<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 26, 2000
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. 15 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 17 [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):
[ ] 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)
[X] 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 between 8 a.m. and
9 p.m. Eastern time or contact your
investment representative.
[PACIFIC CAPITAL FUNDS LOGO]
June 1, 2000
------------------------
Ultra Short Government Fund
------------------------
Class A and Class B
Retail Shares
Class Y
Institutional Shares
The Securities and Exchange Commission has
not approved the shares described in this
prospectus or determined whether this prospectus
is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE> 3
PACIFIC CAPITAL FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
icon
Carefully review this 3 Ultra Short Government Fund
important section, which
summarizes the Fund's
investments, risks, past
performance, and fees.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
icon
Review this section for 6 Ultra Short Government Fund
details on the Fund's 6 Main Risks
investment strategies and
risks.
FUND MANAGEMENT
icon
Review this section for 7 The Investment Adviser
details on the people and 7 Portfolio Managers
organizations who oversee 7 The Distributor and Administrator
the Fund.
SHAREHOLDER INFORMATION
icon
Review this section for 8 Pricing of Fund Shares
details on how shares are 9 Purchasing and Adding to Your Shares
valued, how to purchase, 15 Selling Your Shares
sell and exchange shares, 18 Distribution Arrangements/Sales Charges
related charges, and 23 Exchanging Your Shares
payments of dividends and 24 Dividends, Distributions and Taxes
distributions.
</TABLE>
2
<PAGE> 4
[icon]
RISK/RETURN SUMMARY AND FUND EXPENSES ULTRA SHORT GOVERNMENT FUND
RISK/RETURN SUMMARY
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE High current income consistent with preservation of capital
PRINCIPAL The Fund invests primarily in short-term debt securities
INVESTMENT STRATEGIES issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and in short-term investment grade
corporate debt securities issued by U.S. companies and state
and local government issuers. The Fund may from time to time
invest a substantial portion or all of its assets in certain
categories of U.S. Government securities that pay interest
which is exempt from Hawaii income tax. To achieve greater
price stability than a long-term or intermediate-term bond
fund, the Fund's portfolio securities will have effective
maturities of less than three years at the time of purchase.
The Fund focuses on maintaining the "duration" or interest
rate sensitivity of its overall investment portfolio between
50% and 150% of a one-year U.S. Treasury note, and varies
within that range from time to time in response to actual
and expected interest rate and economic changes.
PRINCIPAL Although the Fund invests in short-term securities, it is
INVESTMENT RISKS not a money market fund. 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 duration of
the Fund's investment portfolio, the greater the fluctuation
in value. The values of any of the Fund's investments may
also decline in response to events affecting the issuer or
its credit rating.
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - 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 income 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>
PERFORMANCE INFORMATION
Because this Fund has been operating for less than
one calendar year, performance information is not
included.
3
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES ULTRA SHORT GOVERNMENT FUND
- -
FEES AND EXPENSES
The fees and expenses for each Class are
based upon the estimated operating expenses
of that Class for the fiscal period ended
July 31, 2000. (The Fund commenced
operations on June 1, 2000.)
<TABLE>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(EXPENSES PAID BY YOU DIRECTLY) A SHARES B SHARES Y SHARES
Maximum sales charge (load) on
purchases (as a % of offering
price) 1.75%(1,4) None(4) None
Maximum deferred sales charge
(load) (as a % of offering price
or sale price, whichever is less) None(2) 5.00%(3) None
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS) A SHARES B SHARES Y SHARES
Management fee(*) 0.40% 0.40% 0.40%
Distribution (12b-1) fee 0.75%(*) 1.00% 0.00%
Other expenses(*) 0.65% 0.65% 0.65%
Total Fund operating expenses(*) 1.80% 2.05% 1.05%
</TABLE>
* Until August 1, 2002, the Advisor has
agreed to limit the Management fee and
reimburse Other expenses so combined they
do not exceed 0.40%. The Distributor is
limiting the 12b-1 fees for Class A shares
to 0.25%. TOTAL FUND OPERATING EXPENSES
AFTER THESE FEE WAIVERS AND REIMBURSEMENTS
WOULD BE 0.65%, 1.40%, AND 0.40% FOR CLASS
A, B AND Y SHARES, RESPECTIVELY.
(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.
As an investor in the Ultra
Short Government 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 The Asset
Management Group of Bank
of Hawaii, 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").
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES ULTRA SHORT GOVERNMENT FUND
- -
EXPENSE EXAMPLE
<TABLE>
<S> <C> <C>
1 3
YEAR YEARS
CLASS A SHARES $355 $731
CLASS B SHARES
Assuming redemption $708 $943
Assuming no redemption $208 $643
CLASS Y SHARES $107 $334
</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.
Class A and Class B shares of
the Fund are not being
offered to the public until
August 1, 2000.
5
<PAGE> 7
icon
INVESTMENT OBJECTIVES, POLICIES AND RISKS
- -
ULTRA SHORT GOVERNMENT FUND
The Ultra Short Government Fund seeks to provide you with high current income
consistent with preservation of capital.
- - PRINCIPAL STRATEGIES
Normally, the Fund invests at least 65% of its total assets in short-term
debt securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and state and local government issuers. The Fund also may
invest in short-term investment grade corporate debt securities issued by
U.S. companies.
To achieve greater price stability than a long-term or intermediate-term bond
fund, the Fund invests in portfolio securities which have effective
maturities of less than three years at the time of purchase. Certain debt
securities such as mortgage-related securities, collateralized mortgage
obligations, asset backed securities and securitized loan receivables, as
well as securities subject to prepayment of principal prior to the stated
maturity date, are often prepaid prior to their stated maturity dates. As a
result, the effective maturity of these securities may be shorter than the
stated maturity. For purposes of compliance with stated maturity policies and
calculation of the Fund's weighted average maturity, the effective maturity
of such securities will be used.
The Fund focuses on maintaining the "duration" or interest rate sensitivity
of its overall investment portfolio between 50% and 150% of a one-year U.S.
Treasury note. The Fund seeks to increase its duration to take advantage of
expected declines in short-term interest rates, and to decrease its duration
when it expects short-term rates to increase.
- - MAIN RISKS
DEBT SECURITIES. The values of the debt securities held by the Fund fluctuate
in response to movements in interest rates. When rates rise, the values
generally fall, and when rates decline, the values generally increase,
although these fluctuations are greater for intermediate and long-term
securities. 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 Fund are direct obligations of the U.S.
Government.
The Fund generally only acquires securities 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 are
unrated obligations that the Adviser determines are of comparable quality.
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 declines after the
Fund buys it, or it is no longer rated, the 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 Fund will invest in the obligations of such instrumentalities
only when the Adviser believes that the credit risk is minimal.
- -
6
<PAGE> 8
icon
FUND MANAGEMENT
- -
THE INVESTMENT ADVISER
The Asset Management Group of Bank of Hawaii (the "Adviser"), a department of
the Bank's Pacific Century Trust Division, is the adviser for the Fund. The
Adviser has managed the financial assets of corporations and institutional
investors for more than a century. The Asset Management Group of Bank of
Hawaii, 111 S. King Street, Honolulu, Hawaii 96813, is among the top 50 trust
firms in the United States based on assets under management and oversees more
than $13 billion in client assets. The Adviser's investment management
team -- including portfolio managers, financial analysts and economists -- is
responsible for nearly $8 billion of these assets.
For these advisory services, the Adviser will receive fees at the annual rate
of up to .40% of the Fund's average daily net assets.
- - PORTFOLIO MANAGERS
Management of the Fund is coordinated by the Adviser's investment unit, which
is staffed with more than 40 people, including seven Chartered Financial
Analysts. All management decisions with respect to the Fund are made by a
committee, with individual portfolio managers having day-to-day
responsibility for managing the Fund.
Edward Haik, Vice President at The Asset Management Group of Bank of Hawaii,
is the portfolio manager for the Fund. Mr. Haik has ten years prior
experience in the investment industry, his most recent five years as a
portfolio manager at The Asset Management Group of Bank of Hawaii. Prior to
joining the Adviser, he held positions at Garban Tokyo, Ltd., Cantor
Fitzgerald Securities, and Merrill Lynch. Mr. Haik earned a Bachelor of Arts
degree from Holy Cross College in 1988.
- - THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services, LP ("BISYS") is the Fund's distributor and BISYS Fund
Services Ohio, Inc. is the Fund's administrator. The address of each is 3435
Stelzer Road, Columbus, Ohio 43219.
7
<PAGE> 9
[icon]
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NAV IS CALCULATED
NAV is calculated by adding
the total value of the
Fund's investments and
other assets attributable
to Class A, B or Y shares,
subtracting its liabilities
attributable to Class A, B
or Y shares, and then
dividing that figure by the
number of outstanding Class
A, B or 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 the Fund's shares is
based on its per share net asset value
("NAV"). The NAV for Class A, B or Y
shares of the 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
received in proper form 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.
8
<PAGE> 10
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CLASS A AND B SHARES
<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 may be charged for any checks that do
not clear. Third-party checks are not
accepted.
The 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 Fund reserves the
right to suspend or modify the continuous
offering of its shares.
You can purchase the Fund
through the Pacific
Capital Funds'
Distributor or through
brokers and other
investment
representatives,
including an affiliate
of the Adviser, 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.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
The 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.
-----------------------------------------------------------------------------
9
<PAGE> 11
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CLASS A AND B 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 advisor or broker that you wish to purchase shares of the Fund 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 Fund on the check.
3. Mail to: Pacific Capital Funds, P.O. 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,
P.O. 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.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
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.
10
<PAGE> 12
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CLASS A AND B SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
Please phone the Funds at 800-258-9232 for instructions on opening an account
or purchasing additional shares by wire transfer.
AUTO INVEST PLAN
You can make automatic investments in the Fund 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 Fund also reserves the right to reject any
purchase or to suspend or modify the continuous offering of its shares.
11
<PAGE> 13
SHAREHOLDER INFORMATION
- -
PURCHASING AND ADDING TO YOUR SHARES -- CLASS Y SHARES
Class Y 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. 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.
-----------------------------------------------------------------------------
12
<PAGE> 14
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- CLASS Y 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"
and include the name of the appropriate Fund(s) on the check.
3. Mail to: Pacific Capital Funds, P.O. 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
P.O. 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.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
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.
13
<PAGE> 15
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES -- Y SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
Please phone the Funds at 800-258-9232 for instructions on opening an account
or purchasing additional shares by wire transfer.
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.
14
<PAGE> 16
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
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.
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.
If selling shares through your financial advisor or broker, ask him or her
for redemption procedures. Your advisor 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 (if your account is an IRA
or another form of retirement plan), 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, P.O. 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
15
<PAGE> 17
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must select this option on your account application.
The Fund does not charge a wire transfer fee. Note: Your financial
institution may 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.
16
<PAGE> 18
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 Fund makes every effort to ensure that telephone redemptions are only
made by authorized traders. 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 Fund, the Transfer Agent, the Adviser 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
or by wire.
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 the 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.
- -
17
<PAGE> 19
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 as of the cancellation
date. No interest is paid during the time the check is outstanding.
- - 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.
<TABLE>
<S> <C> <C> <C>
TYPES OF CHARGES CLASS A CLASS B CLASS Y
Sales Charge (Load) Front-end sales charge (at the No front-end sales charge. You None
time of your purchase); reduced may incur a contingent deferred
sales charges are available.(1) sales charge on shares redeemed
within six years after
purchase; shares automatically
convert to Class A shares after
8 years.
Distribution (12b-1) Subject to annual distribution Subject to annual distribution None
Fees fees of up to .75% of the fees of up to 1.00% of the
Fund's net assets. Fund's net assets.
Fund Expenses Lower annual expenses then Higher annual expenses than Lower annual expenses
Class B shares, and higher than Class A and Class Y shares. than
Class Y shares. Class A and
Class B shares.
<S> <C>
TYPES OF CHARGES
Sales Charge (Load)
Distribution (12b-1)
Fees
Fund Expenses
</TABLE>
(1) You may incur a contingent deferred sales charge on shares sold within
one year of a purchase of $1 million or more.
QUESTIONS?
Call 800-258-9232 or
your
investment
representative.
18
<PAGE> 20
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:
<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 1.75% 1.78% 1.58%
----------------------------------------------------------------------------------
$100,000 up to $250,000 1.25% 1.27% 1.13%
----------------------------------------------------------------------------------
$250,000 up to $500,000 0.80% 0.81% 0.72%
----------------------------------------------------------------------------------
$500,000 up to $1,000,000 0.50% 0.51% 0.45%
----------------------------------------------------------------------------------
$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 Fund for individual sales of $1
million to $5 million and 0.50% of the offering price of Class A shares of
the Fund for individual sales over $5 million.
The Distributor reserves the right to pay the entire sales charge to dealers.
BISYS may provide financial assistance in connection with pre-approved
seminars, conferences and advertising to the extent permitted by applicable
state or self-regulatory agencies, such as the National Association of
Securities Dealers.
19
<PAGE> 21
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
<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 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 the Fund which you exchanged for Class
B shares of another Pacific Capital Fund, or vice versa, we will calculate
your holding period from the time of your original purchase of Class B
shares.
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.
20
<PAGE> 22
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. Shares purchased under the
non-binding Letter of Intent will be held in escrow until the total
investment has been completed. If the Letter of Intent is not completed,
sufficient escrowed shares will be redeemed to pay any applicable
front-end sales charge.
- 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 Pacific
Capital 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, the Advisor and its affiliates or any other organization that
provides services to the Trust.
- Investors for whom The Asset Management Group of Bank of Hawaii or one of
its affiliates acts in a fiduciary, advisory, custodial, agency or similar
capacity (except those investors for whom The Asset Management Group of
Bank of Hawaii provides custodial services).
- Investors who purchase shares of the Fund through a retirement related
payroll deduction plan, a 401(k) plan, a 403(b) plan, or a similar plan
which by its terms permits purchases of shares.
- 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.
- Investors who purchase shares with the proceeds from the recent redemption
of Class Y Shares of the Trust.
BISYS must be notified in writing by you or your financial institution at
the time the purchase is made. A copy of your account statement showing
the redemption must accompany the notice.
REINSTATEMENT PRIVILEGE
If you have sold Class A or B shares of the Fund and decide to reinvest
in the 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.
21
<PAGE> 23
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.
See the Statement of Additional Information for other possible fee waivers.
DISTRIBUTION (12B-1) FEES AND SHAREHOLDER SERVICING FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the 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 the 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 the Fund will not exceed .25% of
the average daily net asset value attributable to the Fund's Class A shares
on an annual basis.
22
<PAGE> 24
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
You can exchange your
shares in the Fund for
shares of the same class of
another Pacific Capital
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 The Asset
Management Group of Bank of
Hawaii serves as investment
adviser. Class Y
shareholders may also
exchange their shares for
other investment companies
for which The Asset
Management Group of Bank of
Hawaii serves as Investment
Advisor. 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.
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.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges from one Pacific Capital Fund to another are taxable. You can make
exchanges by sending a written
request to Pacific Capital Funds,
P.O. 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 Pacific Capital Fund from which the exchange is to be made
- The name of the Pacific Capital 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 Fund due to market timing
strategies, exchange activity may be
limited to four substantial
exchanges within one calendar year
period. The Fund may also refuse any
exchange order.
23
<PAGE> 25
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's net investment income is paid to its shareholders monthly. Its net
capital gains are distributed to shareholders annually. Dividends payable on
Class A shares of the Fund are generally more than on Class B shares because
Class B shares have higher distribution expenses. Dividends payable on Class
Y shares of the Fund are generally more than on Class A or B shares, because
Class Y shares have no distribution expenses.
We automatically reinvest all income dividends and capital gains
distributions in additional shares of the same 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 Fund 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 declared, 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 Fund. 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 advisor about the federal, state and local tax
consequences in your particular circumstances.
The Fund may incur foreign income taxes in connection with some of its
foreign investments. Certain of these taxes may be credited to shareholders.
To the extent that at least 50% of the Fund is invested in obligations, the
interest from which are exempt from income tax under Federal Law, the Fund
will be able to pay out a portion of its dividends free of federal income tax
to the shareholders.
HAWAII TAX INFORMATION
To the extent that at least 50% of the Fund is invested in obligations, the
interest from which are exempt from Hawaii income tax under Hawaii or Federal
law, the Fund will be able to pay out a portion of its dividends free of
Hawaii income tax to the shareholders who are Hawaii residents.
Dividends and distributions made by the Fund to Hawaii residents will
generally be treated for Hawaii income tax purposes in the same manner as
they are treated 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 Fund, but you will be
subject to taxes of other states and localities.
