-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S/jsg9CNB1r+hqHq6SX9AQ4TTHp15jSITvxOCDsd31orqCdWrUQBF3bFf4jX+Lrv 4vWtfhpDhICQpAePiSouGQ== 0000749748-05-000013.txt : 20050729 0000749748-05-000013.hdr.sgml : 20050729 20050729091158 ACCESSION NUMBER: 0000749748-05-000013 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20050729 DATE AS OF CHANGE: 20050729 EFFECTIVENESS DATE: 20050731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASH ASSETS TRUST CENTRAL INDEX KEY: 0000749748 IRS NUMBER: 136844974 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-92164 FILM NUMBER: 05982872 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 380 MADISON AVENUE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASH ASSETS TRUST CENTRAL INDEX KEY: 0000749748 IRS NUMBER: 136844974 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04066 FILM NUMBER: 05982873 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 380 MADISON AVENUE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 485BPOS 1 pcatb05.txt N-1A PARTS A, B AND C Registration Nos. 2-92164 and 811-4066 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ] Pre-Effective Amendment No. _______ [ ] Post-Effective Amendment No. 30 [ X ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ] Amendment No. 29 [ X ] CASH ASSETS TRUST (Exact Name of Registrant as Specified in Charter) 380 Madison Avenue, Suite 2300 New York, New York 10017 (Address of Principal Executive Offices) (212) 697-6666 (Registrant's Telephone Number) EDWARD M.W. HINES Hollyer Brady Barrett & Hines LLP 551 Fifth Avenue, 27th Floor New York, New York 10176 (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box): [___] immediately upon filing pursuant to paragraph (b) [_X_] on July 31, 2005 pursuant to paragraph (b) [___] 60 days after filing pursuant to paragraph(a)(i) [___] on (date) pursuant to paragraph (a)(i) [___] 75 days after filing pursuant to paragraph (a)(ii) [___] on (date) pursuant to paragraph (a)(ii) of Rule 485. [___] This post-effective amendment designates a new effective date for a previous post-effective amendment. The Pacific Capital Funds of Cash Assets Trust 380 Madison Avenue, Suite 2300 New York, NY 10017 800-CATS-4-YOU (800-228-7496) 212-697-6666 Original Shares Prospectus July 31, 2005 Cash Assets Trust consists of three separate portfolios: Pacific Capital Cash Assets Trust (the "Cash Fund") is a general purpose money-market mutual fund which invests in short-term "money-market" securities. Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free Fund") is a tax-exempt money-market mutual fund which invests in short-term tax-exempt "money-market" securities. Pacific Capital U.S. Government Securities Cash Assets Trust (the "Government Securities Fund") is a money-market mutual fund which invests in short-term direct obligations of the United States Treasury, in other obligations issued or guaranteed by agencies or instrumentalities of the United States Government and in certain repurchase agreements secured by U.S. government securities. The Cash Fund, the Tax-Free Fund and the Government Securities Fund are collectively referred to as the "Funds." For purchase, redemption or account inquiries contact the Funds' Shareholder Servicing Agent: PFPC Inc. 760 Moore Road King of Prussia, PA 19406-1212 800-255-2287 toll free For general inquiries & yield information 800-228-7496 toll free or 212-697-6666 The Securities and Exchange Commission has not approved or disapproved the Trust's securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS The Cash Fund: Objective, Investment Strategies, Main Risks................................... Risk/Return Bar Chart and Performance Table ..... Fees and Expenses of the Fund.................... The Tax-Free Fund: Objective, Investment Strategies, Main Risks.......................... Risk/Return Bar Chart and Performance Table ..... Fees and Expenses of the Fund.................... The Government Securities Fund: Objective, Investment Strategies, Main Risks............................................... Risk/Return Bar Chart and Performance Table ..... Fees and Expenses of the Fund.................... Management of the Funds................................... Net Asset Value per Share................................. Purchases ................................................ Redeeming Your Investment................................. Distribution Arrangements................................. Dividends................................................. Tax Information........................................... Financial Highlights...................................... The Cash Fund: Objective, Investment Strategies, Main Risks "What is the Cash Fund's objective?" The objective of the Cash Fund, which is a fundamental policy, is to achieve a high level of current income, stability and liquidity for investors' cash assets by investing in a diversified portfolio of short-term "money-market" securities meeting specific quality standards. "What are the Cash Fund's investment strategies?" The Cash Fund seeks to attain this objective by investing in short-term money-market securities denominated in U.S. dollars that are of high quality and present minimal credit risks. Under the current management policies, the Cash Fund invests only in the following types of obligations: (1) Obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. (2) Bank obligations and instruments secured by them. ("Banks" include commercial banks, savings banks and savings and loan associations and include foreign banks and foreign branches of United States banks.) (3) Short-term corporate debt known as "commercial paper." (4) Corporate debt obligations (for example, bonds and debentures). Debentures are a form of unsecured corporate debt. (5) Variable amount master demand notes which are repayable on not more than 30 days' notice. (6) Repurchase agreements. (7) Shares of investment companies with money-market portfolios. The Cash Fund seeks to maintain a net asset value of $1.00 per share. In general, not more than 5% of the Cash Fund's net assets can be invested in the securities of any issuer. The dollar weighted average maturity of the Cash Fund will be 90 days or less and the Cash Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Cash Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the nationally recognized statistical rating organizations ("NRSROs") or, if unrated, they must be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. Asset Management Group of Bank of Hawaii (the "Adviser") seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Cash Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Cash Fund?" Although the Cash Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Cash Fund. Investment in the Cash Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that they will be traded, and there is no secondary market for them. Variable amount master demand notes repayable in more than seven days are securities which are not readily marketable, and fall within the Cash Fund's overall 10% limitation on securities which are illiquid. These notes are also subject to credit risk. Repurchase agreements involve some risk to the Cash Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. Corporate bonds and debentures are subject to interest rate and credit risks. There are two types of risk associated with the Cash Fund: interest rate risk and credit risk. *Interest rate risk relates to fluctuations in market value arising from changes in interest rates. If interest rates rise, the value of debt securities will normally decline. All fixed-rate debt securities, even the most highly rated, are subject to interest rate risk. *Credit risk relates to the ability of the particular issuers of the obligations the Cash Fund owns to make periodic interest payments as scheduled and ultimately repay principal at maturity. Investments in foreign banks and foreign branches of United States banks involve certain risks. Foreign banks and foreign branches of domestic banks may not be subject to regulations that meet U.S. standards. Investments in foreign banks and foreign branches of domestic banks may also be subject to other risks, including future political and economic developments, the possible imposition of withholding taxes on interest income, the seizure or nationalization of foreign deposits and the establishment of exchange controls or other restrictions. Cash Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in the Cash Fund's Original Shares by showing changes in the performance of the Cash Fund's Original Shares from year to year over a 10-year period and by showing the Cash Fund's average annual returns for the designated periods. How the Cash Fund has performed in the past is not necessarily an indication of how the Cash Fund will perform in the future. [Bar Chart] Annual Total Returns (Original Shares) 1995-2004 10% 8% 5.96 6% 5.45 5.09 5.06 XXXX XXXX 4.88 XXXX XXXX 4.64 XXXX 4% XXXX XXXX XXXX XXXX XXXX XXXX 3.48 XXXX XXXX XXXX XXXX XXXX XXXX XXXX 2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.42 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 0.95 1.10 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 10-year period shown in the bar chart, the highest return for a quarter was 1.54% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.22% (quarter ended September 30, 2003). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 1.09% Average Annual Total Return For the period ended 1 Year 5 Years 10 Years December 31, 2004 Pacific Capital Cash 1.10% 2.56% 3.79% Assets Trust - Original Shares Please call (800) 228-7496 toll free to obtain the Cash Fund's most current seven-day yield. Cash Fund Fees and Expenses of the Fund (Original Shares) This table describes the fees and expenses that you may pay if you buy and hold Original Shares of the Cash Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases.........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends......................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Cash Fund's assets) Investment Advisory Fee.......................0.36% Distribution and/or Service (12b-1) Fee.......0.00% All Other Expenses: Administration Fee....................0.14% Other Expenses........................0.07% Total All Other Expenses.....................0.21% Total Annual Fund Operating Expenses..........0.57% Example This Example is intended to help you compare the cost of investing in Original Shares of the Cash Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Original Shares of the Cash Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Cash Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $58 $183 $318 $714 The Tax-Free Fund: Objective, Investment Strategies, Main Risks "What is the Tax-Free Fund's objective?" The objective of the Tax-Free Fund, which is a fundamental policy, is to provide safety of principal while achieving as high a level as possible of liquidity and of current income exempt from Federal and Hawaii income taxes. "What are the Tax-Free Fund's investment strategies?" The Tax-Free Fund seeks to attain this objective by investing in municipal obligations of Hawaiian issuers to the extent that obligations of the desired quality, maturity and interest rate are available; otherwise by investing in similar obligations of non-Hawaii issuers. These obligations must have remaining maturities not exceeding 397 days, must be of high quality and must present minimal credit risks. At least 80% of the Tax-Free Fund's assets must be invested in tax-exempt obligations. Under the current management policies, the Tax-Free Fund invests only in the following types of obligations: Municipal Obligations As used in this Prospectus, the term "Municipal Obligations" means obligations with maturities of 397 days or less paying interest which, in the opinion of bond counsel or other appropriate counsel, is exempt from regular Federal income taxes. "Hawaiian Obligations" are Municipal Obligations, including those of Guam, the Northern Mariana Islands, Puerto Rico and the Virgin Islands, paying interest which, in the opinion of bond counsel or other appropriate counsel, is also exempt from Hawaii state income taxes. Although the portion of dividends of the Tax-Free Fund paid from interest on Hawaiian Obligations will be free of Hawaii state income tax, that paid from interest on other Municipal Obligations will not. Since it is not possible to predict the extent to which suitable Hawaiian Obligations will be available for investment, the Tax-Free Fund has no investment restriction limiting the proportion of its portfolio which it may invest in other Municipal Obligations. Although exempt from regular Federal income tax, interest paid on certain types of Municipal Obligations, and dividends which the Tax-Free Fund might pay from this interest, are preference items as to the Federal alternative minimum tax. As a fundamental policy, at least 80% of the Tax-Free Fund's net assets will be invested in Municipal Obligations the income paid upon which will not be subject to the alternative minimum tax; accordingly, the Tax-Free Fund can invest the rest of its assets in obligations which are subject to the Federal alternative minimum tax. The Tax-Free Fund may refrain entirely from purchasing these types of Municipal Obligations. Municipal Obligations are debt obligations issued by or on behalf of states, cities, municipalities and other public authorities. Such obligations include: Municipal Bonds Municipal bonds generally have a maturity at the time of issuance of up to 30 years. The Tax-Free Fund can purchase only those with a remaining maturity of 13 months or less. Municipal Notes Municipal notes generally have maturities at the time of issuance of three years or less. These notes are generally issued in anticipation of the receipt of tax funds, of the proceeds of bond placements or of other revenues. The ability of an issuer to make payments is therefore dependent on these tax receipts, proceeds from bond sales or other revenues, as the case may be. Municipal Commercial Paper Municipal commercial paper is a debt obligation with a stated maturity of 397 days or less that is issued to finance seasonal working capital needs or as short-term financing in anticipation of longer-term debt. Concentration From time to time the Tax-Free Fund may invest 25% or more of its assets in Municipal Obligations that are related in such a way that an economic, business or political development or change affecting one of these obligations would also affect the other obligations, for example, Municipal Obligations the interest on which is paid from revenues of similar type projects or Municipal Obligations whose issuers are located in the same state. Other Investment Strategies The Tax-Free Fund may purchase shares of investment companies with money-market portfolios consisting only of Municipal Obligations. The Tax-Free Fund seeks to maintain a net asset value of $1.00 per share. The dollar weighted average maturity of the Tax-Free Fund will be 90 days or less and the Tax-Free Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Tax-Free Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the NRSROs or, if they are unrated, be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. The Adviser seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Tax-Free Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Tax-Free Fund?" Although the Tax-Free Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Tax-Free Fund. Hawaiian Obligations The Tax-Free Fund's assets, being primarily Hawaiian issues, are subject to economic and other conditions affecting Hawaii. Adverse local events, such as a downturn in the Hawaiian economy, could affect the value of the Tax-Free Fund's portfolio. The following is a discussion of the general factors that might influence the ability of Hawaiian issuers to repay principal and interest when due on Hawaiian Obligations. This information is derived from sources that are generally available to investors, is believed to be accurate, but has not been independently verified and may not be complete. Economic conditions are subject to change and there can be no assurance that the following information will not change. The Hawaii economic data through the end of the Fund's fiscal year on March 31, 2005, continued to show record levels of performance. Inflation numbers, meanwhile, remained surprisingly low despite the high energy costs and an acceleration in median home price increases. Most forecasts also hold to a more optimistic, less inflationary outlook in 2005. Hawaii tourism opened 2005 in strong position. Total visitor arrivals and total visitor days are running well ahead of year-earlier numbers. The expectation for the full year is for another record year following the historical highs achieved in 2004. Airline inbound lift capability has been meaningfully expanded with an increase in scheduled seats to enhance growth during the seasonally-important summer months. Unemployment statewide declined to a very low 2.8 percent of the labor force, seasonally-adjusted. Unemployment rates on Maui and Oahu essentially matched the state average, with Kauai and Hawaii island unemployment rates only a little higher. Indeed, most forecasts for Hawaii embody some version of increasingly binding labor supply constraints in the 2005-2006 time frame. While the rise in home prices through the 1st half of 2005 has been stunning, it has been matched by the surprising strength in sales volumes at these high prices. The corresponding growth in residential production sustains the continuing improvements in the construction forecast. The strength of the Hawaii economy has led to favorable rating changes for the State from the national rating agencies. Moody's recently upgraded the State of Hawaii rating to Aa2 from Aa3. S&P and Fitch both maintain AA- ratings for the State of Hawaii; however S&P recently improved its "outlook" for the State to Positive. For the past year, U.S. interest rates responded to the Federal Reserve's monetary operations to begin raising rates and removing policy accommodation at a "measured pace." A year ago the Fed Funds rate was at 1.00%, however, by June of 2005, the Federal Reserve had hiked the Fed Funds rate in nine steps of one-quarter of 1% at each step to raise the overnight rate to 3.25%. The impact of raising rates was felt most strongly in the short and intermediate portions of the yield curve, while the long end of the yield curve actually remained the same or even declined somewhat. The effect on the shape of the curve was a severe "flattening" where the difference between short and long rates narrowed significantly. Meanwhile, Federal Reserve statements suggest that they are still concerned about "imbalances" such as a record current account deficit, soaring home prices and low U.S. savings. Despite record oil prices, inflation remains tame and the U. S. economy continues to expand at a strong clip. The continuing economic expansion leads market participants to expect the Federal Reserve to remain on its stance to increase the overnight rate. With long term interest rates remaining at very low levels even as the Federal Reserve has been raising short-term rates, State and local governments continued to take advantage of this rate environment to refinance and restructure older, more expensive debt. New issuance volume for municipal securities is maintaining a strong pace. The data show that tax-exempt bond issuance for the first half of 2005 hit an all-time record with the expectation that issuance volume will remain strong if rates stay favorable. Other Main Risks Investment in the Tax-Free Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Tax-Free Fund's right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Tax-Free Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument to make payment when due, except when such demand instrument permits same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Tax-Free Fund's custodian subject to a sub-custodial agreement approved by the Tax-Free Fund between that bank and the Tax-Free Fund's custodian. Such obligations are also subject to credit risk. Repurchase agreements involve some risk to the Tax-Free Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. The taxable market is a broader and more liquid market with a greater number of investors, issuers and market makers than the market for Municipal Obligations. The more limited marketability of Municipal Obligations may make it difficult in certain circumstances to dispose of large investments advantageously. In general, Municipal Obligations are also subject to credit risks such as the loss of credit ratings or possible default. In addition, certain Municipal Obligations might lose tax-exempt status in the event of a change in the tax laws. Tax-Free Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in the Tax-Free Fund's Original Shares by showing changes in the performance of the Tax-Free Fund's Original Shares from year to year over a 10-year period and by showing the Tax-Free Fund's average annual returns for the designated periods. How the Tax-Free Fund has performed in the past is not necessarily an indication of how the Tax-Free Fund will perform in the future. [Bar Chart] Annual Total Returns (Original Shares) 1995-2004 10% 8% 6% 4% 3.46 3.01 3.08 3.00 3.64 XXXX XXXX XXXX XXXX 2.79 XXXX 2.46 2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.19 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 0.88 0.99 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 10-year period shown in the bar chart, the highest return for a quarter was 0.95% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.19% (quarter ended September 30, 2003). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 0.87%. Average Annual Total Return For the period ended 1 Year 5 Years 10 Years December 31, 2004 Pacific Capital Tax- 0.99% 1.83 2.45 Free Cash Assets Trust - Original Shares Please call (800) 228-7496 toll free to obtain the Tax-Free Fund's most current seven-day yield. Tax-Free Fund Fees and Expenses of the Fund (Original Shares) This table describes the fees and expenses that you may pay if you buy and hold Original Shares of the Tax-Free Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends......................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Tax-Free Fund's assets) Investment Advisory Fee........................0.30% Distribution and/or Service (12b-1) Fee........0.00% Other: Administration Fee......................0.10% Other Expenses..........................0.09% Total.........................................0.19% Total Annual Fund Operating Expenses. .........0.49% Example This Example is intended to help you compare the cost of investing in Original Shares of the Tax-Free Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Original Shares of the Tax-Free Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Tax-Free Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $50 $157 $274 $616 The Government Securities Fund: Objective, Investment Strategies, Main Risks "What is the Government Securities Fund's objective?" The objective of the Government Securities Fund, which is a fundamental policy, is to provide safety of principal while achieving as high a level as possible of liquidity and of current income. "What are the Government Securities Fund's investment strategies?" The Government Securities Fund seeks to attain this objective by investing only in short-term direct obligations of the United States Treasury, in other obligations issued or guaranteed by agencies or instrumentalities of the United States Government (with remaining maturities of one year or less), in shares of investment companies with money-market portfolios which invest only in U.S. government securities and in certain repurchase agreements secured by U.S. government securities. Under the current management policies, the Government Securities Fund invests only in the following types of obligations: U. S. Treasury Obligations The U.S. Treasury issues various types of marketable securities, consisting of bills, notes, bonds, and certificates of indebtedness, which are all direct obligations of the U.S. government backed by its "full faith and credit" and which differ primarily in the length of their maturity. The Fund may also invest in separately traded principal and interest components of securities issued by the United States Treasury. The principal and interest components of selected securities are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Under the STRIPS program, the principal and interest components are individually numbered and separately issued by the U.S. Treasury at the request of depository financial institutions, which then trade the component parts independently. These instruments may experience more market volatility than regular treasury securities. Other U.S. Government Securities U.S. government agencies and instrumentalities that issue or guarantee securities include, but are not limited to, the Farmers Home Administration, Federal Farm Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing Administration, Federal National Mortgage Association, Financing Corporation, Government National Mortgage Association, Resolution Funding Corporation, Small Business Administration, Student Loan Marketing Association and the Tennessee Valley Authority. Securities issued or guaranteed by U.S. government agencies and instrumentalities are not always supported by the full faith and credit of the United States. Some, such as securities issued by the Federal Home Loan Banks, are backed by the right of the agency or instrumentality to borrow from the U.S. Treasury. Others, such as securities issued by the Federal National Mortgage Association, are supported only by the credit of the instrumentality and not by the U.S. Treasury. If the securities are not backed by the full faith and credit of the United States, the owner of the securities must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment. The Government Securities Fund will invest in government securities, including securities of agencies and instrumentalities, only if the Adviser (pursuant to procedures approved by the Board of Trustees) is satisfied that these obligations present minimal credit risks. Investment Companies The Government Securities Fund may purchase shares of investment companies with money-market portfolios consisting only of U.S. Government securities. Repurchase Agreements The Government Securities Fund may purchase securities subject to repurchase agreements provided that such securities are U.S. government securities. Repurchase agreements may be entered into only with commercial banks or broker/dealers. Subject to the control of the Board of Trustees, the Adviser will regularly review the financial strength of all parties to repurchase agreements with the Government Securities Fund. The Government Securities Fund seeks to maintain a net asset value of $1.00 per share. The dollar weighted average maturity of the Government Securities Fund will be 90 days or less and the Government Securities Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Government Securities Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the NRSROs or, if they are unrated, be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. The Adviser seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Government Securities Fund will purchase only those issues that it believes will enable it to achieve and maintain the highest rating for a mutual fund by two NRSROs. There is no assurance that it will be able to maintain such rating. As a result of this policy, the range of obligations in which the Government Securities Fund can invest is reduced and the yield obtained on such obligations may be less than would be the case if this policy were not in force. The Government Securities Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Government Securities Fund?" Although the Government Securities Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Government Securities Fund. Investment in the Government Securities Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Repurchase agreements involve some risk to the Government Securities Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. Government Securities Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in The Government Securities Fund's Original Shares by showing changes in the performance of the Government Securities Fund's Original Shares from year to year over a 10-year period and by showing the Government Securities Fund's average annual returns for the designated periods. How the Government Securities Fund has performed in the past is not necessarily an indication of how the Government Securities Fund will perform in the future. [Bar Chart] Annual Total Returns (Original Shares) 1995-2004 10% 8% 6% 5.90 5.29 4.79 4.89 4.96 4.58 XXXX 4% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 3.69 2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.43 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.00 1.16 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 10-year period shown in the bar chart, the highest return for a quarter was 1.52% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.23% (quarter ended June 30, 2004). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 1.10 Average Annual Total Return 1 Year 5 Years 10 Years For the period ended 1.16 2.62 3.75 December 31, 2004 Pacific Capital U.S. Government Securities Cash Assets Trust - Original Shares Please call (800) 228-7496 toll free to obtain the Government Securities Fund's most current seven-day yield. Government Securities Fund Fees and Expenses of the Fund (Original Shares) This table describes the fees and expenses that you may pay if you buy and hold Original Shares of the Government Securities Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases.........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends......................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Government Securities Fund's assets) Investment Advisory Fee........................0.33% Distribution and/or Service (12b-1) Fee........0.00% Other: Administration Fee.....................0.07% Other Expenses.........................0.05% Total.........................................0.12% Total Annual Fund Operating Expenses. .........0.45% Example This Example is intended to help you compare the cost of investing in Original Shares of the Government Securities Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Original Shares of the Government Securities Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Government Securities Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $46 $144 $252 $567 Management of the Funds "How are the Funds managed?" Asset Management Group of Bank of Hawaii, Financial Plaza of the Pacific, P.O. Box 3170, Honolulu, HI 96802, the Adviser, is the investment adviser for each of the Funds. Aquila Investment Management LLC, 380 Madison Avenue, Suite 2300, New York, NY 10017, the Administrator, is responsible for administrative services, including providing for the maintenance of the headquarters of the Funds, overseeing relationships between the Funds and the service providers to the Funds, maintaining the Funds' books and records and providing other administrative services. Under the Advisory Agreements, the Adviser provides for investment supervision, including supervising continuously the investment program of each Fund and the composition of its portfolio; determining what securities will be purchased or sold by each Fund; arranging for the purchase and the sale of securities held in the portfolio of each Fund; and, at the Adviser's expense, providing for pricing of each Fund's portfolio daily. Under the Advisory Agreements, during the fiscal year ended March 31, 2005, each Fund would have paid a fee payable monthly and computed on the net asset value of the Fund as of the close of business each business day, except that an expense cap included in each Advisory Agreement reduced the amounts payable below the stated rates. Because of the expense cap, the advisory fees actually paid by the Funds, stated as a percentage of average daily net assets, were: Cash Fund - 0.22%; Tax-Free Fund - 0.14%; Government Securities Fund - 0.18%. Since the Administrator also received a fee from each of the Funds under the applicable Administration Agreement that was also reduced in each case below the applicable stated rate by an expense cap, the administration fees actually paid by the Funds were: Cash Fund - 0.08%; Tax-Free Fund - 0.05%; Government Securities Fund - 0.04%. Information about the Adviser and the Administrator The Adviser is a division of Bank of Hawaii, all of whose shares are owned by Bank of Hawaii Corporation ("BOH Corp."). BOH Corp. is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and its common stock is registered under the Securities Exchange Act of 1934 and is listed and traded on the New York Stock Exchange. BOH Corp. files annual and periodic reports with the Securities and Exchange Commission which are available for public inspection. The Funds' Administrator is a wholly-owned subsidiary of Aquila Management Corporation ("AMC"), founder of each Fund in the Aquilasm Group of Funds, which consists of tax-free municipal bond funds, money-market funds and an equity fund. As of June 30, 2005, these funds had aggregate assets of approximately $4.3 billion, of which approximately $1.8 billion consisted of assets of the money-market funds. AMC's address is the same as that of the Administrator. AMC, which was founded in 1984, is controlled by Mr. Lacy B. Herrmann, directly, through two trusts and through share ownership by his wife. Net Asset Value per Share The net asset value of the shares of each of the Funds' classes of shares is determined as of 4:00 p.m., New York time, on each day that the New York Stock Exchange and the Custodian are open (a "business day"), by dividing the value of the Fund's net assets allocable to the class (which means the value of the assets less liabilities) by the total number of shares of such class outstanding at the time. The price at which a purchase or redemption of shares is effected is based on the net asset value next calculated after your purchase or redemption order is received in proper form. The net asset value per share will normally remain constant at $1.00 per share except under extraordinary circumstances. The net asset value per share is based on a valuation of the Fund's investments at amortized cost. The New York Stock Exchange annually announces the days on which it will not be open. The most recent announcement indicates that it will not be open on the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However, the Exchange may close on days not included in that announcement. In addition, the Custodian is not open on Columbus Day and Veterans Day. Purchases Opening an Account To open a new Original Shares account, you must send a properly completed New Account Application to PFPC Inc. (the "Agent"). The Funds will not honor redemption of shares purchased by wire payment until a properly completed New Account Application has been received by the Agent. The minimum initial investment is $1,000. Subsequent investments may be in any amount. Original Shares are offered solely to (1) financial institutions for the investment of funds for their own account or acting for investors in a fiduciary, agency, investment advisory or custodial capacity; (2) persons entitled to exchange into Original Shares under the exchange privileges of the Funds; (3) Trustees and officers of funds in the Aquilasm Group of Funds; (4) officers and employees of the Adviser, Administrator and the Distributor, Aquila Distributors, Inc., and (5) shareholders owning shares of any of the Funds of record on January 20, 1995, the date on which the Funds first offered two classes of shares. You can make direct investments in Original Shares in any of these three ways: 1. By Mail. You can make payment by check, money order, Federal Reserve draft or other negotiable bank draft drawn in United States dollars on a United States commercial or savings bank or credit union (each of which is a "Financial Institution") payable to the order of Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust or Pacific Capital U.S. Government Securities Cash Assets Trust, as the case may be, and mailed to: (Specify the name of the Fund) Regular Mail Address: PFPC Inc. c/o Aquilasm Group of Funds P.O. Box 9823 Providence, RI 02940-8023 Overnight Mail Address: PFPC Inc. c/o Aquilasm Group of Funds 101 Sabin Street Pawtucket, RI 02860-1247 2. By Wire. You can wire Federal Funds (monies credited to a bank's account with a Federal Reserve Bank) to PNC Bank, NA. To insure prompt and proper crediting to your account, if you choose this method of payment, you should first telephone the Agent (800-255-2287 toll free) and then instruct your bank to wire funds to: PNC BANK, NA Philadelphia, PA ABA No. 0310-0005-3 Account No. 85-0242-8425 Your bank's wire instructions should indicate the appropriate Fund as follows: the Cash Fund: FFC: Pacific Capital Cash Assets Trust - Original Shares the Tax-Free Fund: FFC: Pacific Capital Tax-Free Cash Assets Trust - Original Shares the Government Securities Fund: FFC: Pacific Capital U.S. Government Securities Cash Assets Trust - Original Shares In addition you should supply: * Account name and number (if an existing account). * The name in which the investment is to be registered (if a new account). Your bank may impose a charge for wiring funds. 3. Through Brokers. If you wish, you may invest in the Funds by purchasing shares through registered broker/dealers. The Funds impose no sales or service charge, although broker/dealers may make reasonable charges to their customers for their services. The services to be provided and the fees therefor are established by each broker/dealer acting independently; broker/dealers may establish, as to accounts serviced by them, higher initial or subsequent investment requirements than those required by the Funds. Broker/dealers are responsible for prompt transmission of orders placed through them.
Opening An Account Adding to an Account *Make out a check for the investment amount payable to the *Make out a check for the investment amount payable to appropriate Fund. the appropriate Fund. *Complete a New Account Application, which is available *Fill out the pre-printed stub attached to each Fund's with the Prospectus or upon request, indicating the confirmations or supply the name(s) of account features you wish to authorize. owner(s), the account number and the name of the Fund. *Send your check and account information to your dealer *Send your check and completed New Account Application to or to the Funds' Agent, PFPC Inc., or your dealer or to the Funds' Agent, PFPC Inc., or *Wire funds as described above. *Wire funds as described above. Be sure to supply the name(s) of account owner(s), the account number and the name of the Fund.
