commenced operation on October
14, 1994. Class B shares of the Fund commenced operation on March 2,
1998.
** The maximum applicable sales charge on the Class A shares is 4.0%. The
maximum deferred sales charge on the Class B shares is 5.0%. There is no
sales charge imposed in connection with the purchase of Class Y shares.
DETERMINATION OF NET ASSET VALUE
Net asset value per share of the Class A, Class B and Class Y
shares 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, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and Good Friday.
Securities for which market quotations are available are valued
at latest reported prices. Securities 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 are
converted to U.S. dollar equivalents at the current rate obtained from a
recognized bank or dealer. Foreign currency exchange contracts are valued at the
current cost of covering or offsetting such contracts.
In all cases, bid prices are 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
-61-
<PAGE> 248
market quotations are not readily available are valued at fair value as
determined in good faith by Pacific Century in accordance with procedures
adopted by the Trustees and subject to ratification by the Trustees. If Pacific
Century 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.
PURCHASE OF SHARES
Reference is made to "Purchasing and Adding to Your Shares" in
the Prospectuses for certain information as to the purchase of Fund shares. The
various sales charge reductions and waivers described in the Prospectuses have
been implemented to reflect the economies of scale associated with distribution
activities as the amount of a sale increases, and to reflect the lower level of
such activities necessary for sales to persons who are members of organized
groups, participants in retirement plans, or associated with the Trust and its
affiliates.
Various sales charge reductions are available to certain
qualified groups. A qualified group is a group or association or a category of
purchasers which (i) is 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) gives its endorsement or authorization to an
investment program to assist solicitation of its membership by a broker or
dealer; and (iv) complies with the conditions of purchase in any agreement
entered into between the Trust and the group, representative or broker or
dealer. At the time of purchase, you must furnish the Transfer Agent, either
directly or through a broker or dealer, with information sufficient to permit it
to verify that the purchase qualifies for a reduced sales charge.
Each Fund offers three classes of shares: Shares of Class A are
sold with an initial sales charge, shares of Class B are sold with a contingent
deferred sales charge ("CDSC") and shares of Class Y are sold to eligible
investors without a sales charge. Class A and Class B shares each have exclusive
voting rights with respect to the Rule 12b-1 distribution plan adopted with
respect to such Class. Class B shares automatically convert to Class A shares
after approximately eight years.
CLASS Y SHARES
Class Y 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 the Fund's
Class Y shares. The Board of Trustees has approved an automatic conversion
feature whereby Class Y shares held by shareholders who have terminated their
qualifying relationship on or after February 15, 1997 will be converted to Class
A 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 Class A shareholders in a Fund, such former Class
Y shareholders will be able to reinvest dividends and distributions relating to
their shareholdings, but will be subject to the higher expenses associated with
Class A shares. A conversion of Class Y shares for Class A shares will be a
tax-free transaction for any Class Y shareholder involved in such conversion.
Class Y shareholders who plan to terminate their qualified trust account,
employee benefit account or other qualifying relationship and who do not wish to
have their holdings converted to Class A shares may redeem their shares.
Class Y shareholders whose qualified trust account, employee
benefit account or other qualifying relationship was terminated prior to
February 15, 1997 are permitted to remain as Class Y shareholders. However, such
shareholders may not make additional purchases of Class Y shares, nor may they
reinvest dividends and distributions in respect of their Class Y shareholdings.
SPECIMEN PRICE MARK-UP
Under the current distribution arrangements between the Fund and
the Distributor, Class A shares are sold at a maximum sales charge of 4.00% and
Class B and Class Y shares are sold at net asset value. Using the Growth Stock
Fund's net asset value at
-62-
<PAGE> 249
July 31, 1998, an example of the determination of the maximum offering price of
the Fund's shares is as follows:
Class A
Net asset value........................................ $17.75
Maximum sales charge (4.00% of offering price)......... 0.74
------
Offering price to public............................... $18.49
======
Class B
Net asset value and offering price to public........... $17.72
Class Y
Net asset value and offering price to public........... $17.81
REDEMPTION OF SHARES
Reference is made to the section in the Prospectuses entitled
"Selling Your Class Y 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.
REDEMPTION IN KIND
The Trust intends to pay in cash for all shares of a Fund
redeemed, but the Trust reserves the right to make payment wholly or partly in
shares of readily marketable investment securities. In such cases, a shareholder
may incur brokerage costs in converting such securities to cash. However, the
Trust has elected to be governed by the provisions of Rule 18f-1 under the 1940
Act, pursuant to which it is obligated to pay in cash all request for
redemptions by any shareholder of record, limited in amount with respect to each
shareholder during any 90-day period to the lesser of $250,000 or 1% of the net
asset value of the Trust at the beginning of such period.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any broker-dealer or
group of broker-dealers to execute transactions in its portfolio securities. In
connection with its duties to arrange for the purchase and sale of each Fund's
portfolio securities, Pacific Century and its Sub-Advisers select such
broker-dealers ("Broker-Dealers") as will, in their judgment, implement the
policy of the Trust to achieve quality execution at the most favorable prices
through responsible Broker-Dealers, and in the case of agency transactions, at
competitive commission rates. Pacific Century and its Sub-Advisers deal directly
with the selling or purchasing principal or market maker without incurring
brokerage commissions unless they determine that better price or execution may
be obtained by paying such commissions.
-63-
<PAGE> 250
In allocating transactions to Broker-Dealers, Pacific Century
and its Sub-Advisers are authorized to consider, in determining whether a
particular Broker-Dealer will provide best execution, the Broker-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 where it is believed that
another Broker-Dealer would offer greater reliability or provide a better price
or execution. In addition, Pacific Century and its Sub-Advisers have each
adopted a brokerage allocation policy in reliance on Section 28(e) of the
Securities and Exchange Act of 1934, permitting them to cause a Fund to pay
commission rates in excess of those another Broker-Dealer would have charged if
Pacific Century or the relevant Sub-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 Pacific Century's or the Sub-Adviser's overall
responsibilities as to the accounts over which it exercises investment
discretion. 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. If, on the foregoing basis, the transaction in
question could be allocated to two or more Broker-Dealers, Pacific Century and
its Sub-Advisers are authorized, in allocating portfolio trades, to consider
whether a Broker-Dealer has sold shares of the Trust or any other investment
company or companies having Pacific Century as its investment adviser or having
the same administrator or principal underwriter as the Trust.
Each year, Pacific Century assesses the contribution of the
brokerage and research services provided by the Broker-Dealers, and attempts to
allocate a portion of its brokerage business in response to these assessments.
Research analysts, counselors, and various investment committees each seek to
evaluate the brokerage and research services they receive from Broker-Dealers
and make judgments as to the level of business which would recognize such
services. In addition, Broker-Dealers sometimes suggest a level of business they
would like to receive in return for the various brokerage and research services
they provide. Actual brokerage received by any firm may be less than the
suggested allocations but can, and often does, exceed the suggestions, because
the total business is allocated on the basis of all the considerations described
above. In no case is a Broker-Dealer excluded from receiving business from
Pacific Century because it has not been identified as providing research
services.
Purchases and sales of debt securities are usually principal
transactions. Each of the Funds may also 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 these 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.
Although the Investment Adviser and Sub-Advisers make investment
decisions for the Trust independently from those of their other accounts,
investments of
-64-
<PAGE> 251
the kind made by the Funds may often also be made by such other accounts. When
the Investment Adviser or a Sub-Adviser buys or sells the same security at
substantially the same time on behalf of the Funds and one or more other
accounts managed by the Investment Adviser or Sub-Adviser, the Investment
Adviser or Sub-Adviser allocates available investments by such means as, in its
judgment, result in fair treatment. The Investment Adviser or Sub-Adviser
aggregates orders for purchases and sales of securities of the same issuer on
the same day among the Funds and its other managed accounts, and the price paid
to or received by the Funds and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Funds or the size of the position
purchased or sold by the Funds.
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
turnover rate for a Fund's portfolio 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 Pacific Century or a Sub-Adviser deems portfolio changes
appropriate.
For the fiscal years ended July 31, 1998, July 31, 1997, and
July 31, 1996, 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, 1998, July 31, 1997, and July 31, 1996, are set forth in the
table below:
<TABLE>
<CAPTION>
Brokerage Commissions Paid by Certain Funds
-------------------------------------------
Total Commissions Total Commissions Total Commissions
Paid for Fiscal Paid for Fiscal Paid for Fiscal
Year Ended Year Ended Year Ended
Fund July 31, 1998 July 31, 1997 July 31, 1996
- ---- ------------- ------------- -------------
<S> <C> <C> <C>
Growth and Income Fund $325,674 $237,637 $269,962
Growth Stock Fund $730,536 $241,913 $355,376
New Asia Growth Fund $233,961 $243,253 $ 95,781
</TABLE>
For the fiscal years ended July 31, 1997 and July 31, 1996, New
Asia Growth Fund paid brokerage commissions of $10,992 and $7,457, respectively,
to Credit Lyonnais Securities, an affiliate of Credit Lyonnais, which served as
sub-adviser to the Fund until July 31, 1997. Nicholas-Applegate Capital
Management (Hong Kong) LLC, the current Sub-Adviser to the New Asia Growth Fund
is not affiliated with any Broker-Dealer which effects portfolio transactions
for the Funds. For the fiscal year
-65-
<PAGE> 252
ended July 31, 1997, the percentage of the Fund's aggregate brokerage
commissions paid to Credit Lyonnais Securities was 4.5%, and the percentage of
the aggregate dollar amount of Fund transactions involving the payment of
commissions effected through Credit Lyonnais Securities was 8.5%.
The percentage of total portfolio transactions placed with, and
related commissions paid to, firms which provided research, statistical, or
other services to Pacific Century and the Sub-Adviser to the New Asia Growth
Fund in connection with the management of the Funds, or in some cases, to the
Funds, for the fiscal year ended July 31, 1998 are set forth below:
<TABLE>
<CAPTION>
Total Commission Paid to
Providers of Research,
Percentage of Total Statistical and Other
Fund Portfolio Transactions Services
---- ---------------------- ---------
<S> <C> <C>
Growth Stock Fund 72.60% $510,031
Growth and Income Fund 50.44% $149,033
New Asia Growth Fund 100.00% $233,961
</TABLE>
During the fiscal year ended July 31, 1998, the Funds did not
acquire securities of their regular broker-dealers or of their parents, as such
terms are defined in Rule 10b-1 under the 1940 Act.
The portfolio turnover rates for each Fund for the fiscal years
ended July 31, 1998 and July 31, 1997 are set forth in the table below.
-66-
<PAGE> 253
<TABLE>
<CAPTION>
Portfolio Turnover Rates of the Funds
-------------------------------------
Year Ended July 31, Year Ended July 31,
Fund 1998 1997
- ---- ---- -----
<S> <C> <C>
Diversified Fixed Income Fund 57.72% 80.98%
Growth and Income Fund 75.97% 74.83%
Growth Stock Fund 97.08% 32.20%
New Asia Growth Fund 129.77% 134.89%
Short Intermediate U.S. Treasury 17.07% 51.56%
Securities Fund
Tax-Free Securities Fund 10.71% 11.07%
Tax-Free Short Intermediate 47.10% 29.46%
Securities Fund
U.S. Treasury Securities Fund 11.98% 44.90%
</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.
FEDERAL TAX INFORMATION
Qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (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; and (b) 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 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.
-67-
<PAGE> 254
A 4% nondeductible excise tax will be imposed on each Fund to
the extent it does not meet certain minimum distribution requirements on a
calendar year basis. 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, Small Cap 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 and International Stock Fund invest primarily in foreign securities. If
more than 50% in value of either such Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal Revenue Service
pursuant to which shareholders of the 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 such 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 and International Stock Fund will report annually to their respective
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 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 income tax purposes.
-68-
<PAGE> 255
If a shareholder exchanges or otherwise disposes of shares of a
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 will 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, the 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, the 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, the Fund will subtract the premium received from its
cost basis in the securities purchased.
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 of any net gain or loss recognized on these deemed sales and 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. Newly-enacted Code Section
1259 will require the recognition of gain (but not loss) if a Fund makes a
"constructive sale" of an appreciated financial position (e.g., debt instruments
and stock). A Fund generally will be considered to make a constructive sale of
an appreciated financial position if it sells the same or substantially
identical property short, enters into a futures or forward contract to deliver
the same or substantially identical property, or enters into certain other
similar transactions.
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.
CLASS B SHAREHOLDERS
No gain or loss will be recognized by a shareholder upon the
conversion of Class B shares to Class A shares.
-69-
<PAGE> 256
FOREIGN SHAREHOLDERS
Under the Code, distributions of net investment income
(including distributions of short-term capital gains) by a Fund to a nonresident
alien individual, nonresident alien fiduciary of a trustor estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject to
U.S. withholding tax (at the 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 capital gains derived by
non-resident aliens or 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 if the individual is physically
present in the U.S. for more than 182 days during the taxable year (in which
case the individual may be treated as a U.S. resident in any event).