24
<PAGE> 26
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 27
For more information about the Pacific Capital Funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's annual and semi-annual reports to shareholders contain detailed
information on the Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Pacific Capital 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 Annual/Semi-Annual 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
P.O. BOX 182130
COLUMBUS, OHIO 43218-2130
TELEPHONE: 1-800-258-9232
You can review and copy the Annual and Semi-Annual Reports and the SAI at the
Public Reference Room of the Securities and Exchange Commission. For the hours
of operation for the Public Reference Room call 1-202-942-8090. You can get
text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-0102, or by electronic request, by emailing the SEC at:
[email protected].
- - At no charge from the Edgar database on the Commission's Website at
http://www.sec.gov.
Investment Company Act file no. 811-7454.
6/1
PCP 0036
<PAGE> 28
PACIFIC CAPITAL FUNDS
TELEPHONE: 800-258-9232
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 1, 2000
ULTRA SHORT GOVERNMENT 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 one of the Trust's
thirteen investment portfolios (each a "Fund" and collectively the "Funds"), the
Ultra Short Government Fund (the "Short Government Fund"). The various Funds and
Classes of shares of the Funds are offered through separate Prospectuses.
The Short Government Fund is a diversified portfolio.
This SAI is not a prospectus. You should read this SAI in conjunction
with the applicable Prospectus, dated May 31, 2000. All terms defined in the
applicable Prospectus have the same meanings in this SAI. You can order copies
of the Trust's 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> 29
INVESTMENT RESTRICTIONS
The Short Government Fund's investment objective is fundamental and may
not be changed without approval by vote of the holders of a majority of the
Fund's outstanding voting securities, as described under "General Information --
Voting." If the Trust's Board of Trustees determines, however, that the Fund's
investment objective can best be achieved by a substantive change in a
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 the Fund's
Prospectus, or in the SAI, as being fundamental, is nonfundamental.
The following investment restrictions also apply to the Short
Government Fund. The restrictions designated as fundamental policies may not be
changed without approval by the holders of a majority of the 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 the 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.
As fundamental policies, the Short Government Fund may not:
(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.
(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 (a) U.S. Government Obligations
and repurchase agreements secured by such obligations and (b) 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
-1-
<PAGE> 30
securities, as permitted pursuant to an order and/or a rule issued by the
Securities and Exchange Commission (the "Commission"), and (b) that the 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).
(4) Purchase or sell real estate or real estate limited partnerships
(other than obligations or other securities secured by real estate or interests
therein or securities issued by companies that invest in real estate or
interests therein).
(5) Purchase commodities or commodity contracts, except that the Fund
may 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
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, the Short Government Fund will comply with the following
non fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval:
(1) The 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 the Fund's total assets.
-2-
<PAGE> 31
(2) The 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.
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND RISKS
DEBT SECURITIES
The Short Government Fund may invest in debt securities issued by
domestic corporations, financial institutions, and governments. The debt
securities in which the Fund will invest (including convertible securities, as
applicable) 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). The Fund may only invest in U.S. dollar-denominated foreign debt
securities.
U.S. GOVERNMENT OBLIGATIONS
The Fund may invest in U.S. Government Obligations which include, in
addition to U.S. Treasury Securities, obligations of U.S. Government agencies,
including but not limited to the obligations of the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Student Loan Marketing Association ("SLMA"), Federal National Mortgage
Association ("FNMA"), Resolution Trust Corporation and Federal Home Loan
Mortgage Corporation ("FHLMC"). U.S. Treasury Securities and certain other
obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of FNMA, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, such as those of the SLMA, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored instrumentalities if it
is not obligated to do so by law. Some of these instruments may be variable or
floating rate instruments. The Fund will invest in the obligations of such
instrumentalities only when the Adviser believes that the credit risk with
respect to the instrumentality is minimal.
The 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
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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
The Fund may invest in floating and variable rate debt instruments.
Floating and variable rate debt instruments bear interest at rates that are not
fixed, but vary with changes in specified market rates or indices or at
specified intervals. Certain, of these instruments may carry a demand feature
that would permit the holder to tender them back to the issuer at a par value
prior to maturity. The floating and variable rate instruments that the Fund may
purchase include certificates of participation in such obligations purchased
from banks. The Adviser
will monitor on an ongoing basis the ability of an
issuer of a demand instrument to make payment when due, which could be affected
by events occurring between the date the Fund elects to demand payment and the
date payment is due, except when such demand instruments permit same-day
settlement. In this regard, the 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.
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 the 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 Fund. The Adviser will consider such an event in
determining whether the Fund should continue to hold the obligation.
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, the Adviser must monitor the issuers
of bonds in the Fund's portfolio 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 Fund can meet redemption
requests.
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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, the 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 Fund
are more fully described in Appendix A to this Statement of Additional
Information.
DURATION
The Fund follows a controlled duration strategy. As a measure of a
fixed income security's cash flow, duration is an alternative to the concept of
"term to maturity" in assessing the price volatility associated with changes in
interest rates. Generally, the longer the duration, the more volatility an
investor should expect. For example, the market price of a bond with a duration
of three years would be expected to decline 3% if interest rates rose 1%.
Conversely, the market price of the same bond would be expected to increase 3%
if interest rates fell 1%. The market price of a bond with a duration of six
years would be expected to increase or decline twice as much as the market price
of a bond with a three-year duration. Duration is a way of measuring a
security's maturity in terms of the average time required to receive the present
value of all interest and principal payments as opposed to its term to maturity.
The maturity of a security measures only the time until final payment is due; it
does not take account of the pattern of a security's cash flows over time, which
would include how cash flow is affected by prepayments and by changes in
interest rates. Incorporating a security's yield, coupon interest payments,
final maturity and option features into one measure, duration is computed by
determining the weighted average maturity of a bond's cash flows, where the
present values of the cash flows serve as weights. In computing the duration of
the Fund, the Adviser will estimate the duration of obligations that are subject
to features such as prepayment or redemption by the issuer, put options retained
by the investor or other imbedded options, taking into account the influence of
interest rates on prepayments and coupon flows.
OTHER DEBT OBLIGATIONS
The Short Government Fund may also invest in certain other debt
obligations and described below.
LETTERS OF CREDIT AND LIQUIDITY AGREEMENTS
The Fund may purchase debt obligations that are backed by an
irrevocable letter of credit or liquidity agreement of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
the Adviser, are of investment quality comparable to other permitted
investments of the Fund, may be used for letter of credit and liquidity
agreement backed investments.
BANK AND SAVINGS AND LOAN OBLIGATIONS
The Fund may invest in bank and savings and loan obligations. These
obligations include negotiable certificates of deposit, fixed time deposits,
bankers' acceptances, and interest bearing demand accounts. The Fund limits its
bank investments to dollar-denominated obligations of U.S., Canadian, Asian,
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
The Fund may invest in commercial paper that is rated at the date of
purchase in the two highest short-term rating categories by an NRSRO or unrated
if considered by the Adviser to be of comparable quality. Commercial paper
includes short-term
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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 Fund may invest in Municipal Obligations. Municipal Obligations
include municipal bonds, municipal notes and municipal commercial paper.
MUNICIPAL BONDS. Municipal bonds generally have a maturity at the time
of issuance of up to thirty years. They are principally classified either as
"general obligation" bonds, which are secured by the pledge of the
municipality's faith, credit and taxing power for the payment of principal and
interest, or as "revenue" bonds, which are payable only from the revenues
derived from a particular project or facility and generally are dependent solely
on a specific revenue source.
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. Some 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 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 Assurance Corporation (formerly
called American Municipal Bond Assurance Corporation), 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 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 Fund. An issuer would
likely purchase insurance in order to obtain a higher rating by an NRSRO than it
would receive without the insurance thereby reducing the issuer's borrowing
costs.
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The price paid or received for an Insured Municipal Bond may be higher than the
price that would otherwise be paid or received for the municipal bond absent the
insurance.
The 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 Fund may invest in municipal notes. Municipal
notes include, but are not limited to, tax anticipation notes ("TANs"), bond
anticipation notes ("BANs"), revenue anticipation notes ("RANs") and
construction loan notes. Municipal notes generally have maturities at the time
of issuance of three years or less. The 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 Fund also may invest in certain "private activity" bonds or notes.
The Fund 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"
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include certain related natural persons, affiliated corporations, partnerships
and their partners and S corporations and their shareholders.
TANs. Uncertainty in a municipal issuer's capacity to raise taxes as a
result of such events as a decline in its tax base or a rise in delinquencies
could adversely affect the issuer's ability to meet its obligations on
outstanding TANs. Furthermore, some municipal issuers mix various tax proceeds
into a general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on its
BANs 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. The 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 the Adviser 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 Fund's
portfolio, 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 Fund's
portfolio arising from these or other factors will cause changes in the net
asset value per share of the Fund.
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.
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Furthermore, as a result of legislation or other conditions, the power or
ability of any 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.
GUARANTEED INVESTMENT CONTRACTS
The Short Government Fund 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 Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the 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 Fund 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 Fund will only purchase GICs from issuers which, at the time of
purchase, are rated "A" or higher by A.M. Best Company, have assets of $1
billion or more, and meet quality and credit standards established by Pacific
Century. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market
for GICs does not currently exist. Also, the 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.
ASSET BACKED SECURITIES
The Short Government Fund 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 the 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.
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The life of an Asset Backed Security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an Asset Backed Security, will be primarily a
function of current market interest rates, although other economic and
demographic factors may be involved. For example, falling interest rates
generally result in an increase in the rate of prepayments of mortgage loans,
while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation in
the security's value relative to a conventional debt security. Consequently,
Asset Backed Securities are not as effective in locking in high, long-term
yields. Conversely, in periods of sharply rising rates, prepayments 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 Fund only when the 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
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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 The Adviser and used for the purpose of determining the
average weighted maturity and duration of the Fund's portfolio. Various
independent mortgage backed securities dealers publish average remaining life
data using proprietary models and, in making such determinations for the Fund,
the 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 Fund also may invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pool of assets. Such securities also may be debt
instruments, which also are known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of 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 the 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
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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 such receivables. In addition, unlike most
other Asset Backed Securities, credit card receivables are unsecured obligations
of the cardholders.
ILLIQUID SECURITIES
The Short Government Fund may invest in illiquid securities. The Fund
will not knowingly invest more than 15% of the value of its 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 the 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, the
Fund may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by the Adviser, acting under guidelines and
procedures that are developed, established and monitored by the Board of
Trustees, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
The staff of the Commission has taken the position that OTC options
that are purchased and the assets used as cover for written OTC options should
generally be treated as illiquid securities. However, if a dealer recognized by
the Federal Reserve Bank as a primary dealer in U.S. Government securities is
the other party to an option contract written by the Fund and the Fund has the
absolute right to repurchase the option
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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 the Adviser does not believe that OTC options are generally
illiquid, pending resolution of this issue, the Fund will conduct its operations
in conformity with the views of the Commission staff.
BORROWINGS
The Short Government Fund may borrow from banks up to 20% of the
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of its net assets (but investments may not be purchased while
such outstanding borrowings in excess of 5% of its net assets exists). If the
Fund's asset coverage for borrowings falls below 300%, the Fund will take prompt
action to reduce its borrowings. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Fund may be required to sell
portfolio securities to reduce the debt and restore the 300% asset coverage,
even though it may be disadvantageous from an investment standpoint to sell
securities at that time.
Borrowing for investment purposes is generally known as "leveraging."
Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Fund's portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by appreciation of the securities purchased. In addition, the Fund may be
required to maintain minimum average balances in connection with such borrowing
or pay a commitment fee to maintain a line of credit, which would increase the
cost of borrowing over the stated interest rate.
The Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements which are considered to be borrowings under the
Investment Company Act of 1940 (the " 1940 Act"). At the time the Fund enters
into a reverse repurchase agreement (an agreement under which the Fund sells
portfolio securities and agrees to repurchase them at an agreed-upon date and
price), it will place in a segregated custodial account 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 Fund would pay interest on amounts obtained
pursuant to a reverse repurchase agreement.
LOANS OF PORTFOLIO SECURITIES
The Short Government Fund may lend securities from its portfolio to
brokers, dealers and financial institutions (but not individuals) if liquid
assets equal to the current market
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value of the securities loaned (including accrued interest thereon) plus the
interest payable to the Fund with respect to the loan is maintained with the
Fund. In determining whether to lend a security to a particular broker, dealer
or financial institution, the Adviser will consider all relevant facts and
circumstances, including the creditworthiness of the broker, dealer or financial
institution. Any loans of portfolio securities will be fully collateralized
based on values that are marked to market daily by the Adviser. The Fund
will not enter into any portfolio security lending arrangement having a duration
of longer than one year. Any securities that the Fund may receive as collateral
will not become part of the Fund's portfolio at the time of the loan and, in the
event of a default by the borrower, the Fund will, if permitted by law, dispose
of such collateral except for such part thereof that is a security in which the
Fund may invest. During the time securities are on loan, the borrower will pay
the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn additional income or receive an agreed-upon fee from a
borrower that had delivered cash-equivalent collateral. The Fund will not lend
securities having a value that exceeds 30% of the current value of its total
assets. Loans of securities by the Fund will be subject to termination at the
Fund's or the borrower's option. The Fund may pay reasonable administrative and
custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker.
The Trust has entered into a Securities Lending Agreement with BISYS
Fund Services Ohio, Inc. and Canter Fitzgerald & Co. to implement a securities
lending program (see "Management - Administrator and Distributor" below). The
Trust intends to become a party to an exemptive order received by BISYS from the
Commission, which would permit the Funds to (i) pool the cash collateral from
securities loans and have the collateral managed by the Adviser, (ii) invest
the cash collateral in the BISYS Secured Lending Trust, a private investment
company managed by BISYS for that purpose, and (iii) loan securities to any
broker-dealer affiliated with the Adviser, BISYS, or other affiliates of the
Trust.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Fund may enter into repurchase agreements only with respect to
obligations that could otherwise be purchased by the Fund. All repurchase
agreements will be fully collateralized based on values that are marked to
market daily by The 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.
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<PAGE> 43
OTHER INVESTMENT COMPANIES
In connection with the management of its daily cash position, the 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
the Adviser.
Securities of other investment companies will be acquired by the Fund
within the limits prescribed by the 1940 Act. The Fund intends to limit its
investments so that, as determined immediately after a securities purchase is
made: (a) not more than 5% of the value of its total assets will be invested in
the securities of any one investment company; (b) not more than 10% of the value
of its total assets will be invested in the aggregate in securities of
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the Fund, and (d) the Fund,
together with other investment companies having the same investment adviser and
companies controlled by such companies, owns not more than 10% of the total
stock of any one closed-end company.
As a shareholder of another investment company, the Fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. Accordingly, in addition to bearing
their proportionate share of the Fund's expenses (i.e., management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such other investment companies or trusts. However, the Adviser has
undertaken to waive or reimburse the Fund 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).
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may purchase securities on a "when-issued" basis and may also
purchase or sell securities on a "forward commitment" basis. These transactions,
which involve a commitment by the Fund to purchase or sell particular securities
with payment and delivery taking place at a future date (perhaps one or two
months later), permit the Fund to lock-in a price or yield on a security it owns
or intends to purchase, regardless of future changes in interest rates. When
issued and forward commitment transactions involve the risk, however, that the
yield obtained in a transaction may be less favorable than the yield available
in the market when the securities delivery takes place. The 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 the Fund's total assets absent unusual market conditions.
The Fund will not start earning interest or dividends on when-issued
securities until they are received. The value of the securities underlying a
when-issued purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their value, is taken into account when determining
the net asset value of the Fund starting on
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<PAGE> 44
the date the Fund agrees to purchase the securities. The Fund will establish a
segregated account in which it will maintain liquid assets in an amount at least
equal in value to the Fund's commitment to purchase securities on a when-issued
or forward commitment basis. If the value of these assets declines, the Fund
will replace additional liquid assets in the account on a daily basis so that
the value of the assets in the account is equal to the amount of such
commitments.
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* (58), Trustee and Chairperson - Executive Vice
President of Bank of Hawaii - Private Client and Institutional Services
(1993-present).
Irimga McKay* (39), Trustee and President - 1230 Columbia Street, San
Diego, California 92101. Senior Vice President of BISYS Fund Services
(1994-present); Senior Vice President of Concord Financial Group (1986-1994).