"Can I transfer funds electronically?" You can have funds transferred electronically, in amounts of $50 or more, from your Financial Institution if it is a member of the Automated Clearing House. You may make investments through two electronic transfer features, "Automatic Investment" and "Telephone Investment." * Automatic Investment: You can authorize a pre-determined amount to be regularly transferred from your account. * Telephone Investment: You can make single investments of up to $50,000 by telephone instructions to the Agent. Before you can transfer funds electronically, the Funds' Agent must have your completed New Account Application authorizing these features. If you initially decide not to choose these conveniences and then later wish to do so, you must complete a Ready Access Features Form which is available from the Distributor or Agent, or if your account is set up so that your broker or dealer makes these sorts of changes, request your broker or dealer to make them. The Funds may modify or terminate these investment methods or charge a service fee, upon 30 days' written notice to shareholders. "When are shares issued and dividends declared on them?" The Funds issue shares two ways. First Method - ordinary investments. You will be paid dividends starting on the day (whether or not a Business Day) after the first Business Day on which your purchase order has been received in proper form and funds have become available for investment. You will be paid a dividend on the day on which your shares are redeemed. "When will my order become effective under the First Method?" The Funds must have payment for your purchase available for investment before 4:00 p.m. New York time on a Business Day for your order to be effective on that Business Day. Your order is effective and you will receive the next determined net asset value per share depending on the method of payment you choose, as follows:
When will an order received before When will an order received after 4:00 p.m. on a Business Day be 4:00 p.m. on a Business Day be Payment Method. deemed effective? deemed effective? By wire in Federal Funds or Federal That day. Next Business Day. Reserve Draft. By wire not in Federal Funds. 4:00 p.m. on the Business Day 4:00 p.m. on the Business Day converted to Federal Funds (normally converted to Federal Funds (normally the next Business Day). the next Business Day). By Check. 4:00 p.m. on the Business Day 4:00 p.m. on the Business Day converted to Federal Funds (normally converted to Federal Funds (normally two Business Days for checks on two Business Days for checks on banks in the Federal Reserve System, banks in the Federal Reserve System, longer for other banks). longer for other banks). Automatic Investment. The day you specify; if it is not a Business Day, on the next Business Day. Telephone Investment. That day. Next Business Day.
All checks are accepted subject to collection at full face value in United States funds and must be drawn in United States dollars on a United States bank; if not, shares will not be issued. (The Agent will convert wires and checks to Federal Funds as your agent.) Second Method - For broker/dealers or banks which have requested that this method be used, to which request a Fund has consented. You will be paid dividends starting on the day on which your purchase order has been received in proper form and funds have become available for investment. You will not be paid a dividend on the day on which your shares are redeemed. "When will my order be effective under the Second Method?" Your purchase order is effective and your funds are deemed available for investment on that day if (i) You advise the Agent before 3:30 p.m. New York time on a Business Day of a dollar amount to be invested in the Cash Fund or Government Securities Fund and prior to noon of a dollar amount to be invested in the Tax-Free Fund; and (ii) Your payment in Federal Funds is received by wire on that day. The second investment method is available to prospective investors in shares of a Fund who wish to use it so that the dividends on their shares will commence to be declared on the day the purchase order is effective. Upon written or phone request the Funds will advise you as to the broker/dealers or banks through which such purchases may be made. The Agent will maintain records as to which of your shares were purchased under each of the two investment methods set forth above. If you make a redemption request and have purchased shares under both methods, the Agent will, unless you request otherwise, redeem those shares first purchased, regardless of the method under which they were purchased. Under each method, shares are issued at the net asset value per share next determined after the purchase order is received in proper form. Under each method, the New Account Application must be properly completed and have been received and accepted by the Agent; the Funds or the Distributor may also reject any purchase order. Under each method, Federal Funds (see above) must either be available to the Funds or the payment thereof must be guaranteed to the Funds so that the Funds can be as fully invested as practicable. Transfer on Death ("TOD") Registration The Funds generally permit "transfer on death" ("TOD") registration of shares purchased directly, so that on the death of the shareholder the shares are transferred to a designated beneficiary or beneficiaries. Ask the Agent or your broker/dealer for the Transfer on Death Registration Request Form. With it you will receive a copy of the TOD Rules of the Aquilasm Group of Funds, which specify how the registration becomes effective and operates. By opening a TOD Account, you agree to be bound by the TOD Rules. Redeeming Your Investment You may redeem some or all of your shares by a request to the Agent. Shares will be redeemed at the next net asset value determined after your request has been received in proper form. There is no minimum period for investment in the Funds, except for shares recently purchased by check or by Automatic or Telephone Investment as discussed below. If you purchased Original Shares of any Fund through broker/dealers, banks and other financial institutions which serve as shareholders of record you must redeem through those institutions, which are responsible for prompt transmission of redemption requests. How to Redeem Your Investment By mail, send instructions to: PFPC Inc. c/o Aquilasm Group of Funds P.O. Box 9823 Providence, RI 02940-8023 By telephone, call: 800-255-2287 toll free By FAX, send instructions to: 610-312-5463 For liquidity and convenience, the Funds offer expedited redemption. Expedited Redemption Methods (Non-Certificate Shares Only) You may request expedited redemption for any shares not issued in certificate form in three ways: 1. By Telephone. The Agent will take instructions from anyone by telephone to redeem shares and make payments: a) to a Financial Institution account you have previously specified; or b) by check in the amount of $50,000 or less, mailed to the same name and address on the account from which you are redeeming, provided that neither the name nor the address has changed during the prior 30 days. You may only redeem by check via telephone request once in any seven-day period. Telephoning the Agent Whenever you telephone the Agent, please be prepared to supply: account name(s) and number name of the caller the social security number(s) registered to the account personal identification. Note: Check the accuracy of your confirmation statements immediately upon receipt. The Funds, the Agent, and the Distributor are not responsible for losses resulting from unauthorized telephone transactions if the Agent follows reasonable procedures designed to verify a caller's identity. The Agent may record calls. 2. By FAX or Mail. You may request redemption payments to a predesignated Financial Institution account by a letter of instruction sent to the Agent, PFPC Inc., by FAX at 610-312-5463 or by mail to P.O Box 9823, Providence, RI 02940-8023. The letter, signed by the registered shareholder(s) (no signature guarantee is required), must indicate: account name(s) account number amount to be redeemed any payment directions To have redemption proceeds sent directly to a Financial Institution account, you must complete the Expedited Redemption section of the New Account Application or a Ready Access Features Form. You will be required to provide (1) details about your Financial Institution account, (2) signature guarantees and (3) possible additional documentation. The name(s) of the shareholder(s) on the Financial Institution account must be identical to the name(s) on the Funds' records of your account. You may change your designated Financial Institution account at any time by completing and returning a revised Ready Access Features Form. 3. By Check. The Agent will, upon request, provide you with forms of drafts ("checks") drawn on PNC Bank, NA (the "Bank"). This feature is not available if your shares are represented by certificates. These checks represent a further alternative redemption means and you may make them payable to the order of anyone in any amount of not less than $100. You will be subject to the Bank's rules and regulations governing its checking accounts. If the account is registered in more than one name, each check must be signed by each account holder exactly as the names appear on the account registration, unless expressly stated otherwise on your New Account Application. There is no charge for the maintenance of this special check writing privilege or for the clearance of any checks. When such a check is presented to the Bank for payment, a sufficient number of full and fractional shares in your account will be redeemed to cover the amount of the check. This check writing redemption procedure enables you to continue receiving dividends on those shares equaling the amount being redeemed by check until such time as the check is actually presented to the Bank for payment. Because these checks are paid by redemption of shares in your account, you should be certain that adequate shares are in the account to cover the amount of the check. If insufficient redeemable shares are in the account, the redemption check will be returned marked "insufficient funds." The fact that redemption checks are drafts may also permit a bank in which they are deposited to delay crediting the account in question until that bank has received payment funds for the redemption check. Note: You cannot use checks to redeem shares represented by certificates. If you purchase shares by check, you cannot use checks to redeem them until 15 days after your purchase. You may not present checks directly to any branch of the Bank. This does not affect checks used for the payment of bills or cashed at other banks. You may not use checks to redeem the entire balance of your account, since the number of shares in your account changes daily through dividend payments which are automatically reinvested in full and fractional shares. Only expedited redemption to a predesignated bank account or the regular redemption method (see below) may be used when closing your account. Multiple Redemption Services. You are not limited in choice of redemption methods but may utilize all available forms. However, when both redemption to a predesignated Financial Institution account and check writing are desired, you must so elect on your New Account Application, or by proper completion of a Ready Access Features Form. Regular Redemption Method (Certificate and Non-Certificate Shares) Certificate Shares. Mail to the Funds' Agent: (1) blank (unsigned) certificates for Original Shares to be redeemed, (2) redemption instructions and (3) a stock assignment form. To be in "proper form," items (2) and (3) above must be signed by the registered shareholder(s) exactly as the account is registered. For a joint account, both shareholder signatures are necessary. For your protection, mail certificates separately from signed redemption instructions. We recommend that certificates be sent by registered mail, return receipt requested. We may require additional documentation for certain types of shareholders, such as corporations, partnerships, trustees or executors, or if redemption is requested by someone other than the shareholder of record. Signature_Guarantees. If sufficient documentation is on file, we do not require a signature guarantee for redemptions of certificate or non-certificate shares up to $50,000, payable to the record holder, and sent to the address of record. In all other cases, signatures must be guaranteed. Your signature may be guaranteed by any: member of a national securities exchange U.S. bank or trust company state-chartered savings bank federally chartered savings and loan association foreign bank having a U.S. correspondent bank; or participant in the Securities Transfer Association Medallion Program ("STAMP"), the Stock Exchanges Medallion Program ("SEMP") or the New York Stock Exchange, Inc. Medallion Signature Program ("MSP"). A notary public is not an acceptable signature guarantor. Non-Certificate Shares. You must use the Regular Redemption Method if you have not chosen Expedited Redemption. To redeem by this method, send a letter of instruction to the Funds' Agent, which includes: account name(s) account number dollar amount or number of shares to be redeemed or a statement that all shares held in the account are to be redeemed payment instructions (we normally mail redemption proceeds to your address as registered with a Fund) signature(s) of the registered shareholder(s) and signature guarantee(s), if required, as indicated above after "Certificate Shares." "When will I receive the proceeds of my redemption?" Redemption proceeds are normally sent on the next business day following receipt of your redemption request in proper form. Except as described below, payments will normally be sent to your address of record within seven days.
Redemption Method of Payment Charges Under $1,000. Check. None. $1,000 or more. Check, or wired or transferred None. through the Automated Clearing House to your Financial Institution account, if you so requested on your New Account Application or Ready Access Features Form. Through a broker/dealer. Check or wire, to your broker/dealer. None. However, your broker/dealer may charge a fee.
Although the Funds do not currently intend to, any Fund may impose a charge, up to $5.00 per wire redemption, after written notice to shareholders who have elected this redemption procedure. Upon 30 days' written notice to shareholders, any Fund may modify or terminate the use of the Automated Clearing House to make redemption payments at any time or charge a service fee, although no such fee is presently contemplated. If any such changes are made, the Prospectus will be supplemented to reflect them. If you use a broker or dealer to arrange for a redemption, you may be charged a fee for this service. The Funds may delay payment for redemption of shares recently purchased by check (including certified, cashier's or official bank check), Automatic Investment or Telephone Investment for up to 15 days after purchase; however, payment for redemption will not be delayed after (i) the check or transfer of funds has been honored, or (ii) the Agent receives satisfactory assurance that your Financial Institution will honor the check or transfer of funds. You can eliminate possible delays by paying for purchased shares with wired funds or Federal Reserve drafts. The Funds have the right to postpone payment or suspend redemption rights during certain periods. These periods may occur (i) when the New York Stock Exchange is closed for other than weekends and holidays, (ii) when the Securities and Exchange Commission (the "SEC") restricts trading on the New York Stock Exchange, (iii) when the SEC determines that an emergency exists which causes disposal of, or determination of the value of, portfolio securities to be unreasonable or impracticable, and (iv) during such other periods as the SEC may permit. Any Fund can redeem your shares if their value totals less than $500 as a result of redemptions or failure to meet and maintain the minimum investment level under an Automatic Investment Program. Before such a redemption is made, we will send you a notice giving you 60 days to make additional investments to bring your account up to the minimum. Redemption proceeds may be paid in whole or in part by distribution of a Fund's portfolio securities ("redemption in kind") in conformity with SEC rules. This method will only be used if the Board of Trustees determines that payments partially or wholly in cash would be detrimental to the best interests of the remaining shareholders. "Is there an Automatic Withdrawal Plan?" An Automatic Withdrawal Plan allows you to arrange to receive a monthly or quarterly check in a stated amount, not less than $50. Distribution Arrangements Confirmations and Share Certificates A statement will be mailed to you confirming each purchase or redemption of shares in a Fund. Accounts are rounded to the nearest 1/1000th of a share. The Funds will not issue share certificates unless you so request from the Agent in writing and declare a need for such certificates, such as a pledge of shares or an estate situation. If you have certificates issued, Expedited Redemption Methods described above will not be available and delay and expense may be incurred if you lose the certificates. The Funds will not issue certificates for fractional shares or to shareholders who have elected the checking account or predesignated bank account methods of withdrawing cash from their accounts. The Funds and the Distributor may reject any order for the purchase of shares. In addition, the offering of shares may be suspended at any time and resumed at any time thereafter. Distribution Plan Each Fund has adopted a Distribution Plan under Rule 12b-1 ("Rule 12b-1") under the 1940 Act. Rule 12b-1 provides in substance that an investment company may not engage directly or indirectly in financing any activity which is primarily intended to result in the sale of its shares except pursuant to a plan adopted under that rule. One section of the first part of the Distribution Plan of each Fund is designed to protect against any claim against or involving the Fund that some of the expenses which the Fund pays or may pay come within the purview of Rule 12b-1. Another section of the first part of the Distribution Plan authorizes the Administrator, not the Fund, to make certain payments to certain Qualified Recipients (as defined in the Distribution Plan) which have rendered assistance in the distribution and/or retention of the Funds' shares. For the Cash Fund, these payments may not exceed 0.15 of 1% of the average annual net assets of the Fund for a fiscal year; for the Tax-Free Fund and the Government Securities Fund, the rate is 0.10 of 1%. Each Distribution Plan has other provisions that relate to payments in connection with each Fund's Service Shares Class. None of such payments are made from assets represented by Original Shares of any Fund. Exchange Privilege Generally, you can exchange Original Shares of the Funds into the tax-free municipal bond funds and the equity fund (the "Aquila Bond or Equity Funds") and the Aquila Money-Market Funds in the Aquilasm Group of Funds (collectively, the "Aquila Funds"). The shares acquired in the exchange are subject to the same sales charge, if any, that they would have been subject to had they been purchased rather than acquired in exchange. Because excessive trading can be harmful to the Funds and their other shareholders, the right is reserved to revise or terminate the exchange privilege, to limit the number of exchanges or to reject any exchange if (i) the Funds or any of the other Aquila Funds believe that they would be harmed or be unable to invest effectively or (ii) they receive or anticipate receiving simultaneous orders that may significantly affect the Funds or any other Aquila Fund. Dividends The Funds will declare all of their net income for dividend purposes daily as dividends. If you redeem all of your shares, you will be credited on the redemption payment date with the amount of all dividends declared for the month through the date of redemption, or through the day preceding the date of redemption in the case of shares issued under the "second" method. You will receive monthly a summary of your account, including information as to dividends paid during the month and the shares credited to your account through reinvestment of dividends. Dividends paid by each Fund with respect to Service Shares (the Fund's other class of shares) and Original Shares will be calculated in the same manner, at the same time, on the same day, and will be in the same amount except that any class expenses (including any payments made by Service Shares under the Distribution Plan) will be borne exclusively by that class. Dividends on Original Shares are expected generally to be higher than those on Service Shares because expenses allocated to Service Shares will generally be higher. Dividends will be taxable to you as ordinary income (except as described in "Tax Information Concerning the Tax-Free Fund" below), even though reinvested. Statements as to the tax status of your dividends will be mailed annually. It is possible but unlikely that a Fund may have realized long-term capital gains or losses in a year. Dividends of each Fund will automatically be reinvested in full and fractional shares of the same class at net asset value unless you elect otherwise. You may choose to have all or any part of the payments for dividends or distributions paid in cash. You can elect to have the cash portion of your dividends and distributions deposited, without charge, by electronic funds transfers into your account at a financial institution, if it is a member of the Automated Clearing House. You can make any of these elections on the New Account Application, by a Ready Access Features Form or by a letter to the Agent. Your election to receive some or all of your dividends and distributions in cash will be effective as of the next payment of dividends after it has been received in proper form by the Agent. It will continue in effect until the Agent receives written notification of a change. Whether your dividends and distributions are paid in cash or reinvested, you will receive a monthly statement indicating the current status of your investment account. If you do not comply with laws requiring you to furnish taxpayer identification numbers and report dividends, the Funds may be required to impose backup withholding at a rate of 28% upon payment of redemptions and dividends. The Funds reserve the right to change the dividend and distribution payment option on your account to "reinvest" if mail sent to the address on your account is returned by the post office as "undeliverable" and you have elected to have your account dividends and/or distributions paid in cash. In such event, the Funds would then purchase additional shares of the Funds with any dividend or distribution payments that are "undeliverable". In order to change the option back to "cash", you would need to send the Agent written instructions as described above. Tax Information Tax Information Concerning the Tax-Free Fund The Tax-Free Fund seeks to pay "exempt-interest dividends." These are dividends derived from net income received by the Tax-Free Fund on its Municipal Obligations, provided that, as the Tax-Free Fund intends, at least 50% of the value of its assets is invested in tax-exempt obligations. Such dividends are exempt from regular Federal income tax. The Fund will allocate exempt-interest dividends by applying one designated percentage to all income dividends it declares during its tax year. It will normally make this designation in the first month following its fiscal year end for dividends paid in the prior year. Some portion of the Tax-Free Fund's distributions may be taxable. A shareholder receiving a dividend, for example, from net interest income earned by the Tax-Free Fund from one or more of (i) Taxable Obligations and (ii) income from repurchase agreements and securities loans treats the dividend as a receipt of ordinary income in the computation of the shareholder's gross income regardless of whether it is reinvested in Tax-Free Fund shares; such dividends and capital gains distributions are not included in exempt-interest dividends. Although exempt-interest dividends are not subject to regular Federal income tax, each taxpayer must report the total amount of tax-exempt interest (including exempt-interest dividends from the Tax-Free Fund) received or acquired during the year. Exempt-interest dividends are taken into account in determining the taxable portion of any Social Security or Railroad Retirement benefit you or your spouse receives. Under the Internal Revenue Code, interest on loans incurred by shareholders to enable them to purchase or carry shares of the Tax-Free Fund may not be deducted for regular Federal tax purposes. In addition, under rules used by the Internal Revenue Service for determining when borrowed funds are deemed used for the purpose of purchasing or carrying particular assets, the purchase of shares of the Tax-Free Fund may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to the purchase of shares. If you, or someone related to you, is a "substantial user" of facilities financed by industrial development or private activity bonds, you should consult your own tax adviser before purchasing shares of the Tax-Free Fund. Interest from all Municipal Obligations is tax-exempt for purposes of computing the shareholder's regular tax. However, interest from so-called private activity bonds issued after August 7, 1986, constitutes a tax preference for both individuals and corporations and thus will enter into a computation of the alternative minimum tax ("AMT"). Whether or not that computation will result in a tax will depend on the entire content of your return. The Tax-Free Fund will not invest more than 20% of its assets in the types of Municipal Obligations that pay interest subject to AMT. The 20% limit is a fundamental policy of the Tax-Free Fund; it cannot be changed without shareholder approval. An adjustment required by the Internal Revenue Code will tend to make it more likely that corporate shareholders will be subject to AMT. They should consult their tax advisers. Hawaiian Tax Information Dividends and distributions made by the Tax-Free Fund to Hawaii residents will generally be treated for Hawaii income tax purposes in the same manner as they are treated under the Code for Federal income tax purposes. Under Hawaii law, however, interest derived from obligations of states (and their political subdivisions) other than Hawaii will not be exempt from Hawaii income taxation. (Interest derived from bonds or obligations issued by or under the authority of the following is exempt from Hawaii income taxation: Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands.) For the calendar years 2004, 2003 and 2002, the percentage of the Tax-Free Fund's dividends exempt from State of Hawaii income taxes was 24.18%, 34.21% and 35.34% respectively, which should not be considered predictive of future results. Interest on Hawaiian Obligations, tax-exempt obligations of states other than Hawaii and their political subdivisions, and obligations of the United States or its possessions is not exempt from the Hawaii Franchise Tax. This tax applies to banks, building and loan associations, financial service loan companies, financial corporations, and small business investment companies. Persons or entities who are not Hawaii residents should not be subject to Hawaii income taxation on dividends and distributions made by the Tax-Free Fund but may be subject to other state and local taxes. Shareholders of the Fund should consult their tax advisers about other state and local tax consequences of their investment in the Fund. Hawaiian Tax Information Concerning the Government Securities Fund The Director of Taxation of Hawaii has stated to the Government Securities Fund that dividends paid by a regulated investment company from interest it receives on United States Government obligations will be exempt from State of Hawaii income tax. For the calendar years 2004, 2003 and 2002, the percentage of the Government Securities Fund's dividends exempt from State of Hawaii income taxes was 98.99%, 98.5% and 98.65% respectively, which should not be considered predictive of future results. Dividends paid from other types of interest (including interest on U.S. Treasury repurchase transactions), and capital gains distributions, if any, will be taxable. Pacific Capital Cash Assets Trust Original Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Original Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
ORIGINAL SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ Net asset value, beginning of period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income .................... 0.01 0.01 0.01 0.03 0.06 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income ..... (0.01) (0.01) (0.01) (0.03) (0.06) ------ ------ ------ ------ ------ Net asset value, end of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ................................ 1.36% 0.90% 1.35% 2.52% 5.90% Ratios/supplemental data Net assets, end of period (in millions) .. $ 366 $ 287 $ 361 $ 353 $ 364 Ratio of expenses to average net assets .. 0.37% 0.21% 0.36% 0.58% 0.57% Ratio of net investment income to average net assets ..................... 1.39% 0.90% 1.34% 2.51% 5.77% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets .. 0.57% 0.57% 0.58% -- -- Ratio of net investment income to average net assets ..................... 1.19% 0.54% 1.12% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .. 0.37% 0.21% 0.36% 0.57% 0.57%
Pacific Capital Tax-Free Cash Assets Trust Original Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Original Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
ORIGINAL SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ---- ------ ------ Net asset value, beginning of period ..... $ 1.00 $ 1.00 1.00 $ 1.00 $ 1.00 ------ ------ ---- ------ ------ Income from investment operations: Net investment income ................. 0.01 0.01 0.01 0.02 0.04 ------ ------ ---- ------ ------ Less distributions: Dividends from net investment income .. (0.01) (0.01) (0.01) (0.02) (0.04) ------ ------ ---- ------ ------ Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ............................. 1.16% 0.84% 1.15% 2.00% 3.58% Ratios/supplemental data Net assets, end of period (in millions) $ 134 $ 99 $ 130 $ 100 $ 101 Ratio of expenses to average net assets 0.29% 0.17% 0.28% 0.51% 0.53% Ratio of net investment income to average net assets .................. 1.17% 0.84% 1.13% 1.94% 3.50% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets 0.49% 0.52% 0.50% -- -- Ratio of net investment income to average net assets .................. 0.96% 0.50% 0.90% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .. 0.28% 0.17% 0.27% 0.51% 0.53%
Pacific Capital U. S. Government Securities Cash Assets Trust Original Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Original Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
ORIGINAL SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income ................. 0.01 0.01 0.01 0.03 0.06 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income .. (0.01) (0.01) (0.01) (0.03) (0.06) ------ ------ ------ ------ ------ Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ............................. 1.41% 0.96% 1.34% 2.73% 5.88% Ratios/supplemental data Net assets, end of period (in millions) $ 354 $ 263 $ 270 $ 306 $ 151 Ratio of expenses to average net assets 0.27% 0.11% 0.25% 0.45% 0.47% Ratio of net investment income to average net assets .................. 1.42% 0.96% 1.34% 2.47% 5.73% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets 0.45% 0.46% 0.46% -- -- Ratio of net investment income to average net assets .................. 1.24% 0.62% 1.12% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets 0.27% 0.11% 0.24% 0.45% 0.47%
[Inside Back Cover] Investment Adviser Asset Management Group of Bank of Hawaii Financial Plaza of the Pacific P.O. Box 3170 Honolulu, Hawaii 96802 Administrator Aquila Investment Management LLC 380 Madison Avenue, Suite 2300 New York, New York 10017 Trustees Theodore T. Mason, Chairman Thomas W. Courtney Diana P. Herrmann Stanley W. Hong Russell K. Okata Douglas Philpotts Oswald K. Stender Chairman Emeritus and Founder Lacy B. Herrmann Officers Diana P. Herrmann, Vice Chair and President Charles E. Childs, III, Executive Vice President Sherri Foster, Vice President Robert W. Anderson, Chief Compliance Officer Joseph P. DiMaggio, Chief Financial Officer and Treasurer Edward M.W. Hines, Secretary Distributor Aquila Distributors, Inc. 380 Madison Avenue, Suite 2300 New York, New York 10017 Transfer And Shareholder Servicing Agent PFPC Inc. 760 Moore Road King of Prussia, Pennsylvania 19406 Custodian Bank One Trust Company, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 Independent Registered Public Accounting Firm KPMG LLP 345 Park Avenue New York, New York 10154 Counsel Hollyer Brady Barrett & Hines LLP 551 Fifth Avenue New York, New York 10176 Back Cover This Prospectus concisely states information about the Funds that you should know before investing. A Statement of Additional Information about the Funds (the "SAI") has been filed with the Securities and Exchange Commission. The SAI contains information about the Funds and their management not included in this Prospectus. The SAI is incorporated by reference in its entirety in this Prospectus and is therefore legally a part of this Prospectus. Only when you have read both this Prospectus and the SAI are all material facts about the Funds available to you. You can get additional information about the Funds' investments in the Funds' annual and semi-annual reports to shareholders. In the Funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds' performance during their last fiscal year. You can get the SAI and the Funds' annual and semi-annual reports without charge, upon request, by calling 800-255-2287 (toll free). In addition, you can review and copy information about the Funds (including the SAI) at the Public Reference Room of the SEC in Washington, D.C. Information on the operation of the Public Reference Room is available by calling 202-942-8090. Reports and other information about the Funds are also available on the EDGAR Database at the SEC's Internet site at http://www.sec.gov. Copies of this information can be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. The file number under which the Trust is registered with the SEC under the Investment Company Act of 1940 is 811-4066 The Pacific Capital Funds of Cash Assets Trust Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust A cash management investment [LOGO] PROSPECTUS Original Shares To make shareholder account inquiries, call the Funds' Shareholder Servicing Agent at: 800-255-2287 toll free or you can write to PFPC Inc. 760 Moore Road King of Prussia, PA 19406-1212 Ticker Symbol CUSIP # PCCAT CATXX 14754H101 PCTFCAT TFCXX 14754H309 PCUSGSCAT USCXX 14754H200 This Prospectus should be read and retained for future reference. Pacific Capital Funds of Cash Assets Trust 380 Madison Avenue, Suite 2300 New York, NY 10017 800-CATS-4-YOU (800-228-7496) 212-697-6666 Service Shares Prospectus July 31, 2005 Cash Assets Trust consists of three separate portfolios: Pacific Capital Cash Assets Trust (the "Cash Fund") is a general purpose money-market mutual fund which invests in short-term "money-market" securities. Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free Fund") is a tax-exempt money-market mutual fund which invests in short-term tax-exempt "money-market" securities. Pacific Capital U.S. Government Securities Cash Assets Trust (the "Government Securities Fund") is a money-market mutual fund which invests in short-term direct obligations of the United States Treasury, in other obligations issued or guaranteed by agencies or instrumentalities of the United States Government and in certain repurchase agreements secured by U.S. government securities. The Cash Fund, the Tax-Free Fund and the Government Securities Fund are collectively referred to as the "Funds." For purchase, redemption or account inquiries contact the Funds' Shareholder Servicing Agent: PFPC Inc. 760 Moore Road King of Prussia, PA 19406-1212 800-255-2287 toll free For general inquiries & yield information 800-228-7496 toll free or 212-697-6666 The Securities and Exchange Commission has not approved or disapproved the Trust's securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS The Cash Fund: Objective, Investment Strategies, Main Risks............................................ Risk/Return Bar Chart and Performance Table .......... Fees and Expenses of the Fund......................... The Tax-Free Fund: Objective, Investment Strategies, Main Risks............................................ Risk/Return Bar Chart and Performance Table .......... Fees and Expenses of the Fund......................... The Government Securities Fund: Objective, Investment Strategies, Main Risks..................... Risk/Return Bar Chart and Performance Table .......... Fees and Expenses of the Fund......................... Management of the Funds............................... Net Asset Value per Share............................. Purchases ............................................ Redeeming Your Investment............................. Distribution Arrangements............................. Dividends............................................. Tax Information....................................... Financial Highlights.................................. The Cash Fund: Objective, Investment Strategies, Main Risks "What is the Cash Fund's objective?" The objective of the Cash Fund, which is a fundamental policy, is to achieve a high level of current income, stability and liquidity for investors' cash assets by investing in a diversified portfolio of short-term "money-market" securities meeting specific quality standards. "What are the Cash Fund's investment strategies?" The Cash Fund seeks to attain this objective by investing in short-term money-market securities denominated in U.S. dollars that are of high quality and present minimal credit risks. Under the current management policies, the Cash Fund invests only in the following types of obligations: (1) Obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. (2) Bank obligations and instruments secured by them. ("Banks" include commercial banks, savings banks and savings and loan associations and include foreign banks and foreign branches of United States banks.) (3) Short-term corporate debt known as "commercial paper." (4) Corporate debt obligations (for example, bonds and debentures). Debentures are a form of unsecured corporate debt. (5) Variable amount master demand notes which are repayable on not more than 30 days' notice. (6) Repurchase agreements. (7) Shares of investment companies with money-market portfolios. The Cash Fund seeks to maintain a net asset value of $1.00 per share. In general, not more than 5% of the Cash Fund's net assets can be invested in the securities of any issuer. The dollar weighted average maturity of the Cash Fund will be 90 days or less and the Cash Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Cash Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the nationally recognized statistical rating organizations ("NRSROs") or, if unrated, they must be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. Asset Management Group of Bank of Hawaii (the "Adviser") seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Cash Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Cash Fund?" Although the Cash Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Cash Fund. Investment in the Cash Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that they will be traded, and there is no secondary market for them. Variable amount master demand notes repayable in more than seven days are securities which are not readily marketable, and fall within the Cash Fund's overall 10% limitation on securities which are illiquid. These notes are also subject to credit risk. Repurchase agreements involve some risk to the Cash Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. Corporate bonds and debentures are subject to interest rate and credit risks. There are two types of risk associated with the Cash Fund: interest rate risk and credit risk. *Interest rate risk relates to fluctuations in market value arising from changes in interest rates. If interest rates rise, the value of debt securities will normally decline. All fixed-rate debt securities, even the most highly rated, are subject to interest rate risk. *Credit risk relates to the ability of the particular issuers of the obligations the Cash Fund owns to make periodic interest payments as scheduled and ultimately repay principal at maturity. Investments in foreign banks and foreign branches of United States banks involve certain risks. Foreign banks and foreign branches of domestic banks may not be subject to regulations that meet U.S. standards. Investments in foreign banks and foreign branches of domestic banks may also be subject to other risks, including future political and economic developments, the possible imposition of withholding taxes on interest income, the seizure or nationalization of foreign deposits and the establishment of exchange controls or other restrictions. Cash Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in the Cash Fund's Service Shares by showing changes in the performance of the Cash Fund's Service Shares from year to year over a nine-year period and by showing the Cash Fund's average annual returns for one and five years, and the period since inception. How the Cash Fund has performed in the past is not necessarily an indication of how the Cash Fund will perform in the future. [Bar Chart] Annual Total Returns (Service Shares) 1996-2004 10% 8% 6% 5.69 4.83 4.80 XXXX 4% 4.62 XXXX XXXX 4.38 XXXX XXXX XXXX XXXX XXXX XXXX 3.22 2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.17 0.69 0.85 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 9-year period shown in the bar chart, the highest return for a quarter was 1.48% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.15% (quarter ended September 30, 2003). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 0.96%. Average Annual Total Return For the period ended Since December 31, 2004 1 Year 5 Years Inception Pacific Capital Cash 0.85% 2.31% 3.52%* Assets Trust - Service Shares *From commencement of operations on February 1, 1995. Please call (800) 228-7496 toll free to obtain the Cash Fund's most current seven-day yield. Cash Fund Fees and Expenses of the Fund (Service Shares) This table describes the fees and expenses that you may pay if you buy and hold Service Shares of the Cash Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases.........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends......................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Cash Fund's assets) Investment Advisory Fee........................0.36% Distribution (12b-1) Fee.......................0.25% Other: Administration Fee......................0.14% Other Expenses..........................0.06% Total.........................................0.20% Total Annual Fund Operating Expenses...........0.81% Example This Example is intended to help you compare the cost of investing in the Service Shares of the Cash Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Service Shares of the Cash Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Cash Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $83 $259 $450 $1,002 The Tax-Free Fund: Objective, Investment Strategies, Main Risks "What is the Tax-Free Fund's objective?" The objective of the Tax-Free Fund, which is a fundamental policy, is to provide safety of principal while achieving as high a level as possible of liquidity and of current income exempt from Federal and Hawaii income taxes. "What are the Tax-Free Fund's investment strategies?" The Tax-Free Fund seeks to attain this objective by investing in municipal obligations of Hawaiian issuers to the extent that obligations of the desired quality, maturity and interest rate are available; otherwise by investing in similar obligations of non-Hawaii issuers. These obligations must have remaining maturities not exceeding 397 days, must be of high quality and must present minimal credit risks. At least 80% of the Tax-Free Fund's assets must be invested in tax-exempt obligations. Under the current management policies, the Tax-Free Fund invests only in the following types of obligations: Municipal Obligations As used in this Prospectus, the term "Municipal Obligations" means obligations with maturities of 397 days or less paying interest which, in the opinion of bond counsel or other appropriate counsel, is exempt from regular Federal income taxes. "Hawaiian Obligations" are Municipal Obligations, including those of Guam, the Northern Mariana Islands, Puerto Rico and the Virgin Islands, paying interest which, in the opinion of bond counsel or other appropriate counsel, is also exempt from Hawaii state income taxes. Although the portion of dividends of the Tax-Free Fund paid from interest on Hawaiian Obligations will be free of Hawaii state income tax, that paid from interest on other Municipal Obligations will not. Since it is not possible to predict the extent to which suitable Hawaiian Obligations will be available for investment, the Tax-Free Fund has no investment restriction limiting the proportion of its portfolio which it may invest in other Municipal Obligations. Although exempt from regular Federal income tax, interest paid on certain types of Municipal Obligations, and dividends which the Tax-Free Fund might pay from this interest, are preference items as to the Federal alternative minimum tax. As a fundamental policy, at least 80% of the Tax-Free Fund's net assets will be invested in Municipal Obligations the income paid upon which will not be subject to the alternative minimum tax; accordingly, the Tax-Free Fund can invest the rest of its assets in obligations which are subject to the Federal alternative minimum tax. The Tax-Free Fund may refrain entirely from purchasing these types of Municipal Obligations. Municipal Obligations are debt obligations issued by or on behalf of states, cities, municipalities and other public authorities. Such obligations include: Municipal Bonds Municipal bonds generally have a maturity at the time of issuance of up to 30 years. The Tax-Free Fund can purchase only those with a remaining maturity of 13 months or less. Municipal Notes Municipal notes generally have maturities at the time of issuance of three years or less. These notes are generally issued in anticipation of the receipt of tax funds, of the proceeds of bond placements or of other revenues. The ability of an issuer to make payments is therefore dependent on these tax receipts, proceeds from bond sales or other revenues, as the case may be. Municipal Commercial Paper Municipal commercial paper is a debt obligation with a stated maturity of 397 days or less that is issued to finance seasonal working capital needs or as short-term financing in anticipation of longer-term debt. Concentration From time to time the Tax-Free Fund may invest 25% or more of its assets in Municipal Obligations that are related in such a way that an economic, business or political development or change affecting one of these obligations would also affect the other obligations, for example, Municipal Obligations the interest on which is paid from revenues of similar type projects or Municipal Obligations whose issuers are located in the same state. Other Investment Strategies The Tax-Free Fund may purchase shares of investment companies with money-market portfolios consisting only of Municipal Obligations. The Tax-Free Fund seeks to maintain a net asset value of $1.00 per share. The dollar weighted average maturity of the Tax-Free Fund will be 90 days or less and the Tax-Free Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Tax-Free Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the NRSROs or, if they are unrated, be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. The Adviser seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Tax-Free Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Tax-Free Fund?" Although the Tax-Free Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Tax-Free Fund. Hawaiian Obligations The Tax-Free Fund's assets, being primarily Hawaiian issues, are subject to economic and other conditions affecting Hawaii. Adverse local events, such as a downturn in the Hawaiian economy, could affect the value of the Tax-Free Fund's portfolio. The following is a discussion of the general factors that might influence the ability of Hawaiian issuers to repay principal and interest when due on Hawaiian Obligations. This information is derived from sources that are generally available to investors, is believed to be accurate, but has not been independently verified and may not be complete. Economic conditions are subject to change and there can be no assurance that the following information will not change. The Hawaii economic data through the end of the Trust's fiscal year on March 31, 2005, continued to show record levels of performance. Inflation numbers, meanwhile, remained surprisingly low despite the high energy costs and an acceleration in median home price increases. Most forecasts also hold to a more optimistic, less inflationary outlook in 2005. Hawaii tourism opened 2005 in strong position. Total visitor arrivals and total visitor days are running well ahead of year-earlier numbers. The expectation for the full year is for another record year following the historical highs achieved in 2004. Airline inbound lift capability has been meaningfully expanded with an increase in scheduled seats to enhance growth during the seasonally-important summer months. Unemployment statewide declined to a very low 2.8 percent of the labor force, seasonally-adjusted. Unemployment rates on Maui and Oahu essentially matched the state average, with Kauai and Hawaii island unemployment rates only a little higher. Indeed, most forecasts for Hawaii embody some version of increasingly binding labor supply constraints in the 2005-2006 time frame. While the rise in home prices through the 1st half of 2005 has been stunning, it has been matched by the surprising strength in sales volumes at these high prices. The corresponding growth in residential production sustains the continuing improvements in the construction forecast. The strength of the Hawaii economy has led to favorable rating changes for the State from the national rating agencies. Moody's recently upgraded the State of Hawaii rating to Aa2 from Aa3. S&P and Fitch both maintain AA- ratings for the State of Hawaii; however S&P recently improved its "outlook" for the State to Positive. For the past year, U.S. interest rates responded to the Federal Reserve's monetary operations to begin raising rates and removing policy accommodation at a "measured pace." A year ago the Fed Funds rate was at 1.00%, however, by June of 2005, the Federal Reserve had hiked the Fed Funds rate in nine steps of one-quarter of 1% at each step to raise the overnight rate to 3.25%. The impact of raising rates was felt most strongly in the short and intermediate portions of the yield curve, while the long end of the yield curve actually remained the same or even declined somewhat. The effect on the shape of the curve was a severe "flattening" where the difference between short and long rates narrowed significantly. Meanwhile, Federal Reserve statements suggest that they are still concerned about "imbalances" such as a record current account deficit, soaring home prices and low U.S. savings. Despite record oil prices, inflation remains tame and the U. S. economy continues to expand at a strong clip. The continuing economic expansion leads market participants to expect the Federal Reserve to remain on its stance to increase the overnight rate. With long term interest rates remaining at very low levels even as the Federal Reserve has been raising short-term rates, State and local governments continued to take advantage of this rate environment to refinance and restructure older, more expensive debt. New issuance volume for municipal securities is maintaining a strong pace. The data show that tax-exempt bond issuance for the first half of 2005 hit an all-time record with the expectation that issuance volume will remain strong if rates stay favorable. Other Main Risks Investment in the Tax-Free Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Tax-Free Fund's right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Tax-Free Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument to make payment when due, except when such demand instrument permits same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Tax-Free Fund's custodian subject to a sub-custodial agreement approved by the Tax-Free Fund between that bank and the Tax-Free Fund's custodian. Such obligations are also subject to credit risk. Repurchase agreements involve some risk to the Tax-Free Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. The taxable market is a broader and more liquid market with a greater number of investors, issuers and market makers than the market for Municipal Obligations. The more limited marketability of Municipal Obligations may make it difficult in certain circumstances to dispose of large investments advantageously. In general, Municipal Obligations are also subject to credit risks such as the loss of credit ratings or possible default. In addition, certain Municipal Obligations might lose tax-exempt status in the event of a change in the tax laws. Tax-Free Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in the Tax-Free Fund's Service Shares by showing changes in the performance of the Tax-Free Fund's Service Shares from year to year over a nine-year period and by showing the Tax-Free Fund's average annual returns for one and five years, and the period since inception. How the Tax-Free Fund has performed in the past is not necessarily an indication of how the Tax-Free Fund will perform in the future. [Bar Chart] Annual Total Returns (Service Shares) 1996-2004 10% 8% 6% 4% 2.75 2.82 2.74 2.54 3.38 2% XXXX XXXX XXXX XXXX XXXX 2.21 XXXX XXXX XXXX XXXX XXXX XXXX 0.94 0.62 0.74 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 9-year period shown in the bar chart, the highest return for a quarter was 0.89% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.12% (quarter ended September 30, 2003). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 0.75%. Average Annual Total Return Since For the period 1 Year 5 Years Inception ended December 31, 2004 Pacific Capital Tax- Free Cash Assets Trust - Service Shares 0.74% 1.57% 2.19%* *From commencement of operations on February 1, 1995. Please call (800) 228-7496 toll free to obtain the Tax-Free Fund's most current seven-day yield. Tax-Free Fund Fees and Expenses of the Fund (Service Shares) This table describes the fees and expenses that you may pay if you buy and hold Service Shares of the Tax-Free Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases.........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends .....................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Tax-Free Fund's assets) Investment Advisory Fee......................0.30% Distribution (12b-1) Fee.....................0.25% Other: Administration Fee......................0.10% Other Expenses..........................0.10% Total.......................................0.20% Total Annual Fund Operating Expenses.........0.75% Example This Example is intended to help you compare the cost of investing in Service Shares of the Tax-Free Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Service Shares of the Tax-Free Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Tax-Free Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $77 $240 $417 $930 The Government Securities Fund: Objective, Investment Strategies, Main Risks "What is the Government Securities Fund's objective?" The objective of the Government Securities Fund, which is a fundamental policy, is to provide safety of principal while achieving as high a level as possible of liquidity and of current income. "What are the Government Securities Fund's investment strategies?" The Government Securities Fund seeks to attain this objective by investing only in short-term direct obligations of the United States Treasury, in other obligations issued or guaranteed by agencies or instrumentalities of the United States Government (with remaining maturities of one year or less), in shares of investment companies with money-market portfolios which invest only in U.S. government securities and in certain repurchase agreements secured by U.S. government securities. Under the current management policies, the Government Securities Fund invests only in the following types of obligations: U. S. Treasury Obligations The U.S. Treasury issues various types of marketable securities, consisting of bills, notes, bonds, and certificates of indebtedness, which are all direct obligations of the U.S. government backed by its "full faith and credit" and which differ primarily in the length of their maturity. The Fund may also invest in separately traded principal and interest components of securities issued by the United States Treasury. The principal and interest components of selected securities are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Under the STRIPS program, the principal and interest components are individually numbered and separately issued by the U.S. Treasury at the request of depository financial institutions, which then trade the component parts independently. These instruments may experience more market volatility than regular treasury securities. Other U.S. Government Securities U.S. government agencies and instrumentalities that issue or guarantee securities include, but are not limited to, the Farmers Home Administration, Federal Farm Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing Administration, Federal National Mortgage Association, Financing Corporation, Government National Mortgage Association, Resolution Funding Corporation, Small Business Administration, Student Loan Marketing Association and the Tennessee Valley Authority. Securities issued or guaranteed by U.S. government agencies and instrumentalities are not always supported by the full faith and credit of the United States. Some, such as securities issued by the Federal Home Loan Banks, are backed by the right of the agency or instrumentality to borrow from the U.S. Treasury. Others, such as securities issued by the Federal National Mortgage Association, are supported only by the credit of the instrumentality and not by the U.S. Treasury. If the securities are not backed by the full faith and credit of the United States, the owner of the securities must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment. The Government Securities Fund will invest in government securities, including securities of agencies and instrumentalities, only if the Adviser (pursuant to procedures approved by the Board of Trustees) is satisfied that these obligations present minimal credit risks. Investment Companies The Government Securities Fund may purchase shares of investment companies with money-market portfolios consisting only of U.S. Government securities. Repurchase Agreements The Government Securities Fund may purchase securities subject to repurchase agreements provided that such securities are U.S. government securities. Repurchase agreements may be entered into only with commercial banks or broker/dealers. Subject to the control of the Board of Trustees, the Adviser will regularly review the financial strength of all parties to repurchase agreements with the Government Securities Fund. The Government Securities Fund seeks to maintain a net asset value of $1.00 per share. The dollar weighted average maturity of the Government Securities Fund will be 90 days or less and the Government Securities Fund may buy only those instruments that have a remaining maturity of 397 days or less. Securities the Government Securities Fund buys must present minimal credit risks and at the time of purchase be rated in the two highest rating categories for short-term securities by any two of the NRSROs or, if they are unrated, be determined by the Board of Trustees to be of comparable quality. Some securities may have third-party guarantees to meet these rating requirements. The Adviser seeks to develop an appropriate portfolio by considering the differences among securities of different issuers, yields, maturities and market sectors. The Government Securities Fund will purchase only those issues that it believes will enable it to achieve and maintain the highest rating for a mutual fund by two NRSROs. There is no assurance that it will be able to maintain such rating. As a result of this policy, the range of obligations in which the Government Securities Fund can invest is reduced and the yield obtained on such obligations may be less than would be the case if this policy were not in force. The Government Securities Fund may change any of its management policies without shareholder approval. "What are the main risks of investing in the Government Securities Fund?" Although the Government Securities Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Government Securities Fund. Investment in the Government Securities Fund is not a deposit in Bank of Hawaii, any of its bank or non-bank affiliates or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Repurchase agreements involve some risk to the Government Securities Fund if the other party does not fulfill its obligations under the agreement. The value of money-market instruments tends to fall if prevailing interest rates rise. Government Securities Fund Risk/Return Bar Chart and Performance Table The bar chart and table shown below provide an indication of the risks of investing in the Government Securities Fund's Service Shares by showing changes in the performance of the Government Securities Fund's Service Shares from year to year over a nine-year period and by showing the Government Securities Fund's average annual returns for one and five years, and the period since inception. How the Government Securities Fund has performed in the past is not necessarily an indication of how the Government Securities Fund will perform in the future. [Bar Chart] Annual Total Returns (Service Shares) 1996-2004 10% 8% 6% 5.63 4.53 4.63 4.70 4.32 XXXX 4% XXXX XXXX XXXX XXXX XXXX 3.43 XXXX XXXX XXXX XXXX XXXX XXXX 2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1.18 0.75 0.91 0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 1996 1997 1998 1999 2000 2001 2002 2003 2004 Calendar Years During the 9-year period shown in the bar chart, the highest return for a quarter was 1.46% (quarter ended December 31, 2000) and the lowest return for a quarter was 0.17% (quarter ended June 30, 2004). The year-to-date (from January 1, 2005 to June 30, 2005) total return was 0.98%. Average Annual Total Return Since For the period ended 1 Year 5 Years Inception December 31, 2004 Pacific Capital U.S. 0.91% 2.36% 3.50%* Government Securities Cash Assets Trust - Service Shares *From commencement of operations on February 1, 1995. Please call (800) 228-7496 toll free to obtain the Government Securities Fund's most current seven-day yield. Government Securities Fund Fees and Expenses of the Fund (Service Shares) This table describes the fees and expenses that you may pay if you buy and hold Service Shares of the Government Securities Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases.........................0.00% Maximum Deferred Sales Charge (Load).........0.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends......................0.00% Redemption Fees..............................0.00% Exchange Fees................................0.00% Annual Fund Operating Expenses (expenses that are deducted from the Government Securities Fund's assets) Investment Advisory Fee......................0.33% Distribution (12b-1) Fee.....................0.25% Other: Administration Fee....................0.07% Other Expenses........................0.05% Total Expenses..............................0.12% Total Annual Fund Operating Expenses.........0.70% Example This Example is intended to help you compare the cost of investing in Service Shares of the Government Securities Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Service Shares of the Government Securities Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that you reinvest all dividends and distributions, and that the Government Securities Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years $72 $224 $390 $871 Management of the Funds "How are the Funds managed?" Asset Management Group of Bank of Hawaii, Financial Plaza of the Pacific, P.O. Box 3170, Honolulu, HI 96802, the Adviser, is the investment adviser for each of the Funds. Aquila Investment Management LLC, 380 Madison Avenue, Suite 2300, New York, NY 10017, the Administrator, is responsible for administrative services, including providing for the maintenance of the headquarters of the Funds, overseeing relationships between the Funds and the service providers to the Funds, maintaining the Funds' books and records and providing other administrative services. Under the Advisory Agreements, the Adviser provides for investment supervision, including supervising continuously the investment program of each Fund and the composition of its portfolio; determining what securities will be purchased or sold by each Fund; arranging for the purchase and the sale of securities held in the portfolio of each Fund; and, at the Adviser's expense, providing for pricing of each Fund's portfolio daily. Under the Advisory Agreements, during the fiscal year ended March 31, 2005, each Fund would have paid a fee payable monthly and computed on the net asset value of the Fund as of the close of business each business day, except that an expense cap included in each Advisory Agreement reduced the amounts payable below the stated rates. Because of the expense cap, the advisory fees actually paid by the Funds, stated as a percentage of average daily net assets, were: Cash Fund - 0.22%; Tax-Free Fund - 0.14%; Government Securities Fund - 0.18%. Since the Administrator also received a fee from each of the Funds under the applicable Administration Agreement that was also reduced in each case below the applicable stated rate by an expense cap, the administration fees actually paid by the Funds were: Cash Fund - 0.08%; Tax-Free Fund - 0.05%; Government Securities Fund - 0.04%. Information about the Adviser and the Administrator The Adviser is a division of Bank of Hawaii, all of whose shares are owned by Bank of Hawaii Corporation ("BOH Corp."). BOH Corp. is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and its common stock is registered under the Securities Exchange Act of 1934 and is listed and traded on the New York Stock Exchange. BOH Corp. files annual and periodic reports with the Securities and Exchange Commission which are available for public inspection. The Funds' Administrator is a wholly-owned subsidiary of Aquila Management Corporation ("AMC"), founder of each Fund in the Aquilasm Group of Funds, which consists of tax-free municipal bond funds, money-market funds and an equity fund. As of June 30, 2005, these funds had aggregate assets of approximately $4.3 billion, of which approximately $1.8 billion consisted of assets of the money-market funds. AMC's address is the same as that of the Administrator. AMC, which was founded in 1984, is controlled by Mr. Lacy B. Herrmann, directly, through two trusts and through share ownership by his wife. Net Asset Value Per Share The net asset value of the shares of each of the Funds' classes of shares is determined as of 4:00 p.m. New York time on each day that the New York Stock Exchange and the Custodian are open (a "business day"), by dividing the value of the Fund's net assets allocable to the class (which means the value of the assets less liabilities) by the total number of shares of such class outstanding at the time. The price at which a purchase or redemption of shares is effected is based on the net asset value next calculated after your purchase or redemption order is received in proper form. The net asset value per share will normally remain constant at $1.00 per share except under extraordinary circumstances. The net asset value per share is based on a valuation of the Fund's investments at amortized cost. The New York Stock Exchange annually announces the days on which it will not be open. The most recent announcement indicates that it will not be open on the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However, the Exchange may close on days not included in that announcement. In addition, the Custodian is not open on Columbus Day and Veterans Day. Purchases Opening an Account To open a new Service Shares account directly with any Fund, you must send a properly completed New Account Application to PFPC Inc. (the "Agent"). The Funds will not honor redemption of shares purchased by wire payment until a properly completed New Account Application has been received by the Agent. The minimum initial investment is $1,000. Subsequent investments may be in any amount. You can make direct investments in Service Shares in any of these three ways: 1. By Mail. You can make payment by check, money order, Federal Reserve draft or other negotiable bank draft drawn in United States dollars on a United States commercial or savings bank or credit union (each of which is a "Financial Institution") payable to the order of Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust or Pacific Capital U.S. Government Securities Cash Assets Trust, as the case may be, and mailed to: (Specify the name of the Fund) Regular Mail Address: PFPC Inc. c/o Aquilasm Group of Funds P.O. Box 9823 Providence, RI 02940-8023 Overnight Mail Address: PFPC Inc. c/o Aquilasm Group of Funds 101 Sabin Street Pawtucket, RI 02860-1247 2. By Wire. You can wire Federal Funds (monies credited to a bank's account with a Federal Reserve Bank) to PNC Bank, NA. To insure prompt and proper crediting to your account, if you choose this method of payment, you should first telephone the Agent (800-255-2287 toll free) and then instruct your bank to wire funds to: PNC BANK, NA Philadelphia, PA ABA No. 0310-0005-3 Account No. 85-0242-8425 Your bank's wire instructions should indicate the appropriate Fund as follows: The Cash Fund: FFC: Pacific Capital Cash Assets Trust - Service Shares The Tax-Free Fund: FFC: Pacific Capital Tax-Free Cash Assets Trust - Service Shares The Government Securities Fund: FFC: Pacific Capital U.S. Government Securities Cash Assets Trust - Service Shares In addition you should supply: * Account name and number (if an existing account) * The name in which the investment is to be registered (if a new account). Your bank may impose a charge for wiring funds. 3. Through Brokers. If you wish, you may invest in the Funds by purchasing shares through registered broker/dealers. The Funds impose no sales or service charge on purchases of Service Shares, although financial intermediaries may make reasonable charges to their customers for their services. The services to be provided and the fees therefor are established by each financial intermediary acting independently; financial intermediaries may also determine to establish, as to accounts serviced by them, higher initial or subsequent investment requirements than those required by the Funds. Financial intermediaries are responsible for prompt transmission of orders placed through them. Banks may offer an arrangement whereby their customers may invest in Service Shares of any Fund by establishing a "sweep account" with them. A sweep account connects an FDIC-insured checking account with an account with the Funds. When money is transferred out of a checking account for investment in any of the Funds, it is no longer covered by FDIC insurance. Because of the special arrangements for automated purchases and redemptions of Service Shares that sweep accounts involve, certain options or other features described in this Prospectus (such as alternative purchase and redemption procedures, dividend and distribution arrangements or share certificates) may not be available to persons investing through such accounts. Investments through a sweep account are governed by the terms and conditions of the account (including fees and expenses associated with the account), which are typically set forth in agreements and accompanying disclosure statements used to establish the account. You should review copies of these materials before investing in a Fund through a sweep account. If you are not investing through a financial intermediary, you should follow these instructions:
Opening An Account Adding to an Account *Make out a check for the investment amount payable to the *Make out a check for the investment amount payable to appropriate Fund. the appropriate Fund. *Complete the New Account Application, which is available *Fill out the pre-printed stub attached to each Fund's with the Prospectus or upon request, indicating the confirmations or supply the name(s) of account features you wish to authorize. owner(s), the account number and the name of the Fund. *Send your check and account information to your dealer *Send your check and completed New Account Application to or to the Funds' Agent, PFPC Inc., or your dealer or to the Funds' Agent, PFPC Inc., or *Wire funds as described above. *Wire funds as described above. Be sure to supply the name(s) of account owner(s), the account number and the name of the Fund.
If you make additional investments in Service Shares through an account with a financial intermediary, you will follow the procedures of the financial intermediary, rather than the foregoing. "Can I transfer funds electronically?" You can have funds transferred electronically, in amounts of $50 or more, from your Financial Institution if it is a member of the Automated Clearing House. You may make investments through two electronic transfer features, "Automatic Investment" and "Telephone Investment." * Automatic Investment: You can authorize a pre-determined amount to be regularly transferred from your account. * Telephone Investment: You can make single investments of up to $50,000 by telephone instructions to the Agent. Before you can transfer funds electronically, the Funds' Agent must have your completed New Account Application authorizing these features. If you initially decide not to choose these conveniences and then later wish to do so, you must complete a Ready Access Features Form which is available from the Distributor, Aquila Distributors, Inc., or Agent, or if your account is set up so that your broker or dealer makes these sorts of changes, request your broker or dealer to make them. The Funds may modify or terminate these investment methods or charge a service fee, upon 30 days' written notice to shareholders. If you make additional investments in Service Shares through an account with a financial intermediary, the procedures for such investments will be those provided in connection with the account rather than the foregoing. "When are shares issued and dividends declared on them?" The Funds issue shares two ways. First Method - ordinary investments. You will be paid dividends starting on the day (whether or not a Business Day) after the first Business Day on which your purchase order has been received in proper form and funds have become available for investment. You will be paid a dividend on the day on which your shares are redeemed. "When will my order become effective under the First Method?" The Funds must have payment for your purchase available for investment before 4:00 p.m. New York time on a Business Day for your order to be effective on that Business Day. Your order is effective and you will receive the next determined net asset value per share depending on the method of payment you choose, as follows:
When will an order received before When will an order received after 4:00 p.m. on a Business Day be 4:00 p.m. on a Business Day be Payment Method deemed effective? deemed effective? By wire in Federal Funds or Federal That day. Next Business Day. Reserve Draft. By wire not in Federal Funds. 4:00 p.m. on the Business Day 4:00 p.m. on the Business Day converted to Federal Funds (normally converted to Federal Funds (normally the next Business Day). the next Business Day). By Check. 4:00 p.m. on the Business Day 4:00 p.m. on the Business Day converted to Federal Funds (normally converted to Federal Funds (normally two Business Days for checks on two Business Days for checks on banks in the Federal Reserve System, banks in the Federal Reserve System, longer for other banks). longer for other banks). Automatic Investment. The day you specify; if it is not a Business Day, on the next Business Day. Telephone Investment. That day. Next Business Day.