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 AND
INTERNATIONAL STOCK FUND
Due to investment laws in certain developing countries in Asia,
it is anticipated that investments by New Asia Growth Fund and
International Stock Fund 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, and International Stock Fund may make similar
investments. Each such Fund may invest up to 10% of its total assets in
securities of closed-end investment companies. If a Fund purchases shares of an
investment company (or similar investment entity) organized under foreign law,
the Fund will be treated as owning shares in a passive foreign investment
company ("PFIC") for U.S. federal income tax purposes. The 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 the Fund as a
dividend to its shareholders. A 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 the Fund to
recognize income in a particular year in excess of the distributions received
from such PFICs. Alternatively, a 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, the 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, a 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.
-70-
<PAGE> 257
SPECIAL TAX CONSIDERATIONS FOR THE TAX-FREE FUNDS
FEDERAL TAX INFORMATION
The portion of total dividends paid by each of 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 of
the Fund receiving dividends during such year. In order for a Tax-Free Fund 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 Fund's assets must
consist of tax-exempt securities. In addition, the Fund 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. Within 60 days after the close of its taxable year, each
Tax-Free Fund will notify its shareholders 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(a) of the Code
received by such Fund 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 treated as a
preference 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 a Tax-Free
Fund should consult their tax advisers to determine whether exempt-interest
dividends paid by the Fund 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 a Tax-Free 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 Fund 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
-71-
<PAGE> 258
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.
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.
GENERAL INFORMATION
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on
October 30, 1992, and currently consists of twelve separately managed series.
The Board of Trustees may establish additional series in the future. Each series
has unlimited transferable shares of beneficial interest, with 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 three classes of shares -- Class Y,
Class A, and Class B. The Classes generally have identical rights with respect
to the series of which they are a part, but there are certain matters which
affect one class but not another. Currently, the only such matters are the
existence of Distribution and Shareholder Service Plans with respect to each of
Class A and Class B shares but not Class Y shares, the absence of any sales load
with regard to the purchase of the Class Y shares, and the fact that a
salesperson or any other person entitled to receive compensation for selling or
servicing Class A, Class B or Class Y shares may receive different compensation
with respect to one such Class over the other Class in the same Fund. Class A
and Class B shares have different sales charges and other expenses which may
affect performance. The Trust has a Prospectus for Class Y shares and separate
Prospectuses for Class A and B shares of various Funds. Prospectuses may be
obtained by calling the telephone number listed on the first page of the
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
-72-
<PAGE> 259
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.
When certain matters affect one class but not another, the
shareholders will 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 will 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 are entitled to receive the assets attributable to that
Fund that are available for distribution, and a distribution of any general
assets not attributable to a particular Fund that are available for
distribution, in such manner and on such basis as the Trustees in their sole
discretion may determine.
Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by 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
-73-
<PAGE> 260
account of shareholder liability is limited to circumstances in which a Fund
would be unable to meet its obligations.
PRINCIPAL SHAREHOLDERS
As of October 26, 1998 the persons set forth below were known by
the Trust to own of record or beneficially 5% or more of the Class A, Class B or
Class Y shares, as applicable, of the indicated Fund. Unless otherwise
indicated, the address of STROBRO, REINCO and HAWCO is Pacific Century Trust,
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.
Percentage of Shares Held
of Record Or Beneficially
-------------------------
CLASS Y SHARES
Diversified Fixed Income Securities Fund
STROBRO 77.26%
HAWCO 21.51%
Growth and Income Fund
STROBRO 68.17%
HAWCO 27.16%
Growth Stock Fund
STROBRO 81.90%
HAWCO 12.27%
New Asia Growth Fund
Vanguard Fiduciary Trust Company 6.51%
P.O. Box 2600
V.M. 421
Valley Forge, PA 19482
HAWCO 21.14%
REINCO 13.17%
STROBRO 54.49%
Short Intermediate U.S. Treasury
Securities Fund
-74-
<PAGE> 261
STROBRO 96.34%
Tax-Free Securities Fund
STROBRO 98.68%
Tax-Free Short Intermediate Securities
Fund
STROBRO 97.85%
U.S. Treasury Securities Fund
REINCO 96.26%
CLASS A SHARES
Diversified Fixed Income Fund
BHC Securities Inc. 91.29%
Growth and Income Fund
BHC Securities Inc. 86.41%
Growth Stock Fund
BHC Securities Inc. 73.77%
Arrow & Co. 9.53%
New Asia Growth Fund
-75-
<PAGE> 262
Merrill Lynch Pierce Fenner & Smith 11.90%
Incorporated
4800 Deer Lake Drive East, 3rd Floor
Mutual Fund Operations
Jacksonville, Florida 32246
BHC Securities, Inc. 83.33%
Short Intermediate U.S. Treasury
Securities Fund
BHC Securities, Inc. 88.31%
Merrill Lynch Pierce Fenner & Smith 5.90%
Incorporated
4800 Deer Lake Drive East, 3rd Floor
Mutual Fund Operations
Jacksonville, Florida 32246
Tax-Free Short Intermediate Securities
Fund
BHC Securities, Inc. 83.89%
U.S. Treasury Securities Fund
Hugh Shearer Trustee 6.08%
P.O. Box 3196
Honolulu, HI 96801
BHC Securities, Inc. 78.27%
Merrill Lynch Pierce Fenner & Smith 10.91%
Incorporated
4800 Deer Lake Drive East, 3rd Floor
Mutual Fund Operations
Jacksonville, Florida 32246
Tax-Free Securities Fund
Douglas Philpotts 13.07%
TRST Douglas Philpotts Trust I
DTD 4/28/92
206 Oluolu PL
Kula, Hawaii 96790
Arrow & Co. 16.13%
MO 2-1
P.O. Box 30010
Durham, North Carolina 27702-3010
BHC Securities, Inc. 32.00%
First Hawaiian Bank 12.85%
TRST Robert C & Helen F Nicols Trust
DTD 6/16/97
P.O. Box 3708
Honolulu, Hawaii 96813
CLASS B SHARES
Diversified Fixed Income Securities Fund
BHC Securities, Inc. 20.48%
Growth Stock Fund
BHC Securities, Inc. 5.04%
New Asia Growth Fund
Merrill Lynch Pierce Fenner & Smith 24.50%
Mutual Fund Operations
4800 Deer Lake Dr East, 3rd Floor
Jacksonville, Florida 32246
BHC Securities, Inc. 33.59%
Tax-Free Securities Fund
BHC Securities, Inc. 91.34%
-76-
<PAGE> 263
CUSTODIAN
Union Bank of California, ("Bank of California") has been
retained as Custodian for New Asia Growth Fund and International Stock Fund.
Bank One Trust Company, N.A. ("Bank One") has been retained as Custodian for the
other Funds. 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, Bank One and Bank of California, each receives an
asset-based fee.
INDEPENDENT AUDITORS AND COUNSEL
Ernst & Young LLP serves as the independent auditors for the
Trust. Ernst & Young LLP provides audit services, tax return preparation and
assistance and consultation in connection with certain Commission filings. Its
office is located at One Columbus, Suite 2300, 10 West Broad Street, Columbus,
Ohio 43215.
Paul, Hastings, Janofsky & Walker LLP serves as legal counsel
for the Trust. Its office is located at 555 South Flower Street, Los Angeles,
California 90071.
FINANCIAL INFORMATION
The Trust's 1998 Annual Report to Shareholders accompanies this
SAI. The financial statements in such Annual Report are incorporated in this SAI
by reference. Such financial statements have been audited by the Trust's
independent auditors, Ernst & Young LLP, whose report thereon appears in such
Annual Report. Such financial statements have been incorporated herein in
reliance upon such report given upon their authority as experts in accounting
and auditing. Additional copies of the Trust's 1998 Annual Report to
Shareholders may be obtained at no charge by telephoning the Trust at the number
on the front page of this SAI.
REGISTRATION STATEMENT
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.
-77-
<PAGE> 264
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 maybe in
default or there may be present elements of danger with respect to principal or
interest.
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.
A-1
<PAGE> 265
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 Crating may be used to cover a situation
where a bankruptcy petition has been filed but debt service payments are
continued.
A-2
<PAGE> 266
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> 267
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> 268
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.
A-5
<PAGE> 269
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.
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
A-6
<PAGE> 270
- 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 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.
A-7
<PAGE> 271
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.
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.
A-8
<PAGE> 272
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-9
<PAGE> 273
PART C
OTHER INFORMATION
Item 23. Exhibits.
Exhibit
Number Description
------ --------------
(a-1)* - Declaration of Trust
(a-2)* - Amendment No. 1 to Declaration of Trust
(a-3)* - Amendment No. 2 to Declaration of Trust
(a-4) - Amendment No. 3 to Declaration of Trust
(a-5) - Form of Amendment No. 4 to Declaration of Trust
(b)* - By-Laws
(c) - Instruments Defining Rights of Shareholders
(incorporated by reference to Exhibits a and b
above.)
(d-1)* - Investment Advisory Agreement between Hawaiian Trust
Company, Limited and the Registrant, dated as of October 29,
1993 ("Investment Advisory Agreement")
(d-2)* - Addendum to Investment Advisory Agreement
(d-3)** - Form of Amended Schedule A and Amended Addendum to
Investment Advisory Agreement
(d-4)* - Sub-Advisory Agreement among the Registrant, Pacific Century
Trust and Nicholas-Applegate Capital Management (Hong Kong)
LLC
(d-5)** Form of Sub-Advisory Agreement among the Registrant, Pacific
Century Trust and Nicholas-Applegate Capital Management
(e-1)* - Distribution Agreement between BISYS Fund Services
(formerly, The Winsbury Company Limited Partnership)
and the Registrant, dated as of October 29, 1993, as
amended ("Distribution Agreement")
(e-2)** - Amended Schedules A and B to Distribution Agreement
(e-3)* - Form of Selling Agreement
(f) - Not applicable
C-1
<PAGE> 274
(g-1)* - 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
(g-2)* - Custodian Agreement among Union Bank of California,
Hawaiian Trust Company, Limited, and the Registrant on behalf of
New Asia Growth Fund.
(h-1) - Form of Administration Agreement between BISYS Fund Services
Ohio, Inc. and the Registrant
(h-5) - Form of Fund Accounting Agreement between BISYS Fund Services
Ohio, Inc. and the Registrant
(h-6) - Transfer Agency Agreement between BISYS Fund Services, Inc.
and the Registrant, dated as of February 1, 1998 ("BISYS Transfer
Agency Agreement")
(h-7) - Amended Schedule A to the BISYS Transfer Agency Agreement
(i-1)* - Opinion and Consent of Counsel
(i-2) - Opinion and Consent of Counsel with respect to International
Stock Fund, Small Cap Fund and Value Fund
(j-1) - Consent of Independent Auditors
(k) - Not Applicable
(l)* - Form of investment letter
(m-1)* - Class A Distribution and Shareholder Service Plan
between the Registrant and BISYS Fund Services
(formerly, The Winsbury Company), dated as of October
29, 1993
(m-2)* - Amended Appendix A to the Distribution and Shareholder
Service Plan
(m-3)* - Class B Distribution and Shareholder Service Plan
between the Registrant and BISYS Fund Services
(formerly, The Winsbury Company), dated as of
September 26, 1997
(n) Financial Data Schedules
(o)** Rule 18f-3 Plan
C-2
<PAGE> 275
(p-1)* Powers of Attorney for Irimga McKay, Douglas Philpotts, Richard
W. Gushman, II, Stanley W. Hong, Russell G. Okata, Oswald K.
Stender, and Craig Warren
(p-2)** Power of Attorney for Walter J. Laskey
- ----------------------------------
* Filed as an exhibit to Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A on September 30, 1997 and
incorporated herein by reference.
** Filed as an exhibit to Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A on September 16, 1998 and
incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
Section 5.2 of the Registrant's Declaration of Trust, filed
herewith as Exhibit 23(a), provides for indemnification of the Registrant's
trustees, officers, employees and agents against liabilities incurred by them in
connection with the defense or disposition of any action or proceeding in which
they may be involved or with which they may be threatened, while in office or
thereafter, by reason of being or having been in such office, except with
respect to matters as to which it has been determined that they acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office ("Disabling Conduct").
Section 7 of the Registrant's Fund Account Agreement, filed
herewith as Exhibit 23(h), provides for the indemnification of the Registrant's
Fund Accounting Agent, and its directors, officers, employees and agents against
all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving Disabling Conduct. Section
1.11 of the Registrant's Distribution Agreement, filed herewith as Exhibit
23(e), provides for the indemnification of the Registrant's Distributor against
certain liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct; and
Section 1.12 of such Agreement provides for indemnification by the Distributor
of the Registrant's trustees and officers against certain liabilities incurred
by them in connection with the Distributor's activities.
The Registrant has obtained a trustees' and officers'
liability policy covering certain types of errors and omissions.
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, 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
C-3
<PAGE> 276
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.
Item 26. Business and Other Connections of Investment Adviser and Sub-Advisers.