Douglas Philpotts* (68), 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; Director of Bishop Insurance of
Hawaii, Inc.; Trustee of The Strong Foundation and Seabury Hall; Trustee of Cash
Assets Trust, U.S. Treasuries Cash Assets Trust, Hawaiian Tax-Free Trust and
Tax-Free Cash Assets Trust (1992-present); Affiliated with The Pacific Club,
Oahu 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 (53), 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.
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<PAGE> 45
Stanley W. Hong (63), 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 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 (55), 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 (68), Trustee - 925 Bethel Street, Suite 101,
Honolulu, Hawaii 96813. Trustee of Bernice Pauahi Bishop Estate (1990-1999);
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 (37), 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 (31), Secretary - 1230 Columbia Street, San Diego,
California 92101. Director of BISYS Fund Services (1991-present).
Alaina Metz (32), 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 - President of BISYS Fund
Services (1987-present).
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<PAGE> 46
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).
Frank Deutchki (45), Treasurer - Vice President, Financial Services,
BISYS Fund Services, (Nov. 1997-present); Registration and Compliance Officer,
BISYS Fund Services (April 1996 through Nov. 1997); Vice President and Audit
Director, Chase Global Fund Services (Sept. 1995 through April 1996); Vice
President and Audit Director, Mutual Fund Service Company, a subsidiary of U.S.
Trust Company of New York (1989 through Sept. 1995).
Trustees of the Trust who are not officers or employees of the Trust,
BISYS, The Asset Management Group of Bank of Hawaii 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 aggregate compensation paid by the Trust to the Trustees who are
not officers and employees of the Trust, BISYS, The Asset Management Group of
Bank of Hawaii or its sub-advisers and the aggregate compensation paid to such
Trustees by all investment companies (including the Trust) advised by The Asset
Management Group of Bank of Hawaii for the periods indicated.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE PENSION OR FROM TRUST AND
COMPENSATION RETIREMENT OTHER FUNDS
FROM BENEFITS ACCRUED AS ESTIMATED BENEFITS ADVISED BY
NAME OF TRUSTEE TRUST(1) PART OF FUND EXPENSES UPON RETIREMENT PACIFIC CENTURY (2)
<S> <C> <C> <C> <C>
Richard W. $16,750 None None $51,808
Gushman II
Stanley W. Hong $16,750 None None $53,355
Russell K. Okata $16,750 None None $51,711
Douglas Philpotts $16,750 None None $47,347
Oswald K. Stender $16,750 None None $51,250
</TABLE>
(1) Provided for the fiscal year ended July 31, 1999.
(2) Provided for the calendar year ended December 31, 1998. In addition to
the Trust, each of the Trustees served on the boards of one other
investment company advised by The Adviser, comprising four separate
funds.
Officers, trustees, directors, employees and retired employees of the
Trust, The Asset Management Group of Bank of Hawaii 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
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<PAGE> 47
currently has such arrangements with Mr. Gushman and certain of his affiliated
companies.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), the Short Government Fund and other Funds are advised by The Asset
Management Group of Bank of Hawaii. Subject to the supervision of the Board of
Trustees, the Adviser provides a continuous investment program for the Short
Government Fund, including investment research and management with respect to
all securities and investments and cash equivalents in the Fund. The Adviser
provides services under the Advisory Agreement in accordance with the Fund's
investment objectives, policies, and restrictions.
For its services under the Advisory Agreement, The Asset Management
Group of Bank of Hawaii receives compensation from each Fund based on a
percentage of the Fund's average daily net assets. The rate of advisory fees
payable by the Short Government Fund to Pacific Century is set forth in the
prospectus. For the fiscal years ended July 31, 1999, July 31, 1998 and July 31,
1997, the Adviser received total fees from the Trust as follows(1):
<TABLE>
<CAPTION>
FOR THE FISCAL
YEAR ENDED TOTAL FEES EARNED TOTAL FEES WAIVED
- -------------- ----------------- -----------------
<S> <C> <C>
JULY 31, 1999 $10,091,967.00 $1,162,724.00
JULY 31, 1998 $ 7,448,061.00 $ 653,304.00
JULY 31, 1997 $ 5,502,210.00 $ 55,718.00
</TABLE>
(1) The fees shown above do not include investment advisory fees paid by The
Ultra Short Government Fund as it has not commenced operations.
The Advisory Agreement provides that The Asset Management Group of Bank
of Hawaii will not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund 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 the 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 the Fund on
60 days' written notice by either party and will terminate automatically if
assigned.
The Asset Management Group of Bank of Hawaii has advised the Trust that
the Adviser 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 the Adviser were
prohibited from
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<PAGE> 48
performing any 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 Fund, to the extent consistent with its
investment objectives, policies and restrictions, may invest in securities of
companies with which the Adviser has a lending relationship.
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 the 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. For the fiscal years ended July 31, 1999, July 31,
1998, and July 31, 1997, BISYS received fees from the Trust of $2,270,758,
$1,740,470 and $1,311,563, respectively.
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.
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.
For the fiscal years ended July 31, 1999, July 31, 1998 and July 31,
1997 BISYS Ohio received fund accounting fees of $492,029, $389,116 and $283,253
from the Trust.
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<PAGE> 49
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.
BISYS Ohio and Cantor Fitzgerald & Co. have also entered into a
Securities Lending Agreement with the Trust, pursuant to which BISYS Ohio
provides certain administrative services in connection with the Trust's
securities lending program, which is implemented through Cantor Fitzgerald as
lending agent. Pursuant to the Agreement, the Trust pays BISYS Ohio 35% of the
total monthly earnings derived from the lending program, and BISYS Ohio pays
Cantor Fitzgerald's fees.
As of the date of this Statement of Additional Information the Trust's
lending program has not commenced operations. Pursuant to the Securities Lending
Agreement, the Trust has agreed to indemnify BISYS Ohio against certain
liabilities other than those arising as a result of its gross negligence or
willful misconduct.
TRANSFER AGENT
BISYS Fund Services, Inc., also a wholly-owned subsidiary of The BISYS
Group, Inc., serves as Transfer Agent for the Short Government Fund.
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 Trust officers, Trustees and advisory persons and, as
described below, imposes additional, more onerous restrictions on 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
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<PAGE> 50
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 the
Funds. Investment personnel are subject to additional restrictions such as a ban
on acquiring securities in an initial public offering, "blackout periods" which
prohibit trading by investment personnel of the Funds within periods of trading
by the Funds 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 the Short
Government Fund 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 the Fund 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 Fund 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 Fund 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 Fund of continued growth of the asset base of the Fund,
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 the 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 the 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 the Adviser, 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 the Fund, printing and distributing advertising and sales
literature and reports to Class A and Class B shareholders in connection with
the sale of the Fund's shares, and providing personnel and
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<PAGE> 51
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 31,1999,
restated to reflect fee waivers, were as follows: Class A, $15,522 retained by
BISYS and $73,446 paid to others; Class B, $13,856 retained by BISYS and $93,211
paid to others.
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 the 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 the 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
YIELD
The Short Government Fund 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 ) to the 6th power - 1]
---
cd
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 Fund includes actual interest income, plus or minus
amortized purchase discount (which may include original issue discount) or
premium, less accrued expenses. Realized and unrealized gains and losses on
portfolio securities are not included in the Fund's net
-23-
<PAGE> 52
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 Fund also may be computed by dividing
that portion of the yield of the Fund 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 Fund that is not tax-exempt.
The yields for the Fund 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 Fund will affect the yields of the Fund for any
specified period, and such changes should be considered together with the Fund's
yield in ascertaining the Fund's total return to shareholders for the period.
Yield information for the Fund may be useful in reviewing the performance of the
Funds and for providing a basis for comparison with investment alternatives. The
yield of the 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.
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 the Fund; (5) descriptions of investment strategies for the Fund;
(6) descriptions or comparisons of various savings and investment products
(including, but not limited to, insured bank products, annuities, qualified
retirement plans and individual stocks and bonds), which may or may not include
the Fund; (7) comparisons of investment products (including the Fund) 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 the
Fund. 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 the Fund.
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<PAGE> 53
From time to time, the Trust may also quote the Fund's 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. 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 Fund 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 Fund's 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 the Fund 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 the 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 the Fund or its investments. The Trust may compare the
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.
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<PAGE> 54
DETERMINATION OF NET ASSET VALUE
Net asset value per share of the Class A, Class B and Class Y shares
for the Short Government 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 the Fund are tendered for redemption and no order to
purchase shares is received) during which there is sufficient trading in the
Fund's portfolio securities that the Fund's net asset value per share might be
materially affected. The Exchange 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 Fund, other than debt securities maturing in 60 days or less, are valued
at the mean between the bid and asked prices.
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 Fund for which current market quotations are not readily
available are valued at fair value as determined in good faith by the
Adviser in accordance with procedures adopted by the Trustees and subject to
ratification by the Trustees. If the Adviser 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 Short Government 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
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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.
The 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 the 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 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 the 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.
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<PAGE> 56
SPECIMEN PRICE MARK-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares of the Short Government Fund are sold at a maximum
sales charge of 1.75%. Class B and Class Y shares are sold at net asset value.
Using the Short Government Fund's initial net asset value, an example of the
determination of the maximum offering price of the Fund's shares is as follows:
<TABLE>
<S> <C>
Class A
Net asset value........................................ $10.00
Maximum sales charge (1.75% of offering price) .17
Offering price to public............................... $10.17
======
Class B
Net asset value and offering price to public........... $10.00
======
Class Y
Net asset value and offering price to public........... $10.00
======
</TABLE>
REDEMPTION OF 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 the 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.
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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 the Short
Government Fund's portfolio securities, the Adviser selects such broker-
dealers ("Broker-Dealers") as will, in its 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. The Adviser and deals directly with the
selling or purchasing principal or market maker without incurring brokerage
commissions unless if determines that better price or execution may be obtained
by paying such commissions.
In allocating transactions to Broker-Dealers, the Adviser is
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, the
Adivser has adopted a brokerage allocation policy in reliance on Section 28(e)
of the Securities and Exchange Act of 1934, permitting it to cause the Fund to
pay commission rates in excess of those another Broker-Dealer would have charged
if the Adviser determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by the Broker-Dealer, viewed either in terms of the particular
transaction or the 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, the Adviser is 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 The Asset Management Group of Bank of
Hawaii as its investment adviser or having the same administrator or principal
underwriter as the Trust.
Each year, the Adviser 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
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<PAGE> 58
a Broker-Dealer excluded from receiving business from the Adviser because it
has not been identified as providing research services.
Purchases and sales of debt securities are usually principal
transactions. The Fund 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 Adviser makes investment decisions for the Trust
independently from those of its other accounts, investments of the kind made by
the Fund may often also be made by such other accounts. When the 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 Adviser, it allocates
available investments by such means as, in its judgment, result in fair
treatment. The Adviser aggregates orders for purchases and sales of
securities of the same issuer on the same day among the Fund and its other
managed accounts, and the price paid to or received by the Fund 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 Fund or the size of the position purchased or sold by the Fund.
As a result of its investment policies, the Fund may engage in a
substantial number of portfolio transactions. Accordingly, while the Fund
anticipates that its annual portfolio turnover rate should not exceed 100% under
normal conditions, it is impossible to predict portfolio turnover rates. A high
turnover rate for the 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 deems portfolio changes appropriate.
FEDERAL AND HAWAIIAN TAX INFORMATION
The Prospectus describes generally the federal and certain Hawaiian tax
treatment of distributions by the Short Government Fund. This section of the SAI
includes certain additional information concerning federal and Hawaiian income
taxes.
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<PAGE> 59
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 the 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) the 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 a regulated investment company, the Fund will not be subject to
federal income tax on its net investment income and net capital gains
distributed to its shareholders, provided that it distributes to its
shareholders at least 90% of their net investment income and tax-exempt income
earned in each year.
A 4% nondeductible excise tax will be imposed on the 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 Fund. For
this purpose, any income or gain retained by the 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. The 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.
Gains or losses on sales of portfolio securities by the 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 the 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
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<PAGE> 60
by a shareholder under these circumstances could result in a capital loss for
federal income tax purposes.
If a shareholder exchanges or otherwise disposes of shares of the Fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
for shares of the Fund, or of a different fund, the sales charge previously
incurred acquiring the Fund's shares 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 the 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.
CLASS B SHAREHOLDERS
No gain or loss will be recognized by a shareholder upon the conversion
of Class B shares to Class A shares.
FOREIGN SHAREHOLDERS
Under the Code, distributions of net investment income (including
distributions of short-term capital gains) by the 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 the 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).
FEDERAL TAX INFORMATION
The portion of total dividends paid by the Fund 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 the 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
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<PAGE> 61
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, the 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 Fund may be invested from time to time in obligations of U.S.
Government agencies, the interest from which will be subject to federal income
taxation when distributed to shareholders as dividends.
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 Fund 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 the Fund held less than six months is disallowed to the
extent of any exempt-interest dividends received by the shareholder.
Shareholders who may be "substantial users" (or related persons of
substantial users) with respect to municipal securities held by the 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 Fund, and dividends and distributions made by the Fund to Hawaii
residents, will generally be treated for Hawaii income tax purposes in the same
manner as they are treated under the Code for federal income tax purposes. If at
the close of each quarter of the 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 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.)
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The Fund may be invested from to time in obligations of U.S.
Government agencies, the interest from which may or may not be subject to
Hawaii income taxation when distributed to the shareholders as dividends,
depending on which agency issued the obligations.
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
Investors should be aware that the investments to be made by the Fund
may involve sophisticated tax rules such as the original issue discount rules
that would result in income or gain recognition by the Fund without
corresponding current cash receipts. Although the Fund will seek to avoid
significant noncash income, such noncash income could be recognized by the Fund,
in which case the Fund may distribute cash derived from other sources in order
to meet the minimum distribution requirements described above.
Shares of the Fund 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 the Fund. 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 thirteen 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 Short Government Fund 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
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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 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
the Fund's fundamental investment policies would be voted upon only by
shareholders of the Fund. 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 the Short Government
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.
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<PAGE> 64
Each share of a class of the Fund represents an equal proportional
interest in the Fund 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 as are declared in the discretion of the Trustees. In the
event of the liquidation or dissolution of the Trust, shareholders of the Fund
are entitled to receive the assets attributable to the 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 Short Government Fund
could, under certain circumstances, be held personally liable for the obliga-
tions of the Trust. However, the Trust's Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust. The Declaration
of Trust provides for indemnification out of the Fund's property for any losses
and expenses of any shareholder of the Fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund would be unable to meet its obligations.
CUSTODIAN
Bank One Trust Company, N.A. ("Bank One") has been retained as
Custodian for the Short Government Fund. The 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 the Fund and pays all expenses of the Fund. For its services as
Custodian, Bank One 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.
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REGISTRATION STATEMENT
The Trust's 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.
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APPENDIX A
RATINGS OF FIXED INCOME SECURITIES
The following is a description of the investment grade 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.
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.
A-1
<PAGE> 67
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.
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.
A-2
<PAGE> 68
D&P:
AAA - Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- - High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A, A- - Protection factors are average but adequate. However, risk
factors are more variable in periods of greater economic stress.
BBB+, BBB, BBB - Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
FITCH IBCA:
AAA - Highest credit quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA - Very high credit quality. "AA" ratings denote a very low
expectation of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly vulnerable
to foreseeable events.
A - High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB - Good credit quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the "AAA"
long-term rating category, or to short-term ratings other than "F1".
NR - indicates that Fitch IBCA does not rate the issuer or issue in
question.
Withdrawn - A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
A-3
<PAGE> 69
RatingAlert - Ratings are placed on RatingAlert to notify investors
that there is a reasonable probability of a rating change and the likely
direction of such change. These are designated as "Positive", indicating a
potential upgrade, "Negative", for a potential downgrade, or "Evolving", if
ratings may be raised, lowered or maintained. RatingAlert is typically resolved
over a relatively short period.
THOMSON:
Thomson rates only bank debt.
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.
The ratings from AAA through BBB may include a plus or minus sign
designation which indicates where within the respective category the issue is
placed.
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:
A-4
<PAGE> 70
P-1 (Prime-1) - Issuers rated P-1 have a superior capacity for
repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics:
Leading market positions in well established industries
High rates of return on funds employed
Conservative capitalization structures with moderate reliance on debt
and ample asset protection
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation
- Well established access to a range of financial markets and
assured sources of alternate liquidity
P-2 (Prime-2) - Issuers rated P-2 have a strong capacity for repayment
of short-term promissory obligations. This will normally be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be subject to more variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
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 top two 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-5
<PAGE> 71
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+.
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 IBCA:
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for US public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F1 - Highest credit quality. Indicates the Best capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
F2 - Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the "AAA" long-term
rating category, or to short-term ratings other than "F1".