All checks are accepted subject to collection at full face value in United States funds and must be drawn in United States dollars on a United States bank; if not, shares will not be issued. (The Agent will convert wires and checks to Federal Funds as your agent.) Second Method - For broker/dealers or banks which have requested that this method be used, to which request a Fund has consented. You will be paid dividends starting on the day on which your purchase order has been received in proper form and funds have become available for investment. You will not be paid a dividend on the day on which your shares are redeemed. "When will my order be effective under the Second Method?" Your purchase order is effective and your funds are deemed available for investment on that day if (i) You advise the Agent before 3:30 p.m. New York time on a Business Day of a dollar amount to be invested in the Cash Fund or Government Securities Fund and prior to noon of a dollar amount to be invested in the Tax-Free Fund; and (ii) Your payment in Federal Funds is received by wire on that day. The second investment method is available to prospective investors in shares of a Fund who wish to use it so that the dividends on their shares will commence to be declared on the day the purchase order is effective. Upon written or phone request the Funds will advise you as to the broker/dealers or banks through which such purchases may be made. The Agent will maintain records as to which of your shares were purchased under each of the two investment methods set forth above. If you make a redemption request and have purchased shares under both methods, the Agent will, unless you request otherwise, redeem those shares first purchased, regardless of the method under which they were purchased. Under each method, shares are issued at the net asset value per share next determined after the purchase order is received in proper form. Under each method, the New Account Application must be properly completed and have been received and accepted by the Agent; the Funds or the Distributor may also reject any purchase order. Under each method, Federal Funds (see above) must either be available to the Funds or the payment thereof must be guaranteed to the Funds so that the Funds can be as fully invested as practicable. Transfer on Death ("TOD") Registration The Funds generally permit "transfer on death" ("TOD") registration of shares purchased directly, so that on the death of the shareholder the shares are transferred to a designated beneficiary or beneficiaries. Ask the Agent or your broker/dealer for the Transfer on Death Registration Request Form. With it you will receive a copy of the TOD Rules of the Aquilasm Group of Funds, which specify how the registration becomes effective and operates. By opening a TOD Account, you agree to be bound by the TOD Rules. TOD registration may not be available if you invest through a financial intermediary. Redeeming Your Investment You may redeem some or all of your shares by a request to the Agent. Shares will be redeemed at the next net asset value determined after your request has been received in proper form. There is no minimum period for investment in the Funds, except for shares recently purchased by check or by Automatic or Telephone Investment as discussed below. If you purchased Service Shares of any Fund through broker/dealers, banks and other financial institutions which serve as shareholders of record you must redeem through those institutions, which are responsible for prompt transmission of redemption requests. How to Redeem Your Investment
By mail, send instructions to: By telephone, call: By FAX, send instructions to: PFPC Inc. 800-255-2287 toll free 610-312-5463 c/o Aquilasm Group of Funds P.O. Box 9823 Providence, RI 02940-8023
For liquidity and convenience, the Funds offer expedited redemption. Expedited Redemption Methods (Non-Certificate Shares Only) You may request expedited redemption for any shares not issued in certificate form in three ways: 1. By Telephone. The Agent will take instructions from anyone by telephone to redeem shares and make payments: a) to a Financial Institution account you have previously specified; or b) by check in the amount of $50,000 or less, mailed to the same name and address on the account from which you are redeeming, provided that neither the name nor the address has changed during the prior 30 days. You may only redeem by check via telephone request once in any seven-day period. Telephoning the Agent Whenever you telephone the Agent, please be prepared to supply: account name(s) and number name of the caller the social security number(s) registered to the account personal identification. Note: Check the accuracy of your confirmation statements immediately upon receipt. The Funds, the Agent, and the Distributor are not responsible for losses resulting from unauthorized telephone transactions if the Agent follows reasonable procedures designed to verify a caller's identity. The Agent may record calls. 2. By FAX or Mail. You may request redemption payments to a predesignated Financial Institution account by a letter of instruction sent to the Agent, PFPC Inc., by FAX at 610-312-5463 or by mail to P.O. Box 9823, Providence, RI 02940-8023. The letter, signed by the registered shareholder(s) (no signature guarantee is required), must indicate: account name(s) account number amount to be redeemed any payment directions To have redemption proceeds sent directly to a Financial Institution account, you must complete the Expedited Redemption section of the New Account Application or a Ready Access Features Form. You will be required to provide (1) details about your Financial Institution account, (2) signature guarantees and (3) possible additional documentation. The name(s) of the shareholder(s) on the Financial Institution account must be identical to the name(s) on the Funds' records of your account. You may change your designated Financial Institution account at any time by completing and returning a revised Ready Access Features Form. 3. By Check. The Agent will, upon request, provide you with forms of drafts ("checks") drawn on PNC Bank, NA (the "Bank"). This feature is not available if your shares are represented by certificates. These checks represent a further alternative redemption means and you may make them payable to the order of anyone in any amount of not less than $100. You will be subject to the Bank's rules and regulations governing its checking accounts. If the account is registered in more than one name, each check must be signed by each account holder exactly as the names appear on the account registration, unless expressly stated otherwise on your New Account Application. There is no charge for the maintenance of this special check writing privilege or for the clearance of any checks. When such a check is presented to the Bank for payment, a sufficient number of full and fractional shares in your account will be redeemed to cover the amount of the check. This check writing redemption procedure enables you to continue receiving dividends on those shares equaling the amount being redeemed by check until such time as the check is actually presented to the Bank for payment. Because these checks are paid by redemption of shares in your account, you should be certain that adequate shares are in the account to cover the amount of the check. If insufficient redeemable shares are in the account, the redemption check will be returned marked "insufficient funds." The fact that redemption checks are drafts may also permit a bank in which they are deposited to delay crediting the account in question until that bank has received payment funds for the redemption check. Note: You cannot use checks to redeem shares represented by certificates. If you purchase shares by check, you cannot use checks to redeem them until 15 days after your purchase. You may not present checks directly to any branch of the Bank. This does not affect checks used for the payment of bills or cashed at other banks. You may not use checks to redeem the entire balance of your account, since the number of shares in your account changes daily through dividend payments which are automatically reinvested in full and fractional shares. Only expedited redemption to a predesignated bank account or the regular redemption method (see below) may be used when closing your account. Multiple Redemption Services. You are not limited in choice of redemption methods but may utilize all available forms. However, when both redemption to a predesignated Financial Institution account and check writing are desired, you must so elect on your New Account Application, or by proper completion of a Ready Access Features Form. Regular Redemption Method (Certificate and Non-Certificate Shares) Certificate Shares. Mail to the Funds' Agent: (1) blank (unsigned) certificates for Service Shares to be redeemed, (2) redemption instructions, and (3) a stock assignment form. To be in "proper form," items (2) and (3) above must be signed by the registered shareholder(s) exactly as the account is registered. For a joint account, both shareholder signatures are necessary. For your protection, mail certificates separately from signed redemption instructions. We recommend that certificates be sent by registered mail, return receipt requested. We may require additional documentation for certain types of shareholders such as corporations, partnerships, trustees or executors, or if redemption is requested by someone other than the shareholder of record. Signature_Guarantees. If sufficient documentation is on file, we do not require a signature guarantee for redemptions of certificate or non-certificate shares up to $50,000, payable to the record holder, and sent to the address of record. In all other cases, signatures must be guaranteed. Your signature may be guaranteed by any: member of a national securities exchange U.S. bank or trust company state-chartered savings bank federally chartered savings and loan association foreign bank having a U.S. correspondent bank; or participant in the Securities Transfer Association Medallion Program ("STAMP"), the Stock Exchanges Medallion Program ("SEMP") or the New York Stock Exchange, Inc. Medallion Signature Program ("MSP"). A notary public is not an acceptable signature guarantor. Non-Certificate Shares. You must use the Regular Redemption Method if you have not chosen Expedited Redemption. To redeem by this method, send a letter of instruction to the Funds' Agent, which includes: account name(s) account number dollar amount or number of shares to be redeemed or a statement that all shares held in the account are to be redeemed payment instructions (we normally mail redemption proceeds to your address as registered with a Fund) signature(s) of the registered shareholder(s) and signature guarantee(s), if required, as indicated above after "Certificate Shares". "When will I receive the proceeds of my redemption?" Redemption proceeds are normally sent on the next business day following receipt of your redemption request in proper form. Except as described below, payments will normally be sent to your address of record within seven days.
Redemption Method of Payment Charges Under $1,000. Check. None. $1,000 or more. Check, or wired or transferred None. through the Automated Clearing House to your Financial Institution account if you so requested on your New Account Application or Ready Access Features Form. Through a broker/dealer. Check or wire, to your broker/dealer. None. However, your broker/dealer may charge a fee.
Although the Funds do not currently intend to, any Fund may impose a charge, up to $5.00 per wire redemption, after written notice to shareholders who have elected this redemption procedure. Upon 30 days' written notice to shareholders, any Fund may modify or terminate the use of the Automated Clearing House to make redemption payments at any time or charge a service fee, although no such fee is presently contemplated. If any such changes are made, the Prospectus will be supplemented to reflect them. If you use a broker or dealer to arrange for a redemption, you may be charged a fee for this service. The Funds may delay payment for redemption of shares recently purchased by check (including certified, cashier's or official bank check), Automatic Investment or Telephone Investment for up to 15 days after purchase; however, payment for redemption will not be delayed after (i) the check or transfer of funds has been honored, or (ii) the Agent receives satisfactory assurance that your Financial Institution will honor the check or transfer of funds. You can eliminate possible delays by paying for purchased shares with wired funds or Federal Reserve drafts. The Funds have the right to postpone payment or suspend redemption rights during certain periods. These periods may occur (i) when the New York Stock Exchange is closed for other than weekends and holidays, (ii) when the Securities and Exchange Commission (the "SEC") restricts trading on the New York Stock Exchange, (iii) when the SEC determines that an emergency exists which causes disposal of, or determination of the value of, portfolio securities to be unreasonable or impracticable, and (iv) during such other periods as the SEC may permit. Any Fund can redeem your shares if their value totals less than $500 as a result of redemptions or failure to meet and maintain the minimum investment level under an Automatic Investment Program. Before such a redemption is made, we will send you a notice giving you 60 days to make additional investments to bring your account up to the minimum. Redemption proceeds may be paid in whole or in part by distribution of a Fund's portfolio securities ("redemption in kind") in conformity with SEC rules. This method will only be used if the Board of Trustees determines that payments partially or wholly in cash would be detrimental to the best interests of the remaining shareholders. "Is there an Automatic Withdrawal Plan?" An Automatic Withdrawal Plan, which is available only for shares purchased directly and not for shares purchased through a financial intermediary, allows you to arrange to receive a monthly or quarterly check in a stated amount, not less than $50. Distribution Arrangements Confirmations and Share Certificates If you invest in a Fund directly, rather than through a financial intermediary, all purchases and redemptions of Service Shares will be confirmed and credited to you in an account maintained for you by the Agent in full and fractional shares of the Fund being purchased (rounded to the nearest 1/1000th of a share). Share certificates will not be issued unless you so request from the Agent in writing and declare a need for such certificates, such as a pledge of shares or an estate situation. If certificates are issued at your request, Expedited Redemption Methods described above will not be available and delay and expense may be incurred if you lose the certificates. The Funds will not issue certificates for fractional shares or to shareholders who have elected the checking account or predesignated bank account methods of withdrawing cash from their accounts. Share certificates may not be available to investors who purchase Service Shares through an account with a financial intermediary. The Funds and the Distributor may reject any order for the purchase of shares. In addition, the offering of shares may be suspended at any time and resumed at any time thereafter. Distribution Plan Each Fund has adopted a Distribution Plan under Rule 12b-1 ("Rule 12b-1") under the 1940 Act. One section of the first part of the Distribution Plan of each Fund is designed to protect against any claim against or involving the Fund that some of the expenses which the Fund pays or may pay come within the purview of Rule 12b-1. Another section of the first part of the Distribution Plan authorizes the Administrator, not the Fund, to make certain payments to certain Qualified Recipients (as defined in the Distribution Plan) which have rendered assistance in the distribution and/or retention of the Fund's shares. For the Cash Fund, these payments may not exceed 0.15 of 1% of the average annual net assets of the Fund for a fiscal year; for the Tax-Free Fund and the Government Securities Fund, the rate is 0.10 of 1%. The second part of each Distribution Plan provides for payments by each Fund out of its assets to broker/dealers, other financial institutions and service providers which have entered into appropriate agreements with the Distributor. The total payments under this part of each Distribution Plan may not exceed 0.25 of 1% of the average annual assets of that Fund represented by its Service Shares. A recipient of such payments may pass on a portion of the payments it receives to other financial institutions or service organizations. Payments are made only from those Fund assets represented by Service Shares. Because these distribution fees are paid out of each Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment. Dividends The Funds will declare all of their net income for dividend purposes daily as dividends. If you redeem all of your shares, you will be credited on the redemption payment date with the amount of all dividends declared for the month through the date of redemption, or through the day preceding the date of redemption in the case of shares issued under the "second" method. You will receive monthly a summary of your account, including information as to dividends paid during the month and the shares credited to your account through reinvestment of dividends. Dividends paid by each Fund with respect to Service Shares and Original Shares (the Fund's other class of shares) will be calculated in the same manner, at the same time, on the same day, and will be in the same amount except that any class expenses (including payments made by Service Shares under the Distribution Plan) will be borne exclusively by that class. Dividends on Original Shares are expected generally to be higher than those on Service Shares because expenses allocated to Service Shares will generally be higher. Dividends will be taxable to you as ordinary income (except as described in "Tax Information Concerning the Tax-Free Fund" below), even though reinvested. Statements as to the tax status of your dividends will be mailed annually. It is possible but unlikely that a Fund may have realized long-term capital gains or losses in a year. Dividends of each Fund will automatically be reinvested in full and fractional shares of the same class at net asset value unless you elect otherwise. You may choose to have all or any part of the payments for dividends or distributions paid in cash. You can elect to have the cash portion of your dividends and distributions deposited, without charge, by electronic funds transfers into your account at a financial institution, if it is a member of the Automated Clearing House. You can make any of these elections on the New Account Application, by a Ready Access Features Form or by a letter to the Agent. Your election to receive some or all of your dividends and distributions in cash will be effective as of the next payment of dividends after it has been received in proper form by the Agent. It will continue in effect until the Agent receives written notification of a change. Whether your dividends and distributions are paid in cash or reinvested, you will receive a monthly statement indicating the current status of your investment account. If you do not comply with laws requiring you to furnish taxpayer identification numbers and report dividends, the Funds may be required to impose backup withholding at a rate of 28% upon payment of redemptions and dividends. The Funds reserve the right to change the dividend and distribution payment option on your account to "reinvest" if mail sent to the address on your account is returned by the post office as "undeliverable" and you have elected to have your account dividends and/or distributions paid in cash. In such event, the Funds would then purchase additional shares of the Funds with any dividend or distribution payments that are "undeliverable". In order to change the option back to "cash", you would need to send the Agent written instructions as described above. Tax Information Tax Information Concerning the Tax-Free Fund The Tax-Free Fund seeks to pay "exempt-interest dividends." These are dividends derived from net income received by the Tax-Free Fund on its Municipal Obligations, provided that, as the Tax-Free Fund intends, at least 50% of the value of its assets is invested in tax-exempt obligations. Such dividends are exempt from regular Federal income tax. The Fund will allocate exempt-interest dividends by applying one designated percentage to all income dividends it declares during its tax year. It will normally make this designation in the first month following its fiscal year end for dividends paid in the prior year. Some portion of the Tax-Free Fund's distributions may be taxable. A shareholder receiving a dividend, for example, from net interest income earned by the Tax-Free Fund from one or more of (i) Taxable Obligations and (ii) income from repurchase agreements and securities loans treats the dividend as a receipt of ordinary income in the computation of the shareholder's gross income regardless of whether it is reinvested in Tax-Free Fund shares; such dividends and capital gains distributions are not included in exempt-interest dividends. Although exempt-interest dividends are not subject to regular Federal income tax, each taxpayer must report the total amount of tax-exempt interest (including exempt-interest dividends from the Tax-Free Fund) received or acquired during the year. Exempt-interest dividends are taken into account in determining the taxable portion of any Social Security or Railroad Retirement benefit you or your spouse receives. Under the Internal Revenue Code, interest on loans incurred by shareholders to enable them to purchase or carry shares of the Tax-Free Fund may not be deducted for regular Federal tax purposes. In addition, under rules used by the Internal Revenue Service for determining when borrowed funds are deemed used for the purpose of purchasing or carrying particular assets, the purchase of shares of the Tax-Free Fund may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to the purchase of shares. If you, or someone related to you, is a "substantial user" of facilities financed by industrial development or private activity bonds, you should consult your own tax adviser before purchasing shares of the Tax-Free Fund. Interest from all Municipal Obligations is tax-exempt for purposes of computing the shareholder's regular tax. However, interest from so-called private activity bonds issued after August 7, 1986, constitutes a tax preference for both individuals and corporations and thus will enter into a computation of the alternative minimum tax ("AMT"). Whether or not that computation will result in a tax will depend on the entire content of your return. The Tax-Free Fund will not invest more than 20% of its assets in the types of Municipal Obligations that pay interest subject to AMT. The 20% limit is a fundamental policy of the Tax-Free Fund; it cannot be changed without shareholder approval. An adjustment required by the Internal Revenue Code will tend to make it more likely that corporate shareholders will be subject to AMT. They should consult their tax advisers. Hawaiian Tax Information Dividends and distributions made by the Tax-Free Fund to Hawaii residents will generally be treated for Hawaii income tax purposes in the same manner as they are treated under the Code for Federal income tax purposes. Under Hawaii law, however, interest derived from obligations of states (and their political subdivisions) other than Hawaii will not be exempt from Hawaii income taxation. (Interest derived from bonds or obligations issued by or under the authority of the following is exempt from Hawaii income taxation: Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands.) For the calendar years 2004, 2003 and 2002, the percentage of the Tax-Free Fund's dividends exempt from State of Hawaii income taxes was 24.18%, 34.21% and 35.34% respectively, which should not be considered predictive of future results. Interest on Hawaiian Obligations, tax-exempt obligations of states other than Hawaii and their political subdivisions, and obligations of the United States or its possessions is not exempt from the Hawaii Franchise Tax. This tax applies to banks, building and loan associations, financial service loan companies, financial corporations, and small business investment companies. Persons or entities who are not Hawaii residents should not be subject to Hawaii income taxation on dividends and distributions made by the Tax-Free Fund but may be subject to other state and local taxes. Shareholders of the Fund should consult their tax advisors about other state and local tax consequences of their investment in the Fund. Hawaiian Tax Information Concerning the Government Securities Fund The Director of Taxation of Hawaii has stated to the Government Securities Fund that dividends paid by a regulated investment company from interest it receives on United States Government obligations will be exempt from State of Hawaii income tax. For the calendar years 2004, 2003 and 2002, the percentage of the Government Securities Fund's dividends exempt from State of Hawaii income taxes was 98.99%, 98.5% and 98.65% respectively, which should not be considered predictive of future results. Dividends paid from other types of interest (including interest on U.S. Treasury repurchase transactions), and capital gains distributions, if any, will be taxable. Pacific Capital Cash Assets Trust Service Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Service Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
SERVICE SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ Net asset value, beginning of period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income .................... 0.01 0.01 0.01 0.02 0.05 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income ..... (0.01) (0.01) (0.01) (0.02) (0.05) ------ ------ ------ ------ ------ Net asset value, end of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ................................ 1.11% 0.65% 1.09% 2.27% 5.63% Ratios/supplemental data Net assets, end of period (in millions) .. $ 166 $ 119 $ 123 $ 146 $ 221 Ratio of expenses to average net assets .. 0.61% 0.46% 0.61% 0.83% 0.82% Ratio of net investment income to average net assets ..................... 1.12% 0.65% 1.10% 2.36% 5.49% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets .. 0.81% 0.82% 0.83% -- -- Ratio of net investment income to average net assets ..................... 0.91% 0.29% 0.88% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .. 0.61% 0.46% 0.61% 0.82% 0.82%
Pacific Capital Tax-Free Cash Assets Trust Service Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Service Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
SERVICE SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income ................. 0.01 0.01 0.01 0.02 0.03 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income .. (0.01) (0.01) (0.01) (0.02) (0.03) ------ ------ ------ ------ ------ Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ............................. 0.90% 0.59% 0.90% 1.75% 3.32% Ratios/supplemental data Net assets, end of period (in millions) $ 72 $ 50 $ 56 $ 52 $ 54 Ratio of expenses to average net assets 0.53% 0.42% 0.53% 0.77% 0.78% Ratio of net investment income to average net assets .................. 0.92% 0.59% 0.89% 1.77% 3.26% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets 0.75% 0.77% 0.76% -- -- Ratio of net investment income to average net assets .................. 0.71% 0.25% 0.66% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .. 0.53% 0.42% 0.52% 0.77% 0.78%
Pacific Capital U. S. Government Securities Cash Assets Trust Service Shares Financial Highlights (For a Share Outstanding Throughout Each Period) The financial highlights table is intended to help you understand the Fund's financial performance for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Service Shares of the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP (independent registered public accounting firm), whose report, along with the Fund's financial statements, is included in the annual report, is incorporated by reference into the SAI and is available upon request.
SERVICE SHARES ------------------------------------------------------ YEAR ENDED MARCH 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income ................. 0.01 0.01 0.01 0.02 0.05 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income .. (0.01) (0.01) (0.01) (0.02) (0.05) ------ ------ ------ ------ ------ Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total return ............................. 1.16% 0.71% 1.09% 2.48% 5.62% Ratios/supplemental data Net assets, end of period (in millions) $ 578 $ 575 $ 448 $ 457 $ 332 Ratio of expenses to average net assets 0.52% 0.36% 0.49% 0.70% 0.72% Ratio of net investment income to average net assets .................. 1.16% 0.71% 1.08% 2.39% 5.47% The expense and net investment income ratios without the effect of the Adviser's and Administrator's contractual cap on fees were: Ratio of expenses to average net assets 0.70% 0.71% 0.71% -- -- Ratio of net investment income to average net assets .................. 0.98% 0.36% 0.86% -- -- The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets 0.52% 0.36% 0.49% 0.70% 0.72%
[Inside Back Cover] Investment Adviser Asset Management Group of Bank of Hawaii Financial Plaza of the Pacific P.O. Box 3170 Honolulu, Hawaii 96802 Administrator Aquila Investment Management LLC 380 Madison Avenue, Suite 2300 New York, New York 10017 Trustees Theodore T. Mason, Chairman Thomas W. Courtney Diana P. Herrmann Stanley W. Hong Russell K. Okata Douglas Philpotts Oswald K. Stender Chairman Emeritus and Founder Lacy B. Herrmann Officers Diana P. Herrmann, Vice Chair and President Charles E. Childs, III, Executive Vice President Sherri Foster, Vice President Robert W. Anderson, Chief Compliance Officer Joseph P. DiMaggio, Chief Financial Officer and Treasurer Edward M.W. Hines, Secretary Distributor Aquila Distributors, Inc. 380 Madison Avenue, Suite 2300 New York, New York 10017 Transfer And Shareholder Servicing Agent PFPC Inc. 760 Moore Road King of Prussia, Pennsylvania 19406 Custodian Bank One Trust Company, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 Independent Registered Public Accounting Firm KPMG LLP 345 Park Avenue New York, New York 10154 Counsel Hollyer Brady Barrett & Hines LLP 551 Fifth Avenue New York, New York 10176 This Prospectus concisely states information about the Funds that you should know before investing. A Statement of Additional Information about the Funds (the "SAI") has been filed with the Securities and Exchange Commission. The SAI contains information about the Funds and their management not included in this Prospectus. The SAI is incorporated by reference in its entirety in this Prospectus and is therefore legally a part of this Prospectus. Only when you have read both this Prospectus and the SAI are all material facts about the Funds available to you. You can get additional information about the Funds' investments in the Funds' annual and semi-annual reports to shareholders. In the Funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds' performance during their last fiscal year. You can get the SAI and the Funds' annual and semi-annual reports without charge, upon request, by calling 800-255-2287 (toll free). In addition, you can review and copy information about the Funds (including the SAI) at the Public Reference Room of the SEC in Washington, D.C. Information on the operation of the Public Reference Room is available by calling 202-942-8090. Reports and other information about the Funds are also available on the EDGAR Database at the SEC's Internet site at http://www.sec.gov. Copies of this information can be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. The file number under which the Trust is registered with the SEC under the Investment Company Act of 1940 is 811-4066 The Pacific Capital Funds of Cash Assets Trust Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust A cash management investment [LOGO] PROSPECTUS Service Shares To make shareholder account inquiries, call the Funds' Shareholder Servicing Agent at: 800-255-2287 toll free or you can write to PFPC Inc. 760 Moore Road King of Prussia, PA 19406-1212 Ticker Symbol CUSIP # PCCAT CASXX 14754H408 PCTFCAT TFAXX 14754H507 PCUSGSCAT UCSXX 14754H606 This Prospectus should be read and retained for future reference The Pacific Capital Funds of CASH ASSETS TRUST Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust 380 Madison Avenue, Suite 2300 New York, NY 10017 212-697-6666 800-CATS-4-YOU (800-228-7496) Statement of Additional Information July 31, 2005 This Statement of Additional Information (the "SAI") is not a Prospectus. It relates to Cash Assets Trust (the "Trust") which has three separate funds, Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital U.S. Government Securities Cash Assets Trust (each a "Fund" and collectively, the "Funds"). There are two Prospectuses for the Funds dated July 31, 2005: one for Original Class Shares ("Original Shares"), the other for Service Class Shares ("Service Shares") of the Funds. References in this SAI to "the Prospectus" refer to either of these Prospectuses. The SAI should be read in conjunction with the Prospectus for the class of shares in which you are considering investing. Prospectuses may be obtained from the Fund's Distributor, Aquila Distributors, Inc., 380 Madison Avenue, Suite 2300 New York, NY 10017 800-228-7496 toll free or 212-697-6666 Financial Statements The financial statements for each Fund for the year ended March 31, 2005, which are contained in the Annual Report for that fiscal year, are hereby incorporated by reference into this SAI. Those financial statements have been audited by KPMG LLP, the Trust's independent registered public accounting firm, whose report thereon is incorporated herein by reference. The Annual Report of each Fund can be obtained without charge by calling the toll-free number listed above. The Annual Report will be delivered with the SAI. TABLE OF CONTENTS Trust History.......................................................... Investment Strategies and Risks........................................ Policies of the Funds.................................................. Management of the Funds................................................ Ownership of Securities................................................ Investment Advisory and Other Services................................. Brokerage Allocation and Other Practices............................... Capital Stock.......................................................... Purchase, Redemption, and Pricing of Shares............................ Exchange Privileges.................................................... Taxation of the Trust.................................................. Underwriter............................................................ Appendix A............................................................. CASH ASSETS TRUST STATEMENT OF ADDITIONAL INFORMATION Trust History Cash Assets Trust (the "Trust") is a Massachusetts business trust. It is an open-end, non-diversified management investment company formed in 1984. The Trust consists of three separate funds: Pacific Capital Cash Assets Trust, (the "Cash Fund"), Pacific Capital Tax-Free Cash Assets Trust (the "Tax-Free Fund") and Pacific Capital U.S. Government Securities Cash Assets Trust (the "Government Securities Fund"). They are collectively referred to as the "Funds." Until April 1, 1998, the Government Securities Fund was called the Treasuries Fund. Investment Strategies and Risks The investment objective and policies of each Fund are described in the Prospectuses, which refer to the investments and investment methods described below. Additional Information About the Cash Fund's Investments Under the current management policies, the Cash Fund invests only in the following types of obligations: (1) U.S. Government Securities: Obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. (2) Bank Obligations and Instruments Secured by Them: Bank obligations (i) of U.S. regulated banks having total assets of at least $1.5 billion, which may be domestic banks, foreign branches of such banks or U.S. subsidiaries of foreign banks; (ii) of any foreign bank having total assets equivalent to at least $1.5 billion; or (iii) that are fully insured as to principal by the Federal Deposit Insurance Corporation. ("Banks" includes commercial banks, savings banks and savings and loan associations.) (3) Commercial Paper: Short-term corporate debt. (4) Corporate Debt Obligations: Debt obligations issued by corporations (for example, bonds and debentures). Debentures are a form of unsecured debt issued by corporations. (5) Variable Amount Master Demand Notes: Variable amount master demand notes repayable on not more than 30 days' notice. These notes permit the investment of fluctuating amounts by the Cash Fund at varying rates of interest pursuant to direct arrangements between the Cash Fund, as lender, and the borrower. They permit daily changes in the amounts borrowed. The Cash Fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower may prepay up to the full amount of the note without penalty. Variable amount master demand notes may or may not be backed by bank letters of credit. (6) Certain Other Obligations: Obligations other than those listed in 1 through 5 above only if such other obligations are guaranteed as to principal and interest by either a bank in whose obligations the Cash Fund may invest (see 2 above) or a corporation in whose commercial paper the Cash Fund may invest (see 3 above). If the Cash Fund invests more than 5% of its net assets in such other obligations, the Prospectus will be supplemented to describe them. (7) Repurchase Agreements: The Cash Fund may purchase securities subject to repurchase agreements with commercial banks and broker-dealers provided that such securities consist entirely of U.S. Government securities or securities that, at the time the repurchase agreement is entered into, are rated in the highest rating category by two or more nationally recognized statistical rating organizations ("NRSROs"). (8) When-Issued or Delayed Delivery Securities: The Cash Fund may buy securities on a when-issued or delayed delivery basis. The Cash Fund may not enter into when-issued commitments exceeding in the aggregate 15% of the market value of the Cash Fund's total assets, less liabilities other than the obligations created by when-issued commitments. When-issued securities are subject to market fluctuation and no interest accrues to the Cash Fund until delivery and payment take place; their value at the delivery date may be less than the purchase price. (9) The Cash Fund may purchase shares of investment companies with money-market portfolios. Further Information About Variable Amount Master Demand Notes Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that they will be traded, and there is no secondary market for them. They are redeemable (and thus repayable by the borrower) at principal amount, plus accrued interest, at any time on not more than thirty days' notice. Except for those notes which are payable at principal amount plus accrued interest within seven days after demand, such notes fall within the SEC's overall 10% limitation on securities with possible limited liquidity. There is no limitation on the type of issuer from which these notes will be purchased; however, all such notes must be "First Tier Securities" (as defined in Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act")) and in connection with such purchases and on an ongoing basis, Asset Management Group of the Bank of Hawaii (the "Adviser") will consider the earning power, cash flow and other liquidity ratios of the issuer, and its ability to pay principal and interest on demand, including a situation in which all holders of such notes make demand simultaneously. Master demand notes as such are not typically rated by credit rating agencies and if not so rated the Fund may, under its minimum rating standards, invest in them only if at the time of an investment they are determined to be comparable in quality to rated issues in which the Fund can invest. Information About Insured Bank Obligations The Federal Deposit Insurance Corporation ("FDIC") insures the deposits of Federally insured banks and savings institutions (collectively herein, "banks") up to $100,000. The Cash Fund may purchase bank obligations which are fully insured as to principal by the FDIC. To remain fully insured as to principal, these investments must currently be limited to $100,000 per bank; if the principal amount and accrued interest together exceed $100,000 then the excess accrued interest will not be insured. Insured bank obligations may have limited marketability; unless such obligations are payable at principal amount plus accrued interest on demand or within seven days after demand, or the Board of Trustees determines that a readily available market exists for such obligations, the Cash Fund and the Tax-Free Fund will invest in them only within a 10% limit for each Fund. Information about Certain Other Obligations The Cash Fund may purchase obligations other than those listed in the Prospectus, but only if such other obligations are guaranteed as to principal and interest by either a bank in whose obligations the Cash Fund may invest or a corporation in whose commercial paper it may invest. If any such guarantee is unconditional and is itself an "Eligible Security" (as defined in Rule 2a-7), the obligation may be purchased based on the guarantee; if any such guarantee is not unconditional, purchase of the obligation can only be made if the underlying obligation is an "Eligible Security" and meets all other applicable requirements of Rule 2a-7. As of the date of the SAI the Cash Fund does not own any such obligations and has no present intention of purchasing any. Such obligations can be any obligation of any kind so guaranteed, including, for example, obligations created by "securitizing" various kinds of assets such as credit card receivables or mortgages. If the Cash Fund invests in these assets, they will be identified in the Prospectus and described in the SAI. Additional Information Regarding Municipal Obligations Which The Tax-Free Fund May Purchase Municipal Notes The Tax-Free Fund may invest in municipal notes. Municipal notes include, but are not limited to, tax anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue anticipation notes ("RANs"), and construction loan notes. Notes sold as interim financing in anticipation of collection of taxes, a bond sale or receipt of other revenues are usually general obligations of the issuer. TANs. An uncertainty in a municipal issuer's capacity to raise taxes as a result of such things as a decline in its tax base or a rise in delinquencies could adversely affect the issuer's ability to meet its obligations on outstanding TANs. Furthermore, some municipal issuers mix various tax proceeds into a general fund that is used to meet obligations other than those of the outstanding TANs. Use of such a general fund to meet various obligations could affect the likelihood of making payments on TANs. BANs. The ability of a municipal issuer to meet its obligations on its BANs is primarily dependent on the issuer's adequate access to the longer term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal of, and interest on, BANs. RANs. A decline in the receipt of certain revenues, such as anticipated revenues from another level of government, could adversely affect an issuer's ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal of, and interest on, RANs. Municipal Bonds The two principal classifications of municipal bonds are "general obligation" bonds and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and unlimited taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or projects or, in a few cases, from the proceeds of a special excise or other tax, but are not supported by the issuer's power to levy unlimited general taxes. There are, of course, variations in the security of municipal bonds, both within a particular classification and between classifications, depending on numerous factors. The yields of municipal bonds depend on, among other things, general financial conditions, general conditions of the municipal bond market, size of a particular offering, the maturity of the obligation and rating of the issue. Other Information Since the Tax-Free Fund may invest in industrial development bonds or private activity bonds, the Tax-Free Fund may not be an appropriate investment for entities which are "substantial users" of facilities financed by those industrial development bonds or private activity bonds or for investors who are "related persons" of such users. Generally, an individual will not be a "related person" under the Internal Revenue Code unless such investor or his or her immediate family (spouse, brothers, sisters and lineal descendants) own directly or indirectly in the aggregate more than 50 percent of the equity of a corporation or is a partner of a partnership which is a "substantial user" of a facility financed from the proceeds of "industrial development bonds" or "private activity bonds". A "substantial user" of such facilities is defined generally as a "non-exempt person who regularly uses a part of [a] facility" financed from the proceeds of industrial development bonds or private activity bonds. Under the Tax Reform Act of 1986, there are certain Municipal Obligations the interest on which is subject to the Federal alternative minimum tax on individuals. While the Tax-Free Fund may purchase these obligations, it may, on the other hand, refrain from purchasing them due to this tax consequence. Also the Tax-Free Fund will not purchase Municipal Obligations the interest on which is not exempt from regular Federal income taxes. The foregoing may narrow the number of Municipal Obligations available to the Tax-Free Fund. The Tax-Free Fund may enter into puts with banks or broker-dealers that, in the opinion of the Adviser, present minimal credit risks. The ability of the Tax-Free Fund to exercise a put will depend on the ability of the bank or broker-dealer to pay for the underlying securities at the time the put is exercised. In the event that a bank or broker-dealer should default on its obligation to purchase an underlying security, the Tax-Free Fund might be unable to recover all or a portion of any loss sustained from having to sell the security elsewhere. The Tax-Free Fund may enter into certain puts solely to maintain liquidity and will not exercise its rights thereunder for trading purposes. The puts will be only for periods substantially less than the life of the underlying security. The acquisition of a put will not affect the valuation by the Tax-Free Fund of the underlying security. The actual put will be valued at zero in determining net asset value. Where the Tax-Free Fund pays directly or indirectly for a put, its cost will be reflected as an unrealized loss for the period during which the put is held by the Tax-Free Fund and will be reflected in realized gain or loss when the put is exercised or expires. If the value of the underlying security increases, the potential for unrealized or realized gain is reduced by the cost of the put. The maturity of a Municipal Obligation purchased by the Tax-Free Fund will not be considered shortened by any such put to which the obligation is subject. Additional Information About Other Investments The Tax-Free Fund Can Make Temporary Taxable Investments The Tax-Free Fund may invest the proceeds of the sale of shares or the sale of Municipal Obligations in Taxable Obligations pending investment in Municipal Obligations. The Tax-Free Fund may also enter into repurchase agreements as to Taxable Obligations. As a fundamental policy, under normal market conditions the Tax-Free Fund may not purchase Taxable Obligations if thereafter more than 20% of its net assets would consist of such obligations or cash, except for temporary defensive purposes, i.e., in anticipation of a decline or possible decline in the value of Municipal Obligations. Under current management policies the Taxable Obligations which the Tax-Free Fund may purchase are: Obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities; commercial paper obligations and bank obligations (i) of U.S. regulated banks having total assets of at least $1.5 billion, which may be domestic banks, foreign branches of such banks or U.S. subsidiaries of foreign banks; or (ii) that are fully insured as to principal by the Federal Deposit Insurance Corporation. "Bank" includes commercial banks, savings banks and savings and loan associations. Floating and Variable Rate Instruments The Tax-Free Fund may purchase obligations with a floating or variable rate of interest. These obligations bear interest at rates that are not fixed, but vary with changes in specified market rates or indices, such as the prime rate, or at specified intervals. Certain of these obligations may carry a demand feature that would permit the Tax-Free Fund to tender them back to the issuer at par value prior to maturity. The Adviser will monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. To the extent that floating and variable rate instruments without demand features are not readily marketable, they will be subject to the regulatory restriction that a money-market fund may not invest an amount equal to more than 10% of the current value of its net assets in securities that are illiquid. Certain Put Rights The Tax-Free Fund may enter into put transactions with commercial banks with respect to obligations held in its portfolio. The right of the Tax-Free Fund to exercise a put is unconditional and unqualified. A put is not transferable by the Tax-Free Fund, although the Tax-Free Fund may sell the underlying securities to a third party at any time. If necessary and advisable, the Tax-Free Fund may pay for certain puts either separately in cash or by paying a higher price for portfolio securities that are acquired subject to such a put (thus reducing the yield to maturity otherwise available for the same securities). When-Issued Securities The Tax-Free Fund may purchase Municipal Obligations on a when-issued basis, in which case delivery and payment normally take place within 45 days after the date of the commitment to purchase. The Tax-Free Fund will only make commitments to purchase Municipal Obligations on a when-issued basis with the intention of actually acquiring the securities, but may sell them before the settlement date if it is deemed advisable. Any gains realized in such sales would produce taxable income. No income accrues to the purchaser prior to issuance. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing municipal securities on a when-issued basis is a form of leverage and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself, in which case there could be an unrealized loss in the value of the investment at the time of delivery. Repurchase Agreements The Tax-Free Fund may purchase securities subject to repurchase agreements provided that such securities are otherwise eligible for purchase by the Fund; it is the Tax-Free Fund's current policy to use for repurchase agreements only collateral that consists entirely of U.S. Government securities or securities that, at the time the repurchase agreement is entered into, are rated in the highest rating category by the requisite NRSROs. Repurchase agreements may be entered into only with commercial banks or broker-dealers. Loans of Portfolio Securities The Tax-Free Fund can lend its portfolio securities on a collateralized basis up to 10% of the value of its total assets to specified borrowers (brokers, dealers and certain financial institutions) to increase its income. The Tax-Free Fund may be considered as the beneficial owner of the loaned securities in that any gain or loss in their market price during the loan inures to the Tax-Free Fund and its shareholders; thus, when the loan is terminated, the value of the securities may be more or less than their value at the beginning of the loan. Shares of Investment Companies The Tax-Free Fund may purchase shares of investment companies with money market portfolios consisting only of Municipal Obligations. Ratings The ratings assigned by the nationally recognized statistical rating organizations ("NRSROs") represent their opinions of the quality of the debt securities which they undertake to rate. Ratings are general and not absolute standards of quality; consequently, obligations with the same maturity, stated interest rate and rating may have different yields, while obligations of the same maturity and stated interest rate with different ratings may have the same yield. See Appendix A to this SAI for further information about the ratings of the NRSROs as to the various rated Municipal Obligations and Taxable Obligations which the Tax-Free Fund may purchase. U.S. Government Securities All of the Funds may invest in U.S Government securities (i.e., obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities), which include securities issued by the U.S. Government, such as Treasury Bills (which mature within one year of the date they are issued) and Treasury Notes and Bonds (which are issued with longer maturities). All Treasury securities are backed by the full faith and credit of the United States. The Funds may invest in securities of U.S. government agencies and instrumentalities that issue or guarantee securities. These include, but are not limited to, the Farmers Home Administration, Federal Farm Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing Administration, Federal National Mortgage Association, Financing Corporation, Government National Mortgage Association, Resolution Funding Corporation, Small Business Administration, Student Loan Marketing Association and Tennessee Valley Authority. The Government Securities Fund may purchase shares of investment companies with money-market portfolios which consist only of U.S. government securities. Securities issued or guaranteed by U.S. government agencies and instrumentalities are not always supported by the full faith and credit of the United States. Some, such as securities issued by the Federal Home Loan Banks, are backed by the right of the agency or instrumentality to borrow from the Treasury. Others, such as securities issued by the Federal National Mortgage Association, are supported only by the credit of the instrumentality and not by the Treasury. If the securities are not backed by the full faith and credit of the United States, the owner of the securities must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment. The Funds will invest in government securities, including securities of agencies and instrumentalities, only if the Adviser, acting under procedures approved by the Board of Trustees, is satisfied that these obligations present minimal credit risks. Turnover In general, the Funds will purchase securities with the expectation of holding them to maturity. However, the Funds may to some degree engage in short-term trading to attempt to take advantage of short-term market variations. The Funds may also sell securities prior to maturity to meet redemptions or as a result of a revised management evaluation of the issuer. The Funds will have a high portfolio turnover due to the short maturities of the securities held, but this should not affect net asset value or income, as brokerage commissions are not usually paid on the securities in which the Funds invest. (In the usual calculation of portfolio turnover, securities of the type in which the Funds invests are excluded; consequently, the high turnover which the Funds will have is not comparable to the turnover of non-money-market investment companies.) When-Issued and Delayed Delivery Securities The Cash Fund and the Tax-Free Fund may purchase securities on a when-issued or delayed delivery basis. For example, delivery and payment may take place a month or more after the date of the transaction. The purchase price and the interest rate payable on the securities are fixed on the transaction date. At the time that either Fund makes a commitment to purchase securities on a when-issued or delayed delivery basis, it will record the transaction and thereafter reflect the value of such securities each day in determining its net asset value. The Cash Fund and the Tax-Free Fund will make commitments for such when-issued transactions only when they have the intention of actually acquiring the securities. The Cash Fund and the Tax-Free Fund will each maintain with the Custodian and mark to market every business day a separate account with portfolio securities in an amount at least equal to such commitments. On delivery dates for such transactions, the Cash Fund and the Tax-Free Fund will each meet their obligations from maturities or sales of the securities held in the separate account and/or from cash flow. If the Cash Fund or the Tax-Free Fund chooses to dispose of any right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. Neither the Cash Fund nor the Tax-Free Fund may enter into when-issued commitments exceeding in the aggregate 15% of the market value of its total assets, less liabilities other than the obligations created by when-issued commitments. Shares of Investment Companies The Funds will not purchase shares of an investment company which imposes a sales or redemption charge of any sort; however, an investment company in which any Fund invests may have a distribution plan under which it may pay for distribution expenses or services. The Funds will purchase shares only of investment companies with high-quality portfolios which the Adviser, pursuant to procedures approved by the Board of Trustees, determines present minimal credit risks. Such investments will ordinarily be made to provide additional liquidity and at the same time to earn higher yields than are usually associated with the overnight or short-term obligations in which a Fund might otherwise invest for this purpose. While higher yields than those of alternative investments may be obtainable, these yields will reflect management fees and operating and distribution expenses of the investment companies and will result in duplication of management fees with respect to assets of any Fund so invested. A Fund may not invest in the shares of an investment company if immediately thereafter it has invested more than 10% of the value of its total assets in such companies or more than 5% of the value of its total assets in any one such company; it may not invest in such a company if immediately thereafter it owns more than 3% of the total outstanding voting stock of such a company. Diversification and Certain Industry Requirements The Cash Fund has a rule under which it cannot buy the securities of issuers in any one industry if more than 25% of its total assets would then be invested in securities of issuers of that industry. In applying this rule to commercial paper issued by finance subsidiaries or affiliates of operating companies, if the business of the issuer consists primarily of financing the activities of the related operating company, the Fund considers the industry of the issuer to be that of the related operating company. Policies of the Funds Investment Restrictions Each Fund has a number of policies concerning what it can and cannot do. Those policies, which are called "fundamental policies," may not be changed unless the holders of a majority, as defined in the 1940 Act, of the outstanding shares of that Fund vote to change them. Under the 1940 Act, the vote of the holders of a majority of the outstanding shares of a Fund means the vote of the holders of the lesser of (a) 67% or more of the dollar value of the Fund's shares present at a meeting or represented by proxy if the holders of more than 50% of the dollar value of its shares are so present or represented, or (b) more than 50% of the dollar value of its outstanding shares. Those fundamental policies not set forth in the Prospectus are set forth below. Investment Restrictions of the Cash Fund The following restrictions on the Cash Fund's investments are fundamental policies and cannot be changed without approval of the shareholders of the Cash Fund. 1. The Cash Fund has diversification and anti-concentration requirements. The Cash Fund cannot buy the securities of any issuer if it would then own more than 10% of the total value of all of the issuer's outstanding securities. The Cash Fund cannot buy the securities (not including U.S. Government Securities) of any issuer if more than 5% of its total assets (valued at market value) would then be invested in securities of that issuer. In addition, Rule 2a-7 limits investment in "Second Tier" Securities to 5% of the Cash Fund's assets in the aggregate, and to no more than the greater of 1% of the Cash Fund's assets or $1,000,000 in the securities of any one issuer. The Cash Fund cannot buy the securities of issuers in any one industry if more than 25% of its total assets would then be invested in securities of issuers in that industry; U.S. Government securities and those domestic bank obligations and instruments of domestic banks which the Cash Fund may purchase are considered as not included in this limit; however, obligations of foreign banks and of foreign branches of domestic banks are considered as included in this limit. 2. The Cash Fund can make loans only by lending securities or entering into repurchase agreements. The Cash Fund can buy those debt securities which it is permitted to buy; this is investing, not making a loan. The Cash Fund can lend its portfolio securities on a collateralized basis up to 10% of the value of its total assets to specified borrowers (broker-dealers, banks and certain other financial institutions) to increase its income and enter into repurchase agreements. The Cash Fund may be considered as the beneficial owner of the loaned securities in that any gain or loss in their market price during the loan inures to the Cash Fund and its shareholders; thus, when the loan is terminated, the value of the securities may be more or less than their value at the beginning of the loan. 3. The Cash Fund can borrow only in limited amounts for special purposes. The Cash Fund can borrow from banks for temporary or emergency purposes but only up to 10% of its total assets. It can mortgage or pledge its assets only in connection with such borrowing and only up to the lesser of the amounts borrowed or 5% of the value of its total assets. Interest on borrowings would reduce the Cash Fund's income. The Cash Fund will not purchase any securities while it has any outstanding borrowings which exceed 5% of the value of its assets. 4. Almost all of the Cash Fund's assets must be in established companies. Only 5% of the Cash Fund's total assets may be in issuers less than three years old, that is, which have not been in continuous operation for at least three years. This includes the operations of predecessor companies. Except in connection with borrowings, the Cash Fund will not issue senior securities. Investment Restrictions of the Tax-Free Fund The following restrictions on the Tax-Free Fund's investments are fundamental policies and cannot be changed without approval of the shareholders of the Tax-Free Fund. 1. The Tax-Free Fund has anti-concentration requirements. The Tax-Free Fund cannot buy the securities of issuers in any one industry if more than 25% of its total assets would then be of issuers in that industry; Municipal Obligations, U.S. Government obligations and those bank obligations and instruments of domestic banks which the Fund may purchase are considered as not included in this limit, except that the Fund will consider that a non-governmental user of facilities financed by industrial development bonds is an issuer in an industry. 2. The Tax-Free Fund can make loans only by lending securities or entering into repurchase agreements. The Tax-Free Fund can buy those debt securities which it is permitted to buy; this is investing, not making a loan. The Tax-Free Fund can lend its portfolio securities and enter into repurchase agreements. 3. The Tax-Free Fund can borrow only in limited amounts for special purposes. The Tax-Free Fund can borrow from banks for temporary or emergency purposes but only up to 10% of its total assets. It can mortgage or pledge its assets only in connection with such borrowing and only up to the lesser of the amounts borrowed or 5% of the value of its total assets. Interest on borrowings would reduce the Fund's income. The Tax-Free Fund will not purchase any securities while it has any outstanding borrowings which exceed 5% of the value of its total assets. Except in connection with borrowings, the Tax-Free Fund will not issue senior securities. Investment Restrictions of the Government Securities Fund The following restrictions on the Government Securities Fund's investments are fundamental policies and cannot be changed without approval of the shareholders of the Government Securities Fund. 1. The Government Securities Fund can make loans only by lending securities or entering into repurchase agreements. The Government Securities Fund can buy those debt securities which it is permitted to buy; this is investing, not making a loan. The Government Securities Fund can lend its portfolio securities on a collateralized basis up to 10% of the value of its total assets to specified borrowers (broker-dealers, banks and certain other financial institutions) to increase its income and enter into repurchase agreements. The Government Securities Fund may be considered as the beneficial owner of the loaned securities in that any gain or loss in their market price during the loan inures to the Government Securities Fund and its shareholders; thus, when the loan is terminated, the value of the securities may be more or less than their value at the beginning of the loan. 2. The Government Securities Fund can borrow only in limited amounts for special purposes. The Government Securities Fund can borrow from banks for temporary or emergency purposes but only up to 10% of its total assets. It can mortgage or pledge its assets only in connection with such borrowing and only up to the lesser of the amounts borrowed or 5% of the value of its total assets. Interest on borrowings would reduce the Government Securities Fund's income. The Government Securities Fund will not purchase any securities while it has any outstanding borrowings which exceed 5% of the value of its assets. Except in connection with borrowings, the Government Securities Fund will not issue senior securities. Restrictions Applicable to all of the Funds 1. The Funds invest only in certain limited securities. The Funds cannot buy any voting securities, any commodities or commodity contracts, any mineral related programs or leases, or any warrants, puts, calls or combinations thereof, except that the Tax-Free Fund may purchase Municipal Obligations with put rights in order to maintain liquidity. The Cash Fund and the Tax-Free Fund cannot purchase or hold the securities of any issuer if, to their knowledge, any Trustee, Director or officer of the Fund or its Adviser individually owns beneficially more than 0.5% of the securities of that issuer and all such Trustees, Directors and officers together own in the aggregate more than 5% of such securities. The Cash Fund and the Tax-Free Fund cannot buy real estate or any non-liquid interests in real estate investment trusts; however, they can buy any securities which they could otherwise buy even though the issuer invests in real estate or interests in real estate. 2. The Funds do not buy for control. The Funds cannot invest for the purpose of exercising control or management of other companies. This restriction is not applicable to the Government Securities Fund. 3. The Funds do not sell securities they do not own or borrow from brokers to buy securities. Thus, they cannot sell short or buy on margin. 4. The Funds are not underwriters. The Funds cannot engage in the underwriting of securities, that is, the selling of securities for others. Also, they cannot invest in restricted securities. Restricted securities are securities which cannot freely be sold for legal reasons. Management of the Funds The Board of Trustees The business and affairs of each Fund are managed under the direction and control of its Board of Trustees. The Board of Trustees has authority over every aspect of the Fund's operations, including approval of the advisory agreements and their annual renewal, the contracts with all other service providers and payments under the Fund's Distribution Plan and Shareholder Services Plan. The Trust has an Audit Committee, consisting of all of the Trustees who are "independent" and are not "interested persons" of the Trust. The Committee recommends to the Board of Trustees what independent registered public accounting firm will be selected by the Board of Trustees, reviews the methods, scope and result of audits and the fees charged, and reviews the adequacy of the Trust's internal accounting procedures and controls. The Audit Committee had one meeting during the last fiscal year. The Trust has a Nominating Committee, consisting of all of the non-interested Trustees. The Nominating Committee held no meetings during the last fiscal year. The committee will consider nominees recommended by the shareholders who may send recommendations to the committee in care of the Administrator at 380 Madison Avenue, New York, NY 10017. Trustees and Officers The following material includes information about each Trustee and officer and the Chairman Emeritus of the Trust
Number of Portfolios in Other Directorships Positions Held Fund Held by Trustee with Trust and Complex(4) (The position held is Name, Address(1)(2) and Length of Principal Occupation(s) Overseen by a directorship unless Date of Birth Service(3) During Past 5 Years Trustee indicated otherwise.) Interested Trustee (5) Diana P. Herrmann Trustee since Vice Chair and Chief Executive 10 None New York, NY 2004, President Officer of Aquila Management (02/25/58) since 1998 and Corporation, Founder of the Vice Chair Aquilasm Group of Funds(6) and since 2003 parent of Aquila Investment Management LLC, Administrator, since 2004, President and Chief Operating Officer since 1997, a Director since 1984, Secretary since 1986 and previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; Chief Executive Officer and Vice Chair since 2004 and President, Chief Operating Officer and Manager of the Administrator since 2003; Vice Chair, President, Executive Vice President or Senior Vice President of funds in the Aquilasm Group of Funds since 1986; Director of the Distributor since 1997; trustee, Reserve Money-Market Funds, 1999-2000 and Reserve Private Equity Series, 1998-2000; Governor, Investment Company Institute (2004) and head of its Small Funds Committee since 2004; active in charitable and volunteer organizations. Non-interested Trustees Theodore T. Mason Chair of the Executive Director, East Wind 10 Trustee, Pimco Advisors VIT. New York, NY Board of Power Partners LTD since 1994 (11/24/35) Trustees since and Louisiana Power Partners, 2004 and 1999-2003; Treasurer, Alumni Trustee since Association of SUNY Maritime 1984 College since 2004 (President, 2002-2003, First Vice President, 2000-2001, Second Vice President, 1998-2000) and director of the same organization since 1997; Director, STCM Management Company, Inc., 1973-2004; twice national officer of Naval Reserve Association, commanding officer of four naval reserve units and Captain, USNR (Ret); director, The Navy League of the United States New York Council since 2002; trustee, The Maritime Industry Museum at Fort Schuyler, 2000-2004; and the Maritime College at Fort Schuyler Foundation, Inc. since 2000. Thomas W. Courtney Trustee President, Courtney Associates, 5 Chairman of the Board of Sewickley, PA since 1984 Inc., a venture capital firm, Oppenheimer Quest Value Funds (08/17/33) since 1988. Group, Oppenheimer Small Cap Value Fund, Oppenheimer Midcap Fund, and Oppenheimer Rochester Group of Funds; Chairman of the Board of Pimco Advisors VIT. Stanley W. Hong Trustee President, Waste Management of 4 Trustee, Pacific Capital Funds, Honolulu, HI since 1993 Hawaii, Inc. since 2002; which includes 11 bond and (04/05/36) Corporate Vice President, Hawaii stock funds; director, First Area, Waste Management, Inc. Insurance Co. of Hawaii, Ltd., since 2002; Trustee, The King Lanihau Properties, Ltd. William Charles Lunalilo Trust Estate since 2001; President and Chief Executive Officer, The Chamber of Commerce of Hawaii, 1996-2001; director, Hawaii Public Television Foundation since 1998; Regent, Chaminade University of Honolulu; Chair - trustees, Heald College; trustee, the Nature Conservancy of Hawaii; and director of other corporate and community organizations. Russell K. Okata Trustee since Executive Director, Hawaii 4 Trustee, Pacific Capital Funds, Honolulu, HI 1993 Government Employees Association which includes 11 bond and (03/22/44) AFSCME Local 152, AFL-CIO since stock funds; Chairman, Royal 1981; International Vice State Group. President, American Federation of State, County and Municipal Employees, AFL-CIO since 1981; director of various civic and charitable organizations. Douglas Philpotts Trustee since Retired; formerly director, 4 Trustee, Pacific Capital Funds, Honolulu, HI 1992 Chairman of the Board and which includes 11 bond and (11/21/31) President of Hawaiian Trust stock funds. Company, Limited; present or former director of various Hawaii-based civic and charitable organizations. Oswald K. Stender Trustee since Director, Hawaiian Electric 4 Trustee, Pacific Capital Funds, Honolulu, HI 1993 Industries, Inc., a public which includes 11 bond and (10/08/31) utility holding company, stock funds; director, Grace 1993-2004; trustee, the Bernice Pacific Corporation, an asphalt Pauahi Bishop Estate 1990-1999; paving company, and ACE trustee, Office of Hawaiian Trucking Inc., a trucking Affairs and a member or trustee company. of several community organizations. Chairman Emeritus Because of his importance to the shareholders and to enable the Board of Trustees to continue to have the benefit of his counsel, Mr. Lacy B Herrmann has agreed to continue to be Chairman Emeritus. The Chairman Emeritus may attend Board meetings but has no voting power. Lacy B. Herrmann Founder, Founder and Chairman of the N/A N/A New York, NY Chairman Board, Aquila Management (05/12/29) Emeritus since Corporation, the sponsoring 2004, Trustee, organization and parent of the 1984-2004, and Manager or Administrator and/or Chairman of the Adviser or Sub-Adviser to each Board of fund of the Aquilasm Group of Trustees, Funds, Chairman of the Manager 1984-2003 or Administrator and/or Adviser or Sub-Adviser to each since 2004, and Founder, Chairman of the Board of Trustees, Trustee and (currently or until 1998) President of each since its establishment, beginning in 1984, except Chairman of the Board of Trustees of Hawaiian Tax-Free Trust, Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital U.S. Government Securities Cash Assets Trust through 2003, Trustee until 2004 and Chairman of the Board, Emeritus since 2004; Director of the Distributor since 1981 and formerly Vice President or Secretary, 1981-1998; Trustee Emeritus, Brown University and the Hopkins School; active in university, school and charitable organizations. Officers Charles E. Executive Vice Executive Vice President of all N/A N/A Childs, III President since funds in the Aquilasm Group of New York, NY 2003 Funds and the Administrator and (04/01/57) the Administrator's parent since 2003; formerly Senior Vice President, corporate development, Vice President, Assistant Vice President and Associate of the Administrator's parent since 1987; Senior Vice President, Vice President or Assistant Vice President of the Aquila Money-Market Funds, 1988-2003. Sherri Foster Vice President Senior Vice President, Hawaiian N/A N/A Lahaina, HI since 1997 Tax-Free Trust since 1993 and (07/27/50) formerly Vice President or Assistant Vice President; Vice President or Assistant Vice President of three Aquila Money-Market Funds; Registered Representative of the Distributor since 1985. John M. Herndon Vice President Assistant Secretary of the N/A N/A New York, NY (12/17/39) since 1990 and Aquilasm Group of Funds since Assistant 1995 and Vice President of the Secretary since three Aquila Money-Market Funds 1995 since 1990; Vice President of the Administrator or its predecessor and current parent since 1990. Robert W. Anderson Chief Chief Compliance Officer of the N/A N/A New York, NY Compliance Trust, the Administrator and the (08/23/40) Officer since Distributor since 2004, 2004 and Compliance Officer of the Assistant Administrator or its predecessor Secretary and current parent since 1998 since 2000 and Assistant Secretary of the Aquilasm Group of Funds since 2000; Consultant, The Wadsworth Group, 1995-1998. Joseph P. DiMaggio Chief Financial Chief Financial Officer of the N/A N/A New York, NY Officer since Aquilasm Group of Funds since 2003 (11/06/56) 2003 and and Treasurer since 2000; Treasurer since Controller, Van Eck Global Funds, 2000 1993-2000. Edward M. W. Hines Secretary since Partner, Hollyer Brady Barrett & N/A N/A New York, NY 1984 Hines LLP, legal counsel to the (12/16/39) Trust, since 1989; Secretary of the Aquilasm Group of Funds. Lori A. Vindigni Assistant Assistant Treasurer of the N/A N/A New York, NY Treasurer since Aquilasm Group of Funds since (11/02/66) 2000 2000; Assistant Vice President of the Administrator or its predecessor and current parent since 1998; Fund Accountant for the Aquilasm Group of Funds, 1995-1998.