Pacific Century Trust serves as investment adviser to all of
the Registrant's investment portfolios. To the knowledge of the Registrant, none
of the trustees or executive officers of Pacific Century Trust 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 for his own account
or in the capacity of director, officer, employee, partner or trustee, except as
set forth below:
<TABLE>
<CAPTION>
==========================================================================================
Principal Business(es) During at Least
Name Position(s) 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>
Nicholas-Applegate Management (Hong Kong) LLC ("Nicholas-
Applegate") serves as sub-adviser to New Asia Growth Fund. During the two fiscal
years ended December 31, 1997, Nicholas-Applegate has engaged principally in the
business of providing investment services to institutional and other clients.
All of the additional information required by this Item 26 with respect to
Nicholas-Applegate is set forth in its Form ADV, as amended (File No.
801-54681), which is incorporated herein by reference.
Nicholas-Applegate Capital Management ("NACM") serves as sub-
adviser to Small Cap Fund and International Stock Fund. During the two fiscal
years ended December 31, 1997, Nicholas-Applegate has engaged principally in the
business of providing investment services to institutional and other clients.
All of the additional information required by this Item 26 with respect to
Nicholas-Applegate is set forth in its Form ADV, as amended (File No.
801-21442), which is incorporated herein by reference.
Item 27. Principal Underwriter.
C-4
<PAGE> 277
(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 Alpine Equity Trust, American
Performance Funds, AmSouth Mutual Funds, The ARCH Fund, Inc., The BB&T Mutual
Funds Group, The Coventry Group, ESC Strategic Funds, Inc., The Eureka Funds,
Fountain Square Funds, Hirtle Callaghan Trust, HSBC Family of Funds, The
Infinity Mutual Funds, Inc., Intrust Funds, The Kent Funds, Magna Funds, Meyers
Investment Trust, MMA Proxis Mutual Funds, M.S.D.& T. Funds, Parkstone Group of
Funds, The Parkstone Advantage Funds, Pegasus Funds, Puget Sound Alternative
Investment Series Trust, The Republic Funds Trust, The Republic Advisors Funds
Trust, The Riverfront Funds, Inc., SBSF Funds, Inc. dba Key Mutual Funds, Sefton
Funds, The Sessions Group, Summit Investment Trust, Variable Insurance Funds,
The Victory Portfolios, The Victory Variable Funds, and Vintage Mutual Funds,
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.
(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 Road
Columbus, OH 43219
- ------------------------------------------------------------------------------------------
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
- ------------------------------------------------------------------------------------------
</TABLE>
(c) Not applicable.
Item 28. 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 Road
Columbus, OH 43219-3035
Attention: Secretary
(Registrant)
C-5
<PAGE> 278
(2) Pacific Century Trust
Financial Plaza of the Pacific
111 S. King Street
Honolulu, Hawaii 96813
Attention: Trust Investments
(Investment Adviser)
(3) BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
(Administrator and Distributor)
(4) Nicholas-Applegate Management (Hong Kong) LLC
8 Connaught Place
Hong Kong
(Sub-Adviser)
(5) Nicholas-Applegate Capital Management
600 West Broadway
San Diego, California 92130
(Sub-Adviser)
Item 29. Management Services.
None.
Item 30. Undertakings.
Not Applicable.
C-6
<PAGE> 279
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 12 to the 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 30th day of November, 1998.
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 30, 1998
- ---------------------- (Principal Executive
(Irimga McKay) Officer)
* Treasurer (Principal
- ---------------------- Financial and Accounting
(Craig Warren) Officer)
* Trustee and Chairperson
- ----------------------
(Walter J. Lasky)
* Trustee
- ----------------------
(Douglas Philpotts)
* Trustee
- ----------------------
(Richard W. Gushman, II)
* Trustee
- ----------------------
(Stanley W. Hong)
</TABLE>
C-7
<PAGE> 280
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Trustee
- ----------------------
(Russell K. Okata)
* Trustee
- ----------------------
(Oswald K. Stender)
*By /s/ IRIMGA MCKAY November 30, 1998
- ----------------------
(Irimga McKay
Attorney-in-Fact)
</TABLE>
C-8
<PAGE> 281
EXHIBIT INDEX
PACIFIC CAPITAL FUNDS
Post-Effective Amendment No. 12 to
Form N-1A Registration Statement
(a-4) Amendment No. 3 to Declaration of Trust
Resolutions of the Board of Trustees at a Regular Meeting held
on September 26, 1997
(a-5) Form of Amendment No. 4 to Declaration of Trust
Resolutions of the Board of Trustees at a Regular Meeting held
on September 18, 1998
(h-1) Form of Administration Agreement between BISYS Fund Services
Ohio, Inc. and the Registrant
(h-5) Form of Fund Accounting Agreement between BISYS Fund Services
Ohio Inc. and the Registrant
(h-6) Transfer Agency Agreement between BISYS Fund Services, Inc.
and the Registrant, dated as of February , 1998 ("BISYS Transfer
Agency Agreement")
(h-7) Amended Schedule A to the BISYS Transfer Agency Agreement
(i-2) Opinion and Consent of Counsel with respect to International
Stock Fund, Small Cap Fund and Value Fund
(j-1) Consent of Independent Auditors
(n) Financial Data Schedules
C-9
<PAGE> 1
Exhibit (a-4)
AMENDMENT NO. 3 TO DECLARATION OF TRUST
OF
PACIFIC CAPITAL FUNDS
The undersigned, Secretary of the Pacific Capital Funds (the "Trust"), a
trust with transferrable 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 amendments were duly adopted by the affirmative vote of a majority of
the Trustees at a regular meeting held on September 26, 1997 pursuant to the
resolutions attached as Exhibit A hereto:
1. there is hereby established one additional class of shares of the Trust
which shall be designated the "Class B" shares. The Class B shares shall
have all of the rights and preferences with respect to the classes of
shares of the Trust set forth in the Declaration of Trust.
2. The existing "Retail Class" shares shall be redesignated "Class A"
shares and the existing "Institutional Class" shares shall be
redesignated "Class Y" shares.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Declaration of Trust this 6th day of October, 1997.
/s/ Gregory T. Maddox
----------------------------------------
Name: Gregory T. Maddox
Title: Secretary
1230 Columbia Street
San Diego, CA 92101
<PAGE> 2
EXHIBIT A
PACIFIC CAPITAL FUNDS
RESOLUTIONS OF THE BOARD OF TRUSTEES
AT A REGULAR MEETING HELD ON SEPTEMBER 26, 1997
RESOLVED, that the Trustees hereby approve an amendment to the Trust's
Declaration of Trust to redesignate the "Retail Class" shares as "Class A"
shares, and the "Institutional Class" shares as "Class Y" shares, and to create
a new class of shares, the "Class B" shares, such shares to have identical
voting, dividend and liquidation rights as the Class A and Class Y shares, but
to be subject to a contingent deferred sales load and a Rule 12b-1 distribution
and shareholder servicing fee; and
FURTHER RESOLVED, that the proper officers of the Trust be, and they hereby are,
authorized to prepare and file all such documents and reports, including any
necessary amendments to the Trust's Declaration of Trust with the Commonwealth
of Massachusetts, and to the Trust's Registration Statement on Form N-1A with
the SEC or any state securities commission, 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 Class B shares and the redesignation of the
Retail Class and Institutional Class shares.
<PAGE> 3
ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
ss. )
COUNTY OF SAN DIEGO )
On this 6th day of October, 1997, before me, a Notary Public in and for
said state, duly commissioned and sworn, personally appeared Gregory T. Maddox,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed in 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/ Irene E. Higino
----------------------------------------
Notary Public
<PAGE> 1
Exhibit (a-5)
AMENDMENT NO. 4 TO DECLARATION OF TRUST
OF
PACIFIC CAPITAL FUNDS
The undersigned, Secretary of the Pacific Capital Funds (the "Trust"), a
trust with transferrable 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 18, 1998, pursuant to the
resolutions attached as Exhibit A hereto:
1. there is hereby established three additional series of shares of the
Trust, which shall be designated as the Pacific Capital Value Fund
series, the Pacific Capital Small Cap Fund series and the Pacific
Capital International Stock Fund series, each of which shall have Class
A, Class B and Class Y shares. The shares of each series and Class shall
have all of the rights and preferences with respect to series and
classes of shares of the Trust set forth in the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has executed this Amendment to the
Declaration of Trust this ____ day of November, 1998.
----------------------------------------
Name: Gregory T. Maddox
Title: Secretary
1230 Columbia Street
San Diego, CA 92101
<PAGE> 2
EXHIBIT A
PACIFIC CAPITAL FUNDS
RESOLUTIONS OF THE BOARD OF TRUSTEES
AT A REGULAR MEETING HELD ON SEPTEMBER 18, 1998
RESOLVED, that the Trustees hereby establishes the following new series of the
Trust Pacific Capital Small Cap Fund, Pacific Capital Value Fund, and Pacific
Capital International Stock Fund, having the same rights and privileges of all
other series of the Trust.
RESOLVED FURTHER, that the Board of Trustees hereby establishes Class A, B and
Y shares of beneficial interest of such Funds, having the same rights and
privileges of all other Class A, B and Y shares of the Trust.
FURTHER RESOLVED, that the proper officers of the Trust be, and they hereby are,
authorized to prepare and file all such documents and reports, including any
necessary amendments to the Trust's Declaration of Trust with the Commonwealth
of Massachusetts, and to the Trust's Registration Statement on Form N-1A with
the SEC or any state securities commission, and to do all such other acts and
things as they or any of them deem necessary or desirable to effectuate the
establishment of such Funds and Classes thereof.
<PAGE> 1
Exhibit (h-1)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1998, between
PACIFIC CAPITAL FUNDS, a Massachusetts business trust (the "Trust") and BISYS
FUND SERVICES OHIO, INC., an Ohio corporation (the "Administrator").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Trust as the Trust and the Administrator may agree on
("Funds") and as listed on Schedule A attached hereto and made a part of this
Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Trust hereby retains the
Administrator to act as the administrator of the Funds and to furnish the Funds
with the management and administrative services as set forth in Article 2 below.
The Administrator hereby accepts such employment and agrees to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized
herein, shall have no authority to act for or represent the Trust in any way and
shall not be deemed an agent of the Trust.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Funds, and, on behalf of the Trust, will
investigate, assist in the selection of and conduct relations with custodians,
depositories, accountants, legal counsel, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and persons in any other capacity deemed
to be necessary or desirable for the Funds' operations. The Administrator shall
provide the Trustees of the Trust with such reports regarding investment
performance as they may reasonably request but shall have no responsibility for
supervising the performance by any investment adviser or sub-adviser of its
responsibilities.
The Administrator shall provide the Trust with regulatory reporting,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for shareholders' and Trustees' meetings) for handling the
affairs of the Funds and such other services as the Administrator shall, from
time to time, determine to be necessary to perform its obligations under this
Agreement. In addition, at the request of the Board of Trustees, the
Administrator
<PAGE> 2
shall make reports to the Trust's Trustees concerning the performance of its
obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Trust expenses and control all
disbursements for the Trust, and as appropriate compute the
Trust's total return, expense ratios, portfolio turnover rate
and, if required, portfolio average dollar-weighted maturity;
(b) assist Trust counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents
(including reports regarding the sale and redemption of Shares
as may be required in order to comply with Federal and state
securities laws) as may be necessary or desirable to register
the Trust's Shares with state securities authorities, monitor
the sale of Trust Shares for compliance with state securities
laws, and file with the appropriate state securities
authorities the registration statements and reports for the
Trust and the Trust's Shares and all amendments thereto, as
may be necessary or convenient to register and keep effective
the Trust and the Trust's Shares with state securities
authorities to enable the Trust to make a continuous offering
of its Shares;
(d) develop and prepare, with the assistance of the Trust's
investment adviser, communications to shareholders, including
the annual report to shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Trust shareholders, and supervise and facilitate
the proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among
others, the Trust's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Trust's transfer agent with respect to the
payment of dividends and other distributions to shareholders;
(g) calculate performance data of the Funds for dissemination
to information services covering the investment Trust
industry;
(h) coordinate and supervise the preparation and filing of the
Trust's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Trust or any
Fund of the Trust, including, without limitation, the Trust's
investment adviser, distributor, custodian, fund
2
<PAGE> 3
accountant, transfer agent, outside legal counsel and
independent public accountants, and at the request of the
Board of Trustees, report to the Board on the performance of
such organizations;
(j) assist with the layout and printing of publicly
disseminated prospectuses and assist with and coordinate
layout and printing of the Trust's semi-annual and annual
reports to shareholders;
(k) assist with the design, development, and operation of the
Funds, including new classes, investment objectives, policies
and structure;
(l) provide individuals reasonably acceptable to the Trust's
Board of Trustees to serve as officers of the Trust, who will
be responsible for the management of certain of the Trust's
affairs as determined by the Trust's Board of Trustees;
(m) advise the Trust and its Board of Trustees on matters
concerning the Trust and its affairs;
(n) obtain and keep in effect fidelity bonds and Trustees and
officers/errors and omissions insurance policies for the Trust
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Trust's Board of Trustees;
(o) monitor and advise the Trust and its Funds on their
regulated investment company status under the Internal Revenue
Code of 1986, as amended;
(p) perform all administrative services and functions of the
Trust and each Fund to the extent administrative services and
functions are not provided to the Trust or such Fund pursuant
to the Trust's or such Fund's investment advisory agreement,
distribution agreement, custodian agreement, transfer agent
agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Funds as the Trust
and the Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for
the Trust on Form N-SAR and all required notices pursuant to
Rule 24f-2.