NR - indicates that Fitch IBCA does not rate the issuer or issue in
question.
Withdrawn - A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert - Ratings are placed on RatingAlert to notify investors
that there is a reasonable probability of a rating change and the likely
direction of such change. These are designated as "Positive", indicating a
potential upgrade, "Negative", for a potential downgrade, or "Evolving", if
ratings may be raised, lowered or maintained. RatingAlert is typically resolved
over a relatively short period.
A-6
<PAGE> 72
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.
CORPORATE NOTE RATINGS
S&P:
The two highest ratings for corporate notes are SP-1 and SP-2.
SP-1 - Notes rated SP-1 reflect a very strong or strong capacity to pay
principal and interest. Note issues with overwhelming safety characteristics
will be rated SP-1+.
SP-2 - Notes rated SP-2 reflect a satisfactory capacity to pay
principal and interest.
D&P:
D-1+ - Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1 - Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
D-1- - High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
D-2 - Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
TAX EXEMPT BOND RATINGS
MOODY'S:
Moody's ratings for U.S. Tax Exempt Municipal Bonds range from Aaa to C
and utilize substantially the same definitional elements as are set forth under
the Moody's section of the Corporate Bond Ratings descriptions on page ___.
S&P:
A-7
<PAGE> 73
S&P's ratings for U.S. Tax Exempt Municipal Bonds range from AAA to D
and utilize substantially the same definitional elements as are set forth under
the Moody's section of the Corporate Bond Ratings descriptions on page ___.
D&P:
D&P's ratings for U.S. Tax Exempt Municipal Bonds range from AAA to DP
and utilize substantially the same definitional elements as are set forth under
the D&P section of the Corporate Bond Ratings descriptions on page ___.
FITCH IBCA:
Fitch IBCA's ratings for U.S. Tax Exempt Municipal Bonds range from AAA
to D and utilize substantially the same definitional elements as are set forth
under the D&P section of the Corporate Bond Ratings descriptions on page ___.
TAX EXEMPT NOTE RATINGS
MOODY'S:
MIG 1/VMIG 1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
In the case of variable rate demand obligations (VRDOs), a
two-component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest payments,
and the other represents an evaluation of the degree of risk associated with the
demand feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
Issues that are subject to a periodic reoffer and resale in the
secondary market in a "dutch auction" are assigned a long-term rating based only
on Moody's assessment of the ability and willingness of the issuer to make
timely principal and interest payments. Moody's expresses no opinion as to the
ability of the holder to sell the security in a secondary market "dutch
auction." Such issues are identified by the insertion of the words "dutch
auction" into the name of the issue.
Issues or the features associated with MIG or VMIG ratings are
identified by date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings. Each rating
designation is unique with no
A-8
<PAGE> 74
implication as to any other similar issue of the same obligor. MIG ratings
terminate at the retirement of the obligation while VMIG rating expiration will
be a function of each issue's specific structural or credit features.
S&P:
Municipal notes with maturities of three years or less are usually
given note ratings to distinguish more clearly the credit quality of notes as
compared to bonds.
SP-1 - Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service is given a plus
designation.
SP-2 - Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
D&P:
D&P's ratings for U.S. Tax Exempt Notes range from D-1+ to D-5 and
utilize substantially the same definitional elements as are set forth under the
D&P section of the Corporate Notes Ratings descriptions on page ___.
FITCH IBCA:
Fitch IBCA's ratings for U.S. Tax Exempt Notes range from F-1 to D and
utilize substantially the same definitional elements as are set forth under the
D&P section of the Corporate Notes Ratings descriptions on page ___.
A-9
<PAGE> 75
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT RESTRICTIONS.................................................................................1
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND RISKS....................................................3
MANAGEMENT.............................................................................................16
DISTRIBUTION AND SHAREHOLDER SERVICE PLANS.............................................................22
CALCULATION OF YIELD...................................................................................23
DETERMINATION OF NET ASSET VALUE.......................................................................26
PURCHASE OF SHARES.....................................................................................26
REDEMPTION OF SHARES...................................................................................28
PORTFOLIO TRANSACTIONS.................................................................................29
FEDERAL AND HAWAIIAN TAX INFORMATION...................................................................30
GENERAL INFORMATION....................................................................................34
CUSTODIAN..............................................................................................36
INDEPENDENT AUDITORS AND COUNSEL.......................................................................36
REGISTRATION STATEMENT.................................................................................37
APPENDIX A RATINGS OF FIXED INCOME SECURITIES..........................................................1
</TABLE>
-i-
<PAGE> 76
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A-1
<PAGE> 77
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)*** 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 CMG First State (Hong Kong) LLC [New Asia Growth
Fund]
(d-5)** Form of Sub-Advisory Agreement among the Registrant, Pacific
Century Trust and Nicholas-Applegate Capital Management
[International Stock Fund]
(d-6)**** Sub-Advisory Agreement among the Registrant, Pacific Century
Trust and Nicholas-Applegate Capital Management [Small Cap
Fund]
C-1
<PAGE> 78
(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
(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) Not Applicable
(k) Not Applicable
C-2
<PAGE> 79
(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)** Rule 18f-3 Plan
(o) Not Applicable
(p-1) Code of Ethics of Registrant
(p-2) Code of Ethics of Advisor
(p-3) Code of Ethics of Distributor
(q-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
(q-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. 12 to Registrant's
Registration Statement on Form N-1A on September 16, 1998 and
incorporated herein by reference.
*** Filed as an exhibit to Post-Effective Amendment No. 14 to Registrant's
Registration Statement on Form N-1A on December 1, 1998 and
incorporated herein by reference.
**** Filed as an exhibit to Post-Effective Amendment No. 13 to Registrant's
Registration Statement on Form N-1A on November 30, 1999 and
incorporated herein by reference.
C-3
<PAGE> 80
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 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.
The Asset Management Group of Bank of Hawaii 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
the Adviser 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:
C-4
<PAGE> 81
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Business(es) During at
Name Position(s) Least the Last Two Fiscal Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William E. Aull Director President, Hawaii Pacific University
Owner/Manager, various Australian
cattle/sheep ranches.
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert M. Richards, Jr. Director President and Manager, Kahua
Ranch, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
K. Tim Yee Director President and Chief Executive
Officer Queen Emmu Foundation
- ------------------------------------------------------------------------------------------------------------------------------------
Frank McGee Senior Vice Riggs National Bank
President
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CMG First State (Hong Kong) LLC ("CMG") serves as sub-adviser
to New Asia Growth Fund. During the two fiscal years ended December 31, 1998,
CMG 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 CMG 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, 1998, 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.
(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>
====================================================================================================================================
Positions and Positions and
Name and Principal Offices with Offices with
Business Addresses BISYS Fund Services the Registrant
<S> <C> <C>
</TABLE>
C-5
<PAGE> 82
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<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)
(2) The Asset Management Group of Bank of Hawaii
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) CMG First State (Hong Kong) LLC
3 Exchange Square, Room 604-6
8 Connaught Place Central
Hong Kong
(Sub-Adviser)
(5) Nicholas-Applegate Capital Management
600 West Broadway
San Diego, California 92130
(Sub-Adviser)
C-6
<PAGE> 83
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
Not Applicable.
C-7
<PAGE> 84
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. __ 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 ____ day of March, 2000.
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 March __, 2000
___________________________ (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-8
<PAGE> 85
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Trustee
- ---------------------------
(Russell K. Okata)
* Trustee
- ---------------------------
(Oswald K. Stender)
*/s/ IRIMGA MCKAY Trustee March __, 2000
- ---------------------------
(Irimga McKay, Attorney-in-Fact)
</TABLE>
C-9
<PAGE> 1
Exhibit p-1
PACIFIC CAPITAL FUNDS
CODE OF ETHICS
--------------
1. PURPOSES
This Code of Ethics (the "Code") has been adopted in accordance with
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the "1940
Act"). Rule 17j-1 generally proscribes fraudulent or manipulative practices with
respect to purchases or sales of securities held or to be acquired by investment
companies, if effected by associated persons of such companies. The purpose of
this Code of Ethics is to provide regulations and procedures consistent with the
1940 Act and Rule 17j-1 designed to give effect to the general prohibitions
set forth in Rule 17j-1(a) as follows:
(a) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any
affiliated person of an investment adviser of or principal
underwriter for a registered investment company, in connection
with the purchase or sale, directly or indirectly, by such
person of a security held or to be acquired, as defined in
this section, by such registered investment company --
(1) To employ any device, scheme or artifice to defraud
such registered investment company;
(2) To make to such registered investment company any
untrue statement of a material fact or omit to state
to such registered investment company a material fact
necessary in order to make the statements made, in
light of the circumstances under which they are made,
not misleading;
(3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon any such registered investment company; or
(4) To engage in any manipulative practice with respect
to such registered investment company.
Also, each Access Person has a duty to act in the best
interest of the Fund. In addition to the various laws and regulations covering
the Fund's activities, it is clearly in the Fund's best interest to avoid
potential conflicts of interest or even the appearance of such conflict with
respect to the conduct of Access Persons. While it is not possible to anticipate
all instances of potential conflict, the standard is clear.
1
<PAGE> 2
2. GENERAL PRINCIPLES
We believe it is appropriate to restate and periodically distribute the
Fund's Code to all Access Persons. As a general principle, it is imperative that
Access Persons avoid any such situation that might comprise, or call into
question, their exercise of fully independent judgment in the interests of
shareholders. If you have any doubt as to the propriety of any activity, you
should consult the [Compliance Department].
While it is not possible to specifically define and prescribe rules
regarding all possible cases in which conflicts might arise, this code is
designed to set forth the Fund's policy regarding conduct in those situations in
which conflicts are most likely to develop. As you consider the more detailed
portions of the Code below, you should keep in mind the following fundamental
fiduciary principles that govern personal investment activities:
A. The interests of the shareholders must come first. In any
decision relating to your personal investments, you must
scrupulously avoid serving you own interests ahead of those of
the shareholders.
B. Personal investment should comport with both the letter and
the spirit of this Code, and should avoid any actual or
potential conflicts of interest.
C. Access Persons should not take inappropriate advantage of
their position.
3. DEFINITIONS
(a) "Fund" means Pacific Capital Funds or any series thereof, for
which the Manager serves as an investment adviser.
(b) "Access Person" means any director, officer or Advisory Person
of the Fund, including any person fitting within the category
of Investment Personnel.
(c) "Advisory Person" means (i) any employee of the Fund or of any
company in a Control relationship to the Fund, who, in
connection with his regular functions or duties, makes,
participates in, or obtains information regarding the purchase
or sale of a security by the Fund, or whose functions relate
to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a Control
relationship to the Fund who obtains information concerning
recommendations made to the Fund with regard to the purchase
or sale of a security.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made
and communicated and, with respect to the person making the
2
<PAGE> 3
recommendation, when such person seriously considers making
such a recommendation.
(e) "Beneficial ownership" shall be interpreted with reference to
the definition contained in the provisions of Section 16 of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder, as such provision may be interpreted
by the Securities and Exchange Commission. (See Appendix I
attached.)
(f) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of 1940 Act.
(g) "Disinterested Trustee" means a trustee of the Fund who is not
an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the 1940 Act.
(h) "Investment Personnel" means those Access Persons who have the
responsibility and authority to make investment decisions
affecting the Fund or who assist in the process of making such
decisions (e.g., by providing information and advice with
respect to, or by executing, such decisions). Investment
Personnel includes, but is not limited to, portfolio managers,
securities analysts and traders.
(i) "Manager" means the investment adviser or sub-adviser, if any,
of the Fund.
(j) "Purchase or sale of a security" includes, INTER ALIA, the
writing of an option to purchase or sell a security, the
conversion of a convertible security and the exercise of a
warrant for the purchase of a security.
(k) "Review Officer" means the officer of the Fund designated from
time-to-time by the Fund to receive and review reports of
purchases and sales by Access Persons.
(l) "Security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include
shares of registered open-end investment companies, securities
issued or guaranteed as to principal and interest by the
Government of the United States, short term debt securities
which are "government securities" within the meaning of
Section 2(a)(16) of the 1940 At, bankers' acceptances, bank
certificates of deposit, commercial paper and such other money
market instruments as designated by the Board of Trustees of
the Fund.
3
<PAGE> 4
(m) "Security held or to be acquired" by the Fund means any
Security which, within the most recent 15 days, (i) is or has
been held by the Fund, or (ii) is being or has been considered
by the Fund or the Manager for purchase by such company.
(n) "Personal Securities Transaction" means (i) transactions for
your own account, including IRAs, or (ii) transactions for an
account in which you have indirect beneficial ownership,
unless you have no direct or indirect influence or control
over the account. Accounts involving family (including
husband, wife, minor children or other dependent relatives),
or accounts in which you have a beneficial interest (such as a
trust of which you are an income or principal beneficiary) are
included within the meaning of "indirect beneficial interest."
4. RESTRICTIONS AND PROCEDURES ON PERSONAL SECURITIES TRANSACTIONS
(a) PROHIBITED PURCHASES AND SALES: Except as otherwise provided
in Section 5 hereof:
(1) No Access Person shall purchase or sell, directly or
indirectly, any Security in which he has, or by
reason of such transactions acquires, any direct or
indirect beneficial ownership which to his actual
knowledge at the time of such purchase or sale:
(i) is being considered for purchase or sale by
the Fund; or
(ii) is being purchased or sold by the Fund.
(2) No Access Person shall reveal to any other person
(except in the normal course of his or her duties on
behalf of the Fund) any information regarding
securities transaction by the Fund or consideration
by the Fund or the Manager of any such Securities
transaction.
(3) No Access Person shall recommend any securities
transaction by the Fund without having disclosed his
or her interest, if any, in such securities or the
issuer thereof, including without limitation (i) his
or her direct or indirect beneficial ownership of any
securities of such issuer; (ii) any contemplated
transaction by such person in such securities; (iii)
any position with such issuer or its affiliates; and
(iv) any present or proposed business relationship
between such issuer or its affiliates, on the one
hand, and such person or any party in which such
person has a significant interest, on the other;
provided, however, that in the event the interest of
such Access
4
<PAGE> 5
Person in such securities or issuer is not material
to his or her personal net worth any contemplated
transaction by such person in such securities cannot
reasonably be expected to have a material adverse
effect on any such transaction by the Fund or on the
market for the securities generally, such Access
Person shall not be required to disclose his or her
interest in the securities or issuer thereof in
connection with any such recommendation.
(b) INITIAL PUBLIC OFFERINGS: Investment Personnel shall not
acquire any Securities in an initial public offering, in order
to preclude any possibility of their profiting improperly from
their positions on behalf of the Fund.
(c) PRIVATE PLACEMENTS: Investment Personnel shall not acquire any
Securities in a private placement without the prior approval
of the Review Person. This prior approval should take into
account, among other factors, whether the investment
opportunity should be reserved for the Fund and its
shareholders, and whether the opportunity is being offered to
an individual by virtue of his or her position with the Fund.
Investment Personnel who have been authorized to acquire
securities in a private placement should disclose such private
placement investment if he or she plays a material role in the
Fund's subsequent investment decision regarding the same
issuer. In the foregoing circumstances, the Fund's decision to
purchase securities of the issuer shall be subject to an
independent review by Investment Personnel with no personal
interest in such issuer.
(d) BLACKOUT PERIODS: Investment Personnel shall not execute a
securities transaction on a day during which the Fund has a
pending "buy" or "sell" order in that same security, nor shall
Investment Personnel execute such securities transaction until
one trading day after the Fund's order is executed or
withdrawn. In addition, no portfolio manager shall purchase or
sell a security within at least seven calendar days before and
after the series of the Fund that he or she manages trades in
that security.
(e) GIFTS: Investment Personnel shall not receive any gift or
other thing of more than de minimis value ($100) from any
person or entity that does business with or on behalf of the
Fund.
(f) SERVICE AS A DIRECTOR: Investment Personnel shall not serve on
the boards of directors of publicly traded companies, absent
prior authorization based upon a determination that the board
service would be consistent with the interests of the Fund and
its shareholders. As a general matter, directorships in
unaffiliated public companies or companies which may
reasonably be expected to become public companies will not be
authorized because of the potential for conflicts which may
impede the Fund's freedom
5
<PAGE> 6
to act in the best interests of shareholders. Service with
charitable organizations generally will be authorized,
subject to considerations related to time required during
working hours and use of proprietary information.
(g) OTHER CONFLICTS OF INTEREST: Access Persons should also be
aware that the areas other than personal securities
transactions or gifts and sensitive payments may involve
conflicts of interest. The following should be regarded as
examples of situations involving real or potential conflicts
rather than a complete list of situations to avoid.