(1)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. The Asset Management Group of Bank of Hawaii is the Trust's investment adviser. (2) The mailing address of each Trustee and officer is c/o Pacific Capital Funds of Cash Assets Trust, 380 Madison Avenue, New York, NY 10017. (3) Because the Trust does not hold annual meetings, each Trustee holds office for an indeterminate term. The term of office of each officer is one year. (4) Includes certain Aquila-sponsored funds that are dormant and have no public shareholders. (5) Ms. Herrmann is an interested person of the Trust as an officer of the Trust, as a director, officer and shareholder of the Administrator's corporate parent, as an officer and Manager of the Administrator, and as a shareholder and director of the Distributor. (6) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S. Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets Trust, each of which is a money-market fund, are called the "Aquila Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of which is a tax-free municipal bond fund, are called the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; considered together, these 11 funds, which do not include the dormant funds described in footnote 4, are called the "Aquilasm Group of Funds." Securities Holdings of the Trustees (as of 12/31/04)
Name of Trustee Dollar Range of Aggregate Dollar Range of Ownership Ownership in The in Aquila sm Investment Companies Pacific Capital Funds of Overseen by Trustee(1) Cash Assets Trust (1) Interested Trustees Diana P.. Herrmann D E Non-interested Trustees Theodore T. Mason B D Thomas W. Courtney A C Stanley W. Hong A C Russell K. Okata A C Douglas Philpotts C C Oswald K. Stender B C
(1) A. None B. $1-$10,000 C. $10,001-$50,000 D. $50,001-$100,000 E. over $100,000 None of the non-interested Trustees or their immediate family members holds of record or beneficially any securities of the Adviser or the Distributor. The Funds do not pay fees to Trustees affiliated with the Administrator or Adviser or to any of the Funds' officers. During the fiscal year ended March 31, 2005, the Cash Fund, the Tax-Free Fund and the Government Securities Fund paid, respectively, $86,081, $45,789 and $130,204 in compensation and reimbursement of expenses to the Trustees. The Funds are among the 11 funds in the Aquilasm Group of Funds, which consists of tax-free municipal bond funds, money-market funds and an equity fund. The following tables list the compensation of all Trustees who received compensation from the Funds, the compensation each received during each Fund's fiscal year from all funds in the Aquilasm Group and the number of such funds. None of such Trustees has any pension or retirement benefits from the Fund or any of the other funds in the Aquila group.
Compensation Compensation Compensation from from from the Government Name the Cash Fund the Tax-Free Fund Securities Fund Theodore T. Mason $11,550 $6,950 $15,950 Thomas W. Courtney $10,150 $5,550 $14,550 Stanley W. Hong $10,150 $5,550 $14,550 Russell K. Okata $10,150 $5,550 $14,550 Douglas Philpotts $10,150 $5,550 $14,550 Oswald K. Stender $10,150 $5,550 $14,550
Compensation Number of from all funds boards on which in the Aquilasm the Trustee Name Group now serves* Theodore T. Mason $67,800 10 Thomas W. Courtney $58,175 5 Stanley W. Hong $46,400 4 Russell K. Okata $46,000 4 Douglas Philpotts $46,000 4 Oswald Stender $46,400 4 * Messrs. Hong, Okata, Philpotts and Stender are also trustees of the 11 funds in the Pacific Capital Group of Funds for which the Adviser is also investment adviser. For the same period, these funds paid them each the amount of $27,000. Ownership of Securities On July 5, 2005 the following holders held 5% or more of a class of shares of the Funds: Name and address of the holder of record Number of shares Percent of class The Cash Fund: Original Shares Bank of Hawaii P. O. Box 1930 Honolulu, HI 96805 301,501,255 96.29% The Cash Fund: Service Shares BHC Securities, Inc. 2005 Market Street Philadelphia, PA 19103 53,569,031 31.65% Bank of Hawaii P.O. Box 1930 Honolulu, HI 96805-1930 115,641,059 68.33% The Tax-Free Fund: Original Shares Bank of Hawaii P.O. Box 1930 Honolulu, HI 96805-1930 108,937,411 94.93% The Tax-Free Fund: Service Shares Bank of Hawaii P.O. Box 1930 Honolulu, HI 96805-1930 94,763,185 90.67% BHC Securities, Inc. 2005 Market Street, Philadelphia, PA 19103 8,836,091 8.45% The Government Securities Fund: Original Shares Bank of Hawaii P.O. Box 1930 Honolulu, HI 96805-1930 349,676,224 99.03% The Government Securities Fund: Service Shares Bank of Hawaii P.O. Box 1930 Honolulu, HI 96805-1930 594,584,248 93.92% The Funds' management is not aware of any person, other than those named above, who beneficially owned 5% or more of either class of a Fund's outstanding shares on such date. On the basis of information received from the record owners listed above, the Funds' management believes (i) that all of the Original Shares indicated are held for the benefit of custodial or trust clients; and (ii) that all of such shares could be considered as "beneficially" owned by the named shareholders in that they possessed shared voting and/or investment powers as to such shares. The Service Shares indicated above are held for the benefit of customers. Management Ownership As of the date of this SAI, all of the Trustees and officers of the Trust as a group owned less than 1% of its outstanding shares. Investment Advisory and Other Services Asset Management Group of the Bank of Hawaii (formerly Pacific Century Trust) supervises the investment program of each Fund and the composition of its portfolio. On September 30, 1997, the operations of Hawaiian Trust Company, Ltd., formerly a subsidiary of the Bank of Hawaii, became a division of the Bank of Hawaii and assumed the name Pacific Century Trust. The services of the Adviser to each Fund are rendered under an Investment Advisory Agreement between that Fund and the Adviser (together, the "Advisory Agreements") which was most recently approved by the Fund's shareholders on March 22, 1996. The Advisory Agreements of the Funds provide, subject to the control of the Board of Trustees, for investment supervision by the Adviser. Under each Advisory Agreement, the Adviser will furnish information as to the Fund's portfolio securities to any provider of fund accounting services to each Fund; will monitor records of each Fund as to the Fund's portfolio, including prices, maintained by such provider of such services; and will supply at its expense, monthly or more frequently as may be necessary, pricing of each Fund's portfolio based on available market quotations using a pricing service or other source of pricing information satisfactory to that Fund. Each Advisory Agreement states that the Adviser shall, at its expense, provide to the Fund all office space and facilities, equipment and clerical personnel necessary for the carrying out of the Adviser's duties under the Advisory Agreement. Under each Advisory Agreement, the Adviser pays all compensation of those officers and employees of the Fund and of those Trustees, if any, who are affiliated with the Adviser, provided, however, that if any Trustee is an affiliate of the Adviser solely by reason of being a member of its Board of Directors, the Funds may pay compensation to such Trustee, but at a rate no greater than the rate they pay to the other Trustees. Under the Advisory Agreements, each Fund bears the cost of preparing and setting in type its prospectuses, statements of additional information, and reports to its shareholders and the costs of printing or otherwise producing and distributing those copies of such prospectuses, statements of additional information and reports as are sent to its shareholders. Under each Advisory Agreement, all costs and expenses not expressly assumed by the Adviser or by the Administrator under the Fund's Administration Agreement or by the Fund's principal underwriter are paid by the Fund. The Advisory Agreements list examples of such expenses borne by the Funds, the major categories of such expenses being: legal and audit expenses, custodian and transfer agent, or shareholder servicing agent, fees and expenses, stock issuance and redemption costs, certain printing costs, registration costs of the Funds and their shares under Federal and State securities laws, interest, taxes, and non-recurring expenses, including litigation. Each Advisory Agreement may be terminated by the Adviser at any time without penalty upon giving the Fund sixty days' written notice, and may be terminated by the Fund at any time without penalty upon giving the Adviser sixty days' written notice, provided that such termination by the Fund shall be directed or approved by the vote of a majority of all its Trustees in office at the time or by the vote of the holders of a majority (as defined in the 1940 Act) of its voting securities at the time outstanding and entitled to vote; each agreement automatically terminates in the event of its assignment (as so defined). Each Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, the Adviser is not liable for any loss sustained by the adoption of any investment policy or the purchase, sale or retention of any security and permits the Adviser to act as investment adviser for any other person, firm or corporation. Each Fund agrees to indemnify the Adviser to the full extent permitted under the Trust's Declaration of Trust. The Advisory Agreement states that it is agreed that the Adviser shall have no responsibility or liability for the accuracy or completeness of the Fund's Registration Statement under the Securities Act of 1933 and the 1940 Act, except for the information supplied by the Adviser for inclusion therein. Each Advisory Agreement contains the provisions set forth below under "Brokerage Allocation and Other Practices." The Administration Agreements Under Administration Agreements with each Fund (the "Administration Agreements"), Aquila Investment Management LLC as Administrator, at its own expense, provides office space, personnel, facilities and equipment for the performance of its functions thereunder and as is necessary in connection with the maintenance of the headquarters of the Fund and pays all compensation of the Fund's Trustees, officers and employees who are affiliated persons of the Administrator. The Administration Agreements went into effect November 1, 1993. Under the Administration Agreements, subject to the control of the Funds' Board of Trustees, the Administrator provides all administrative services to each Fund other than those relating to its investment portfolio and the maintenance of its accounting books and records. Such administrative services include but are not limited to maintaining books and records (other than accounting books and records) of the Funds, and overseeing all relationships between the Funds and their transfer agent, custodian, legal counsel, auditors and principal underwriter, including the negotiation of agreements in relation thereto, the supervision and coordination of the performance of such agreements, and the overseeing of all administrative matters which are necessary or desirable for effective operation of the Funds and for the sale, servicing or redemption of the Funds' shares. Advisory and Administration Fees During the three fiscal years ended March 31, 2005, 2004, and 2003 the Funds paid the following fees: To the Adviser: Tax-Free Government Cash Fund Fund Securities Fund 2005 $1,611,275(1) $553,218(2) $2,755,992(3) 2004 $1,637,319(4) $464,121(5) $2,490,502(6) 2003 $1,732,539(7) $500,067(8) $2,290,790(9) To the Administrator: Tax-Free Government Cash Fund Fund Securities Fund 2005 $640,201(1) $186,437(2) $628,238(3) 2004 $644,444(4) $167,539(5) $571,912(6) 2003 $659,945(7) $175,163(8) $529,560(9) (1) $640,692 in Advisory fees was reduced; $256,008 in Administrative fees was reduced. (2) $291,119 in Advisory fees was reduced; $98,109 in Administrative fees was reduced. (3) $1,227,819 in Advisory fees was reduced; $280,009 in Administrative fees was reduced. (4) $1,184,109 in Advisory fees was reduced; $466,062 in Administrative fees was reduced. (5) $401,358 in Advisory fees was reduced; $144,883 in Administrative fees was reduced. (6) $2,138,917 in Advisory fees was reduced; $491,175 in Administrative fees was reduced. (7) $764,768 in Advisory fees was reduced; $291,308 in Administrative fees was reduced. (8) $287,684 in Advisory fees was reduced; $100,769 in Administrative fees was reduced. (9) $1,252,871 in Advisory fees was reduced; $289,623 in Administrative fees was reduced. Renewal of Investment Advisory Agreement Renewal until June 30, 2006 of the Investment Advisory Agreement (the "Advisory Agreement") for each fund between the Trust and the Adviser was approved by the Board of Trustees and the independent Trustees in June, 2005. At a meeting called and held for that purpose at which a majority of the independent Trustees were present in person, the following materials were considered: o Copies of the agreements to be renewed; o A term sheet describing the material terms of the agreements; o The Annual Report of the Trust for the year ended March 31, 2005; o A Report by the Administrator containing data about the performance of each of the portfolios and data about their respective fees, expenses, purchases and redemptions together with comparisons of such data with similar data about other comparable funds, as well as data as to the profitability of the Adviser and the Administrator; and o Quarterly materials reviewed at prior meetings on each of the portfolio's performance, operations, portfolio and compliance. The Trustees considered each Advisory Agreement separately. The Trustees reviewed materials relevant to, and considered, the factors set forth below, and as to each agreement reached the conclusions described. The nature, extent, and quality of the services provided by the Adviser. The investment objective of each of the Trust's portfolios is to seek to provide safety of principal while achieving as a high a level of liquidity and of current income (and with respect to the Tax-Free Fund, current income exempt from Federal and Hawaii income taxes). To achieve these objectives, the Adviser has provided management of each fund's portfolio, as well as provided facilities for credit analysis of each of the funds' portfolio securities. With respect to the Government Securities Fund, the Adviser has managed the investment portfolio in order to achieve a Aaa/AAA rating from both Moody's Investors Service and Standard and Poor's, respectively. The Board considered that the Adviser had provided all services the Board deemed necessary or appropriate, including the specific services that the Board has determined are required for the Trust, given that its purpose is to provide shareholders with safety of principal while achieving as a high a level of liquidity and of current income. The Board concluded that a commendable quality of services was provided and that the Trust would be well served if they continued. Evaluation of this factor weighed in favor of renewal of the Advisory Agreement. The investment performance of the Trust (and each of its portfolios) and Adviser. The Board determined it appropriate to consider each fund's performance. For the fiscal year ended March 31, 2005 each fund's average annual rate of return was: Cash Fund (Original Shares): 1.36% Cash Fund (Service Shares): 1.11% Tax-Free Fund (Original Shares): 1.16% Tax-Free Fund (Service Shares): 0.90% Government Securities Fund (Original Shares): 1.41% Government Securities Fund (Service Shares): 1.16% The Board reviewed each aspect of each fund's performance and compared its performance with that of their respective benchmarks. It was noted that the materials provided by the Administrator indicated that compared to each fund's respective benchmark, the Trust's portfolios had investment performance that was either comparable to or favorable for one-, five- and ten-year periods as compared with the benchmark. The Board considered these results to be consistent with the purposes of each of the Trust's portfolios. The Board concluded that the performance of each fund, in light of market conditions, was satisfactory. Evaluation of this factor indicated to the Trustees that renewal of the Advisory Agreement would be appropriate. The costs of the services to be provided and profits to be realized by the Adviser and its affiliates from the relationship with the Trust (and each of its portfolios). The information provided in connection with renewal contained expense data for each fund and its major local competitor as well as data for each of the funds with respect to their respective peer groups, including data for money market funds of a comparable asset size. The materials also showed the profitability to the Adviser of its services to the Trust. The Board compared the expense and fee data with respect to each of the portfolios to similar data about other funds that it found to be relevant. The Board concluded that the expenses of the each of the portfolios and the fees paid were similar to and were reasonable as compared to those being paid by its respective local competitor and other money market funds nationwide. The Board considered that the foregoing indicated the appropriateness of the costs of the services to the Trust, which was being well managed as indicated by the factors considered previously. The Board further concluded that the profitability to the Adviser did not argue against approval of the fees to be paid under each Advisory Agreement. The extent to which economies of scale would be realized as the Trust, and its portfolios, grows. Data provided to the Trustees showed that the asset size of each of the portfolios had been generally increasing in recent years. However, they concluded that the uncertain interest rate environment might make it difficult to achieve substantial growth in assets in the near future. The Trustees also noted that the materials indicated that the each portfolio's fees were generally comparable to those of its peers, including those with breakpoints. Evaluation of this factor indicated to the Board that the Advisory Agreement should be renewed without addition of breakpoints at this time. Benefits derived or to be derived by the Adviser and its affiliates from the relationship with the Trust (and each of its portfolios). The Board observed that, as is generally true of most fund complexes, the Adviser and its affiliates, by providing services to a number of funds or other investment clients including the Trust's three portfolios, were able to spread costs as they would otherwise be unable to do. The Board noted that while that produces efficiencies and increased profitability for the Adviser and its affiliates, it also makes their services available to the three portfolios of the Trust at favorable levels of quality and cost which are more advantageous to the Trust's portfolios than would otherwise have been possible. Transfer Agent, Custodian and Independent Registered Public Accounting Firm The Funds' Shareholder Servicing Agent (transfer agent) is PFPC Inc., 760 Moore Road, King of Prussia, PA 19406-1212. Each Fund's Custodian is Bank One Trust Company N.A., 1111 Polaris Parkway, Columbus, OH 43240; it receives, holds and delivers the Funds' portfolio securities (including physical securities, book-entry securities, and securities in depositories) and money, performs related accounting functions and issues reports to the Funds. The Funds' independent registered public accounting firm, KPMG LLP, 345 Park Avenue, New York, New York 10154, performed the annual audit of the Funds' financial statements for the fiscal year ended March 31, 2005. Tait, Weller & Baker ("TWB") has been selected as the Funds' independent registered public accounting firm for the fiscal year ending March 31, 2006 by the Funds' Audit Committee, and the selection has been preliminarily ratified by the Board of Trustees, including a majority of the Independent Trustees. TWB has concentrated its accounting practice primarily in the mutual fund industry for more than 40 years and is one of the industry's largest providers. Brokerage Allocation and Other Practices During the fiscal years ended March 31, 2005, 2004, and 2003 all of the Funds' transactions were principal transactions and no brokerage commissions were paid. The following provisions regarding brokerage allocation and other practices relating to purchases and sales of the Funds' securities are contained in each Fund's Advisory Agreement. Each Advisory Agreement provides that in connection with its duties to arrange for the purchase and sale of the Fund's portfolio securities, the Adviser shall select such broker-dealers ("dealers") as shall, in the Adviser's judgment, implement the policy of the Fund to achieve "best execution," i.e., prompt, efficient and reliable execution of orders at the most favorable net price. The Adviser shall cause the Fund to deal directly with the selling or purchasing principal or market maker without incurring brokerage commissions unless the Adviser determines that better price or execution may be obtained by paying such commissions; the Fund expects that most transactions will be principal transactions at net prices and that the Fund will incur little or no brokerage costs. The Fund understands that purchases from underwriters include a commission or concession paid by the issuer to the underwriter and that principal transactions placed through dealers include a spread between the bid and asked prices. In allocating transactions to dealers, the Adviser is authorized to consider, in determining whether a particular dealer will provide best execution, the dealer's reliability, integrity, financial condition and risk in positioning the securities involved, as well as the difficulty of the transaction in question, and thus need not pay the lowest spread or commission available if the Adviser determines in good faith that the amount of commission is reasonable in relation to the value of the brokerage and research services provided by the dealer, viewed either in terms of the particular transaction or the Adviser's overall responsibilities as to the accounts as to which it exercises investment discretion. If, on the foregoing basis, the transaction in question could be allocated to two or more dealers, the Adviser is authorized, in making such allocation, to consider whether a dealer has provided research services. Such research may be in written form or through direct contact with individuals and may include quotations on portfolio securities and information on particular issuers and industries, as well as on market, economic or institutional activities. The Fund recognizes that no dollar value can be placed on such research services or on execution services, that such research services may or may not be useful to the Fund and/or other accounts of the Adviser and that research received by such other accounts may or may not be useful to the Fund. Limitation of Redemptions in Kind Each Fund has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1 percent of the net asset value of the Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, the Fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets into cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described under "Net Asset Value Per Share" in the Prospectus, and such valuation will be made as of the same time the redemption price is determined. Capital Stock Description of Shares The Trust issues three series of shares, each series constituting the shares of a Fund. Each series has separate assets and liabilities and is comprised of two classes of shares: Original Shares and Service Shares. The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares and to divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interests in the Trust. Each share represents an equal proportionate interest in a Fund. Income, direct liabilities and direct operating expenses of each series will be allocated directly to such series, and general liabilities and expenses, if any, of the Trust will be allocated among the series in a manner acceptable to the Board of Trustees. Certain expenses of a series specifically allocable to a particular class will be borne by that class; the expense of the series not so allocated will be allocated among the classes in a manner acceptable to the Board of Trustees and in accordance with any applicable exemptive order or rule of the SEC. Upon liquidation of a series, shareholders of each class of the series are entitled to share pro-rata (subject to liabilities, if any, allocated specifically to that class) in the net assets of that series available for distribution to shareholders and upon liquidation of the Trust, the respective series are entitled to share proportionately in the assets available to the Trust after allocation to the various series. If they deem it advisable and in the best interests of shareholders, the Board of Trustees of the Trust may create additional classes of shares (subject to rules and regulations of the Securities and Exchange Commission or by exemptive order) or the Board of Trustees may, at its own discretion, create additional series of shares, each of which may have separate assets and liabilities (in which case any such series will have a designation including the word "Series"). Shares are fully paid and non-assessable, except as set forth below with respect to potential liability of shareholders of a Massachusetts business trust; the holders of shares have no pre-emptive or conversion rights. Voting Rights At any meeting of shareholders, shareholders are entitled to one vote for each dollar of net asset value (determined as of the record date for the meeting) represented by the shares held (and proportionate fractional votes for fractional dollar amounts). Shareholders will vote on the election of Trustees and on other matters submitted to the vote of shareholders. No amendment may be made to the Declaration of Trust without the affirmative vote of the holders of a majority of the outstanding shares of the Trust. The Trust may be terminated (i) upon the sale of its assets to another issuer, or (ii) upon liquidation and distribution of the assets of the Trust, in either case if such action is approved by the vote of the holders of a majority of the outstanding shares of each series. If not so terminated, the Trust will continue indefinitely. Rule 18f-2 under the 1940 Act provides that matters submitted to shareholders be approved by a majority of the outstanding voting securities of each series, unless it is clear that the interests of each series in the matter are identical or the matter does not affect a series. However, the rule exempts the selection of accountants and the election of Trustees from the separate voting requirement. Classes do not vote separately except that, as to matters exclusively affecting one class (such as the adoption or amendment of class-specific provisions of the Distribution Plan), only shares of that class are entitled to vote. Each Fund has two classes of shares: Original Shares: Original Shares are offered solely to (1) financial institutions for the investment of funds for their own account or for which they act in a fiduciary, agency, investment advisory or custodial capacity; (2) persons entitled to exchange into Original Shares under the exchange privileges of the Trust; (3) Trustees and officers of funds in the Aquilasm Group of Funds; (4) officers and employees of the Adviser, Administrator and Distributor and (5) shareholders owning shares of the Trust of record on January 20, 1995, the date on which the Funds first offered two classes of shares. Service Shares: Service Shares are offered to anyone. There are no sales charges or redemption fees. Service Shares of each Fund are subject to a Distribution (12b-1) fee of 0.25 of 1% of the average annual assets of the Fund represented by Service Shares. The Trust is an entity of the type commonly known as a Massachusetts business trust. Under Massachusetts law, shareholders of a trust such as the Trust may, under certain circumstances, be held personally liable as partners for the obligations of the trust. However, for the protection of shareholders, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by any Fund or the Trustees. The Declaration of Trust provides for indemnification out of the Trust's property of any shareholder held personally liable for the obligations of the Trust. The Declaration of Trust also provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to the relatively remote circumstances in which the Trust itself would be unable to meet its obligations. If any series or class is unable to meet the obligations attributable to it (which, in the case of the Trust, is a remote possibility), other series or classes would be subject to such obligations with a corresponding increase in the risk of the shareholder liability mentioned in the prior sentence. The Declaration of Trust further indemnifies the Trustees out of the assets of each Fund and provides that they will not be liable for errors of judgment or mistakes of fact or law; but nothing in the Declaration of Trust protects a Trustee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. Purchase, Redemption, and Pricing of Shares Amortized Cost Valuation The Funds operate under Rule 2a-7 (the "Rule") of the Securities and Exchange Commission which permits them to value their portfolios on the basis of amortized cost. The amortized cost method of valuation is accomplished by valuing a security at its cost and thereafter assuming a constant amortization rate to maturity of any discount or premium, and does not reflect the impact of fluctuating interest rates on the market value of the security. This method does not take into account unrealized gains or losses. While the amortized cost method provides certainty in valuation, there may be periods during which value, as determined by amortized cost, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield on a Fund's shares may tend to be higher than a like computation made by a fund with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio instruments and changing its dividends based on these changing prices. The converse would apply in a period of rising interest rates. Under the Rule, each Fund's Board of Trustees must establish, and has established, procedures (the "Procedures") designed to stabilize at $1.00, to the extent reasonably possible, the Fund's price per share as computed for the purpose of sales and redemptions. Such procedures must include review of the Fund's portfolio holdings by the Board of Trustees at such intervals as it may deem appropriate and at such intervals as are reasonable in light of current market conditions to determine whether the Fund's net asset value calculated by using available market quotations deviates from the per share value based on amortized cost. "Available market quotations" may include actual market quotations (valued at the mean between bid and asked prices), estimates of market value reflecting current market conditions based on quotations or estimates of market value for individual portfolio instruments or values obtained from yield data relating to a directly comparable class of securities published by reputable sources. Under the Rule, if the extent of any deviation between the net asset value per share based upon "available market quotations" (see above) and the net asset value per share based on amortized cost exceeds $0.005, the Board of Trustees must promptly consider what action, if any, will be initiated. When the Board of Trustees believes that the extent of any deviation may result in material dilution or other unfair results to investors or existing shareholders, it is required to take such action as it deems appropriate to eliminate or reduce to the extent reasonably practicable such dilution or unfair results. Such actions could include the sale of portfolio securities prior to maturity to realize capital gains or losses or to shorten average portfolio maturity, withholding dividends or payment of distributions from capital or capital gains, redemptions of shares in kind, or establishing a net asset value per share using available market quotations. The Procedures contemplate changes in the dividends payable by the each Fund under specified conditions, as described below under "Computation of Daily Dividends." This portion of the Procedures provides that actions that the Trustees would consider under certain circumstances can be taken automatically. Computation of Daily Dividends Under the Procedures that each Fund's Board of Trustees has adopted relating to amortized cost valuation, the calculation of each Fund's daily dividends will change under certain circumstances from that indicated in the Prospectus. If on any day the deviation between net asset value determined on an amortized cost basis and that determined using market quotations is $0.003 or more, the amount of such deviation will be added to or subtracted from the daily dividend to the extent necessary to reduce such deviation to within $0.003. If on any day there is insufficient net income to absorb any such reduction, the Board of Trustees would be required under the Rule to consider taking other action if the deviation, after eliminating the dividend for that day, exceeds $0.005. One of the actions which the Board of Trustees might take could be the elimination or reduction of dividends for more than one day. Automatic Withdrawal Plan If you own or purchase shares of a Fund having a net asset value of at least $5,000 you may establish an Automatic Withdrawal Plan under which you will receive a monthly or quarterly check in a stated amount, not less than $50. Stock certificates will not be issued for shares held under an Automatic Withdrawal Plan. All dividends must be reinvested. Shares will be redeemed on the last business day of the month as may be necessary to meet withdrawal payments. Shares acquired with reinvested dividends will be redeemed first to provide such withdrawal payments and thereafter other shares will be redeemed to the extent necessary, and, depending upon the amount withdrawn, your principal may be depleted. Redemption of shares for withdrawal purposes may reduce or even liquidate the account. Monthly or quarterly payments paid to shareholders may not be considered as a yield or income on investment. Exchange Privileges Original Shares There are two exchange privileges available to holders of Original Shares of the Funds: the Pacific Capital Exchange Privilege and the Aquilasm Group Exchange Privilege. Pacific Capital Exchange Privilege Shareholders may exchange their Original Shares in any Fund for Institutional Class shares of any of the existing or future funds (series) of Pacific Capital Funds, each of which represents a different portfolio. As of the date of this SAI, the existing funds are Growth Stock Fund, Growth and Income Fund, New Asia Growth Fund, Diversified Fixed Income Fund, Tax Free Securities Fund, Tax Free Short Intermediate Securities Fund, U.S. Treasuries Securities Fund and Short Intermediate U.S. Treasury Securities Fund. Each of these funds is referred to as a "Pacific Capital Fund" and collectively they are referred to as the "Pacific Capital Funds" or the "Pacific Capital Exchange Group." The Adviser acts as investment adviser for the Pacific Capital Funds. All exchanges are subject to certain conditions described below. Aquilasm Group Exchange Privilege Shareholders may exchange their Original Shares of any Fund into certain related tax-free municipal bond funds and an equity fund (the "Aquila Bond and Equity Funds") and money-market funds (the "Aquila Money-Market Funds"), all of which (the "Aquila Exchange Group") are sponsored by Aquila Investment Management LLC and Aquila Distributors, Inc., and have the same Administrator and Distributor as the Funds. All exchanges are subject to certain conditions described below. As of the date of this SAI, the Aquila Bond and Equity Funds are Hawaiian Tax-Free Trust, Tax-Free Trust of Oregon, Tax-Free Trust of Arizona, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For Utah, Narragansett Insured Tax-Free Income Fund, and Aquila Rocky Mountain Equity Fund; the Aquila Money-Market Funds are the Funds. (With respect to exchanges of Original Shares of any Fund into shares of any other Fund, only exchanges for Original Shares of those funds are permitted.) Because excessive trading in shares of the Funds can be harmful to the Funds and their other shareholders, the right is reserved to revise or terminate the exchange privilege, to limit the number of exchanges or to reject any exchange if (i) the Funds or any of the other Aquila Funds believe that they would be harmed or be unable to invest effectively or (ii) they receive or anticipate receiving simultaneous orders that may significantly affect the Funds or any other Aquila Fund. Terms and Conditions of Both Exchange Privileges for Original Shares The Institutional Class shares of each Pacific Capital Fund have an exchange privilege which allows further exchanges among the Institutional Class shares of each other Pacific Capital Fund at relative net asset values. The Institutional Class shares of each Pacific Capital Fund also have another exchange privilege with certain funds in the Aquila Exchange Group under which their shares and Original Shares of Funds may be exchanged, also without payment of an additional sales charge. The funds in the Aquila Exchange Group also have exchange privileges, as described below. Under the exchange privileges of both Exchange Groups, once any applicable sales charge has been paid