The Administrator shall perform such other services for the Trust that
are mutually agreed upon by the parties from time to time. Such services may
include performing internal audit examinations; mailing the annual reports of
the Funds; preparing an annual list of shareholders; and mailing notices of
shareholders' meetings, proxies and proxy statements, for all of which the Trust
will pay the Administrator's out-of-pocket expenses.
3
<PAGE> 4
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Trustees of the
Trust who are affiliated persons of the Administrator or any affiliate of the
Administrator; provided, however, that unless otherwise specifically provided
herein, the Administrator shall not be obligated to pay the compensation of any
employee of the Trust retained by the Trustees of the Trust to perform services
on behalf of the Trust.
(B) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Trustees who are not
affiliated persons of the Administrator or any investment advisers to the Trust
or any affiliate of the Administrator or any such investment adviser, insurance,
interest, brokerage costs, litigation and other extraordinary or nonrecurring
expenses, and all fees and charges of investment advisers to the Trust.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Trust shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Trust
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including but not limited to the travel and lodging expenses incurred
by officers and employees of the Administrator in connection with attendance at
Board meetings.
If this Agreement becomes effective subsequent to the first
day of a month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are
4
<PAGE> 5
assumed by or may be asserted against the Administrator hereunder. The
Administrator shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any act or omission in carrying out its duties
hereunder, except a loss resulting from willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder, except as may otherwise be provided
under provisions of applicable law which cannot be waived or modified hereby.
(As used in this Article 5, the term "Administrator" shall include directors,
officers, employees and other agents of the Administrator as well as the
Administrator itself.)
The Trust agrees to indemnify and hold harmless the Administrator, 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 any actions taken by the Administrator or the
Administrator's failure to take any actions with respect to the performance of
services under this Agreement on behalf of any Fund or based, if applicable,
upon reasonable reliance on information, records, instructions or requests with
respect to such Fund given or made to the Administrator by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of the Administrator in cases of its own bad faith,
willful misfeasance, negligence or reckless disregard by it of its obligations
and duties.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust, but failure to do so in good faith shall not affect the
Administrator's rights hereunder.
The Trust shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Trust elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the Trust
and satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Trust does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
5
<PAGE> 6
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Trustees, officers, employees
and shareholders of the Trust are or may be or become interested in the
Administrator, as officers, employees or otherwise, and that directors, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Trust, and that the Administrator may be or become
interested in the Trust as a shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor, and the Administrator
shall be responsible, to the extent provided in Article 5 hereof, for all acts
of such subcontractor as if such acts were its own. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Trust, and (ii) by the vote of a majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Trustees meeting called
for the purpose of voting on such approval.
ARTICLE 10. Proprietary and Confidential Information. The Administrator
agrees on behalf of itself and its directors, officers 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.
ARTICLE 11. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or
6
<PAGE> 7
maintained by the Administrator on behalf of the Trust shall be prepared and
maintained at the expense of the Administrator, but shall be the property of the
Trust and will be made available to or surrendered promptly to the Trust on
request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 12. Maintenance of Systems and Equipment; Uncontrollable
Events. The Administrator 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 beyond its
reasonable control, the Administrator shall use its best efforts to minimize
service interruptions. The Administrator represents and warrants that the
various procedures and systems which it has implemented with regard to
safekeeping from loss or damage attributable to fire, theft or any other cause
of the 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
its obligations hereunder. Notwithstanding the foregoing, the Administrator
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. In any such event, the Administrator shall, at no additional
expense to the Trust, take all steps reasonably necessary to minimize service
interruptions.
ARTICLE 13. Representations of the Trust. The Trust certifies to the
Administrator 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, executed and delivered
by the Trust, and constitutes 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.
ARTICLE 14. Representations of the Administrator. The Administrator
represents and warrants that: (1) the Administrator will perform comprehensive
tests on its systems to simulate the actual turning of the century. These tests
shall be intended to identify any operational issues caused by the century
change at midnight December 31, 1999. The Administrator agrees to implement by
December 31, 1998, all necessary updates and changes to its systems, if any, to
accommodate the turn of the century; and (2) this Agreement has been duly
authorized, executed and delivered by the Administrator, and constitutes a
legal, valid and binding obligation of the Administrator, enforceable against
the Administrator 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.
7
<PAGE> 8
ARTICLE 15. Insurance. The Administrator shall notify the Trust should
any of the Administrator's insurance coverage be canceled or reduced. Such
notification shall include the date of change and the reasons therefor. The
Administrator shall notify the Trust of any material claims against the
Administrator 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 the
Administrator under its insurance coverage.
ARTICLE 16. Headings. Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
ARTICLE 17. Entire Agreement. Effective as of the date set forth above,
the Administration Agreement between the parties dated as of October 29, 1993 is
terminated and shall be of no further force or effect except as otherwise set
forth therein. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and may not be amended without the
written consent of both parties.
ARTICLE 18. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, 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.
ARTICLE 19. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the following address: if to the Trust, c/o Walter J. Laskey,
Chairman, Pacific Capital Funds, 111 South King Street, Honolulu, Hawaii 96813;
if to the Administrator, at 3435 Stelzer Road, Columbus, Ohio 43219; or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
ARTICLE 20. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 21. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 22. Matters Relating to the Trust as a Massachusetts Business
Trust. 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
8
<PAGE> 9
'
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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
PACIFIC CAPITAL FUNDS
By: /s/ IRIMGA McKAY
-----------------------------
Title: President
--------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ WILLIAM J. TOMKO
-----------------------------
Title: Executive Vice President
--------------------------
9
<PAGE> 10
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF OCTOBER 1, 1998
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
Funds: This Agreement shall apply to all Funds of PACIFIC CAPITAL FUNDS,
either now or hereafter created (collectively, the "Funds"). The
current Funds of the Trust are set forth below:
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
Growth and Income Fund
New Asia Growth Fund
Balanced Fund
Value Fund
Small Capitalization Fund
International Stock Fund
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Trust will pay the
Administrator on the first business day of each month, or at such
time(s) as the Administrator shall request and the parties hereto shall
agree, a fee computed daily at the annual rate of:
Twenty one-hundredths of one percent (.2%) of each Fund's
average daily net assets
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 purposes of determining the fees payable to the Administrator, the
value of the net assets of a particular Fund shall be computed in the
manner described in the Trust's Articles of Incorporation or in the
Prospectus or Statement of Additional Information respecting that Fund
as from time to time is in effect for
A-1
<PAGE> 11
the computation of the value of such net assets in connection with the
determination of the redemption value of the shares of such Fund.
The parties hereby confirm that the fees payable hereunder shall be
applied to each Fund as a whole, and not to separate classes of shares
within the Funds.
The fee payable by the Trust hereunder shall be allocated to each Fund
based upon its pro rata share (in proportion to average daily net
assets) of the total fee payable hereunder. Such fee as is attributable
to each Fund shall be a separate (and not joint or joint and several)
obligation of each such Fund. The Administrator may agree, from time to
time, to waive any fees payable under this Agreement. Such waiver shall
be at the Administrator's sole discretion.
Term: Pursuant to Article 7, the term of this Agreement shall commence on
October 1, 1998 and shall remain in effect through December 31, 2001
("Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive
one-year periods ("Rollover Periods"). This Agreement may be terminated
without penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the parties or
(iii) for "cause," as defined below, upon the provision of 60 days
advance written notice by the party alleging cause. Written notice of
nonrenewal must be provided at least 60 days prior to the end of the
Initial Term or any Rollover Period, as the case may be.
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 material breach of this Agreement that
has not been cured within thirty (30) days following written notice of
such breach from the non-breaching party; (c) 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; (d) financial difficulties on
the part of the party to be terminated which are 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 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 (e)
any other circumstance which substantially impairs the performance of
the obligations and duties of the party to be terminated, or its
ability to perform those obligations and duties as contemplated herein.
Notwithstanding the foregoing, 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
A-2
<PAGE> 12
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 in this Schedule A, 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.
If, for any reason other than nonrenewal, mutual agreement of the
parties or "cause", as defined above, the Administrator is replaced as
administrator, or if a third party is added to perform all or a part of
the services provided by the Administrator under this Agreement
(excluding any sub-administrator appointed by the Administrator as
provided in Article 7 hereof), then the Trust shall make a one-time
cash payment, in consideration of the fee structure and services to be
provided under this Agreement, and not as a penalty, to the
Administrator equal to the lesser of the amount due the Administrator
for: (i) a one year period commencing on the date the Administrator is
replaced or a third party is added; or (ii) the remainder of the
then-current term of this Agreement, assuming for purposes of
calculation of the payment that the amount due the Administrator shall
be based upon the total combined net asset value of the Funds as shown
in their most recently audited financial statements and shall remain
constant for the remainder of the then-current term.
In the event the Trust is merged into another legal entity in part or
in whole pursuant to any form of business reorganization or is
liquidated in part or in whole prior to the expiration of the
then-current term of this Agreement, the parties acknowledge and agree
that the liquidated damages provision set forth above shall be
applicable in those instances in which the Administrator is not
retained to provide administration services consistent with this
Agreement. The one-time cash payment referenced above shall be due and
payable on the day prior to the first day in which the Administrator is
replaced or a third party is added.
A-3
<PAGE> 1
Exhibit (h-5)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of October, 1998, between PACIFIC CAPITAL
FUNDS, a Massachusetts business trust (the "Trust") and BISYS FUND SERVICES
OHIO, INC., an Ohio corporation ("Fund Accountant").
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant 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.
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) 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;
(ii) 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;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule;
and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services daily for each Fund:
(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
<PAGE> 2
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Trust's Board
of Trustees;
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Trust the daily market pricing
of securities in any money market Funds,
with the comparison to the amortized cost
basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Trust;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions and (3) income and
expense accounts;
(xiii) Provide accounting reports in connection
with the Trust's regular annual audit and
other audits and examinations by regulatory
agencies; and
2
<PAGE> 3
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Trust or a Fund's investment adviser, which
may result in an additional charge, the
amount of which shall be agreed upon between
the parties.
(ii) Fund Accountant may provide such other
similar services with respect to a Fund as
may be reasonably requested by the Trust,
which may result in an additional charge,
the amount of which shall be agreed upon
between the parties.
(d) Additional Accounting Services. Fund Accountant shall
also perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Trust.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax
returns and federal excise tax
returns;
(B) the Trust's semi-annual reports
with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder
reports;
(D) registration statements on Form
N-1A and other filings relating to
the registration of shares;
3
<PAGE> 4
(E) the Administrator's monitoring of
the Trust's status as a regulated
investment company under Subchapter
M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's
auditors; and
(G) examinations performed by the SEC.
(e) Independent Contractor. Fund Accountant shall, for
all purposes herein, be deemed to be an independent
contractor and, unless otherwise expressly provided
or authorized herein, shall have no authority to act
for or represent the Trust in any way and shall not
be deemed an agent of the Trust.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any
entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Fund Accountant shall not be relieved of any
of its obligations under this Agreement by the appointment of such subcontractor
and provided further, that Fund Accountant 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 Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in
Section 3 hereof, the Trust agrees to reimburse Fund Accountant for its
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
4
<PAGE> 5
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly
authorized; and
(f) Any additional out-of-pocket expenses reasonably incurred by
Fund Accountant in the performance of its duties and
obligations under this Agreement.
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 such Fund commences operation) (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,
until December 31, 2001 (the "Initial Term"). Thereafter, unless otherwise
terminated as provided herein, this Agreement shall be renewed automatically for
successive one-year periods ("Rollover Periods"). This Agreement may be
terminated without penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of 60 days advance written notice
by the party alleging cause. Written notice of nonrenewal must be provided
within 60 days of the end of the Initial Term or any Rollover Period, as the
case may be.
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 are 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
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; (d) a material breach of this Agreement that has not been cured
within 30 days following written notice of such breach from the non-breaching
party; or (e) any other circumstance which substantially impairs the performance
of the obligations and duties of the party to be terminated, or its ability to
perform those obligations and duties as contemplated herein.
After such termination for so long as Fund Accountant, 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.
5
<PAGE> 6
Compensation due Fund Accountant and unpaid by the Trust upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
Fund Accountant shall be entitled to collect from the Trust, in addition to the
compensation described under Section 3 hereof, the amount of all of Fund
Accountant's cash disbursements for services in connection with Fund
Accountant'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, Fund Accountant will provide the
Trust with reasonable access to any Trust documents or records remaining in its
possession.