(1) "Inside Information" - The use of, "inside
information" applies to personal securities
transactions as well as to Fund transactions.
(2) "Use of Information" - Information acquired in
connection with your position as an Access Person
may not be used in any way which might be contrary
to or in competition with the interest of
shareholders.
(3) "Disclosure of Information" - Information regarding
actual or contemplated investment decisions,
research priorities or Fund interests should be
treated confidentially and in no way can be used for
personal gain.
(h) BAN ON SHORT-TERM TRADING PROFITS: Investment Personnel shall not
profit in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within 60 calendar days. Any profit realized on
short-term trades should be required to be disgorged.
5. EXEMPTED TRANSACTIONS
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or Control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
6
<PAGE> 7
(f) Purchases or sales which receive the prior approval
of the Review Officer because they are only remotely
potentially harmful to the Fund because they
would be very unlikely to affect a highly
institutional market, or because they clearly are
not related economically to the securities to be
purchased, sold or held by the Fund.
(g) The Review Officer can grant exemptions from the
personal trading restrictions in this Code upon
determining that the transaction for which an
exemption is requested would not violate any policy
embodied in this Code and that an exemption is
appropriate to avoid an injustice to the Access
Person in the particular factual situation presented.
Factors to be considered may include: the size and
holding period of the Access Person's position in the
security, the market capitalization of the issuer,
the liquidity of the security, the reason for the
Access Person's requested transaction, the amount and
timing of client trading in the same or a related
security, and other relevant factors.
Any Access Person wishing an exemption should submit
a written request to the Review Officer setting forth
the pertinent facts and reasons why the Access Person
believes that the exemption should be granted.
However, exemptions are intended to be exceptions,
and repetitive exemptive applications with respect to
any one individual will not be well received.
6. DISINTERESTED TRUSTEES
A trustee of the Fund who is not an officer of the Fund or an
officer, employee or director of the Manager will not be subject to the
provisions of Sections 7 or 8 of this Code unless, at the time of a transaction,
such trustee knew or, in the ordinary course of fulfilling his official duties
as a trustee of the Fund, should have known, that during the 15-day period
immediately preceding the date of the transaction by the trustee, the Security
was under active consideration by the Fund. If the trustee had such actual or
imputed knowledge, then the provisions of Section 8 shall be applicable with
respect to the particular transaction.
7. COMPLIANCE PROCEDURES
(a) PRECLEARANCE: All Access Persons are to "preclear"
Personal Securities Transactions prior to execution
through the Review Officer. This includes bonds,
stocks (including closed-end funds), convertibles,
preferreds, options on securities, warrants, rights,
etc. for domestic and foreign Securities whether
publicly traded or privately placed. The only
exceptions to this requirement are automatic dividend
reinvestment plan acquisitions, financial futures and
options on futures, automatic employee stock purchase
plan acquisitions, transactions in open-end mutual
funds, U.S. Government securities, commercial paper,
or non-volitional transactions.
7
<PAGE> 8
Non-volitional transactions include gifts to you over
which you have no control of the timing or
transactions which result from corporate action
applicable to all similar Security holders (such as
splits, tender offers, mergers, stock dividends,
etc.). Please note, however, that most of these
transactions must be reported even though they do not
have to be precleared. The Review Officer may require
other persons to preclear Personal Securities
Transactions as he or she may deem necessary and
appropriate for compliance with this Code. See
Section 8 for reporting obligations.
(b) RECORDS OF SECURITIES TRANSACTIONS: All Access
Persons are to direct their brokers to supply to the
Review Officer, on a timely basis, duplicate copies
of confirmations of all Personal Securities
Transactions and copies of periodic statements for
all Securities accounts.
(c) POST-TRADE MONITORING: The Review Officer shall
review all Personal Securities Transactions by Access
Persons to ensure that no conflict exists with Fund
trades.
(d) DISCLOSURE OF PERSONAL HOLDINGS: Investment Personnel
are required to disclose all personal securities
holdings upon commencement of employment and
thereafter on an annual basis.
(e) CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS: All
Access Persons are required to certify annually that
they have read and understand the Code and recognize
that they are subject thereto. Further, Access
Persons are required to certify annually that they
have complied with the requirements of the Code and
that they have disclosed or reported all Personal
Securities Transactions required to be disclosed or
reported pursuant to the requirements of the Code.
(f) REVIEW BY THE BOARD OF TRUSTEES: Management will
prepare a report to the Board of Trustees (1)
quarterly that identifies any violations requiring
significant remedial action during the past quarter;
and (2) annually that a) summarizes existing
procedures concerning personal investing and any
changes in the procedures made during the past year,
and b) identifies any recommended changes in existing
restrictions or procedures based upon the Fund's
experience under the Code, evolving industry
practices, or developments in applicable laws or
regulations.
8. REPORTING
(a) The Securities and Exchange Commission requires that
a record of all Personal Securities Transactions be
kept available for inspection, and that
8
<PAGE> 9
these records be maintained on at least a quarterly
basis. To comply with these rules, it is necessary to
have every Access Person file a quarterly report
within 10 calendar days after the end of each
calendar quarter.(1) Quarterly Report forms will be
distributed to all employees on the last business day
of each quarter. Completed forms should be sent to
the Review Officer. The forms and transactions in all
personal accounts will be reviewed each quarter on a
confidential basis.
(b) The quarterly report must include the required
information for all Personal Securities Transactions
as defined above, except transactions in open-end
mutual funds, U.S. Government securities or
commodities. Non-volitional transactions must also be
reported and the nature of the transaction clearly
specified in the report.
(c) Quarterly reports must be filed by all Access Persons
even if there were no reportable transactions during
the quarter. (Write "none" and return with your
signature.)
(d) The report required by this section shall contain the
following information:
(i) The date of the transaction, the title and
the number of shares, and the principal
amount of each security involved;
(ii) The nature of the transaction (i.e.,
purchase, sale or any other type of
acquisition or disposition);
(iii) The price at which the transaction was
effected; and
(iv) The name of the broker, dealer or bank with
or through whom the transaction was
effected.
(e) The report may contain a statement that the report
shall not be construed as an admission by the person
making such report that he has any direct or indirect
beneficial ownership in the security to which the
report relates.
9. SANCTIONS
- ---------
(1) Access Persons who provide copies of confirmations and periodic
statements pursuant to Section 8 hereof need only certify in such
report that no other transactions were executed during the quarter.
9
<PAGE> 10
Upon discovering a violation of this Code, the Board of
Trustees of the Fund may impose such sanctions as it deems appropriate,
including, INTER ALIA, a letter of censure or suspension or termination of the
employment of the violator. All material violations of this Code and any
sanctions imposed with respect thereto shall be reported periodically to the
Board of Trustees of the Fund.
10. AUDIT BY REVIEW OFFICER
Adherence to the Code is considered a basic condition of
employment with the Fund. The Review Officer will monitor compliance with the
Code and review such violations of the Code as may occur and determine what
action or sanctions are appropriate in the event of a violation. The Review
Officer will report, periodically and upon request, to the Board of Trustees of
the Fund.
Again, we emphasize the importance of Access Persons obtaining
prior clearance of all personal securities transactions, filing the quarterly
reports promptly and avoiding other situations which might involve even the
appearance of a conflict of interest. Questions regarding interpretation of this
policy or questions related to specific situations should be directed to the
Review Officer.
11. EFFECTIVE DATE
This Code was adopted at a meeting of the Board of Trustees of
the Fund. This Code shall become effective on ______________ 1995 and remain in
effect until amended or replaced by the Board of Trustees by subsequent action.
10
<PAGE> 11
APPENDIX I
----------
The term "beneficial ownership "of securities would include
not only ownership of securities held by an Access Person for his or her own
benefit whether in bearer form or registered in his or her own name or
otherwise, but also ownership of securities held for his or her benefit by
others (regardless of whether or how they are registered) such as custodians,
brokers, executors, administrators, or trustees (including, potentially, trusts
in which he or she has only a remainder interest), and securities held for his
or her account by pledgees, securities owned by a partnership in which he or she
is a member, and securities owned by any corporation which he or she should
regard as a personal holding corporation. Correspondingly, this term would
exclude securities held by an Access Person for the benefit of someone else.
Ordinarily, this term would not include securities held by
executors or administrators in estates in which an Access Person is a legatee or
beneficiary unless there is a specific legacy to such person of such securities
or such person is the sole legatee or beneficiary and there are other assets in
the estate sufficient to pay debts ranking ahead of such legacy, or the
securities are held in the estate more than a year after the decedent's death.
Securities held in the name of another should be considered as
"beneficially" owned by an Access Person where such person enjoys "benefits
substantially equivalent to ownership." The Securities and Exchange Commission
has said that although the final determination of beneficial ownership is a
question to be determined in the light of the facts of the particular case,
generally a person is regarded as the beneficial owner of securities held in the
name of his or her spouse and their minor children. Absent special circumstances
such relationship ordinarily results in such person obtaining benefits
substantially equivalent to ownership, E.G., application of the income derived
from such securities to maintain a common home, to meet expenses which such
person otherwise would meet from other sources, or the ability to exercise a
controlling influence over the purchase, sale or voting of such securities.
An Access Person also may be regarded as the beneficial owner
of securities held in the name of another person, if by reason of any contract,
understanding, relationship, agreement, or other arrangement, he obtains
therefrom benefits substantially equivalent to those of ownership. Moreover, the
fact that the holder is a relative or relative of a spouse and sharing the same
home as an Access Person may in itself indicate that the Access Person would
obtain benefits substantially equivalent to those of ownership from securities
held in the name of such relative. Thus, absent countervailing facts, it is
expected that securities held by relatives who share the same home as an Access
Person will be treated as being beneficially owned by the Access Person.
An Access Person also is regarded as the beneficial owner of
securities held in the name of a spouse, minor children or other person, even
though he does not obtain therefrom the
11
<PAGE> 12
aforementioned benefits of ownership, if he can vest or revest title in himself
at once or at some future time.
The Securities and Exchange Commission staff has said in
"no-action" letters that, for purposes of Rule 17j-1 under the 1940 Act, the
definition of "beneficial owner" is determined by reference to Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934, as amended (the "Regulation"). The
Regulation defines the term "beneficial owner" to include any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has, or shares in, a direct or indirect pecuniary
interest in particular equity securities. The term pecuniary interest is defined
by the Regulation to include any opportunity, directly or indirectly, to profit,
or share in any profit, derived from a transaction in the subject securities.
The Regulation provides some guidance by defining an "indirect
pecuniary interest" in a transaction to include a general partner's interest in
portfolio securities held by the general or limited partnership, a person's
interest in securities held by a trust, and an individual's right, even if
currently unexercised, to acquire equity securities through the exercise or
conversion of any derivative securities, such as warrants. While these interests
are mentioned specifically in the Regulation, the "pecuniary interest" would, of
course, also include other interests not specifically noted in the Regulation.
The Regulation also specifies certain interests that do not
qualify as pecuniary interests in securities. Specifically, the Regulation
states that a shareholder does not have a pecuniary interest in the securities
held by a corporation or similar entity, provided he or she is not a control
person of the entity and does not have, or share, investment control over the
entity's portfolio. Furthermore, under the Regulation, one does not have
beneficial ownership, by virtue of ownership of an investment company's shares,
of the portfolio securities that are held by such investment company if it is
registered under the 1940 Act.
Because the determination of "beneficial ownership" may entail
a highly specific factual analysis, you may wish to seek guidance from the
compliance officer of the Funds or from counsel to the Funds.
12
<PAGE> 1
Exhibit p-2
PACIFIC CENTURY FINANCIAL CORPORATION
PACIFIC CENTURY TRUST
CODE OF ETHICS
<PAGE> 2
<TABLE>
Table of Contents
<CAPTION>
<S> <C> <C>
Introduction...................................................................1
I. Legal and Regulatory Compliance
1. Bank Bribery Act..........................................................3
2. Antitrust and Bank Anti-Tying Laws and Regulations........................4
3. Securities Trading on Inside Information..................................4
4. Advice in Legal or Tax Matters............................................6
5. Dealing With Government Officials, Regulators,
Examiners, and Auditors...................................................6
6. Responding to Inquiries of Accountants, Auditors and Examiners............7
7. Other Laws and Regulations................................................7
8. Recordkeeping and Accounting Responsibilities.............................7
II. Avoiding Conflicts of Interest
9. Personal Financial Involvement in Extending Credit........................8
10. Processing Bank Transactions with the Company.............................8
11. Signing on Customer Accounts..............................................8
12. Personal Fees or Commissions..............................................8
13. Transactions Involving Company-Owned or Fiduciary Property................9
14. Avoiding Preferential Treatment...........................................9
15. Benefits Under Wills or Trusts............................................9
16. Awarding Orders, Contracts and Commitments................................9
17. Gifts to Customers........................................................9
18. Gifts to Supervisors......................................................9
III. Using Confidential Information Properly
19. Protection of Confidential Relationships.................................10
20. Disclosure of Information on Company Business Opportunities..............10
21. Protection of Confidential Internal Information..........................10
22. Protection of Staff Member Information...................................10
IV. Conducting Company Business Properly
23. Relationships with Competitors...........................................11
24. Solicitation or Distribution of Literature...............................11
25. Use of Company Letterhead................................................11
26. Electronic Communications................................................11
27. Clearance of Statements before Public Release and Use of Company Name....12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
V. Conducting Outside Activities Properly
28. Outside Employment.......................................................13
29. Investment in Business of Customers, Suppliers or Competitors............13
30. Directorship on Boards of For-Profit Companies and
Involvement in Non-Profit Organizations..................................13
31. Political Contributions and Activities...................................13
32. Participation in Public Office or on Public Boards.......................14
VI. Handling Your Finances Properly
33. Personal Borrowing and Lending...........................................15
34. Margin Accounts..........................................................15
35. Meeting Your Financial Obligations.......................................15
VII. Dealing With Other/Staff Members
36. Staff Member Relations...................................................16
37. Equal Employment Opportunity and Affirmative Action......................16
VIII. Appendices
A. Guidelines for Appropriate Conduct.......................................17
B. Administration of the Code - Reporting Violations,
Investigations and Disciplinary Action...............................18
C. Numbers to Call..........................................................18
D. Acknowledgment of Receipt
</TABLE>
<PAGE> 4
Code of Ethics and Conduct
Introduction
This Code of Ethics and Conduct applies to all staff members of the Pacific
Century Financial Corporation and its affiliates and subsidiaries (the
"Company"), in all Company locations.
We strive to fully serve our customers' changing financial services needs, while
at the same time meeting the highest ethical standards. We depend upon the
talents and efforts of our staff members for our success, and our reputation for
honesty, integrity and safety is the sum of the personal reputations of our
individual staff members. We all have worked hard over the years to establish
our reputation for honesty and ethical conduct, and we must protect against any
actions or conduct that could even potentially damage that reputation. To that
end you are expected to:
o Comply fully with all applicable laws and regulations and to seek
legal advice or interpretations whenever necessary to ensure
compliance.
o Manage your personal and business affairs to avoid any conflict of
interest (or even the appearance of conflict of interest). Conflicts
of interest that do occur must be resolved so as to avoid
embarrassment or liability on the part of the Company.
o Use confidential information properly.
o Conduct business on behalf of the Company in a manner that protects
its property and furthers its interests without exposing the Company
to undue risks.
o Conduct your outside activities in a way that does not compromise you
or the Company.
o Handle your personal finances and other financial transactions
properly.
o Treat Company staff members, customers and others with whom you have
dealings fairly and with respect.
1
<PAGE> 5
We have established this Code to give you general guidance on ethical issues and
on appropriate conduct. Where the correct course of action is doubtful, you
should not rely solely on your own judgment or interpretation of the Code, but
should discuss the matter your supervisor, Senior Manager or the Human Resources
Division. If you fully and timely disclose the facts to your supervisor or other
appropriate manager and obtain prior approval of your actions you will usually
have complied with the Code. If you are a supervisor, you must also ensure that
those you supervise consistently adhere to this Code in letter and in spirit.
ACTIONS OR CONDUCT IN VIOLATION OF THE CODE MAY RESULT IN DISCIPLINARY ACTION UP
TO AND INCLUDING IMMEDIATE TERMINATION FROM EMPLOYMENT.
The term "family" as used in this Code includes your spouse and your or your
spouse's children, parents, siblings, grandparents, uncles, aunts, nephews,
nieces, and cousins. The term "immediate family" means your spouse, your or your
spouse's children, parents, and siblings and any person residing in your
household.