If, for any reason other than nonrenewal, mutual agreement of
the parties or "cause", as defined above, Fund Accountant is replaced as Fund
Accountant, or if a third party is added to perform all or a part of the
services provided by Fund Accountant under this Agreement (excluding any
sub-accountant appointed by Fund Accountant as provided in Section 2 hereof),
then the Trust shall make a one-time cash payment, in consideration of the fee
structure and services to be provided under this Agreement, and not as a
penalty, to Fund Accountant equal to the lesser of the amount due Fund
Accountant for: (i) a period of one year commencing on the date Fund Accountant
is replaced or a third party is added; or (ii) the remainder of the then-current
term of this Agreement, assuming for purposes of calculation of the payment that
the amount due Fund Accountant shall be based upon the total combined net asset
value of the Funds as shown in their most recently audited financial statements
and shall remain constant for the remainder of the then-current term.
In the event the Trust is merged into another legal entity in
part or in whole pursuant to any form of business reorganization or is
liquidated in part or in whole prior to the expiration of the then-current term
of this Agreement, the parties acknowledge and agree that the liquidated damages
provision set forth above shall be applicable in those instances in which Fund
Accountant is not retained to provide fund accounting services consistent with
this Agreement. The one-time cash payment referenced above shall be due and
payable on the day prior to the first day in which Fund Accountant is replaced
or a third party is added.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant 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 Fund Accountant in the absence
of bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties set forth herein, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby.
The Trust agrees to indemnify and hold harmless Fund
Accountant, 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 any actions taken by Fund
Accountant or Fund Accountant's failure to take any actions with respect to the
performance of services under this Agreement on
6
<PAGE> 7
behalf of any Fund or based, if applicable, upon reasonable reliance on
information, records, instructions or requests with respect to such Fund given
or made to Fund Accountant by a duly authorized representative of the Trust;
provided that this indemnification shall not apply to actions or omissions of
Fund Accountant in cases of its own bad faith, willful misfeasance, negligence
or reckless disregard by it of its obligations and duties.
The rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may ultimately be
merited. In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Trust may be asked to
indemnify or hold Fund Accountant harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that Fund Accountant will use all reasonable care
to identify and notify the Trust promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Trust, but failure to do so in good faith shall not
affect Fund Accountant's rights hereunder.
The Trust shall be entitled to participate at its own expense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the Trust elects to assume the
defense of any such claim, the defense shall be conducted by counsel chosen by
the Trust and satisfactory to Fund Accountant, whose approval shall not be
unreasonably withheld. In the event that the Trust elects to assume the defense
of any suit and retain counsel, Fund Accountant shall bear the fees and expenses
of any additional counsel retained by it. If the Trust does not elect to assume
the defense of a suit, it will reimburse Fund Accountant for the reasonable fees
and expenses of any counsel retained by Fund Accountant.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust
all books and records which the Trust and Fund Accountant is, or may be,
required to keep and maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating to the
maintenance of books and records in connection with the services to be provided
hereunder. Fund Accountant 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. Reports.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed
7
<PAGE> 8
pursuant to the terms and the conditions of this Agreement to be provided or
completed by Fund Accountant, 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 ten 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 ten
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, except as provided in
Section 7 hereof, Fund Accountant 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.
10. Rights of Ownership.
All computer programs and procedures developed by or on behalf
of Fund Accountant to perform services required to be provided by Fund
Accountant under this Agreement are the property of Fund Accountant. 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.
11. Return of Records.
Fund Accountant may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Fund Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant 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
Fund Accountant 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.
12. Representations of the Trust.
The Trust certifies to Fund Accountant 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, executed and delivered by the Trust, and constitutes 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.
8
<PAGE> 9
13. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) Fund
Accountant will perform comprehensive tests on its systems to simulate the
actual turning of the century. These tests shall be intended to identify any
operational issues caused by the century change at midnight December 31, 1999.
Fund Accountant agrees to implement by December 31, 1998, all necessary updates
and changes to its systems, if any, to accommodate the turn of the century;, and
(2) this Agreement has been duly authorized, executed and delivered by Fund
Accountant, and constitutes a legal, valid and binding obligation of Fund
Accountant, enforceable against Fund Accountant 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. Insurance.
Fund Accountant shall notify the Trust should any of Fund
Accountant's insurance coverage be canceled or reduced. Such notification shall
include the date of change and the reasons therefor. Fund Accountant shall
notify the Trust of any material claims against Fund Accountant 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 Fund Accountant under its insurance
coverage.
15. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and
of any amendments thereto, certified by the proper
official of the state in which such document has been
filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments
thereto; and
(ii) Certified copies of resolutions of the Board
of Trustees covering the approval of this
Agreement, authorization of a specified
officer of the Trust to execute and deliver
this Agreement and authorization for
specified officers of the Trust to instruct
Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together
with specimen signatures of those officers who are
authorized to instruct Fund Accountant in all
matters.
(d) Two copies of the current Prospectuses and Statements
of Additional Information for each Fund.
9
<PAGE> 10
16. Information Furnished by Fund Accountant.
Fund Accountant has furnished to the Trust copies of corporate
actions covering the following matters:
(i) Approval of this Agreement, and
authorization of a specified officer of Fund
Accountant to execute and deliver this
Agreement; and
(ii) Authorization of Fund Accountant to act as
fund accountant for the Trust and to provide
accounting services for the Trust.
17. Amendments to Documents.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. 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 employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes, which shall not be unreasonably withheld.
18. Maintenance of Systems and Equipment; Uncontrollable Events.
Fund Accountant 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 beyond its
reasonable control, Fund Accountant shall use its best efforts to minimize
service interruptions. Fund Accountant represents and warrants that the various
procedures and systems which it has implemented with regard to safekeeping from
loss or damage attributable to fire, theft or any other cause of the 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 its obligations
hereunder. Notwithstanding the foregoing, Fund Accountant 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. In any such event, Fund Accountant shall, at no additional expense to
the Trust, take all steps reasonably necessary to minimize service
interruptions.
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in
Section 8 hereof, Fund Accountant shall have no responsibility for the
preparation, contents and distribution of any 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
10
<PAGE> 11
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
shares. Nothing in this Section 19 shall modify the obligations of Fund
Accountant, or any affiliate of Fund Accountant under any other agreement with
the Trust.
20. 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: if to the Trust, c/o Walter J. Laskey,
Chairman, Pacific Capital Funds, 111 South King Street, Honolulu, Hawaii 96813;
if to Fund Accountant, at 3435 Stelzer Road, Columbus, Ohio 43219; or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
22. 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. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Ohio, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
24. Entire Agreement.
Effective as of the date set forth above, the Fund Accounting
Agreement between the parties dated as of October 29, 1993 is terminated and
shall be of no further force or effect except as otherwise set forth therein.
This Agreement contains the entire understanding of the parties with respect to
the subject matter hereof, and may not be amended without the written consent of
both parties.
11
<PAGE> 12
25. Matters Relating to the Trust as a Massachusetts Business
Trust.
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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day and year first above written.
PACIFIC CAPITAL FUNDS
By: /s/ Irimga McKay
-----------------------------
Title: President
-------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ William J. Tomko
----------------------------
Title: Executive Vice President
-------------------------
12
<PAGE> 13
Dated: October 1, 1998
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES OHIO, INC.
FEES
Fund Accountant shall be entitled to receive fees from each Fund in accordance
with the following schedule:
Annual Per Fund Fee:
Three one-hundredths of one percent (.03%) of each Fund's average daily
net assets up to three hundred million dollars.
Two and one-half one-hundredths of one percent (.025%) of each Fund's
average daily net assets in excess of three hundred million dollars up
to five hundred and fifty million dollars.
Two one-hundredths of one percent (.02%) of each Fund's average daily
net assets in excess of five hundred and fifty million dollars.
Multiple Classes of Shares:
Classes of shares which have different net asset values or pay
different daily dividends will be treated as separate classes, and in
addition to the fee schedule above, Fund Accountant will be entitled to
receive annual per class fees for any additional classes in excess of
three classes as agreed upon in writing between the parties.
A-1
<PAGE> 1
Exhibit (h-6)
TRANSFER AGENCY AGREEMENT
-------------------------
AGREEMENT made this 1st day of February, 1998, between PACIFIC CAPITAL
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES,
INC. ("BISYS"), a Delaware corporation having its principal place of business at
3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust identified in Schedule A hereto (individually referred to
herein as a "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS 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.
---------
BISYS shall perform for the Trust the transfer agent services
set forth in Schedule B hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule B hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
-----
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule C hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule B hereto shall be subject to mutual
agreement at the time such amendment to Schedule B is proposed.
<PAGE> 2
3. Reimbursement of Expenses.
--------------------------
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Trust, the Trust's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of
an officer of the Trust thereunto duly authorized.
4. Effective Date.
---------------
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
-----
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
October 29, 2001 (the "Initial Term"). Thereafter, unless otherwise terminated
as provided herein, this Agreement shall be renewed automatically for successive
one-year periods ("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the manner set forth
below, (ii) by mutual agreement of the parties or (iii) for "cause," as defined
below, upon the provision of 60 days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided within 60 days of
the end of the Initial Term or any Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) a
material breach of this Agreement that has not been cured within thirty (30)
days following written notice of such breach
2
<PAGE> 3
from the non-breaching party; (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;
or (c) financial difficulties on the part of the party to be terminated which
are 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 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.
After such termination, for so long as BISYS, 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. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its distributor or investment adviser and/or other parties, of the
Trust's property, records, instruments and documents, or any copies thereof. To
the extent that BISYS may retain in its possession copies of any Trust documents
or records subsequent to such termination which copies had not been requested by
or on behalf of the Trust in connection with the termination process described
above, BISYS, for a reasonable fee, will provide the Trust with reasonable
access to such copies.
If, for any reason, BISYS is replaced as transfer agent, or if a
third party is added to perform all or a part of the services provided by BISYS
under this Agreement (excluding any sub-transfer agent appointed by BISYS as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages to, BISYS equal to the balance due BISYS for the
remainder of the term of this Agreement, assuming for purposes of calculation of
the payment that the number of shareholder accounts within the Trust on the date
BISYS is replaced, or a third party is added, will remain constant for the
balance of the contract term.
In the event the Trust is merged into another legal entity in
part or in whole or is otherwise liquidated in part or in whole pursuant to a
business reorganization prior to the expiration of the then-current term of this
Agreement, the parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those instances in which BISYS
is not retained by the surviving entity to provide transfer agency services and
(ii) for purposes of calculating the payment amount representing liquidated
damages, the number of shareholder accounts within the Trust shall be the
greater of: (i) the number of shareholder accounts at the time the Trust's Board
of Trustees receives notification of an intention on the part of Fund management
to effect such a business reorganization; (ii) the number of shareholder
accounts at the time the Trust's Board of Trustees formally approves such a
business reorganization; or (iii) the number of shareholder accounts on the day
prior to the first day during which assets are transferred by the Trust
3
<PAGE> 4
to the surviving entity pursuant to the plan of reorganization. The one-time
cash payment referenced above shall be due and payable on the day prior to the
first day during which assets are transferred to the surviving entity pursuant
to the plan of reorganization.
The parties further acknowledge and agree that, in the event
BISYS is replaced, or a third party is added, as set forth above, (i) a
determination of actual damages incurred by BISYS would be extremely difficult,
and (ii) the liquidated damages provision contained herein is intended to
adequately compensate BISYS for damages incurred and is not intended to
constitute any form of penalty.
6. Uncontrollable Events.
----------------------
BISYS 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.
7. Legal Advice.
-------------
BISYS shall notify the Trust at any time BISYS believes that it
is in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Trust, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to BISYS' responsibilities
and duties hereunder and BISYS shall in no event be liable to the Trust or any
Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
8. Instructions.
-------------
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
4
<PAGE> 5
9. Standard of Care; Reliance on Records and Instructions;
-------------------------------------------------------
Indemnification.
----------------
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, 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 BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, 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, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. Record Retention and Confidentiality.
-------------------------------------
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS 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 (the "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, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. Reports.
--------
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule D attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
D. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein not later than three
business days from the receipt
5
<PAGE> 6
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 be binding upon the Trust and any other recipient, and BISYS
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.
12. Rights of Ownership.
--------------------
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. 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.
13. Return of Records.
------------------
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS 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 BISYS 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.
14. Bank Accounts.
--------------
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. Representations of the Trust.
-----------------------------
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust, shares of each Fund which are redeemed by the Trust may be
sold by the Trust from its treasury, and (c) 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,
6
<PAGE> 7
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
16. Representations of BISYS.
-------------------------
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' 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 its obligations hereunder.
17. Insurance.
----------
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS 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 BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
---------------------------------------------------
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of
the state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Trustees covering the following matters:
A. Approval of this Agreement and authorization
of a specified officer of the Trust to
execute and deliver this Agreement and
authorization for specified officers of the
Trust to instruct BISYS hereunder; and
7
<PAGE> 8
B. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding,
such statement to be certified by the Treasurer of the
Trust.
19. Information Furnished by BISYS.
-------------------------------
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
8
<PAGE> 9
20. Amendments to Documents.
------------------------
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
-----------------------
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of such amendments or changes.
22. Compliance with Law.
--------------------
Except for the obligations of BISYS set forth in Section 10
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 "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS 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 1933 Act and the 1940
Act has been declared or becomes effective.
23. 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: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
9
<PAGE> 10
24. Headings.
---------
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
-----------
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. Governing Law and Matters Relating to the Trust as a
----------------------------------------------------
Massachusetts Business Trust.
-----------------------------
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Trust personally, but shall bind only the trust property of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees,
and this Agreement has been signed and delivered by an authorized officer of the
Trust, acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
PACIFIC CAPITAL FUNDS
By:/s/ Irimga McKay
-------------------------------------
BISYS FUND SERVICES, INC.
By:/s/ William J. Tomko
-------------------------------------
10
<PAGE> 11
Dated: February 1, 1998
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS AND
BISYS FUND SERVICES, INC.
FUNDS
-----
Diversified Fixed Income Fund
Equity Value Fund
Growth and Income Fund
Growth Stock Fund
International Equity Fund
New Asia Growth Fund
Short Intermediate U.S. Treasury Securities Fund
Small Company Growth Fund
Tax-Free Securities Fund
Tax-Free Short Intermediate Securities Fund
U.S. Treasury Securities Fund
PACIFIC CAPITAL FUNDS
By:/s/ Irimga McKay
-------------------------------------
Title: President
----------------------------------
BISYS FUND SERVICES, INC.
By:/s/ William J. Tomko
-------------------------------------
Title: Senior Vice President
----------------------------------
A-1
<PAGE> 12
Dated: February 1, 1998
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
------------------------
1. Shareholder Transactions
------------------------
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for Shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new
shares through dividend reimbursement.
2. Account Holder Information Services
-----------------------------------
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
B-1
<PAGE> 13
3. Compliance Reporting
--------------------
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
--------------------------------------
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. Account Maintenance
-------------------
a. Maintain all Account Holder records for each Portfolio account.
b. Issue statements on scheduled cycle, providing duplicate second
and third party copies if required.
c. Record account information changes.
d. Maintain account documentation files for each Account Holder.
B-2
<PAGE> 14
PACIFIC CAPITAL FUNDS
By:/s/ Irimga McKay
-------------------------------------
Title: President
----------------------------------
BISYS FUND SERVICES, INC.
By:/s/ William J. Tomko
-------------------------------------
Title: Senior Vice President
----------------------------------
B-3
<PAGE> 15
Date: February 1, 1998
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
-------------------
Annual Per Class Fee: Pursuant to Section 2 of this Agreement, BISYS shall
- --------------------- be entitled to receive an annual fee of $15,000 per
class which fee shall be payable in monthly
increments. Each monthly increment shall become due
and payable on the first day of each month or at such
other time that is agreed upon by the parties.
Annual Per Account Fees: Class A Daily Dividend $25.00
- ------------------------ Class A Periodic Dividend $23.00
Class B Daily Dividend $27.00
Class B Periodic Dividend $25.00
Class Y Daily Dividend $17.00
Class Y Periodic Dividend $15.00
Out-of-pocket Expenses: BISYS shall be entitled to be reimbursed for all
- ----------------------- reasonable out-of-pocket expenses including, but not
limited to, the expenses set forth in Section 3 of
this Agreement
PACIFIC CAPITAL FUNDS
By:/s/ Irimga McKay
-------------------------------------
Title: President
----------------------------------
BISYS FUND SERVICES, INC.
By:/s/ William J. Tomko
-------------------------------------
Title: Senior Vice President
----------------------------------
C-1
<PAGE> 16
Dated: February 1, 1998
SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS
AND
BISYS FUND SERVICES, INC.
REPORTS
-------
1. Daily Account Holder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d Reinvested Dividends.
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual Report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
D-1
<PAGE> 1
Exhibit (h-7)
Dated: October 1, 1998
AMENDED
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
PACIFIC CAPITAL FUNDS AND
BISYS FUND SERVICES, INC.
FUNDS
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
Value Fund
Small Capitalization Fund
International Stock Fund
PACIFIC CAPITAL FUNDS
By: /s/ Irimga McKay
-----------------------------
Title: President
-------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ William J. Tomko
----------------------------
Title: Executive Vice President
-------------------------
A-1
<PAGE> 1
Exhibit (i-2)
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 South Flower Street
Los Angeles, California
November 20, 1998
Pacific Capital Funds
111 South King Street
Honolulu, Hawaii
Ladies and Gentlemen,
We have acted as counsel to Pacific Capital Funds, a Massachusetts business
trust (the "Company"), in connection with the issuance of an indefinite number
of units of beneficial interest ("Shares") of the Pacific Capital International
Stock Fund, Pacific Capital Value Fund and Pacific Capital Small Cap Fund series
of Shares of the Company (each a "Fund") in a public offering pursuant to a
Registration Statement on Form N-1A (Registration No. 33-57684), as amended,
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Registration Statement").
In our capacity as counsel for the Company, we have examined the
Declaration of Trust of the Company dated October 30, 1992, as amended, the
bylaws of the Company, and originals or copies of actions of the Board of
Trustees of the Company, as furnished to us by the Company, certificates of
public officials, statutes and such other documents, records and certificates as
we have deemed necessary for the purposes of this opinion.
Based upon our examination as aforesaid, we are of the opinion that the
Shares of each Fund are duly authorized and, when purchased and paid for as
described in the Registration Statement, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion of counsel as an exhibit to
the Registration Statement.
Very truly yours,
PAUL, HASTINGS, JANOFSKY & WALKER LLP
<PAGE> 1
Exhibit (j-1)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the prospectus and under the captions "Independent Auditors and
Counsel" and "Financial Information" in the Statement of Additional Information,
both included in Post-Effective Amendment No. 12 to the Registration Statement
(Form N-1A No. 811-7454) of Pacific Capital Funds and to the use of our report
dated September 4, 1998, incorporated therein by reference.
ERNST & YOUNG LLP
Columbus, Ohio
November 24, 1998
<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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 278592228
<INVESTMENTS-AT-VALUE> 390269101
<RECEIVABLES> 3758795
<ASSETS-OTHER> 14012
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 394041908
<PAYABLE-FOR-SECURITIES> 3307646
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381321
<TOTAL-LIABILITIES> 3688967
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 214516016
<SHARES-COMMON-STOCK> 775975<F1>
<SHARES-COMMON-PRIOR> 559075<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2939
<ACCUMULATED-NET-GAINS> 64162991
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 111676873
<NET-ASSETS> 390352941
<DIVIDEND-INCOME> 3051276
<INTEREST-INCOME> 0
<OTHER-INCOME> (3988)
<EXPENSES-NET> 3328416
<NET-INVESTMENT-INCOME> (281128)
<REALIZED-GAINS-CURRENT> 80853461
<APPREC-INCREASE-CURRENT> (13215903)
<NET-CHANGE-FROM-OPS> 67356430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3666<F1>
<DISTRIBUTIONS-OF-GAINS> 1563676<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 216021<F1>
<NUMBER-OF-SHARES-REDEEMED> 81528<F1>
<SHARES-REINVESTED> 82407<F1>
<NET-CHANGE-IN-ASSETS> 182203735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14564210
<OVERDISTRIB-NII-PRIOR> 14687
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2468860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3508161
<AVERAGE-NET-ASSETS> 11056007<F1>
<PER-SHARE-NAV-BEGIN> 17.43<F1>
<PER-SHARE-NII> (0.04)<F1>
<PER-SHARE-GAIN-APPREC> 2.99<F1>
<PER-SHARE-DIVIDEND> 0.01<F1>
<PER-SHARE-DISTRIBUTIONS> 2.62<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 17.75<F1>
<EXPENSE-RATIO> 1.32<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 12
<NAME> GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 278592228
<INVESTMENTS-AT-VALUE> 390269101
<RECEIVABLES> 3758795
<ASSETS-OTHER> 14012
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 394041908
<PAYABLE-FOR-SECURITIES> 3307646
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381321
<TOTAL-LIABILITIES> 3688967
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 214516016
<SHARES-COMMON-STOCK> 21066498<F1>
<SHARES-COMMON-PRIOR> 11375655<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2939
<ACCUMULATED-NET-GAINS> 64162991
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 111676873
<NET-ASSETS> 390352941
<DIVIDEND-INCOME> 3051276
<INTEREST-INCOME> 0
<OTHER-INCOME> (3988)
<EXPENSES-NET> 3328416
<NET-INVESTMENT-INCOME> (281128)
<REALIZED-GAINS-CURRENT> 80853461
<APPREC-INCREASE-CURRENT> (13215903)
<NET-CHANGE-FROM-OPS> 67356430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 207716<F1>
<DISTRIBUTIONS-OF-GAINS> 29415345<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 11559218<F1>
<NUMBER-OF-SHARES-REDEEMED> 3777051<F1>
<SHARES-REINVESTED> 1908676<F1>
<NET-CHANGE-IN-ASSETS> 182203735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14564210
<OVERDISTRIB-NII-PRIOR> 14687
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2468860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3508161
<AVERAGE-NET-ASSETS> 297743902<F1>
<PER-SHARE-NAV-BEGIN> 17.44<F1>
<PER-SHARE-NII> 0.00<F1>
<PER-SHARE-GAIN-APPREC> 3.01<F1>
<PER-SHARE-DIVIDEND> 0.02<F1>
<PER-SHARE-DISTRIBUTIONS> 2.62<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 17.81<F1>
<EXPENSE-RATIO> 1.07<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Y Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 13
<NAME> GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 278592228
<INVESTMENTS-AT-VALUE> 390269101
<RECEIVABLES> 3758795
<ASSETS-OTHER> 14012
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 394041908
<PAYABLE-FOR-SECURITIES> 3307646
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381321
<TOTAL-LIABILITIES> 3688967
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 214516016
<SHARES-COMMON-STOCK> 82329<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2939
<ACCUMULATED-NET-GAINS> 64162991
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 111676873
<NET-ASSETS> 390352941
<DIVIDEND-INCOME> 3051276
<INTEREST-INCOME> 0
<OTHER-INCOME> (3988)
<EXPENSES-NET> 3328416
<NET-INVESTMENT-INCOME> (281128)
<REALIZED-GAINS-CURRENT> 80853461
<APPREC-INCREASE-CURRENT> (13215903)
<NET-CHANGE-FROM-OPS> 67356430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 83868<F1>
<NUMBER-OF-SHARES-REDEEMED> 1539<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 182203735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14564210
<OVERDISTRIB-NII-PRIOR> 14687
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2468860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3508161
<AVERAGE-NET-ASSETS> 736960<F1>
<PER-SHARE-NAV-BEGIN> 16.36<F1>
<PER-SHARE-NII> (0.05)<F1>
<PER-SHARE-GAIN-APPREC> 1.41<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 17.72<F1>
<EXPENSE-RATIO> 2.07<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>B 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 20963201
<INVESTMENTS-AT-VALUE> 22749809
<RECEIVABLES> 540850
<ASSETS-OTHER> 649
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23291308
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23079
<TOTAL-LIABILITIES> 23079
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25455448
<SHARES-COMMON-STOCK> 113832<F1>
<SHARES-COMMON-PRIOR> 116045<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 16315
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3957512
<ACCUM-APPREC-OR-DEPREC> 1786608
<NET-ASSETS> 23268229
<DIVIDEND-INCOME> 11517
<INTEREST-INCOME> 1484270
<OTHER-INCOME> 0
<EXPENSES-NET> 191889
<NET-INVESTMENT-INCOME> 1303898