The term "Senior Manager" means a Senior Vice President or higher officer.
The term "supplier" includes any vendor, contractor, consultant or other
third-party provider of goods or services to the Company.
The term "SPM" refers to the Company's Standard Procedures Manuals.
The term "Managing Committee" as used in this Code is comprised of the Chairman
and CEO, the President, and the Vice Chairs of the Company.
You must certify that you have received and read a copy of the Code and will
abide by its provisions at all times. You must also certify that you are
currently in compliance with the Code and that you are not aware of any present
or anticipated conflicts of interest. If there is any conflict, you must report
the conflict in writing to your supervisor or Senior Manager.
THIS CODE REFLECTS CURRENT COMPANY POLICIES AND PRACTICES AND IS NOT INTENDED TO
CREATE OR CONFER CONTRACTUAL RIGHTS OR TO MODIFY YOUR AT-WILL EMPLOYMENT STATUS.
AS AN AT-WILL STAFF MEMBER, EITHER YOU OR THE COMPANY MAY TERMINATE YOUR
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE OR REASON AND WITH OR WITHOUT
NOTICE. THE COMPANY HAS THE RIGHT TO CHANGE THIS CODE FROM TIME TO TIME AND WILL
INFORM YOU OF SUCH CHANGES. HOWEVER, ANY CHANGES MUST HAVE THE WRITTEN APPROVAL
OF THE MANAGING COMMITTEE.
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I. LEGAL AND REGULATORY COMPLIANCE
1. BANK BRIBERY ACT
GENERAL PROHIBITION. The Bank Bribery Act prohibits you from (1) soliciting
for yourself or for another anything of value from anyone in return for any
business, service or confidential information of the Company or (2)
accepting anything of value from anyone in connection with the business of
the Company either before or after a transaction is discussed or
consummated. The Act prohibits gifts given, offered, solicited or accepted
corruptly and with the intent to influence or be influenced. Ultimately you
cannot be certain as to another's intention in offering or making a gift.
Nor can you know how a court would later judge your own intentions.
Consequently you must exercise great caution in accepting any gift or
gratuity. In no case should you accept a gift that places you under a
feeling of obligation.
VIOLATION. A gift over $100, if given, offered, solicited or accepted with
corrupt intent is a felony subject to a fine of $1 million or three times
the amount of the gift, whichever is greater, and thirty years
imprisonment. Even a gift not exceeding $100, if given, offered, solicited
or accepted with corrupt intent, is a misdemeanor subject to a fine of
$1,000 and one year imprisonment.
EXCEPTIONS PROVIDED FOR UNDER REGULATORY GUIDELINES. You may of course
accept bona fide salary, wages, fees or other compensation paid, or
expenses paid or reimbursed, in the usual course of business by the
Company. In addition, you may accept certain gifts of reasonable value if
it is clear from the circumstances that the giver is not trying to
corruptly influence a Company transaction. Examples of gifts that you may
accept are:
o meals, refreshments, entertainment, accommodations or travel
arrangements (all of reasonable value) in the course of a meeting or
other occasion, the purpose of which is to hold bona fide business
discussions or to foster better business relations, provided that the
Company would have paid the expense as a reasonable business expense
if not paid for by the other party. The reasonable value of this
amenity may not exceed $100;
o advertising or promotional material of reasonable value such as pens,
pencils, note pads, key chains, calendars and similar items. The
reasonable value of this type of gift may not exceed $10;
o discounts or rebates on merchandise or services that do not exceed
those available to other customers; and
o gifts related to commonly recognized events or occasions such as a
promotion, new job, wedding, retirement, holiday or birthday. The
reasonable value of this type of gift may not exceed $50; and
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o charitable, educational or religious organization awards for
recognition of service and accomplishment. The reasonable value of
this type of gift may not exceed $50.
Cash gifts are NOT to be accepted under any circumstances. (You may accept
a gift certificate not redeemable for cash provided it falls into one of
the above exceptions.)
CASE BY CASE EXCEPTIONS. If you are offered or receive anything of value
not authorized by this Code, you must obtain the written approval of its
acceptance from your Senior Manager on the basis of a full written
disclosure of:
o the name and relationship of the person offering the gift;
o the nature of the gift;
o the value of the gift;
o the circumstances surrounding the offer; and
o any other facts that may be relevant.
2. ANTITRUST AND BANK ANTI-TYING LAWS AND REGULATIONS
You may not discuss, settle or control prices, rates, trade practices, or
costs with competitors or engage in any other activities prohibited by
antitrust laws. Subject to certain limited exceptions, you may not offer
credit, property or other services or vary the compensation involved on the
condition or requirement that the customer:
o enter into a business relationship with another company;
o provide some unrelated or unusual credit, property or service to the
Company; or
o refrain from dealing with another financial institution.
Except where traditional loan, discount, deposit or trust services are
involved, and again subject to certain limited regulatory exceptions, you
may not provide a banking product or service to a customer on the condition
or requirement that the customer obtain some additional product or service
from the Company. For a detailed treatment of anti-tying issues, refer to
SPM, GS45-07.
3. SECURITIES TRADING POLICY
Trading in any securities issued by the Company or the Company's customers
may involve securities laws implications that have serious consequences.
The Company has adopted a Securities Trading Policy in order to prevent
violations of securities laws by staff members.
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A. RULE 10b-5 LIABILITY
Rule 10b-5 of the Securities Exchange Act of 1934 establishes
liabilities for damages if a person buys or sells securities of the
Company or any other publicly-traded company on the basis of material
information (either favorable or unfavorable) that has not been made
available to the public. Material information is any information that
a reasonable investor would consider important in deciding whether to
buy, sell, or not engage in any activity regarding publicly-traded
securities. Information is material if it is likely to have a
significant effect on the price of the securities in question.
B. POLICY
If you have material information that has not been made available to
the public, neither you nor any immediate family member may buy or
sell securities or engage in any other action to take advantage of, or
pass on to others, that information.
o TIPPING INFORMATION TO OTHERS. You must not "tip" others to the
existence of material nonpublic information. Both the "tipper"
and the "tippee" may be liable under Rule 10b-5 for damages to
ALL persons who traded in Company securities during the period
such information was not public, regardless of whether either
benefited or profited. As a result, if you are aware of material
information that has not been made available to the public, you
must not trade or inform others of such information until such
information is public.
o WHEN INFORMATION IS PUBLIC. You must not trade any Company
securities immediately after the Company has made the material
information available to the public. You should refrain from
trading Company securities until the information has been
adequately circulated to the public and investors have had a
chance to evaluate it. As a general rule, you should not engage
in any transaction until the third business day after the
information has been made public.
o TRANSACTIONS BY FAMILY MEMBERS. These restrictions also apply to
immediate family members and others living in your household. As
a result, you are responsible for compliance by those persons.
o OTHER COMPANIES. This policy also applies to national information
relating to any other companies, including our customers,
obtained in the course of your employment at the Company.
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C. CONSEQUENCES OF VIOLATION OF SECURITIES LAWS
The consequences of insider trading violations are serious. For
individuals who trade on material information that has not been made
available to the public or tip such information to others, the
federal-law penalties alone may include:
o a civil penalty of up to three times the profit gained or the
loss avoided;
o a criminal fine (no matter how small the profit) of up to $1
million;
o a jail term of up to ten years; or
o all three of the above.
D. SUMMARY
You must strictly follow this policy and avoid improper securities
transactions. The penalties that may be imposed for illegal trading
are staggering, and the harm to reputation that may result is not
reparable. Any questions regarding the appropriateness of securities
transactions, should be directed to your attorney or to the Company's
Corporate Secretary prior to making any purchase or sale of Company
securities.
4. ADVICE IN LEGAL OR TAX MATTERS
The practice of law is confined to licensed attorneys. You may not under
any circumstances give legal advice to customers and you should avoid
making any statements that could be interpreted as giving legal advice. The
Company's attorneys are employed to render service to the Company and
should not be asked to provide personal advice to staff members, customers
or others. You may not under any circumstances give tax advice to
customers, unless you are a Pacific Century Trust staff member providing
tax planning and preparation services incidental to fiduciary services or a
Pacific Century Investment Services staff member providing tax advice
incidental to investment or brokerage services.
5. DEALING WITH GOVERNMENT OFFICIALS, REGULATORS, EXAMINERS AND AUDITORS
Customer relationships with persons holding political or governmental
office, regulators examiners and auditors must be established and
maintained in strict adherence to applicable laws and regulations. You may
not grant to such persons preferred rates, terms or conditions or other
accommodations not otherwise generally available. Further, as a matter of
federal law, you may not make any loan or give any gratuity to any
government official who examines or has authority to examine the Company.
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6. RESPONDING TO INQUIRIES OF ACCOUNTANTS, AUDITORS AND EXAMINERS
You must fully cooperate with the Company's auditors and accountants and
government examiners. You must answer their questions completely and
truthfully and withhold no adverse information. Questions regarding
requests should be referred to your supervisor or to Pacific Century
Compliance Department, or if the question is of a legal nature, to the
Legal Division.
7. OTHER LAWS AND REGULATIONS
The myriad laws and regulations to which the Company is subject are too
numerous to specify in this Code. They include state and federal laws and
regulations and the laws and regulations of other host countries in which
the Company does business. They include laws of general application such as
criminal laws, employment laws, tax laws, copyright laws, etc. They also
include laws applicable only to the Company's financial institution
subsidiaries such as fair lending laws, the Bank Secrecy Act, etc. Guidance
on routine compliance is generally available from your supervisor or from
the SPM. Guidance is also available from Pacific Century Compliance
Department and the Legal Division.
8. RECORDKEEPING AND ACCOUNTING RESPONSIBILITIES
You are expected to accurately record all transactions you handle involving
the assets and liabilities of the Company or customer accounts in
accordance with the Company's established cash handling procedures and
accounting and internal control systems, so as to insure the integrity of
customer records and the Company's financial statements. No undisclosed
funds or accounts shall be established for any purpose.
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II. AVOIDING CONFLICTS OF INTEREST
9. PERSONAL FINANCIAL INVOLVEMENT IN EXTENDING CREDIT
o You may not participate in any aspect of an extension of credit by the
Company to yourself or a member of your family. The Company does not
as a matter of policy extend credit to a customer if proceeds are to
be given or loaned to you or a member of your family; or used to repay
a debt owed to you or a member of your family.
o Unless first approved by your Senior Manager, the Company will not
extend credit to a customer to finance the purchase of real or
personal property from you or a member of your family or to a company
in which you or a member of your family has an interest as a director,
officer, controlling person or partner.
o You may not loan your personal funds to customers or to suppliers you
deal with on behalf of the Company.
10. PROCESSING PERSONAL TRANSACTIONS WITH THE COMPANY
You may not personally process any transaction on your own Company accounts
or the Company accounts of members of your family. To protect yourself in
the event of a cash shortage or account discrepancy and to avoid even the
appearance of impropriety, refer such transactions to another staff member
for processing.
11. SIGNING ON CUSTOMER ACCOUNTS
You may not sign on customer accounts, act as agent or co-lessee of
customer safe deposit boxes or otherwise represent customers. Exceptions:
You may sign where you act in an ownership capacity or where you act on the
basis of a close family relationship. Where permitted by law or by written
agreement, Pacific Century Trust staff members may sign on customers'
accounts in the course of providing fiduciary services. Where customary and
permitted by law, authorized by the customer and approved by the Manager of
International Banking Division, overseas branch staff members may sign on
customer accounts for the purpose of facilitating accounts receivable
financing arrangements.
12. PERSONAL FEES OR COMMISSIONS
You may not accept personal fees or commissions from persons outside the
Company in connection with Company transactions.
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13. TRANSACTIONS INVOLVING COMPANY-OWNED OR FIDUCIARY PROPERTY
Neither you nor a member of your immediate family may purchase Company
property, including property acquired through repossession or in settlement
of debt, unless the purchase is first approved by your Senior Manager or
unless the purchase is court-approved or court-confirmed. Neither you nor a
member of your immediate family may purchase or borrow any assets from or
sell any assets to any estate, trust or other fiduciary account
administered by the Company, except as permitted by laws or regulations
governing such transactions.
14. AVOIDING PREFERENTIAL TREATMENT
You may not act for the Company in any transaction involving persons or
firms in which you or your family has any significant financial interest.
Further, you must not give or appear to give preferential treatment on the
basis of personal friendship.
15. BENEFITS UNDER WILLS OR TRUSTS
You may not accept from a customer or supplier (other than a member of your
family) a bequest, legacy or benefit or interest in property under a trust.
16. AWARDING ORDERS, CONTRACTS AND COMMITMENTS
If you are responsible for recommending or approving purchases of goods or
services for the Company, you must deal with suppliers without favoritism.
Although you may consider a supplier's account relationship, your
purchasing activities should nevertheless be on the basis of merit. You may
not act in any transaction involving a supplier in which you or a member of
your family has an interest. Refer such transactions to your supervisor
after fully disclosing the situation.
17. GIFTS TO CUSTOMERS
Where permitted by local law or regulation, gifts of nominal value to
customers or prospective customers given without any intent to influence a
transaction with the Company may be approved as follows:
o not to exceed $25 by a branch or department manager;
o not to exceed $50 by a Regional Manager;
o not to exceed $100 by a Senior Manager; and
o not to exceed $200 by a member of the Managing Committee.
18. GIFTS TO SUPERVISORS
If you are a supervisor, you may not accept gifts that exceed $25 in value
from anyone you supervise during any twelve-month period.
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III. USING CONFIDENTIAL INFORMATION PROPERLY
19. PROTECTION OF CONFIDENTIAL RELATIONSHIPS
You must protect our confidential relationships with our customers at all
times. THIS IS A FUNDAMENTAL PRINCIPLE OF THE FINANCIAL SERVICES BUSINESS.
All information concerning a customer's account balances, management,
customer lists, business plans, forecasts, decisions, problems, financial
condition, or any other confidential matters must be protected. Such
information may be shared within the Company or with its examiners,
regulators, attorneys, accountants, auditors or other agents only on a
strict "need to know" basis. Confidential customer information may not be
released to outsiders except as a routine and controlled response to credit
inquiries upon the customer's written authorization or in response to
service of legal process. Use of confidential information for personal gain
is improper and may violate the Company's Securities Trading Policy and
insider trading laws. See Securities Trading on Inside Information, section
I.3.
20. DISCLOSURE OF INFORMATION ON COMPANY BUSINESS OPPORTUNITIES
Opportunities for business development and growth are among our Company's
most valuable assets. Complete information on customer relationships is
critical to realizing the value of those assets. All customer information
known to you that may affect a Company transaction or business opportunity
must be made available to your supervisor, Senior Manager or other
appropriate Company decision maker.
21. PROTECTION OF CONFIDENTIAL INTERNAL INFORMATION
Information concerning internal Company matters such as business plans,
forecasts, decisions, customer lists, statistical information, operational
procedures and policies, internal reports, interest rates and other pricing
information, forms, contractual relationships with customers and staffing
matters is confidential. You may not use or disclose such information for
private gain. Except in response to legal process, release or disclosure of
such information to persons outside the Company must first be approved by
the Managing Committee. Examination reports of bank regulatory agencies are
the property of those agencies and are strictly confidential. You are
prohibited from giving information from those reports to anyone not
officially connected with the examined bank.
22. PROTECTION OF STAFF MEMBER INFORMATION
You must refer requests from outside the Company for information regarding
past, present or prospective staff members to the Human Resources Division
for response. Within the Company information concerning staff members
should be shared only with those who require the information to perform
their duties. You are responsible for safeguarding the confidentiality of
information you have concerning any staff members you supervise.
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IV. CONDUCTING COMPANY BUSINESS PROPERLY
23. RELATIONSHIPS WITH COMPETITORS
You must act ethically towards our competitors. You must not disseminate
gossip, rumors or false and disparaging statements concerning a competitor
or engage in any other unfair actions intended to wrongfully damage a
competitor.
24. SOLICITATION OR DISTRIBUTION OF LITERATURE
You may not permit the distribution of literature or circulation of
petitions or solicitation of staff members or customers by outsiders during
working or non-working hours, in public or nonpublic areas of the Company.
The time, place and manner in which you as a staff member may distribute
literature or solicit other staff members on Company premises is also
strictly circumscribed to prevent interference with our operations. You may
not use the internal mail or electronic mail systems to distribute or
circulate written or printed material for any purpose other than carrying
out Company business. For detailed guidelines on solicitations and related
activities and information on Company sponsored solicitations such as
United Way, refer to SPM, HR10-60
25. USE OF THE COMPANY LETTERHEAD
Company letterhead identifies the content of a letter with the Company. You
may use it only for Company matters. You may not use letterhead for
personal or non-official correspondence.