<REALIZED-GAINS-CURRENT> 144578
<APPREC-INCREASE-CURRENT> 311969
<NET-CHANGE-FROM-OPS> 1760445
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 57773<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 15083<F1>
<NUMBER-OF-SHARES-REDEEMED> 22522<F1>
<SHARES-REINVESTED> 5226<F1>
<NET-CHANGE-IN-ASSETS> (1650959)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 35524
<OVERDIST-NET-GAINS-PRIOR> 4102090
<GROSS-ADVISORY-FEES> 137647
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 239522
<AVERAGE-NET-ASSETS> 1060700<F1>
<PER-SHARE-NAV-BEGIN> 9.37<F1>
<PER-SHARE-NII> 0.52<F1>
<PER-SHARE-GAIN-APPREC> 0.21<F1>
<PER-SHARE-DIVIDEND> 0.52<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.58<F1>
<EXPENSE-RATIO> 1.07<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 22
<NAME> U.S. TREASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 20963201
<INVESTMENTS-AT-VALUE> 22749809
<RECEIVABLES> 540850
<ASSETS-OTHER> 649
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23291308
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23079
<TOTAL-LIABILITIES> 23079
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25455448
<SHARES-COMMON-STOCK> 2313582<F1>
<SHARES-COMMON-PRIOR> 2541120<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 16315
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3957512
<ACCUM-APPREC-OR-DEPREC> 1786608
<NET-ASSETS> 23268229
<DIVIDEND-INCOME> 11517
<INTEREST-INCOME> 1484270
<OTHER-INCOME> 0
<EXPENSES-NET> 191889
<NET-INVESTMENT-INCOME> 1303898
<REALIZED-GAINS-CURRENT> 144578
<APPREC-INCREASE-CURRENT> 311969
<NET-CHANGE-FROM-OPS> 1760445
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1246125<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 41875<F1>
<NUMBER-OF-SHARES-REDEEMED> 396268<F1>
<SHARES-REINVESTED> 126855<F1>
<NET-CHANGE-IN-ASSETS> (1650959)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 35524
<OVERDIST-NET-GAINS-PRIOR> 4102090
<GROSS-ADVISORY-FEES> 137647
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 239522
<AVERAGE-NET-ASSETS> 21880531<F1>
<PER-SHARE-NAV-BEGIN> 9.38<F1>
<PER-SHARE-NII> 0.54<F1>
<PER-SHARE-GAIN-APPREC> 0.21<F1>
<PER-SHARE-DIVIDEND> 0.54<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.59<F1>
<EXPENSE-RATIO> 0.82<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 24676544
<INVESTMENTS-AT-VALUE> 25172367
<RECEIVABLES> 350279
<ASSETS-OTHER> 844
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25523490
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26366
<TOTAL-LIABILITIES> 26366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24988144
<SHARES-COMMON-STOCK> 67852<F1>
<SHARES-COMMON-PRIOR> 64800<F1>
<ACCUMULATED-NII-CURRENT> 40
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13117
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 495823
<NET-ASSETS> 25497124
<DIVIDEND-INCOME> 14426
<INTEREST-INCOME> 1782413
<OTHER-INCOME> 0
<EXPENSES-NET> 193168
<NET-INVESTMENT-INCOME> 1603671
<REALIZED-GAINS-CURRENT> 164505
<APPREC-INCREASE-CURRENT> 82834
<NET-CHANGE-FROM-OPS> 1851010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31037<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 33871<F1>
<NUMBER-OF-SHARES-REDEEMED> 33870<F1>
<SHARES-REINVESTED> 3051<F1>
<NET-CHANGE-IN-ASSETS> (1843323)
<ACCUMULATED-NII-PRIOR> 40
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 151388
<GROSS-ADVISORY-FEES> 149837
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 271104
<AVERAGE-NET-ASSETS> 607934<F1>
<PER-SHARE-NAV-BEGIN> 9.55<F1>
<PER-SHARE-NII> 0.49<F1>
<PER-SHARE-GAIN-APPREC> 0.09<F1>
<PER-SHARE-DIVIDEND> 0.49<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.64<F1>
<EXPENSE-RATIO> 0.89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 32
<NAME> SHORT INTERMEDIATE U.S. TRASURY SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 24676544
<INVESTMENTS-AT-VALUE> 25172367
<RECEIVABLES> 350279
<ASSETS-OTHER> 844
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25523490
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26366
<TOTAL-LIABILITIES> 26366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24988144
<SHARES-COMMON-STOCK> 2572899<F1>
<SHARES-COMMON-PRIOR> 2793910<F1>
<ACCUMULATED-NII-CURRENT> 40
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13117
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 495823
<NET-ASSETS> 25497124
<DIVIDEND-INCOME> 14426
<INTEREST-INCOME> 1782413
<OTHER-INCOME> 0
<EXPENSES-NET> 193168
<NET-INVESTMENT-INCOME> 1603671
<REALIZED-GAINS-CURRENT> 164505
<APPREC-INCREASE-CURRENT> 82834
<NET-CHANGE-FROM-OPS> 1851010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1572634<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1717266<F1>
<NUMBER-OF-SHARES-REDEEMED> 1941708<F1>
<SHARES-REINVESTED> 3431<F1>
<NET-CHANGE-IN-ASSETS> (1843323)
<ACCUMULATED-NII-PRIOR> 40
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 151388
<GROSS-ADVISORY-FEES> 149837
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 271104
<AVERAGE-NET-ASSETS> 29359473<F1>
<PER-SHARE-NAV-BEGIN> 9.56<F1>
<PER-SHARE-NII> 0.51<F1>
<PER-SHARE-GAIN-APPREC> 0.10<F1>
<PER-SHARE-DIVIDEND> 0.51<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.66<F1>
<EXPENSE-RATIO> 0.64<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 382668660
<INVESTMENTS-AT-VALUE> 413675058
<RECEIVABLES> 6619837
<ASSETS-OTHER> 6625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 420301520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431734
<TOTAL-LIABILITIES> 431734
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 386491279
<SHARES-COMMON-STOCK> 281810<F1>
<SHARES-COMMON-PRIOR> 234871<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2372109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31006398
<NET-ASSETS> 419869786
<DIVIDEND-INCOME> 59233
<INTEREST-INCOME> 20499344
<OTHER-INCOME> 0
<EXPENSES-NET> 2875718
<NET-INVESTMENT-INCOME> 17682859
<REALIZED-GAINS-CURRENT> 2987336
<APPREC-INCREASE-CURRENT> (459271)
<NET-CHANGE-FROM-OPS> 20210924
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 109666<F1>
<DISTRIBUTIONS-OF-GAINS> 12546<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151580<F1>
<NUMBER-OF-SHARES-REDEEMED> 108228<F1>
<SHARES-REINVESTED> 3587<F1>
<NET-CHANGE-IN-ASSETS> 120560490
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1009455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2237411
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3402761
<AVERAGE-NET-ASSETS> 2443720<F1>
<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> 0.48<F1>
<PER-SHARE-GAIN-APPREC> 0.06<F1>
<PER-SHARE-DIVIDEND> 0.48<F1>
<PER-SHARE-DISTRIBUTIONS> 0.06<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.84<F1>
<EXPENSE-RATIO> 1.02<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 42
<NAME> TAX-FREE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 382668660
<INVESTMENTS-AT-VALUE> 413675058
<RECEIVABLES> 6619837
<ASSETS-OTHER> 6625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 420301520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431734
<TOTAL-LIABILITIES> 431734
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 386491279
<SHARES-COMMON-STOCK> 38297933<F1>
<SHARES-COMMON-PRIOR> 27323380<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2372109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31006398
<NET-ASSETS> 419869786
<DIVIDEND-INCOME> 59233
<INTEREST-INCOME> 20499344
<OTHER-INCOME> 0
<EXPENSES-NET> 2875718
<NET-INVESTMENT-INCOME> 17682859
<REALIZED-GAINS-CURRENT> 2987336
<APPREC-INCREASE-CURRENT> (459271)
<NET-CHANGE-FROM-OPS> 20210924
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17570991<F1>
<DISTRIBUTIONS-OF-GAINS> 1612136<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 13905682<F1>
<NUMBER-OF-SHARES-REDEEMED> 3083534<F1>
<SHARES-REINVESTED> 152405<F1>
<NET-CHANGE-IN-ASSETS> 120560490
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1009455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2237411
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3402761
<AVERAGE-NET-ASSETS> 370399392<F1>
<PER-SHARE-NAV-BEGIN> 10.86<F1>
<PER-SHARE-NII> 0.51<F1>
<PER-SHARE-GAIN-APPREC> 0.08<F1>
<PER-SHARE-DIVIDEND> 0.51<F1>
<PER-SHARE-DISTRIBUTIONS> 0.06<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.88<F1>
<EXPENSE-RATIO> 0.77<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 43
<NAME> TAX-FREE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 382668660
<INVESTMENTS-AT-VALUE> 413675058
<RECEIVABLES> 6619837
<ASSETS-OTHER> 6625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 420301520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431734
<TOTAL-LIABILITIES> 431734
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 386491279
<SHARES-COMMON-STOCK> 25091<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2372109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31006398
<NET-ASSETS> 419869786
<DIVIDEND-INCOME> 59233
<INTEREST-INCOME> 20499344
<OTHER-INCOME> 0
<EXPENSES-NET> 2875718
<NET-INVESTMENT-INCOME> 17682859
<REALIZED-GAINS-CURRENT> 2987336
<APPREC-INCREASE-CURRENT> (459271)
<NET-CHANGE-FROM-OPS> 20210924
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2202<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 24963<F1>
<NUMBER-OF-SHARES-REDEEMED> 9<F1>
<SHARES-REINVESTED> 137<F1>
<NET-CHANGE-IN-ASSETS> 120560490
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1009455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2237411
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3402761
<AVERAGE-NET-ASSETS> 140983<F1>
<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> 0.21<F1>
<PER-SHARE-GAIN-APPREC> (0.01)<F1>
<PER-SHARE-DIVIDEND> 0.21<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.83<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>B 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 51722164
<INVESTMENTS-AT-VALUE> 52161604
<RECEIVABLES> 551127
<ASSETS-OTHER> 1454
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52714185
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51469
<TOTAL-LIABILITIES> 51469
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52023228
<SHARES-COMMON-STOCK> 47363<F1>
<SHARES-COMMON-PRIOR> 71289<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 200048
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 439440
<NET-ASSETS> 52662716
<DIVIDEND-INCOME> 31603
<INTEREST-INCOME> 2119509
<OTHER-INCOME> 0
<EXPENSES-NET> 362268
<NET-INVESTMENT-INCOME> 1788844
<REALIZED-GAINS-CURRENT> 244498
<APPREC-INCREASE-CURRENT> (310212)
<NET-CHANGE-FROM-OPS> 1723130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20127<F1>
<DISTRIBUTIONS-OF-GAINS> 3439<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 12916<F1>
<NUMBER-OF-SHARES-REDEEMED> 38495<F1>
<SHARES-REINVESTED> 1653<F1>
<NET-CHANGE-IN-ASSETS> 14528354
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173444
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238731
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 420641
<AVERAGE-NET-ASSETS> 575688<F1>
<PER-SHARE-NAV-BEGIN> 10.17<F1>
<PER-SHARE-NII> 0.35<F1>
<PER-SHARE-GAIN-APPREC> (0.02)<F1>
<PER-SHARE-DIVIDEND> 0.35<F1>
<PER-SHARE-DISTRIBUTIONS> 0.06<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.09<F1>
<EXPENSE-RATIO> 1.01<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 52
<NAME> TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 51722164
<INVESTMENTS-AT-VALUE> 52161604
<RECEIVABLES> 551127
<ASSETS-OTHER> 1454
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52714185
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51469
<TOTAL-LIABILITIES> 51469
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52023228
<SHARES-COMMON-STOCK> 5142262<F1>
<SHARES-COMMON-PRIOR> 3664505<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 200048
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 439440
<NET-ASSETS> 52662716
<DIVIDEND-INCOME> 31603
<INTEREST-INCOME> 2119509
<OTHER-INCOME> 0
<EXPENSES-NET> 362268
<NET-INVESTMENT-INCOME> 1788844
<REALIZED-GAINS-CURRENT> 244498
<APPREC-INCREASE-CURRENT> (310212)
<NET-CHANGE-FROM-OPS> 1723130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1768717<F1>
<DISTRIBUTIONS-OF-GAINS> 214455<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2359743<F1>
<NUMBER-OF-SHARES-REDEEMED> 903387<F1>
<SHARES-REINVESTED> 21401<F1>
<NET-CHANGE-IN-ASSETS> 14528354
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 173444
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238731
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 420641
<AVERAGE-NET-ASSETS> 47170517<F1>
<PER-SHARE-NAV-BEGIN> 10.21<F1>
<PER-SHARE-NII> 0.38<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> 0.38<F1>
<PER-SHARE-DISTRIBUTIONS> 0.06<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.15<F1>
<EXPENSE-RATIO> 0.76<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 152120874
<INVESTMENTS-AT-VALUE> 157868950
<RECEIVABLES> 2936872
<ASSETS-OTHER> 3378
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160809200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166953
<TOTAL-LIABILITIES> 166953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155959801
<SHARES-COMMON-STOCK> 137069<F1>
<SHARES-COMMON-PRIOR> 103034<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1065630
<ACCUM-APPREC-OR-DEPREC> 5748076
<NET-ASSETS> 160642247
<DIVIDEND-INCOME> 100433