26. ELECTRONIC COMMUNICATIONS
All electronic and telephonic communication systems (including Internet and
network access, facsimiles, telecopiers, computers, copy machines and other
software or business equipment) are the property of the Company, as are
all communications and information transmitted by, received from, or stored
in these systems and all system pass codes. The systems, system
information and communications and system pass codes are to be used
strictly in accordance with Company policies and procedures and solely for
job-related purposes. Messages received by you via these systems should
only be disclosed to or discussed with individuals who have a need to know
such information. You may not use a code, access a file, or retrieve any
stored communication unless authorized to do so by the Company. You may not
use a pass code that has not been issued to you or that is unknown to the
Company.
You should have no expectation of privacy when transmitting, using, or
storing information with these systems, including telephonic, e-mail or
voice-mail messages. You may not use these systems in a way that disrupts
or offends others. For example, the use of these systems to make
discriminatory or harassing statements, vulgarities, obscenities, or
disparaging comments is strictly prohibited.
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Additionally, these systems may not be used to solicit or communicate with
others in violation of the Company's solicitation policies. To ensure use
that is consistent with the Company's legitimate business interests,
authorized Company representatives may monitor use of electronic and
telephonic communications systems and business equipment from time to time,
and may access, retrieve, print, read, copy and preserve all e-mail,
voicemail, telephonic or other electronic communications entering, leaving,
or stored in these systems.
27. CLEARANCE OF STATEMENTS BEFORE PUBLIC RELEASE AND THE USE OF COMPANY NAME
The Company wishes to be identified with progressive undertakings that
benefit the communities we serve. At the same time, we must be sensitive to
public opinion. Use of the Company's name in a particular circumstance must
be appropriate. You may not lend the Company's name to an undertaking or
state the Company's position in speeches, interviews, statements to the
press, written articles or other public communication unless the matter has
first been cleared through Corporate Communications Department-Marketing
Division or a member of the Managing Committee.
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V. CONDUCTING OUTSIDE ACTIVITIES PROPERLY
28. OUTSIDE EMPLOYMENT
Due to possible conflicts of interest and the potential for interference
with your job, you may not undertake outside employment (including
self-employment and acting as a personal representative or other fiduciary
for any person other than a family member) without prior written approval
of Human Resources Division and the concurrence of your supervisor. In no
case may you be employed by another financial services provider, including
a bank, a real estate or securities brokerage firm, an appraisal firm, an
insurance company or agency or another type of financial institution.
29. INVESTMENT IN BUSINESS OF CUSTOMERS, SUPPLIERS OR COMPETITORS
Neither you nor any member of your family residing with you may without
written disclosure to the Company hold a material investment, including any
direct or indirect financial interest, in the business of a customer,
supplier or competitor of the Company. A "material investment" as used in
this paragraph is an investment that exceeds (a) five percent of the gross
assets of a closely-owned business; (b) 0.10 percent of the estimated value
of the equity securities of a publicly-traded company; or (c) five percent
of the net worth of you and your immediate family. You must disclose a
material investment to your supervisor and Senior Manager in writing.
30. DIRECTORSHIP ON BOARDS OF FOR-PROFIT COMPANIES AND INVOLVEMENT IN
NON-PROFIT ORGANIZATIONS
Due to possible conflict of interests and the potential for interference
with your job, you may not act as a director of an outside for-profit
company. Exceptions to this policy must first be approved in writing by the
Managing Committee. You are encouraged as a good private citizen to take an
active part in non-profit organizations such as civic organizations,
improvement associations, service clubs, churches and similar
organizations. Prior approval is not required for volunteer work you do or
positions you hold in non-profit organizations. However, the time you spend
pursuing these interests should not interfere with your job. In addition,
when acting in a private capacity you should clearly distinguish your
personal views from the Company's views and avoid taking controversial
positions that may be incorrectly attributed to the Company.
31. POLITICAL CONTRIBUTIONS AND ACTIVITIES
You are encouraged as a good private citizen to support political
candidates or parties of your choice by donating your own time or money.
However, you may not under any circumstances make any direct or indirect
political contribution of Company funds or other property or otherwise
permit the use of Company resources for political purposes.
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You may not take time away from work for political activities unless you
first obtain written approval from the Director of Human Resources Division
with the concurrence of your supervisor.
32. PARTICIPATION IN PUBLIC OFFICE OR ON PUBLIC BOARDS
Due to possible conflicts of interest and the potential for interference
with your job, you may not seek election to a public office or accept
appointment to a public commission or board without the prior written
approval of the Managing Committee with the concurrence of your supervisor.
If you seek office or accept an appointment, you do so as an individual
and not as a representative of the Company.
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VI. HANDLING YOUR FINANCES PROPERLY
33. PERSONAL BORROWING AND LENDING
You are encouraged to meet your borrowing needs by applying to one of our
lending subsidiaries and taking advantage of special loan programs offered
to staff members. You may not lend to or borrow from other staff members.
You may not borrow from a supplier or customer, except through the use of a
customary retail charge account. You may of course borrow from another bank
or financial institution, but you may not accept favored treatment as to
interest rate, maturity, security, repayment terms or any other provisions.
34. MARGIN ACCOUNTS
The Company neither encourages nor discourages staff members' use of margin
accounts. Prior written approval of the Director of Human Resources
Division is required. Any staff member considering the use of such an
arrangement should carefully evaluate the risks involved in leveraging
investments subject to volatile changes in market value. This subject is
treated in more detail in SPM 40-50.
35. MEETING YOUR FINANCIAL OBLIGATIONS
You are expected to manage your personal finances properly and to meet your
financial obligations promptly. Failure to do so undermines your
credibility and that of the Company. Your precarious financial condition
could be thought to influence actions or judgments you make on behalf of
the Company. If you repeatedly overdraft your Company accounts, you will
be asked to close them. If you fail to cure delinquencies on Company
accounts or if you cause the Company to incur a loss, your employment may
be terminated.
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VII. DEALING WITH OTHER/STAFF MEMBERS
36. STAFF MEMBER RELATIONS
You are expected to treat other staff members with courtesy, respect and
understanding. You are expected to discuss job-related problems openly with
your supervisor or the Human Resources Division, and you are expected to
cooperate in resolving differences fairly and promptly.
37. EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION
We are committed to fully complying in letter and spirit with all Equal
Employment Opportunity and Affirmative Action laws and regulations. Our
staff member relations in all respects are to be conducted without regard
to race, color, religion, sex, national origin, ancestry, age, disability,
sexual orientation, marital status, or veteran status or other prohibited
basis. Sexual harassment, ancestry harassment or other harassment of staff
members is unethical and in some cases unlawful and is not tolerated at the
Company. For a fuller statement of our policy concerning these matters,
refer to SPM, HR10-15.
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VIII. APPENDICES
A. GUIDELINES FOR APPROPRIATE CONDUCT
The following list gives examples of misconduct that may result in discipline,
up to and including involuntary termination of your employment with the Company.
By listing examples, the Company does not intend to preclude its ability to take
appropriate disciplinary action in situations not listed. Nor does it intend to
create or confer contractual rights that limit or modify your at-will employment
status. As an at-will staff member, either you or the Company may terminate your
employment at any time with or without cause or reason and with or without
notice. Unacceptable misconduct includes:
o violating a law or regulation relating to the business of the Company;
o being excessively absent or tardy;
o being insubordinate or refusing to perform work assigned or to carry
out instructions of a supervisor or manager;
o falsifying or omitting to make pertinent entries upon Company records,
including applications for employment, accounting, personnel and
payroll records;
o lying, concealing relevant information, failing to cooperate with
Company investigations, or falsifying or refusing to give testimony;
o committing embezzlement, check kiting, or other theft or otherwise
acting dishonestly;
o making false or malicious statements about other staff members, the
Company or our services;
o carrying or using firearms or weapons of any kind on Company premises
or in the course of Company business;
o possessing or using illegal drugs or intoxicating liquor on Company
premises or in the course of Company business, reporting for duty
under the influence of illegal drugs or intoxicating liquor or
otherwise violating our Substance Abuse Policy;
o making unauthorized or excessive use of or willfully damaging Company
property or equipment;
o failing to repay obligations you owe to the Company in timely fashion,
causing loss to the Company or otherwise mishandling your personal
finances;
o gambling on Company premises or through the use of Company facilities;
o fighting, assaulting, threatening, harassing or injuring another
person;
o violating any provision of this Code; or
o engaging in any other unlawful, immoral, indecent or improper conduct
that adversely affects your ability to perform your job or the
Company's operations, reputation or goodwill.
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B. ADMINISTRATION OF THE CODE -
VIOLATIONS, INVESTIGATION AND DISCIPLINARY ACTION
You must report immediately to your supervisor any knowledge of or any request
or directive to engage in any of the following:
o any act which appears to be a violation of the Code or otherwise improper
or illegal;
o any improper entry on the Company's records or reports;
o any omission of an entry that should be made;
o any suppression of or failure or refusal to disclose any information that
may harm the Company or may suggest a violation of law; or
o any improper disclosure of confidential information.
If you are not comfortable reporting the matter to your supervisor or believe
that your supervisor has not dealt with the matter properly, you should raise
the matter with your department, division or group manager or with Human
Resources Staff Advisory. Refer to the Appendix of Numbers to Call.
You will not be disciplined or retaliated against for acting in good faith to
report a violation or potential violation. Regardless of how the report is made,
the Company's policy is to investigate and inform you of the outcome.
Disciplinary action will be taken against those who:
o violate the Code,
o withhold information concerning reported violations,
o retaliate or encourage others to retaliate against a staff member who in
good faith reports a violation,
o contribute to a violation through your supervisor or lack of diligence, or
o make false or bad faith reports of violations.
C. NUMBERS TO CALL
Human Resources Division - Staff Advisory: 808-537-8840
Legal Division Response Line: 808-537-8875
Pacific Century Compliance Department: 808-537-8522
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[PACIFIC CENTURY TRUST LOGO] INTERNAL COMMUNICATION
DATE: October 1, 1997
TO: Access Person - "Code of Ethics"
FROM: William Barton
SUBJECT: Pacific Century Trust Code of Ethics
================================================================================
Pacific Century Trust has adopted and is operating under the Pacific Capital
Funds Code of Ethics and the Cash Assets Trust Code of Ethics which have been
written in accordance with Rule 17j-I(b) under the Investment Company Act of
1940. You have been identified as an "Access Person" as stated in the codes.
Attached are the Code of Ethics and copies of reporting forms.
Please read the Code of Ethics carefully and comply fully. By signing below, you
certify that you have read and understand the Code of Ethics and recognize that
you are subject thereto. You also certify that you will comply with the
requirements of the Code of Ethics and that you will disclose or report all
Personal Securities Transactions required to be disclosed or reported pursuant
to the requirements of the Code of Ethics. As a note, you will need to certify
compliance on an annual basis.
The "Review Officer" as referred to in the Code of Ethics will be either myself
or David Zerfoss. In the event that both of us are unavailable, the Investment
Group Team Leaders will act as "Review Officer".
Please return a signed copy of this memo to Cindy Hanscam.
If you have any questions, please see me or David.
/s/ William Barton
--------------------------
Attachments
Acknowledged by:
--------------------------
Signature
--------------------------
Print Name
--------------------------
Department
--------------------------
Date
<PAGE> 23
[PACIFIC CENTURY TRUST LOGO]
QUARTERLY REPORT
OF PERSONAL SECURITIES TRANSACTIONS
<TABLE>
<CAPTION>
TRANSACTION TRADE PRINCIPAL
(BUY OR SELL) DATE SECURITY NAME SHARES AMOUNT PRICE BROKER
<S> <C> <C> <C> <C> <C> <C>
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
- ------------- ----- ----------------------- -------- ---------- ------- ----------
</TABLE>
I hereby certify that the above transactions are in accordance with the Code of
Ethics adopted by Pacific Century Trust.
If no reportable transactions were made during the quarter, please write "none"
in the first blank and sign below.
----------------------------
Signature:
----------------------------
Date
----------------------------
Department
*Pursuant to the Code of Ethics, please submit this report within 10 calendar
days after the end of each calendar quarter to Cindy Hanscam.
Revised 11/3/97
<PAGE> 24
[PACIFIC CENTURY TRUST LOGO]
"PRECLEARANCE"
OF PERSONAL SECURITIES TRANSACTIONS
<TABLE>
<CAPTION>
FOR REVIEW OFFICER USE
-------------------------
SHORT-TERM DURING EXEMPTION
TRADE BLACKOUT CODE
TRANSACTION W/GAIN? PERIOD(S)? (SEE BELOW)
(BUY OR SELL) TRADE DATE SECURITY NAME SHARES (Y/N) (Y/N) OR "DENIED."
<S> <C> <C> <C> <C> <C> <C>
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
- ------------- ---------- ---------------------- -------- ---------- ----------- ------------
</TABLE>
Exemption Codes: A = Transaction unlikely to affect a highly institutional
market
B = Transaction not related economically to securities
being traded in the funds
C = Other (Explain in white space below)
Exemptions must be requested in writing. If the trade is rejected for any
reason, you can request an exemption in writing by resubmitting the form with an
explanation of why an exemption should be granted. Exemptions are intended to be
exceptions, and repetitive exemptive applications with respect to any one
individual will not be well received.
I hereby certify that the above actions are in accordance with the Code of
Ethics adopted by Pacific Century Trust. These transactions will be reported in
full detail on the next due Quarterly Personal Transactions Report.
------------------------------
Print Name
------------------------------
Signature
------------------------------
Date
------------------------------
Department
------------------------------
Approved by Date
Revised 11/03/97
<PAGE> 25
[PACIFIC CENTURY TRUST LOGO]
ANNUAL LIST OF PERSONAL SECURITIES HOLDINGS
AND CERTIFICATION OF COMPLIANCE
SECURITIES HELD AS OF ____________:
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
By signing below, I re-certify that I have read and understand the Code of
Ethics adopted by Pacific Century Trust and recognize that I am subject hereto.
I also certify that I have complied with the requirements of the Code and that I
have disclosed or reported all Personal Securities Transactions required to be
disclosed or reported pursuant to the requirements of the Code of Ethics.
------------------------------
Print Name
------------------------------
Signature
------------------------------
Department
------------------------------
Date
Revised 9/26/96
<PAGE> 1
Exhibit p-3
BISYS FUND SERVICES
-------------------
CODE OF ETHICS
--------------
I. INTRODUCTION
This Code of Ethics (the "Code") sets forth the basic policies of
ethical conduct for all directors, officers and associates (hereinafter referred
to as "Covered Persons") of the BISYS Fund Services companies listed on Exhibit
A hereto (hereinafter collectively referred to as "BISYS").
Rule 17j-1(b) under the Investment Company Act of 1940, as amended,
(the "1940 Act") makes it unlawful for BISYS companies operating as a principal
underwriter of a registered investment company (hereinafter referred to
individually as a "Fund" or collectively as the "Funds"), or any affiliated
person of such principal underwriter, in connection with the purchase or sale by
such person of a security "HELD OR TO BE ACQUIRED"(1) by any Fund:
(1) to employ any device, scheme or artifice to defraud the Fund;
(2) to make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order
to make the statements made, in light of the circumstances
under which they are made, not misleading;
(3) to engage in any act, practice or course of business that
operates or would operate as a fraud or deceit upon the Fund;
or
(4) to engage in any manipulative practice with respect to the
Fund.
Any violation of this provision by a Covered Person shall be deemed to
be a violation of this Code.
II. RISKS OF NON-COMPLIANCE
Any violation of this Code may result in the imposition by BISYS of
sanctions against the Covered Person, or may be grounds for the immediate
termination of the Covered Person's position with BISYS. In addition, in some
cases (e.g., the misuse of inside information), a violation of federal and state
civil and criminal statutes may subject the Covered Person to fines,
imprisonment and/or monetary damages.
- ----------
(1) A security "HELD OR TO BE ACQUIRED" is defined under Rule 17j-l(a)(10) as
any COVERED SECURITY which, within the most recent fifteen (15) days: (A) is or
has been held by a Fund, or (B) is being or has been considered by a Fund or the
investment adviser for a Fund for purchase by the Fund. A purchase or sale
includes the writing of an option to purchase or sell and any security that is
convertible into or exchangeable for, any security that is held or to be
acquired by a Fund. "COVERED SECURITIES", as defined under Rule 17j-1(a)(4), DO
NOT INCLUDE: (i) securities issued by the United States Government; (ii)
bankers' acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt instruments, including repurchase agreements; (iii)
shares of open-end investment companies; (iv) transactions which you had no
direct or indirect influence or control; (v) transactions that are not
initiated, or directed, by you; and (vi) securities acquired upon the exercise
of rights issued by the issuer to all shareholders pro rata.
<PAGE> 2
III. ETHICAL STANDARDS
The foundation of this Code consists of basic standards of conduct
including, but not limited to, the avoidance of conflicts between personal
interests and interests of BISYS or its Fund clients. To this end, Covered
Persons should understand and adhere to the following ethical standards:
(a) THE DUTY AT ALL TIMES TO PLACE THE INTERESTS OF FUND
SHAREHOLDERS FIRST;
This duty requires that all Covered Persons avoid serving
their own personal interests ahead of the interests of the
shareholders of any Fund for which BISYS serves as the
administrator, distributor, transfer agent or fund accountant.
(b) THE DUTY TO ENSURE THAT ALL PERSONAL SECURITIES TRANSACTIONS
BE CONDUCTED IN A MANNER THAT IS CONSISTENT WITH THIS CODE TO
AVOID ANY ACTUAL OR POTENTIAL CONFLICT OF INTEREST OR ANY
ABUSE OF SUCH COVERED PERSON'S POSITION OF TRUST AND
RESPONSIBILITY; AND
Covered Persons should study this Code and ensure that they
understand its requirements. Covered Persons should conduct
their activities in a manner that not only achieves technical
compliance with this Code but also abides by its spirit and
principles.
(c) THE DUTY TO ENSURE THAT COVERED PERSONS DO NOT TAKE
INAPPROPRIATE ADVANTAGE OF THEIR POSITION WITH BISYS.
Covered Persons engaged in personal securities transactions
should not take inappropriate advantage of their position or
of information obtained during the course of their association
with BISYS. Covered Persons should avoid situations that might
compromise their judgment (e.g., the receipt of perquisites,
gifts of more than de minimis value or unusual investment
opportunities from persons doing or seeking to do business
with BISYS or the Funds).
A "PERSONAL SECURITIES TRANSACTION" is considered to be a
transaction in a Covered Security of which the Covered Person
is deemed to have "BENEFICIAL OWNERSHIP."2 This includes, but
is not limited to, transactions in accounts of the Covered
Person's spouse, minor children, or other relations residing
in the Covered Person's household, or accounts in which the
Covered Person has discretionary investment control.
- ----------
(2) "BENEFICIAL OWNERSHIP" of a security is defined under Rule 16a-1(a)(2) of
the Securities Exchange Act of 1934, which provides that a Covered Person should
consider himself/herself the beneficial owner of securities held by his/her
spouse, his/her minor children, a relative who shares his/her home, or other
persons, directly or indirectly, if by reason of any contract, understanding,
relationship, agreement or other arrangement, he/she obtains from such
securities benefits substantially equivalent to those of ownership. He/she
should also consider himself/herself the beneficial owner of securities if
he/she can vest or revest title in himself/herself now or in the future.
2
<PAGE> 3
IV. RESTRICTIONS AND PROCEDURES
This section is divided into two (2) parts. Part A relates to
restrictions and procedures applicable to all Covered Persons in addition to the
aforementioned Rule 17j-1(b) provisions. Part B imposes additional restrictions
and reporting requirements for those Covered Persons who are listed on Exhibit B
hereto (hereinafter referred to as "ACCESS PERSONS"3).
A. RESTRICTIONS AND PROCEDURES FOR ALL COVERED PERSONS:
--------------------------------------------------------
1. Prohibition Against Use of Material Inside Information
------------------------------------------------------
Covered Persons may have access to information about Funds
that is confidential and not available to the general public,
such as (but not limited to) information concerning securities
held in, or traded by, Fund portfolios, information concerning
certain underwritings of broker/dealers affiliated with a Fund
that may be deemed to be "MATERIAL INSIDE INFORMATION", and
information which involves a merger or acquisition that has
not been disclosed to the public.
"MATERIAL INSIDE INFORMATION" IS DEFINED AS ANY INFORMATION
ABOUT A COMPANY WHICH HAS NOT BEEN DISCLOSED TO THE GENERAL
PUBLIC AND WHICH EITHER A REASONABLE PERSON WOULD DEEM TO BE
IMPORTANT IN MAKING AN INVESTMENT DECISION OR THE
DISSEMINATION OF WHICH IS LIKELY TO IMPACT THE MARKET PRICE OF
THE COMPANY'S SECURITIES.
Covered Persons in possession of material inside information
must not trade in or recommend the purchase or sale of the
securities concerned until the information has been properly
disclosed and disseminated to the public.
2. Initial and Annual Certifications
---------------------------------
Within ten (10) days following the commencement of their
employment or otherwise becoming subject to this Code and at
least annually following the end of the calendar year, all
Covered Persons shall be required to sign and submit to the
Code Compliance Officer a written certification, in the form
of Exhibit C hereto, affirming that he/she has read and
understands this Code to which he/she is subject. In addition,
the Covered Person must certify annually that he/she has
complied with the requirements of this Code and has disclosed
and reported all personal securities
- ----------
(3) An "ACCESS PERSON" is defined under Rule 17j-1(a)(1)(ii) to include any
director, officer or general partner of a principal underwriter for a Fund who,
in the ordinary course of business, makes, participates in or OBTAINS
INFORMATION regarding the purchase or sale of securities for such Fund or whose
functions or duties in the ordinary course of business relate to the making of
any recommendation to such Fund regarding the purchase or sale of securities.
This Code has included BISYS associates that are not directors, officers or
general partners of any BISYS Fund Services company but would otherwise be
deemed Access Persons for purposes of this Code.
3
<PAGE> 4
transactions that are required to be disclosed and reported by
this Code. The Code Compliance Officer will circulate the
Annual Certifications and Holdings Reports for completion
following the end of each calendar year.
B. RESTRICTIONS AND REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS:
-------------------------------------------------------------------
Each Access Person must refrain from engaging in a PERSONAL
SECURITIES TRANSACTION when the Access Person knows, or in the
ordinary course of fulfilling his/her duties would have reason
to know, that at the time of the personal securities
transaction a Fund has a pending buy or sell order in the same
Covered Security.
1. Initial and Annual Holdings Reports
-----------------------------------
All Access Persons must file a completed Initial and Annual
Holdings Report, in the form of Exhibit D hereto, with the
Code Compliance Officer WITHIN TEN (10) DAYS OF COMMENCEMENT
OF THEIR EMPLOYMENT OR OTHERWISE BECOMING SUBJECT TO THIS CODE
AND THEREAFTER ON AN ANNUAL BASIS FOLLOWING THE END OF THE
CALENDAR YEAR IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
CODE COMPLIANCE OFFICER.
2. Transaction/New Account Reports
-------------------------------
All Access Persons must file a completed Transaction/New
Account Report, in the form of Exhibit E hereto, with the Code
Compliance Officer WITHIN TEN (10) DAYS AFTER (I) OPENING AN
ACCOUNT WITH A BROKER, DEALER OR BANK IN WHICH COVERED
SECURITIES ARE HELD; OR (II) ENTERING INTO ANY PERSONAL
SECURITIES TRANSACTION IN WHICH AN ACCESS PERSON HAS ANY
DIRECT OR INDIRECT BENEFICIAL OWNERSHIP. Personal securities
transactions are those involving any COVERED SECURITY(1) in
which the person has, or by reason of such personal securities
transaction acquires, any direct or indirect, "BENEFICIAL
OWNERSHIP."(2)
3. Confirmations and Statements
----------------------------
In order to provide BISYS with information to determine
whether the provisions of this Code are being observed, each
Access Person shall direct his/her broker, dealer or bank to
supply to the Code Compliance Officer, on a timely basis,
duplicate copies of confirmations of all personal securities
transactions and copies of monthly statements for all Covered
Securities accounts. The confirmations should match the
Transaction/New Account Reports. These confirmations and
statements should be mailed, on a confidential basis, to the
Code Compliance Officer at the following address:
4
<PAGE> 5
ATTN: Code Compliance Officer
Regulatory Services
BISYS Fund Services
3435 Stelzer Road, Suite 1000
Columbus, Ohio 43219-8001
C. REVIEW OF REPORTS AND ASSESSMENT OF CODE ADEQUACY:
------------------------------------------------------
The Code Compliance Officer shall review and maintain the
Initial and Annual Certifications, Initial and Annual Holdings
Reports and Transaction/New Account Reports (the "Reports")
with the records of BISYS. Following receipt of the Reports,
the Code Compliance Officer shall consider in accordance with
Procedures designed to prevent Access Persons from violating
this Code:
(a) whether any personal securities transaction evidences
an apparent violation of this Code; and
(b) whether any apparent violation of the reporting
requirement has occurred pursuant to Section B above.
Upon making a determination that a violation of this Code,
including its reporting requirements, has occurred, the Code
Compliance Officer shall report such violations to the General
Counsel of BISYS Fund Services who shall determine what
sanctions, if any, should be recommended to be taken by BISYS.
The Code Compliance Officer shall prepare quarterly reports to
be presented to the Fund Boards of Directors/Trustees with
respect to any material trading violations under this Code.
This Code, a copy of all Reports referenced herein, any
reports of violations, and lists of all Covered and Access
Persons required to make Reports, shall be preserved for the
period(s) required by Rule 17j-1. BISYS shall review the
adequacy of the Code and the operation of its related
Procedures at least once a year.
V. REPORTS TO FUND BOARDS OF DIRECTORS/TRUSTEES
BISYS shall submit the following reports to the Board of
Directors/Trustees for each Fund for which it serves as principal underwriter:
A. BISYS Fund Services Code of Ethics
----------------------------------
A copy of this Code shall be submitted to the Board of each
Fund no later than September 1, 2000 or for new Fund clients,
prior to BISYS commencing operations as principal underwriter,
for review and approval. Thereafter, all material changes to
this Code shall be submitted to each Board for review and
approval not later than six (6) months following the date of
implementation of such material changes.
5
<PAGE> 6
B. Annual Certification of Adequacy
--------------------------------
The Code Compliance Officer shall annually prepare a written
report to be presented to the Board of each Fund detailing the
following:
1. Any issues arising under this Code or its related
Procedures since the preceding report, including
information about material violations of this Code or
its related Procedures and sanctions imposed in
response to such material violations; and
2. A Certification to Fund Boards, in the form of
Exhibit F hereto, that BISYS has adopted Procedures
designed to be reasonably necessary to prevent Access
Persons from violating this Code.
6
<PAGE> 7
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT A
The following companies are subject to the BISYS Fund Services Code of
Ethics(1):
Barr Rosenberg Funds Distributor, Inc.
BISYS Fund Services, Inc.
BISYS Fund Services Limited Partnership
BISYS Fund Services Ohio, Inc.
BNY Hamilton Distributors, Inc.
CFD Fund Distributors, Inc.
Centura Funds Distributor, Inc.
Concord Financial Group, Inc.
Kent Funds Distributors, Inc.
Evergreen Distributor, Inc.
IBJ Funds Distributor, Inc..
Mentor Distributors, LLC
The One Group Services Company
Performance Funds Distributor, Inc.
VISTA Fund Distributors, Inc.
- ----------
(1) The companies listed on this Exhibit A may be amended from time to time, as
required.
AS OF JANUARY 11, 2000
A-1
<PAGE> 8
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT B
The following Covered Persons are considered ACCESS PERSONS under the BISYS Fund
Services Code of Ethics(1):
Client Services - all associates
CFD Fund Distributors, Inc. - all directors, officers and employees
Directors/Officers of each BISYS entity listed on Exhibit A that met the
statutory definition of Access Person under Rule17j-1
Financial Services (Fund Accounting and Financial Administration) - all
associates
Fund Administration - all associates
Information Systems - all associates
Legal Services - all paralegals and attorneys
The One Group Services Company - all directors, officers and employees
Tax Services - all associates
VISTA Fund Distributors, Inc.- all officers, directors and employees
All wholesalers and telewholesalers employed by the BISYS companies listed on
Exhibit A
- ----------
(1) The Access Persons listed on this Exhibit B may be amended from time to
time, as required.
AS OF JANUARY 11, 2000
B-1
<PAGE> 9
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT C
INITIAL AND ANNUAL CERTIFICATIONS
I hereby certify that I have read and thoroughly understand and agree
to abide by the conditions set forth in the BISYS Fund Services Code of Ethics.
I further certify that, during the time of my affiliation with BISYS, I will
comply or have complied with the requirements of this Code and will
disclose/report or have disclosed/reported all personal securities transactions
required to be disclosed/reported by the Code.
If I am deemed to be an Access Person under this Code, I certify that I
will comply or have complied with the Transaction/New Account Report
requirements as detailed in the Code and submit herewith my Initial and Annual
Holdings Report. I further certify that I will direct or have directed each
broker, dealer or bank with whom I have an account or accounts to send to the
BISYS Code Compliance Officer duplicate copies of all confirmations and
statements relating to my account(s).
- --------------------------------
Print or Type Name
- ---------------------------------
Signature
- ---------------------------------
Date
C-1
<PAGE> 10
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT D
INITIAL AND ANNUAL HOLDINGS REPORT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF ACCOUNT NUMBER(S) IF NEW ACCOUNT,
BROKER, DEALER OR BANK(S) DATE ESTABLISHED
<S> <C> <C>
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
- -------------------------------------- ------------------ ------------------
</TABLE>
ATTACHED ARE THE COVERED SECURITIES BENEFICIALLY OWNED BY ME AS OF THE DATE OF
THIS INITIAL AND ANNUAL HOLDINGS REPORT.
- ---------------------------------
Print or Type Name
- ---------------------------------
Signature
- ---------------------------------
Date
D-1
<PAGE> 11
SECURITY NUMBER OF PRINCIPAL AMOUNT
DESCRIPTION COVERED
(SYMBOL/CUSIP) SECURITIES/
SHARES HELD
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
D-2
<PAGE> 12
BISYS FUND SERVICES CODE OF ETHICS -TRANSACTION/NEW ACCOUNT REPORT
EXHIBIT E
I hereby certify that the Covered Securities described below (or
attached hereto in the annual statement from my broker, dealer or bank) were
purchased or sold on the date(s) indicated. Such Covered Securities were
purchased or sold in reliance upon public information lawfully obtained by me
through independent research. I have also listed below the account number(s) for
any new account(s) opened in which Covered Securities are held. My decision to
enter into any personal securities transaction(s) was not based upon information
obtained as a result of my affiliation with BISYS.
<TABLE>
COVERED SECURITIES PURCHASED/ACQUIRED OR SOLD/DISPOSED
<CAPTION>
Security Trade Number of Per Share Principal Interest Maturity Name of Broker, Dealer
Description Date Shares Price Amount Rate Rate or Bank (and Account Number Bought (B) or
(Symbol/CUSIP) (If Applicable) (If Applicable) and Date Established, If New) Sold (S)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
- -------- ----- ------- ------ -------- ------- -------- ------------------ --------------
</TABLE>
This Transaction/New Account Report is not an admission that you have
or had any direct or indirect beneficial ownership in the Covered Securities
listed above.
- --------------------------------
Print or Type Name
- -------------------------------- --------------------------------
Signature Date
E-1
<PAGE> 13
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT F
CERTIFICATION TO FUND BOARDS
BISYS Fund Services ("BISYS") requires that all directors, officers and
associates of BISYS ("Covered Persons") certify that they have read and
thoroughly understand and agree to abide by the conditions set forth in the
BISYS Code of Ethics (the "Code"). If such Covered Persons are deemed to be
Access Persons under the Code, they are required to submit Initial and Annual
Holdings Reports, as well as Transaction/New Account Reports, to the Code
Compliance Officer, listing all personal securities transactions in Covered
Securities for all such accounts in which the Access Person has any direct or
indirect beneficial interest within ten (10) days of entering into any such
transactions. Access Persons must direct their broker, dealer or bank(s) to send
duplicate trade confirmations and statements of all such personal securities
transactions directly to the Code Compliance Officer who compares them to the
required Transaction/New Account Reports. Additionally, the Code Compliance
Officer undertakes a quarterly review of all Access Person's personal securities
transactions against the Fund's Investment Adviser for all such Funds that BISYS
serves as principal underwriter.
The undersigned hereby certifies that BISYS has adopted Procedures designed to
be reasonably necessary to prevent Access Persons from violating BISYS' Code and
the required provisions of Rule 17j-1 under the Investment Company Act of 1940,
as amended.
- -------------------------------- ------------------
Kathleen McGinnis Date
Code Compliance Officer
BISYS Fund Services
F-1