<INTEREST-INCOME> 9444163
<OTHER-INCOME> 0
<EXPENSES-NET> 1158039
<NET-INVESTMENT-INCOME> 8386557
<REALIZED-GAINS-CURRENT> 1495447
<APPREC-INCREASE-CURRENT> 1593062
<NET-CHANGE-FROM-OPS> 11475066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 73933<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 76334<F1>
<NUMBER-OF-SHARES-REDEEMED> 48813<F1>
<SHARES-REINVESTED> 6514<F1>
<NET-CHANGE-IN-ASSETS> 26956168
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2561077
<GROSS-ADVISORY-FEES> 897228
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1360858
<AVERAGE-NET-ASSETS> 1379395<F1>
<PER-SHARE-NAV-BEGIN> 10.71<F1>
<PER-SHARE-NII> 0.58<F1>
<PER-SHARE-GAIN-APPREC> 0.21<F1>
<PER-SHARE-DIVIDEND> 0.58<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.92<F1>
<EXPENSE-RATIO> 1.02<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 62
<NAME> DIVERSIFIED FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 152120874
<INVESTMENTS-AT-VALUE> 157868950
<RECEIVABLES> 2936872
<ASSETS-OTHER> 3378
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160809200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166953
<TOTAL-LIABILITIES> 166953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155959801
<SHARES-COMMON-STOCK> 14448098<F1>
<SHARES-COMMON-PRIOR> 12296236<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1065630
<ACCUM-APPREC-OR-DEPREC> 5748076
<NET-ASSETS> 160642247
<DIVIDEND-INCOME> 100433
<INTEREST-INCOME> 9444163
<OTHER-INCOME> 0
<EXPENSES-NET> 1158039
<NET-INVESTMENT-INCOME> 8386557
<REALIZED-GAINS-CURRENT> 1495447
<APPREC-INCREASE-CURRENT> 1593062
<NET-CHANGE-FROM-OPS> 11475066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8310871<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 5277274<F1>
<NUMBER-OF-SHARES-REDEEMED> 3131037<F1>
<SHARES-REINVESTED> 5625<F1>
<NET-CHANGE-IN-ASSETS> 26956168
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2561077
<GROSS-ADVISORY-FEES> 897228
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1360858
<AVERAGE-NET-ASSETS> 148119967<F1>
<PER-SHARE-NAV-BEGIN> 10.78<F1>
<PER-SHARE-NII> 0.61<F1>
<PER-SHARE-GAIN-APPREC> 0.22<F1>
<PER-SHARE-DIVIDEND> 0.61<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.00<F1>
<EXPENSE-RATIO> 0.77<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 63
<NAME> DIVERSIFIED FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 152120874
<INVESTMENTS-AT-VALUE> 157868950
<RECEIVABLES> 2936872
<ASSETS-OTHER> 3378
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160809200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166953
<TOTAL-LIABILITIES> 166953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155959801
<SHARES-COMMON-STOCK> 21654<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1065630
<ACCUM-APPREC-OR-DEPREC> 5748076
<NET-ASSETS> 160642247
<DIVIDEND-INCOME> 100433
<INTEREST-INCOME> 9444163
<OTHER-INCOME> 0
<EXPENSES-NET> 1158039
<NET-INVESTMENT-INCOME> 8386557
<REALIZED-GAINS-CURRENT> 1495447
<APPREC-INCREASE-CURRENT> 1593062
<NET-CHANGE-FROM-OPS> 11475066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1753<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 21588<F1>
<NUMBER-OF-SHARES-REDEEMED> 86<F1>
<SHARES-REINVESTED> 152<F1>
<NET-CHANGE-IN-ASSETS> 26956168
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2561077
<GROSS-ADVISORY-FEES> 897228
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1360858
<AVERAGE-NET-ASSETS> 38653<F1>
<PER-SHARE-NAV-BEGIN> 10.79<F1>
<PER-SHARE-NII> 0.23<F1>
<PER-SHARE-GAIN-APPREC> 0.12<F1>
<PER-SHARE-DIVIDEND> 0.23<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.91<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>B 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-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 135532907
<INVESTMENTS-AT-VALUE> 172765472
<RECEIVABLES> 1003782
<ASSETS-OTHER> 8946
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173778200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158789
<TOTAL-LIABILITIES> 158789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115871150
<SHARES-COMMON-STOCK> 359541<F1>
<SHARES-COMMON-PRIOR> 215980<F1>
<ACCUMULATED-NII-CURRENT> 4407
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20511289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37232565
<NET-ASSETS> 173619411
<DIVIDEND-INCOME> 2115440
<INTEREST-INCOME> 5787
<OTHER-INCOME> (275)
<EXPENSES-NET> 1572870
<NET-INVESTMENT-INCOME> 548082
<REALIZED-GAINS-CURRENT> 25362538
<APPREC-INCREASE-CURRENT> (4884)
<NET-CHANGE-FROM-OPS> 25905736
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11210<F1>
<DISTRIBUTIONS-OF-GAINS> 376436<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 164933<F1>
<NUMBER-OF-SHARES-REDEEMED> 44668<F1>
<SHARES-REINVESTED> 23296<F1>
<NET-CHANGE-IN-ASSETS> 46072054
<ACCUMULATED-NII-PRIOR> 44608
<ACCUMULATED-GAINS-PRIOR> 6489949
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1153390
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1655829
<AVERAGE-NET-ASSETS> 5003687<F1>
<PER-SHARE-NAV-BEGIN> 17.25<F1>
<PER-SHARE-NII> 0.03<F1>
<PER-SHARE-GAIN-APPREC> 3.01<F1>
<PER-SHARE-DIVIDEND> 0.04<F1>
<PER-SHARE-DISTRIBUTIONS> 1.53<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 18.72<F1>
<EXPENSE-RATIO> 1.33<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 72
<NAME> GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 135532907
<INVESTMENTS-AT-VALUE> 172765472
<RECEIVABLES> 1003782
<ASSETS-OTHER> 8946
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173778200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158789
<TOTAL-LIABILITIES> 158789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115871150
<SHARES-COMMON-STOCK> 8785704<F1>
<SHARES-COMMON-PRIOR> 7171253<F1>
<ACCUMULATED-NII-CURRENT> 4407
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20511289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37232565
<NET-ASSETS> 173619411
<DIVIDEND-INCOME> 2115440
<INTEREST-INCOME> 5787
<OTHER-INCOME> (275)
<EXPENSES-NET> 1572870
<NET-INVESTMENT-INCOME> 548082
<REALIZED-GAINS-CURRENT> 25362538
<APPREC-INCREASE-CURRENT> (4884)
<NET-CHANGE-FROM-OPS> 25905736
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 577057<F1>
<DISTRIBUTIONS-OF-GAINS> 10964762<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3189329<F1>
<NUMBER-OF-SHARES-REDEEMED> 2244480<F1>
<SHARES-REINVESTED> 669602<F1>
<NET-CHANGE-IN-ASSETS> 46072054
<ACCUMULATED-NII-PRIOR> 44608
<ACCUMULATED-GAINS-PRIOR> 6489949
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1153390
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1655829
<AVERAGE-NET-ASSETS> 138903184<F1>
<PER-SHARE-NAV-BEGIN> 17.27<F1>
<PER-SHARE-NII> 0.07<F1>
<PER-SHARE-GAIN-APPREC> 3.01<F1>
<PER-SHARE-DIVIDEND> 0.07<F1>
<PER-SHARE-DISTRIBUTIONS> 1.53<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 18.75<F1>
<EXPENSE-RATIO> 1.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 73
<NAME> GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 135532907
<INVESTMENTS-AT-VALUE> 172765472
<RECEIVABLES> 1003782
<ASSETS-OTHER> 8946
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173778200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158789
<TOTAL-LIABILITIES> 158789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115871150
<SHARES-COMMON-STOCK> 116921<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 4407
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20511289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37232565
<NET-ASSETS> 173619411
<DIVIDEND-INCOME> 2115440
<INTEREST-INCOME> 5787
<OTHER-INCOME> (275)
<EXPENSES-NET> 1572870
<NET-INVESTMENT-INCOME> 548082
<REALIZED-GAINS-CURRENT> 25362538
<APPREC-INCREASE-CURRENT> (4884)
<NET-CHANGE-FROM-OPS> 25905736
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 119054<F1>
<NUMBER-OF-SHARES-REDEEMED> 2134<F1>
<SHARES-REINVESTED> 1<F1>
<NET-CHANGE-IN-ASSETS> 46072054
<ACCUMULATED-NII-PRIOR> 44608
<ACCUMULATED-GAINS-PRIOR> 6489949
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1153390
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1655829
<AVERAGE-NET-ASSETS> 393107<F1>
<PER-SHARE-NAV-BEGIN> 17.58<F1>
<PER-SHARE-NII> (0.02)<F1>
<PER-SHARE-GAIN-APPREC> 1.12<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 18.68<F1>
<EXPENSE-RATIO> 2.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>B 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-31-1998
<PERIOD-START> AUG-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 19167904
<INVESTMENTS-AT-VALUE> 15738697
<RECEIVABLES> 420183
<ASSETS-OTHER> 136793
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16295673
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46228
<TOTAL-LIABILITIES> 46228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26859667
<SHARES-COMMON-STOCK> 254254<F1>
<SHARES-COMMON-PRIOR> 249040<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 99662
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7081708
<ACCUM-APPREC-OR-DEPREC> (3428852)
<NET-ASSETS> 16249445
<DIVIDEND-INCOME> 617808
<INTEREST-INCOME> 0
<OTHER-INCOME> (23732)
<EXPENSES-NET> 360072
<NET-INVESTMENT-INCOME> 234004
<REALIZED-GAINS-CURRENT> (7316086)
<APPREC-INCREASE-CURRENT> (5091456)
<NET-CHANGE-FROM-OPS> (12173538)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 256220<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 46993<F1>
<NUMBER-OF-SHARES-REDEEMED> 68170<F1>
<SHARES-REINVESTED> 26391<F1>
<NET-CHANGE-IN-ASSETS> (5585154)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1836687
<OVERDISTRIB-NII-PRIOR> 64536
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 164957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 408748
<AVERAGE-NET-ASSETS> 2402804<F1>
<PER-SHARE-NAV-BEGIN> 13.89<F1>
<PER-SHARE-NII> 0.09<F1>
<PER-SHARE-GAIN-APPREC> (6.59)<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 1.04<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.35<F1>
<EXPENSE-RATIO> 2.18<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>A Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 82
<NAME> NEW ASIA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-31-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 19167904
<INVESTMENTS-AT-VALUE> 15738697
<RECEIVABLES> 420183
<ASSETS-OTHER> 136793
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16295673
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46228
<TOTAL-LIABILITIES> 46228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26859667
<SHARES-COMMON-STOCK> 2286069<F1>
<SHARES-COMMON-PRIOR> 1318129<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 99662
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7081708
<ACCUM-APPREC-OR-DEPREC> (3428852)
<NET-ASSETS> 16249445
<DIVIDEND-INCOME> 617808
<INTEREST-INCOME> 0
<OTHER-INCOME> (23732)
<EXPENSES-NET> 360072
<NET-INVESTMENT-INCOME> 234004
<REALIZED-GAINS-CURRENT> (7316086)
<APPREC-INCREASE-CURRENT> (5091456)
<NET-CHANGE-FROM-OPS> (12173538)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34752<F1>
<DISTRIBUTIONS-OF-GAINS> 1580467<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1199997<F1>
<NUMBER-OF-SHARES-REDEEMED> 408645<F1>
<SHARES-REINVESTED> 176588<F1>
<NET-CHANGE-IN-ASSETS> (5585154)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1836687
<OVERDISTRIB-NII-PRIOR> 64536
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 164957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 408748
<AVERAGE-NET-ASSETS> 15904023<F1>
<PER-SHARE-NAV-BEGIN> 13.94<F1>
<PER-SHARE-NII> 0.12<F1>
<PER-SHARE-GAIN-APPREC> (6.63)<F1>
<PER-SHARE-DIVIDEND> 0.02<F1>
<PER-SHARE-DISTRIBUTIONS> 1.04<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.37<F1>
<EXPENSE-RATIO> 1.93<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>Y Class
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000896647
<NAME> PACIFIC CAPITAL FUNDS
<SERIES>
<NUMBER> 83
<NAME> NEW ASIA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> MAR-02-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 19167904
<INVESTMENTS-AT-VALUE> 15738697
<RECEIVABLES> 420183
<ASSETS-OTHER> 136793
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16295673
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46228
<TOTAL-LIABILITIES> 46228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26859667
<SHARES-COMMON-STOCK> 10473<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 99662
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7081708
<ACCUM-APPREC-OR-DEPREC> (3428852)
<NET-ASSETS> 16249445
<DIVIDEND-INCOME> 617808
<INTEREST-INCOME> 0
<OTHER-INCOME> (23732)
<EXPENSES-NET> 360072
<NET-INVESTMENT-INCOME> 234004
<REALIZED-GAINS-CURRENT> (7316086)
<APPREC-INCREASE-CURRENT> (5091456)
<NET-CHANGE-FROM-OPS> (12173538)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 10584<F1>
<NUMBER-OF-SHARES-REDEEMED> 111<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> (5585154)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1836687
<OVERDISTRIB-NII-PRIOR> 64536
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 164957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 408748
<AVERAGE-NET-ASSETS> 21699<F1>
<PER-SHARE-NAV-BEGIN> 9.09<F1>
<PER-SHARE-NII> 0.04<F1>
<PER-SHARE-GAIN-APPREC> (2.79)<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.34<F1>
<EXPENSE-RATIO> 2.89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00<F1>
<FN>
<F1>B Class
</FN>
</TABLE>