with respect to exchangeable shares of a fund in one of the Exchange Groups, those shares (and any shares acquired as a result of reinvestment of dividends and/or distributions) may be exchanged any number of times among the other funds of the same Exchange Group without the payment of any additional sales charge. An exchange between the two Exchange Groups will, however, result in the applicable sales charge if the shares of the fund being acquired in the exchange carry a sales charge, unless the shares being exchanged are the Eligible Shares (see below) of that Exchange Group. The "Pacific Capital Eligible Shares" of any Pacific Capital Fund are those Institutional shares which were (a) acquired by direct purchase with payment of any applicable sales charge, or which were received in exchange for shares of another Pacific Capital Fund on which any applicable sales charge was paid; (b) acquired with payment of any applicable sales charge by exchange for Original Shares of any Fund; (c) acquired in one or more exchanges between Original Shares of the Funds and shares of the Pacific Capital Funds so long as the Pacific Capital Fund shares were originally purchased as set forth in (a) or (b); or (d) acquired as a result of reinvestment of dividends and/or distributions on Pacific Capital Eligible Shares. If you own Pacific Capital Eligible Shares of any Fund, you may exchange them for shares of any Pacific Capital Fund or any Aquila Money-Market Fund without payment of any sales charge. The shares received will continue to be Pacific Capital Eligible shares. You may also exchange them for the shares of any Aquila Bond or Equity Fund, but only upon payment of the appropriate sales charges. The Aquila Group Exchange Privilege The Aquila Bond and Equity Funds offer classes of Shares: Class A Shares ("Front-Payment Shares") and Class C Shares ("Level-Payment Shares"), which can be purchased by anyone, and Class Y Shares ("Institutional Class Shares"), which are offered only to institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Some funds also offer Financial Intermediary Class Shares ("Class I Shares"). The Exchange Privilege has different provisions for each class. (1) Originally purchased Money-Market Fund shares. Shares of a Money-Market Fund (and any shares acquired as a result of reinvestment of dividends and/or distributions on these shares) acquired directly in a purchase (or in exchange for Money-Market Fund shares that were themselves directly purchased), rather than in exchange for shares of a Bond or Equity Fund, may be exchanged for shares of any class of any Bond or Equity Fund that the investor is otherwise qualified to purchase, but the shares received in such an exchange will be subject to the same sales charge, if any, that they would have been subject to had they been purchased rather than acquired in exchange for Money-Market Fund shares. If the shares received in exchange are shares that would be subject to a contingent deferred sales charge ("CDSC") if purchased directly, the holding period governing the CDSC will run from the date of the exchange, not from the date of the purchase of Money-Market Fund shares. (2) CDSCs upon redemptions of shares acquired through exchanges. If you exchange shares of the following categories, no CDSC will be imposed at the time of exchange, but the shares you receive in exchange for them will be subject to the applicable CDSC if you redeem them before the requisite holding period (extended, if required) has expired: - CDSC Class A Shares; - Class C Shares: and - Shares of a Money-Market Fund that were received in exchange for CDSC Class A Shares or Class C Shares. If the shares you redeem would have incurred a CDSC if you had not made any exchanges, then the same CDSC will be imposed upon the redemption regardless the exchanges that have taken place since the original purchase. (3) Extension of Holding Periods by owning Money-Market Funds. Any period of 30 days or more during which Money-Market Fund shares received on an exchange of CDSC Class A Shares or Class C Shares are held is not counted in computing the applicable holding period for CDSC Class A Shares or Class C Shares. Each Fund, as well as the Bond and Equity Funds, reserves the right to reject any exchange into its shares, if shares of the fund into which exchange is desired are not available for sale in your state of residence. The Funds may also modify or terminate this exchange privilege at any time. In the case of termination, the Prospectus will be appropriately supplemented. No such modification or termination shall take effect on less than 60 days' written notice to shareholders. Exchange Privilege for Service Shares: You may exchange Service Shares in any Fund for Retail Class shares of any of the existing or future funds (series) of the Pacific Capital Exchange Group (see "Exchange Privilege for Original Shares" above). Shareholders of any Fund may also exchange their Service Shares for Service Shares of any other Fund, all of which are series of the Trust and as such, have the same Administrator, Distributor and Adviser. They are collectively called the "Funds." All exchanges are subject to certain conditions described below. Terms and Conditions of the Service Shares Exchange Privilege The Retail Class shares of each Pacific Capital Fund have an exchange privilege which allows further exchanges for Retail Class shares of each other Pacific Capital Fund at relative net asset values without the payment of additional sales charges. Under the exchange privileges of the Pacific Capital Exchange Group, once any applicable sales charge has been paid with respect to exchangeable shares of a fund in the Pacific Capital Exchange Group, those shares (and any shares acquired as a result of reinvestment of dividends and/or distributions) may be exchanged any number of times among the other funds of the Pacific Capital Exchange Group without the payment of any additional sales charge. The "Pacific Capital Eligible Shares" of any Pacific Capital Fund are those Retail Shares which were (a) acquired by direct purchase with payment of any applicable sales charge, or which were received in exchange for shares of another Pacific Capital Fund on which any applicable sales charge was paid; (b) acquired with payment of any applicable sales charge by exchange for Service Shares of a Fund; (c) acquired in one or more exchanges between Service Shares of Funds and Retail Shares of Pacific Capital Funds so long as the Pacific Capital Fund shares were acquired as set forth in (a) or (b); or (d) acquired as a result of reinvestment of dividends and/or distributions on Pacific Capital Eligible Shares. "Pacific Capital Eligible Shares" of a Fund are those Service Shares which were acquired (a) by exchange for other Pacific Capital Eligible Shares or (b) as a result of reinvestment of dividends and/or distributions of otherwise Pacific Capital Eligible Shares. If you own Pacific Capital Eligible Shares of a Fund, you may exchange them for shares of any Pacific Capital Fund without payment of any sales charge. The shares received will continue to be Pacific Capital Eligible shares. If you own Service Shares of any of the Funds that are not Pacific Capital Eligible Shares, you may exchange them for Service Shares of any other Fund without payment of any sales charge. The shares received will continue not to be Pacific Capital Eligible shares. You may also exchange them for the Retail Shares of any Pacific Capital Fund, but only upon payment of the appropriate sales charge. Each of the Funds, as well as the Pacific Capital Funds, reserves the right to reject any exchange into its shares, if the shares of the fund into which exchange is desired are not available for sale in the shareholder's state of residence, and to modify or terminate this exchange privilege at any time; in the case of termination, the Prospectus will be appropriately supplemented. No such modification or termination shall take effect on less than 60 days' written notice to shareholders. Provisions Applicable to All Exchanges of Original Shares and Service Shares All exercises of an exchange privilege are subject to the conditions that (i) the shares being acquired are available for sale in your state of residence; and (ii) the aggregate net asset value of the shares surrendered for exchange is at least equal to the applicable minimum investment requirement of the investment company whose shares are being acquired. To effect an exchange, you must complete a form which is available from the Distributor, unless you have elected the Telephone Exchange feature on the Application. The exchange will be effected at the relative exchange prices of the shares being exchanged next determined after receipt by the Distributor of a properly completed form or Telephone Exchange request. The exchange prices will be the respective net asset values of the shares (unless a sales charge is to be deducted in connection with an exchange of shares as described above, in which case the exchange price of shares of the Pacific Capital Fund or Aquila Bond or Equity Fund will be its public offering price). Dividends paid by the Aquila Money-Market Funds are taxable, except to the extent that dividends paid by the Tax-Free Fund (which invests in tax-free municipal obligations) are exempt from regular Federal income tax and Hawaiian income tax, and to the extent that dividends paid by the Government Securities Fund (which invests in U.S. government obligations) are exempt from state income taxes. Dividends paid by the Aquila Rocky Mountain Equity Fund are taxable. If your state of residence is not the same as that of the issuers of obligations in which a tax-free municipal bond fund or a tax-free money market-fund invests, the dividends from that fund may be subject to income tax of the state in which you reside. Accordingly, you should consult your tax adviser before acquiring shares of such a fund under the exchange privilege arrangement. An exchange is treated for Federal tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss, depending on the cost or other tax basis of the shares exchanged and the holding period; no representation is made as to the deductibility of any such loss that may occur. If you are considering an exchange into one of the funds listed above, you should send for and carefully read its Prospectus. Transfer on Death Registration Each of the funds in the Aquilasm Group of Funds now generally permits registration of its shares in beneficiary form, subject to the funds' rules governing Transfer on Death ("TOD") registration, if the investor resides in a state that has adopted the Uniform Transfer on Death Security Registration Act (a "TOD State"; for these purposes, Missouri is deemed to be a TOD State). This form of registration allows you to provide that, on your death, your shares are to be transferred to the one or more persons that you specify as beneficiaries. To register shares of a Fund in TOD form, complete the special TOD Registration Request Form and review the Rules Governing TOD Registration; both are available from the Agent. The Rules, which are subject to amendment upon 60 days' notice to TOD account owners, contain important information regarding TOD accounts with a Fund; by opening such an account you agree to be bound by them, and failure to comply with them may result in your shares' not being transferred to your designated beneficiaries. If you open a TOD account with a Fund that is otherwise acceptable but, for whatever reason, neither the Fund nor the Transfer Agent receives a properly completed TOD Registration Request Form from you prior to your death, the Fund reserves the right not to honor your TOD designation, in which case your account will become part of your estate. You are eligible for TOD registration only if, and as long as, you reside in a TOD State. If you open a TOD account and your account address indicates that you do not reside in a TOD State, your TOD registration will be ineffective and the Fund may, in its discretion, either open the account as a regular (non-TOD) account or redeem your shares. Such a redemption may result in a loss to you and may have tax consequences. Similarly, if you open a TOD account while residing in a TOD State and later move to a non-TOD State, your TOD registration will no longer be effective. In both cases, should you die while residing in a non-TOD State the Fund reserves the right not to honor your TOD designation. At the date of this SAI, most states are TOD States. Distribution Plan Each Fund has adopted a Distribution Plan under Rule 12b-1 ("Rule 12b-1") under the 1940 Act; all of the plans have substantially the same terms. In the following material the "Plan" means the Plan of any of the Funds. Rule 12b-1 provides in substance that an investment company may not engage directly or indirectly in financing any activity which is primarily intended to result in the sale of its shares except pursuant to a plan adopted under Rule 12b-1. The Plan is in two parts. The Plan states that while it is in effect, the selection and nomination of those Trustees of any Fund who are not "interested persons" of the Fund shall be committed to the discretion of such disinterested Trustees but that nothing in the Plan shall prevent the involvement of others in such selection and nomination if the final decision on any such selection and nomination is approved by a majority of such disinterested Trustees. Part I of the Plan Part I of the Plan is designed to protect against any claim involving the Fund that the administration fee and some of the expenses which the Fund pays or may pay come within the purview of Rule 12b-1. No Fund considers such fee or any payment enumerated in Part I of the Plan as so financing any such activity. However, it might be claimed that such fee and some of the expenses a Fund pays come within the purview of Rule 12b-1. If and to the extent that any payments (including fees) specifically listed in Part I of the Plan are considered to be primarily intended to result in or are indirect financing of any activity which is primarily intended to result in the sale of a Fund's shares, these payments are authorized under the Plan. As used in Part I of the Plan, "Qualified Recipients" means (i) any principal underwriter or underwriters of a Fund (other than a principal underwriter which is an affiliated person, or an affiliated person of an affiliated person, of the Administrator) and (ii) broker-dealers or others selected by Aquila Investment Management LLC (the "Administrator") with which it or a Fund has entered into written agreements ("Plan Agreements") and which have rendered assistance (whether direct, administrative or both) in the distribution and/or retention of a Fund's shares or servicing shareholder accounts. "Qualified Holdings" means, as to any Qualified Recipient, all Fund shares beneficially owned by such Qualified Recipient or by one or more customers (brokerage or other) or other contacts and/or its investment advisory or other clients, if the Qualified Recipient was, in the sole judgment of the Administrator, instrumental in the purchase and/or retention of such Fund shares and/or in providing administrative assistance in relation thereto. The Plan permits the Administrator to make payments ("Administrator's Permitted Payments") to Qualified Recipients. These Administrator's Permitted Payments are made by the Administrator and are not reimbursed by the Fund to the Administrator. Permitted Payments may not exceed, for any fiscal year of a Fund (pro-rated for any fiscal year which is not a full fiscal year), in the case of the Cash Fund, 0.15 of 1% of the average annual net assets of the Fund, and in the case of the Tax-Free Fund and the Government Securities Fund 0.10 of 1% of their respective average annual net assets. The Administrator shall have sole authority (i) as to the selection of any Qualified Recipient or Recipients; (ii) not to select any Qualified Recipient; and (iii) to determine the amount of Administrator's Permitted Payments, if any, to each Qualified Recipient, provided that the total Administrator's Permitted Payments to all Qualified Recipients do not exceed the amount set forth above. The Administrator is authorized, but not directed, to take into account, in addition to any other factors deemed relevant by it, the following: (a) the amount of the Qualified Holdings of the Qualified Recipient; (b) the extent to which the Qualified Recipient has, at its expense, taken steps in the shareholder servicing area; and (c) the possibility that the Qualified Holdings of the Qualified Recipient would be redeemed in the absence of its selection or continuance as a Qualified Recipient. Notwithstanding the foregoing two sentences, a majority of the Independent Trustees (as defined below) may remove any person as a Qualified Recipient. The Plan states that whenever the Administrator bears the costs, not borne by a Fund's Distributor, of printing and distributing all copies of the Fund's prospectuses, statements of additional information and reports to shareholders which are not sent to the Fund's shareholders, or the costs of supplemental sales literature and advertising, such payments are authorized. Part I of the Plan recognizes that, in view of the Administrator's Permitted Payments and bearing by the Administrator of certain distribution expenses, the profits, if any, of the Administrator are dependent primarily on the administration fees paid by the Fund to the Administrator and that its profits, if any, would be less, or losses, if any, would be increased due to such Administrator's Permitted Payments and the bearing by it of such expenses. If and to the extent that any such administration fees paid by the Fund might, in view of the foregoing, be considered as indirectly financing any activity which is primarily intended to result in the sale of shares issued by the Fund, the payment of such fees is authorized by Part I of the Plan. Part I of the Plan also states that if and to the extent that any of the payments by the Fund listed below are considered to be "primarily intended to result in the sale of" shares issued by the Fund within the meaning of Rule 12b-1, such payments are authorized under the Plan: (i) the costs of the preparation of all reports and notices to shareholders and the costs of printing and mailing such reports and notices to existing shareholders, irrespective of whether such reports or notices contain or are accompanied by material intended to result in the sale of shares of the Fund or other funds or other investments; (ii) the costs of the preparation and setting in type of all prospectuses and statements of additional information and the costs of printing and mailing all prospectuses and statements of additional information to existing shareholders; (iii) the costs of preparation, printing and mailing of any proxy statements and proxies, irrespective of whether any such proxy statement includes any item relating to, or directed toward, the sale of the Fund's shares; (iv) all legal and accounting fees relating to the preparation of any such reports, prospectuses, statements of additional information, proxies and proxy statements; (v) all fees and expenses relating to the registration or qualification of the Fund and/or its shares under the securities or "Blue-Sky" laws of any jurisdiction; (vi) all fees under the Securities Act of 1933 and the 1940 Act, including fees in connection with any application for exemption relating to or directed toward the sale of the Fund's shares; (vii) all fees and assessments of the Investment Company Institute or any successor organization, irrespective of whether some of its activities are designed to provide sales assistance; (viii) all costs of the preparation and mailing of confirmations of shares sold or redeemed or share certificates, and reports of share balances; and (ix) all costs of responding to telephone or mail inquiries of investors or prospective investors. Part I of the Plan states that while Part I is in effect, the Fund's Administrator shall report at least quarterly to the Fund's Trustees in writing for its review on the following matters: (i) all Administrator's Permitted Payments made to Qualified Recipients, the identity of the Qualified Recipient of each Payment and the purpose for which the amounts were expended; (ii) all costs of each item specified in the second preceding paragraph (making estimates of such costs where necessary or desirable) during the preceding calendar or fiscal quarter; and (iii) all fees of the Fund to the Administrator paid or accrued during such quarter. Part I of the Plan defines as the Fund's Independent Trustees those Trustees who are not "interested persons" of the Fund as defined in the 1940 Act and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan. Part I of the Plan, unless terminated as hereinafter provided, continues in effect from year to year only so long as such continuance is specifically approved at least annually by the Fund's Trustees and its Independent Trustees with votes cast in person at a meeting called for the purpose of voting on such continuance. In voting on the implementation or continuance of Part I of the Plan, those Trustees who vote to approve such implementation or continuance must conclude that there is a reasonable likelihood that Part I of the Plan will benefit the Fund and its shareholders. Part I of the Plan may be terminated at any time by vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the outstanding voting securities of the Fund. Part I of the Plan may not be amended to increase materially the amount of payments to be made without shareholder approval, and all amendments must be approved in the manner set forth above as to continuance of Part I of the Plan. Part I of the Plan states that in the case of a Qualified Recipient which is a principal underwriter of the Fund the Plan Agreement shall be the agreement contemplated by Section 15(b) of the 1940 Act since each such agreement must be approved in accordance with, and contain the provisions required by, Rule 12b-1. The Plan also states that in the case of Qualified Recipients which are not principal underwriters of the Fund, the Plan Agreements with them shall be the agreements with the Administrator with respect to payments under Part I of the Plan. Under Rule 12b-1, all agreements related to implementation of a plan must be in writing and must contain specified adoption and continuance requirements, including a requirement that they terminate automatically on their "assignment," as that term is defined in the 1940 Act. The other adoption and continuance requirements as to such agreements are the same as those described above as to Part I of the Plan itself except that: (i) no shareholder action is required for the approval of such agreements, and (ii) termination by Trustee or shareholder action as there described may be on not more than 60 days' written notice. The Plan Agreement between the Fund and the Administrator is governed by the foregoing requirements. During the Funds' fiscal year ended March 31, 2005 no or nominal Administrator's Permitted Payments (under $1,000) were made by the Administrator to Qualified Recipients. The formula under which the payments described above may be made under Part I of the Plan by the Administrator was arrived at by considering a number of factors. One of such factors is that such payments are designed to provide incentives for Qualified Recipients (i) in the case of Qualified Recipients which are principal underwriters, to act as such and (ii) in the case of all Qualified Recipients, to devote substantial time, persons and effort to the sale of the shares of the Fund. Another factor is that such payments by the Administrator to Qualified Recipients may provide the only incentive for Qualified Recipients to do so; there is no sales charge on the sale of the Fund's shares and, although Part II of the Plan, as discussed below, permits certain payments by the Fund to persons providing distribution and/or shareholder service assistance, those payments are permitted only in connection with one of the Fund's two classes of shares. Another factor is that the Fund is one of a group of funds having certain common characteristics. Each such fund (i) is a money-market fund; and (ii) has as its investment adviser a banking institution or an affiliate which invests assets over which it has investment authority in money-market funds advised by other banking institutions or affiliates. The marketing of the Fund's shares may be facilitated since each such institution can, due to these common characteristics, be fully and currently informed as to the quality of the investments of and other aspects of the operations of each of the other funds and if such an investment is otherwise appropriate, can, although not required to do so, invest assets over which it has investment authority in one or more of the other funds. Part II of the Plan Part II of the Plan authorizes payment of certain distribution or service fees by the Fund in connection with Service Shares of the Fund. As used in Part II of the Plan, "Designated Payees" means (i) any principal underwriter or underwriters of the Fund and (ii) broker-dealers or others selected by Aquila Distributors, Inc. (the "Distributor") with which it or the Fund has entered into written agreements ("Distributor's Plan Agreements") and which have rendered assistance (whether direct, administrative or both) in the distribution and/or retention of shares of the specified class or servicing shareholder accounts with respect to those shares. "Qualified Holdings" means, as to any Designated Payee, all Service Shares beneficially owned by such Designated Payee or by one or more customers (brokerage or other) or other contacts and/or its investment advisory or other clients, if the Designated Payee was, in the sole judgment of the Distributor, instrumental in the purchase and/or retention of such shares and/or in providing administrative assistance in relation thereto. Part II of the Plan permits the Fund to make payments ("Fund's Permitted Payments") to Designated Payees. These Fund's Permitted Payments are made by the Fund directly or through the Distributor and may not exceed, for any fiscal year of the Fund (pro-rated for any fiscal year which is not a full fiscal year), 0.25 of 1% of the average annual net assets of the Fund represented by the Service Shares class of Fund shares. Such payments are to be made out of the Fund assets allocable to Service Shares. The Distributor shall have sole authority (i) as to the selection of any Designated Payee or Payees; (ii) not to select any Designated Payee; and (iii) to determine the amount of Fund's Permitted Payments, if any, to each Designated Payee, provided that the total Fund's Permitted Payments to all Designated Payees do not exceed the amount set forth above. The Distributor is authorized, but not directed, to take into account, in addition to any other factors deemed relevant by it, the following: (a) the amount of the Qualified Holdings of the Designated Payee; (b) the extent to which the Designated Payee has, at its expense, taken steps in the shareholder servicing area; and (c) the possibility that the Qualified Holdings of the Designated Payee would be redeemed in the absence of its selection or continuance as a Designated Payee. Notwithstanding the foregoing two sentences, a majority of the Independent Trustees (as defined below) may remove any person as a Designated Payee. Part II of the Plan states that while Part II is in effect, the Distributor shall report at least quarterly to the Fund's Trustees in writing for its review on the following matters: (i) all Fund's Permitted Payments made to Designated Payees, the identity of the Designated Payee of each Payment and the purpose for which the amounts were expended; and (ii) all fees of the Fund to the Distributor, sub-adviser or Administrator paid or accrued during such quarter. Part II of the Plan, unless terminated as hereinafter provided, continues in effect from year to year only so long as such continuance is specifically approved at least annually by the Fund's Trustees and its Independent Trustees with votes cast in person at a meeting called for the purpose of voting on such continuance. In voting on the implementation or continuance of Part II of the Plan, those Trustees who vote to approve such implementation or continuance must conclude that there is a reasonable likelihood that Part II of the Plan will benefit the Fund and its shareholders. Part II of the Plan may be terminated at any time by vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the outstanding voting securities of the Service Shares class. Part II of the Plan may not be amended to increase materially the amount of payments to be made without shareholder approval, and all amendments must be approved in the manner set forth above as to continuance of Part II of the Plan. Part II of the Plan states that in the case of a Designated Payee which is a principal underwriter of the Fund, the Distributor's Plan Agreement shall be the agreement contemplated by Section 15(b) of the 1940 Act since each such agreement must be approved in accordance with, and contain the provisions required by, Rule 12b-1. The Plan also states that in the case of Designated Payees which are not principal underwriters of the Fund, the Distributor's Plan Agreements with them shall be the agreements with the Distributor with respect to payments under Part II of the Plan. During the three fiscal years ended March 31, 2005, 2004 and 2003 the following payments were made by each of the Funds under Part II of their respective Plans to Designated Payees. All such payments were for compensation. The Bank of Hawaii and a subsidiary, Bankoh Investment Services, Inc., are among those who receive payments authorized by Part II of the Plans. Cash Fund Tax-Free Fund Government Securities Fund 2005 $308,691 $149,014 $1,246,209 2004 $304,868 $131,223 $1,195,479 2003 $330,175 $131,253 $1,067,315 Taxation of the Trust Each Fund, during its last fiscal year, qualified and intends to continue to qualify under subchapter M of the Internal Revenue Code; if so qualified it will not be liable for Federal income taxes on amounts distributed by the Fund. Underwriter Aquila Distributors, Inc. acts as each Fund's principal underwriter in the continuous public offering of each Fund's shares. The Distributor is not obligated to sell a specific number of shares. Under the Distribution Agreement, the Distributor is responsible for the payment of certain printing and distribution costs relating to prospectuses and reports as well as the costs of supplemental sales literature, advertising and other promotional activities. Net Under- writing Compensation Name of Discounts on Redemp- Principal and tions and Brokerage Other Underwriter Commissions Repurchases Commissions Compensation Aquila Distributors Inc. None None None None The Distributor currently handles the distribution of the shares of eleven funds (three money-market funds, seven tax-free municipal bond funds and an equity fund), including the Funds. The shares of the Distributor are owned 24% by Diana P. Herrmann, 72% by Mr. Herrmann and other members of his immediate family and the balance by current employees of Aquila Investment Management LLC. APPENDIX A NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS Bond Ratings At the date of this Additional Statement there are four organizations considered as Nationally Recognized Statistical Rating Organizations ("NRSROs") for purposes of Rule 15c3-1 under the Securities Exchange Act of 1934. Their names, a brief summary of their respective rating systems, some of the factors considered by each of them in issuing ratings and their individual procedures are described below. STANDARD & POOR'S CORPORATION Commercial paper consists of unsecured promissory notes issued to raise short-term funds. An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. S&P's commercial paper ratings are graded into several categories from "A-1" for the highest-quality obligations (which can also have a plus (+) sign designation) to "D" for the lowest. The two highest categories are: A-1: This highest category indicates the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus (+) sign. A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high for issues designated A-1. An S&P corporate debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. The ratings are based, in varying degrees, on the following considerations: 1) Likelihood of default -- capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligations; 2) Nature of and provisions of the obligation; and 3) Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. The two highest categories are: AAA: Capacity to pay interest and repay principal is extremely strong. AA: Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a degree. MOODY'S INVESTORS SERVICE Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations which have an original maturity not exceeding one year. Obligations relying upon support mechanisms such as letters of credit and bonds of indemnity are excluded unless explicitly rated. The two highest categories are: Prime-1: Issuers rated P-1 have a superior ability for repayment of senior short-term debt obligations, evidenced by the following characteristics: o Leading market positions in well-established industries. o High rates of return on funds employed. o Conservative capital structure with moderate reliance on debt and ample asset protection. o Broad margins in earnings coverage of fixed financial charges and high internal cash generation. o Well-established access to a range of markets and assured sources of alternative liquidity. Prime-2: Issuers rated P-2 have a strong ability for repayment of senior short-term debt obligations, evidenced by the above-mentioned characteristics, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternative liquidity is maintained. Corporate bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by large or exceptionally stable margin and principal is secure. Corporate bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. Aa bonds are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities, fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long-term risk appear somewhat greater than the Aaa securities. DOMINION BOND RATING SERVICE LIMITED ("DBRS") DBRS Bond and Long Term Debt Rating Scale. Long term debt ratings are meant to give an indication of the risk that the borrower will not fulfill its full obligations in a timely manner with respect to both interest and principal commitments. AAA Bonds rated AAA are of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. AA Bonds rated AA are of superior credit quality, and protection of interest and principal is considered high. A Bonds rated A are of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than with AA rated entities. BBB Bonds rated BBB are of adequate credit quality. BB Bonds rated BB are defined to be speculative, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. B Bonds rated B are highly speculative and there is a reasonably high level of uncertainty which exists as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity. DBRS Commercial Paper and Short Term Debt Rating Scale. Commercial paper ratings are meant to give an indication of the risk that the borrower will not fulfill its obligations in a timely manner. All three DBRS rating categories for short term debt use "high," "middle" or "low" as subset grades to designate the relative standing of the credit within a particular rating category. R-1 (high) Short term debt rated R-1 (high) is of the highest credit quality, and indicates an entity which possesses unquestioned ability to repay current liabilities as they fall due. R-1 (middle) Short term debt rated R-1 (middle) is of superior credit quality and, in most cases, ratings in this category differ from R-1 (high) credits to only a small degree. R-1 (low) Short term debt rated R-1 (low) is of satisfactory credit quality. the overall strength and outlook for key liquidity, debt and profitability ratios is not normally as favorable as with higher rating categories, but these considerations are still respectable. R-2 (high), Short term debt rated R-2 is of adequate credit quality and within the three subset grades, R-2 (middle), debt protection ranges from having reasonable ability for timely repayment to a level R-2 (low) which is considered only just adequate. R-3 (high), Short term debt rated R-3 is speculative, and within the three subset grades, the capacity R-3 (middle), for timely payment ranges from mildly speculative to doubtful. R-3 (low) FITCH INVESTORS SERVICE, INC. The Fitch short-term ratings apply to debt obligations that are payable on demand which include commercial paper, certificates of deposit, medium-term notes and municipal and investment notes. Short-term ratings places greater emphasis than long-term ratings on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are: F-1+: Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+". The Fitch long-term rating represents their assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. The Fitch long-term rating are: AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong. DESCRIPTION OF MUNICIPAL BOND AND COMMERCIAL PAPER RATINGS Municipal Bond Ratings Standard & Poor's. A Standard & Poor's municipal obligation rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers or lessees. The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances. The ratings are based, in varying degrees, on the following considerations: I. Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation; II. Nature of and provisions of the obligation; III. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors rights. AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Provisional Ratings: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise his own judgment with respect to such likelihood and risk. Standard & Poor's ratings for municipal note issues are designated SP in order to help investors distinguish more clearly the credit quality of notes as compared to bonds. Notes bearing the designation SP-1 are deemed very strong or to have strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Notes bearing the designation SP-2 are deemed to have a satisfactory capacity to pay principal and interest. Moody's Investors Service. A brief description of the applicable Moody's Investors Service rating symbols and their meanings follows: Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Bonds in the Aa, A, Baa, Ba and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1, A1, Baa1, Ba1 and B1. Moody's Short Term Loan Ratings - There are three rating categories for short-term obligations, all of which define an investment grade situation. These are designated as Moody's Investment Grade MIG 1 through MIG 3. In the case of variable rate demand obligations (VRDOs), two ratings are assigned; one representing an evaluation of the degree of risk associated with scheduled principal and interest payments, and the other representing an evaluation of the degree of risk associated with the demand feature. The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When no rating is applied to the long or short-term aspect of a VRDO, it will be designated NR. Issues or the features associated with MIG or VMIG ratings are identified by date of issue, date of maturity or maturities or rating expiration date and description to distinguish each rating from other ratings. Each rating designation is unique with no implication as to any other similar issue of the same obligor. MIG ratings terminate at the retirement of the obligation while VMIG rating expiration will be a function of each issuer's specific structural or credit features. MIG1/VMIG1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing. MIG2/VMIG2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. MIG3/VMIG3 This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow, and market access for refinancing is likely to be less well established. Commercial Paper Ratings Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually promissory obligations. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers: Prime 1 -- Highest Quality; Prime 2 -- Higher Quality; Prime 3 -- High Quality. A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment. Ratings are graded into four categories, ranging from "A" for the highest quality obligations to "D" for the lowest. Issues assigned the highest rating, A, are regarded as having the greatest capacity for timely payment. Issues in this category are designed with the numbers 1, 2 and 3 to indicate the relative degree of safety. The designation A-1 indicates that the degree of safety regarding timely payment is either overwhelming or very strong. A "+" designation is applied to those issues rated "A-1" which possess safety characteristics. Capacity for timely payment on issues with the designation A-2 is strong. However, the relative degree of safety is not as high as for issues designated A-1. Issues carrying the designation A-3 have a satisfactory capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. CASH ASSETS TRUST PART C: OTHER INFORMATION Financial Statements Financial Statements of the Pacific Capital Funds of Cash Assets Trust: Included in Part A: Financial Highlights of Pacific Capital Cash Assets Trust Pacific Capital Tax-free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Incorporated by reference into Part B: Report of Independent Registered Public Accounting Firm Statement of Assets and Liabilities as of March 31, 2005: Pacific Capital Cash Assets Trust Pacific Capital Tax-free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Statement of Operations for the Year Ended March 31, 2005: Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Statement of Changes in Net Assets for the Years Ended March 31, 2005 and 2004: Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Statement of Investments as of March 31, 2005: Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Notes to Financial Statements: Pacific Capital Cash Assets Trust Pacific Capital Tax-free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Included in Part C: ITEM 23 Exhibits: (a) Amended and Restated Declaration of Trust (ii) (b) By-laws (x) (c) Instruments defining rights of shareholders The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares and to divide or combine the shares into a greater or lesser number of shares without thereby changing the proportionate beneficial interests in the Trust. Each share represents an equal proportionate interest in the Trust with each other share of its class; shares of the respective classes represent proportionate interests in the Trust in accordance with their respective net asset values. Upon liquidation of the Trust, shareholders are entitled to share pro-rata in the net assets of the Trust available for distribution to shareholders, in accordance with the respective net asset values of the shares of each of the Trust's classes at that time. All shares are presently divided into four classes; however, if they deem it advisable and in the best interests of shareholders, the Board of Trustees of the Trust may create additional classes of shares, which may differ from each other as provided in rules and regulations of the Securities and Exchange Commission or by exemptive order. The Board of Trustees may, at its own discretion, create additional series of shares, each of which may have separate assets and liabilities (in which case any such series will have a designation including the word "Series"). See the Additional Statement for further information about possible additional series. Shares are fully paid and non-assessable, except as set forth under the caption "General Information" in the Additional Statement. At any meeting of shareholders, shareholders are entitled to one vote for each dollar of net asset value (determined as of the record date for the meeting) per share held (and proportionate fractional votes for fractional dollar amounts). Shareholders will vote on the election of Trustees and on other matters submitted to the vote of shareholders. Shares vote by classes on any matter specifically affecting one or more classes, such as an amendment of an applicable part of the Distribution Plan. No amendment may be made to the Declaration of Trust without the affirmative vote of the holders of a majority of the outstanding shares of the Trust except that the Trust's Board of Trustees may change the name of the Trust. The Trust may be terminated (i) upon the sale of its assets to another issuer, or (ii) upon liquidation and distribution of the assets of the Trust, in either case if such action is approved by the vote of the holders of a majority of the outstanding shares of the Trust. (d) (1) Investment Advisory Agreement for Pacific Capital Cash Assets Trust Series (i) (2) Assignment and Assumption of Administration Agreement for Pacific Capital Cash Assets Trust Series (ix) (3) Investment Advisory Agreement for Pacific Capital Tax-Free Cash Assets Trust Series (i) (4) Assignment and Assumption of Administration Agreement for Pacific Capital Tax-Free Cash Assets Trust Series (ix) (5) Investment Advisory Agreement for Pacific Capital U.S. Government Securities Cash Assets Trust Series (i) (6) Assignment and Assumption of Administration Agreement for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ix) (e) (1) Distribution Agreement for Pacific Capital Cash Assets Trust Series (iv) (2) Anti-Money Laundering Amendment to Distribution Agreement for Pacific Capital Cash Assets Trust Series (viii) (3) Distribution Agreement for Pacific Capital Tax-Free Cash Assets Trust Series (iv) (4) Anti-Money Laundering Amendment to Distribution Agreement for Pacific Capital Tax-Free Cash Assets Trust Series (viii) (5) Distribution Agreement for Pacific Capital U.S. Government Securities Cash Assets Trust Series (iv) (6) Anti-Money Laundering Amendment to Distribution Agreement for Pacific Capital U.S. Government Securities Cash Assets Trust Series (viii) (7) Distribution Assistance Agreement for All Series (ii) (8) Distribution Assistant Agreement for All Series with BHC Securities, Inc. (ii) (f) Not applicable (g) Custody Agreement for All Series (ii) (h) (1) Transfer Agency Agreement for All Series (iii) (2) Anti-Money Laundering Amendment to Transfer Agency Agreement (viii) (3) Customer Identification Services Amendment to Transfer Agency Agreement (ix) (4) Administration Agreement for Pacific Capital Cash Assets Trust Series (ii) (5) Administration Agreement for Pacific Capital Tax-Free Cash Assets Trust Series (ii) (6) Administration Agreement for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ii) (7) Agreement between the Trust and Aquila Distributors, Inc. for Pacific Capital Cash Assets Trust Series (ii) (8) Agreement between the Trust and Aquila Management Corporation for Pacific Capital Cash Assets Trust Series (ii) (9) Agreement between the Trust and Hawaiian Trust Company, Limited for Pacific Capital Cash Assets Trust Series (ii) (10) Agreement between the Trust and Aquila Distributors, Inc. for Pacific Capital Tax-Free Cash Assets Trust Series (ii) (11) Agreement between the Trust and Aquila Management Corporation for Pacific Capital Tax-Free Cash Assets Trust Series (ii) (12) Agreement between the Trust and Hawaiian Trust Company, Limited for Pacific Capital Tax-Free Cash Assets Trust Series (ii) (13) Agreement between the Trust and Aquila Distributors, Inc. for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ii) (14) Agreement between the Trust and Aquila Management Corporation for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ii) (15) Agreement between the Trust and Hawaiian Trust Company, Limited for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ii) (16) Principles of Cooperation for All Series (ii) (i) (1) Opinion of Trust Counsel (ii) (2) Consent of Trust Counsel (x) (j) Consent of Independent Registered Public Accounting Firm (x) (k) Not applicable (l) Not applicable (m) (1) Distribution Plan for Pacific Capital Cash Assets Trust Series (ii) (2) Distribution Plan for Pacific Capital Tax-Free Cash Assets Trust Series (ii) (3) Distribution Plan for Pacific Capital U.S. Government Securities Cash Assets Trust Series (ii) (n) Plan pursuant to Rule 18f-3 under the 1940 Act (vii) (o) Reserved (p) Codes of Ethics (1) (a) Pacific Capital Cash Assets Trust Series (x) (1) (b) Pacific Capital Tax-Free Cash Assets Trust Series (x) (1) (c) Pacific Capital U.S. Government Securities Cash Assets Trust Series (x) (2) The Adviser (x) (3) The Distributor (x) (i) Filed as an exhibit to Registrant's Post-Effective Amendment No. 20 dated May 25, 1996 and incorporated herein by reference. (ii) Filed as an exhibit to Registrant's Post-Effective Amendment No. 21 dated July 27, 1997 and incorporated herein by reference. (iii) Filed as an exhibit to Registrant's Post-Effective Amendment No. 22 dated May 27, 1998 and incorporated herein by reference. (iv) Filed as an exhibit to Registrant's Post-Effective Amendment No. 24 dated July 27, 1999 and incorporated herein by reference. (v) Filed as an exhibit to Registrant's Post-Effective Amendment No. 25 dated July 31, 2000 and incorporated herein by reference. (vi) Filed as an exhibit to Registrant's Post-Effective Amendment No. 26 dated July 26, 2001 and incorporated herein by reference. (vii) Filed as an exhibit to Registrant's Post-Effective Amendment No. 27 dated July 29, 2002 and incorporated herein by reference. (viii) Filed as an exhibit to Registrant's Post-Effective Amendment No. 28 dated July 29, 2003 and incorporated herein by reference. (ix) Filed as an exhibit to Registrant's Post-Effective Amendment No. 29 dated July 29, 2004 and incorporated herein by reference. (x) Filed herewith. ITEM 24. Persons Controlled By or Under Common Control with Registrant None ITEM 25. Indemnification Subdivision (c) of Section 12 of Article SEVENTH of Registrant's Amended and Restated Declaration of Trust, filed as Exhibit 1 herewith, is incorporated herein by reference. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, officers, and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Trustee, officer, or controlling person of Registrant in the successful defense of any action, suit, or proceeding) is asserted by such Trustee, officer, or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26. Business and Other Connections of Investment Adviser Asset Management Group of Bank of Hawaii, Registrant's investment adviser, is a division of Bank of Hawaii. Bank of Hawaii is a state-chartered bank. Bank of Hawaii is a subsidiary of Bank of Hawaii Corporation, formerly Pacific Century Financial Corporation. Bank of Hawaii Corporation is a bank holding company. ITEM 27. Principal Underwriters (a) Aquila Distributors, Inc. serves as principal underwriter to Aquila Rocky Mountain Equity Fund, Churchill Tax-Free Fund of Kentucky, Hawaiian Tax-Free Trust, Narragansett Insured Tax-Free Income Fund, Tax-Free Fund for Utah, Tax-Free Fund of Colorado, Tax-Free Trust of Arizona, and Tax-Free Trust of Oregon, in addition to serving as the Registrant's principal underwriter. (b) For information about the Directors and officers of Aquila Distributors, Inc., reference is made to the Form BD filed by it under the Securities Exchange Act of 1934. (c) Not applicable. ITEM 28. Location of Accounts and Records All such accounts, books, and other documents are maintained by the adviser, the administrator, the custodian, and the transfer agent, whose addresses appear on the back cover pages of the Prospectuses and Statements of Additional Information of the three Portfolios of the Trust. ITEM 29. Management Services Not applicable. ITEM 30. Undertakings (a) Not applicable. (b) Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933, and has caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York, on the 29th day of July, 2005. CASH ASSETS TRUST (Registrant) By /s/ Diana P. Herrmann ----------------------------- Diana P. Herrmann, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement or Amendment has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE /s/ Diana P. Herrmann - ---------------------- Trustee and 7/29/05 Diana P. Herrmann President ----------- /s/Thomas W. Courtney 7/29/05 - ---------------------- Trustee ----------- Thomas W. Courtney /s/Stanley W. Hong 7/29/05 - ---------------------- Trustee ----------- Stanley W. Hong /s/ Theodore T. Mason - ---------------------- Chair of the 7/29/05 Theodore T. Mason Board ----------- /s/Russell K. Okata 7/29/05 - ---------------------- Trustee ----------- Russell K. Okata /s/Douglas Philpotts 7/29/05 - ---------------------- Trustee ----------- Douglas Philpotts /s/Oswald K. Stender 7/29/05 - ---------------------- Trustee ----------- Oswald K. Stender /s/Joseph P. DiMaggio 7/29/05 - ---------------------- Chief Financial Officer ----------- Joseph P. DiMaggio and Treasurer CASH ASSETS TRUST Exhibit List Exhibit Exhibit Number Description (b) By-laws (i) (2) Consent of Trust Counsel (j) Consent of Independent Registered Public Accounting Firm (p) (1) (a) Code of Ethics of Pacific Capital Cash Assets Trust Series (p) (1) (b) Code of Ethics of Pacific Capital Tax-Free Cash Assets Trust Series (p) (1) (c) Code of Ethics of Pacific Capital U.S. Government Securities Cash Assets Trust Series (p) (2) Code of Ethics of the Adviser (p) (3) Code of Ethics of the Distributor EX-99.B 3 pcatb05byl.txt AMENDED BY-LAWS Dated: December 11, 2004 CASH ASSETS TRUST BY-LAWS ARTICLE I SHAREHOLDERS Section 1. Place of Meeting. All meetings of the Shareholders (which term as used herein shall, together with all other terms defined in the Declaration of Trust, have the same meaning as in the Declaration of Trust) shall be held at the principal office of the Trust or at such other place as may from time to time be designated by the Board of Trustees and stated in the notice of meeting. Section 1A. Shareholder Voting. At any meeting of Shareholders, Shareholders are entitled to one (1) vote for each dollar of net asset value (determined as of the record date for the meeting) per Share held (and fractional votes for fractional dollar amounts.) Section 2. Annual Meeting. In any year in which the Trustees determine that a meeting of the Shareholders of the Trust shall be held for the purpose of electing Trustees, that meeting shall be held on such date and at such time as may be determined by the Board of Trustees and as shall be designated in the notice of meeting for the purpose of electing Trustees until the next meeting for such purpose and for the transaction of such other business as may properly be brought before the meeting. Section 3. Special or Extraordinary Meetings. Special or extraordinary meetings of Shareholders for any purpose or purposes may be called by the Chair of the Board of Trustees, if any, or by the President or by the Board of Trustees and shall be called by the Secretary upon receipt of the request in writing signed by holders of Shares representing not less than one third of the votes eligible to be cast thereat. Such request shall state the purpose or purposes of the proposed meeting. Section 4. Notice of Meetings of Shareholders. Not less than ten days' and not more than ninety days' written or printed notice of every meeting of Shareholders, stating the time and place thereof (and the general nature of the business proposed to be transacted at any special or extraordinary meeting), shall be given to each Shareholder entitled to vote thereat by leaving the same with him or at his residence or usual place of business or by mailing it, postage prepaid and addressed to him at his address as it appears upon the books of the Trust. No notice of the time, place or purpose of any meeting of Shareholders need be given to any Shareholder who attends in person or by proxy or to any Shareholder who, in writing executed and filed with the records of the meeting, either before or after the holding thereof, waives such notice. Section 5. Record Dates. The Board of Trustees may fix, in advance, a date, not exceeding ninety days and not less than ten days preceding the date of any meeting of Shareholders, and not exceeding ninety days preceding any dividend payment date or any date for the allotment of rights, as a record date for the determination of the Shareholders entitled to receive such dividends or rights, as the case may be; and only Shareholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights, as the case may be. Section 6. Quorum, Adjournment of Meetings. The presence in person or by proxy of the holders of record of outstanding Shares of the Trust representing at least one-third of the votes eligible to be cast thereat shall constitute a quorum at all meetings of Shareholders. If at any meeting of the Shareholders there shall be less than a quorum present, the Shareholders present at such meeting may, without further notice, adjourn the same from time to time until a quorum shall attend, but no business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted had the meeting not been adjourned. Section 7. Voting and Inspectors. At all meetings of Shareholders every Shareholder of record entitled to vote thereat shall be entitled to vote at such meeting either in person or by proxy appointed by such Shareholder or his duly authorized attorney-in-fact. All elections of Trustees shall be had by a plurality of the votes cast and all questions shall be decided by a majority of the votes cast, in each case at a duly constituted meeting, except as otherwise provided in the Declaration of Trust or in these By-Laws or by specific statutory provision superseding the restrictions and limitations contained in the Declaration of Trust or in these By-Laws. At any election of Trustees, the Board of Trustees prior thereto may, or, if they have not so acted, the Chair of the meeting may, and upon the request of the holders of the outstanding Shares of the Trust representing 10% of its net asset value entitled to vote at such election shall, appoint two inspectors of election who shall first subscribe an oath or affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. No candidate for the office of Trustee shall be appointed such Inspector. The Chair of the meeting may cause a vote by ballot to be taken upon any election or matter, and such vote shall be taken upon the request of the holders of the outstanding Shares of the Trust representing 10% of its net asset value entitled to vote on such election or matter. Section 8. Conduct of Shareholders' Meetings. The meetings of the Shareholders shall be presided over by the Chair of the Board of Trustees, if any, or if he shall not be present, by the President, or if he shall not be present, by a Vice-President, or if neither the Chair of the Board of Trustees, the President nor any Vice-President is present, by a Chair to be elected at the meeting. A person who relinguishes the Chair shall not be considered present for purposes of this Section until such time as he or she resumes the Chair. The Secretary of the Trust, if present, shall act as Secretary of such meetings, or if he is not present, an Assistant Secretary shall so act; if neither the Secretary nor an Assistant Secretary is present, then the meeting shall elect its secretary. Section 9. Concerning Validity of Proxies, Ballots, Etc. At every meeting of the Shareholders, all proxies shall be received and taken in charge of and all ballots shall be received and canvassed by the secretary of the meeting, who shall decide all questions touching the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless inspectors of election shall have been appointed as provided in Section 7, in which event such inspectors of election shall decide all such questions. ARTICLE II BOARD OF TRUSTEES Section 1. Number and Tenure of Office. The business and property of the Trust shall be conducted and managed by a Board of Trustees consisting of the number of initial Trustees, which number may be increased or decreased as provided in Section 2 of this Article. Each Trustee shall, except as otherwise provided herein, hold office until the annual meeting of Shareholders of the Trust next succeeding his election or until his successor is duly elected and qualifies. Trustees need not be Shareholders. Section 2. Increase or Decrease in Number of Trustees; Removal. The Board of Trustees, by the vote of a majority of the entire Board, may increase the number of Trustees to a number not exceeding fifteen, and may elect Trustees to fill the vacancies created by any such increase in the number of Trustees until the next annual meeting or until their successors are duly elected and qualify; the Board of Trustees, by the vote of a majority of the entire Board, may likewise decrease the number of Trustees to a number not less than two but the tenure of office of any Trustee shall not be affected by any such decrease. Vacancies occurring other than by reason of any such increase shall be filled as provided for a Massachusetts business corporation. In the event that after proxy material has been printed for a meeting of Shareholders at which Trustees are to be elected any one or more management nominees dies or becomes incapacitated, the authorized number of Trustees shall be automatically reduced by the number of such nominees, unless the Board of Trustees prior to the meeting shall otherwise determine. Any Trustee at any time may be removed either with or without cause by resolution duly adopted by the affirmative votes of the holders of the majority of the Shares of the Trust present in person or by proxy at any meeting of Shareholders at which such vote may be taken, provided that a quorum is present, or by such larger vote as may be required by Massachusetts law. Any Trustee at any time may be removed for cause by resolution duly adopted at any meeting of the Board of Trustees provided that notice thereof is contained in the notice of such meeting and that such resolution is adopted by the vote of at least two thirds of the Trustees whose removal is not proposed. As used herein, "for cause" shall mean any cause which under Massachusetts law would permit the removal of a Trustee of a business trust. Section 3. Place of Meeting. The Trustees may hold their meetings, have one or more offices, and keep the books of the Trust outside Massachusetts, at any office or offices of the Trust or at any other place as they may from time to time by resolution determine, or, in the case of meetings, as they may from time to time by resolution determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. Section 4. Regular Meetings. Regular meetings of the Board of Trustees shall be held at such time and on such notice, if any, as the Trustees may from time to time determine. The annual meeting of the Board of Trustees shall be held as soon as practicable after the annual meeting of the Shareholders for the election of Trustees. Section 5. Special Meetings. Special meetings of the Board of Trustees may be held from time to time upon call of the Chair of the Board of Trustees, if any, the President or two or more of the Trustees, by oral or telegraphic or written notice duly served on or sent or mailed to each Trustee not less than one day before such meeting. No notice need be given to any Trustee who attends in person or to any Trustee who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Such notice or waiver of notice need not state the purpose or purposes of such meeting. Section 6. Quorum. One-third of the Trustees then in office shall constitute a quorum for the transaction of business, provided that a quorum shall in no case be less than two Trustees. If at any meeting of the Board there shall be less than a quorum present (in person or by open telephone line, to the extent permitted by the l940 Act), a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. The act of the majority of the Trustees present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by statute, by the Declaration of Trust or by these By-Laws. Section 7. Committees. The Board of Trustees, by the affirmative vote of a majority of the entire Board, may appoint one or more committees which shall in each case consist of such number of members (not less than two) and shall have and may exercise such powers as the Board may determine in the resolution appointing them. A majority of all members of any such committee may determine its action, and fix the time and place of its meetings, unless the Board of Trustees shall otherwise provide. The Board of Trustees shall have power at any time to change the members and powers of any such committee, to fill vacancies, and to discharge any such committee. Section 8. Informal Action by and Telephone Meetings of Trustees and Committees. Any action required or permitted to be taken at any meeting of the Board of Trustees or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board, or of such committee, as the case may be. Trustees or members of a committee of the Board of Trustees may participate in a meeting by means of a conference telephone or similar communications equipment; such participation shall, except as otherwise required by the 1940 Act, have the same effect as presence in person. Section 9. Compensation of Trustees. Trustees shall be entitled to receive such compensation from the Trust for their services as may from time to time be voted by the Board of Trustees. Section 10. Dividends. Dividends or distributions payable on the Shares may, but need not be, declared by specific resolution of the Board as to each dividend or distribution; in lieu of such specific resolutions, the Board may, by general resolution, determine the method of computation thereof, the method of determining the Shareholders to which they are payable and the methods of determining whether and to which Shareholders they are to be paid in cash or in additional Shares. ARTICLE III OFFICERS Section 1. Executive Officers. The executive officers of the Trust shall be chosen by the Board of Trustees as soon as may be practicable after the annual meeting of the Shareholders. These may include a Chair of the Board of Trustees, and shall include a President, one or more Vice-Presidents (the number thereof to be determined by the Board of Trustees), a Secretary and a Treasurer. The Chair of the Board of Trustees, if any, and the President may, but need not be, selected from among the Trustees. The Board of Trustees may also in its discretion appoint Assistant Secretaries, Assistant Treasurers, and other officers, agents and employees, who shall have such authority and perform such duties as the Board may determine. The Board of Trustees may fill any vacancy which may occur in any office. Any two offices, except those of President and Vice-President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law or these By-Laws to be executed, acknowledged or verified by two or more officers. At any time when a person other than an interested person of the Trust under the Investment Company Act of 1940 holds the position of Chair of the Board of Trustees, that person shall not be considered an executive officer and the position shall be a Board position only. Section 2. Term of Office. The term of office of all officers shall be one year and until their respective successors are chosen and qualify; however, any officer may be removed from office at any time with or without cause by the vote of a majority of the entire Board of Trustees. Section 3. Powers and Duties. The officers of the Trust shall have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as may from time to time be conferred by the Board of Trustees. ARTICLE IV SHARES Section 1. Certificates of Shares. Each Shareholder of the Trust may be issued a certificate or certificates for his Shares in such form as the Board of Trustees may from time to time prescribe, but only if and to the extent and on the conditions prescribed by the Board. Section 2. Transfer of Shares. Shares shall be transferable on the books of the Trust by the holder thereof in person or by his duly authorized attorney or legal representative, upon surrender and cancellation of certificates, if any, for the same number of Shares, duly endorsed or accompanied by proper instruments of assignment and transfer, with such proof of the authenticity of the signature as the Trust or its agent may reasonably require; in the case of Shares not represented by certificates, the same or similar requirements may be imposed by the Board of Trustees. Section 3. Stock Ledgers. The stock ledgers of the Trust, containing the name and address of the Shareholders and the number of Shares held by them respectively, shall be kept at the principal offices of the Trust or, if the Trust employs a transfer agent, at the offices of the transfer agent of the Trust. Section 4. Lost, Stolen or Destroyed Certificates. The Board of Trustees may determine the conditions upon which a new certificate may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety to the Trust and the transfer agent, if any, to indemnify it and such transfer agent against any and all loss or claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed. ARTICLE V SEAL The Board of Trustees shall provide a suitable seal of the Trust, in such form and bearing such inscriptions as it may determine. ARTICLE VI FISCAL YEAR The fiscal year of the Trust shall be fixed by the Board of Trustees. ARTICLE VII AMENDMENT OF BY-LAWS The By-Laws of the Trust may be altered, amended, added to or repealed by the Shareholders or by majority vote of the entire Board of Trustees, but any such alteration, amendment, addition or repeal of the By-Laws by action of the Board of Trustees may be altered or repealed by the Shareholders. EX-23 4 pcatb05councon.txt CONSENT OF TRUST COUNSEL HOLLYER BRADY BARRETT & HINES LLP 551 Fifth Avenue New York, NY 10176 Tel: (212) 818-1110 FAX: (212) 818-0494 July 29, 2005 To the Trustees of Cash Assets Trust We consent to the incorporation by reference into post-effective amendment No. 30 under the 1933 Act and No. 29 under the 1940 Act of our opinion dated July 29, 1997. Hollyer Brady Barrett & Hines LLP /s/ William L.D. Barrett by------------------------------ Partner EX-23 5 pcatb05audcon.txt CONSENT OF IND. REGISTERED PUBLIC ACCTG FIRM Consent of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders of The Pacific Capital Funds of Cash Assets Trust: We consent to the incorporation by reference, in this registration statement, of our report dated May 23, 2005, on the statements of assets and liabilities, including the schedules of investments, of The Pacific Capital Funds of Cash Assets Trust ("Trust") (comprised of Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust, and Pacific Capital U.S. Government Securities Cash Assets Trust) as of March 31, 2005, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights and our report thereon are included in the Annual Report of the Trust as filed on Form N-CSR. We also consent to the references to our firm under the headings "Financial Highlights" in the Prospectus and "Financial Statements" and "Transfer Agent, Custodian and Independent Registered Public Accounting Firm" in the Statement of Additional Information. KPMG LLP New York, New York July 29, 2005 EX-99.P 6 pcatb05coepccat.txt CODE OF ETHICS OF CATS CODE OF ETHICS for PACIFIC CAPITAL CASH ASSETS TRUST Effective: January 7, 2005 (Revised January 25, 2005) ii TABLE OF CONTENTS I. INTRODUCTION.......................................................1 II. DEFINITIONS........................................................2 III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS................5 IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE.....................................................6 V. COMPLIANCE WITH LAWS AND REGULATIONS...............................6 A. General Prohibitions Applicable to All Personnel..........6 B. Front-Running.............................................6 C. Market Timing.............................................6 VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING........................7 A. Pre-Clearance of Personal Securities Transactions.........7 B. Prohibited Trading Practices..............................8 1. Short-Term Trading...............................8 2. Short Sales......................................8 C. Blackout Periods..........................................8 D. Exempt Transactions.......................................8 E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President...............9 VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS....................................................9 A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports")..........................10 B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports")...........................11 VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND..........................12 IX. GIFTS AND GRATUITIES..............................................13 X. ADVISING NON-AQUILA ENTITIES......................................14 XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES......................................................14 XII. RECORD KEEPING....................................................14 XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS.................................16 XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES...................16 XV. BOARD APPROVAL....................................................16 A. Initial Approval of Codes of Ethics......................16 B. Material Changes to Codes of Ethics......................16 C. Annual Reports to the Fund Board.........................17 APPENDICES Note: The forms set forth in the Appendices are not part of this Code of Ethics but are appended for convenience. Appendix A........CERTIFICATION OF RECEIPT OF CODE OF ETHICS Appendix B........PERSONAL TRADING REQUEST FORM Appendix C........INITIAL & ANNUAL HOLDINGS AND ACCOUNTS REPORT Appendix D........QUARTERLY TRANSACTION AND ACCOUNTS REPORT I. INTRODUCTION It is the policy of PACIFIC CAPITAL CASH ASSETS TRUST (the "Fund") that conflicts, or even the appearance of conflicts, between the interests of the Fund and its shareholders, and the interests of the Fund's officers and trustees and of its service providers and their respective personnel, must be avoided at all times. This code of ethics (the "Code of Ethics" or the "Code") has been adopted to implement this policy. As an officer, trustee, director, LLC Manager, Control Person or employee of the Fund or an Aquila Entity, you are subject to all applicable provisions of this Code. Codes of ethics have been adopted by each of the Aquila Entities and each of the Aquila Funds, and cover every officer, trustee, director, LLC Manager, Control Person and employee of those entities. The Chief Compliance Officer ("CCO") of the Fund is responsible for enforcing and interpreting this Code, and is available to answer any questions you may have. Independent Trustees may contact the CCO or, in the alternative, Fund Counsel. DEFINITIONS "Access Person" shall mean any person who is an Advisory Person. In addition, the following persons are presumed to be Access Persons of the Fund: (1) all officers and trustees of the Fund; and (2) all officers and LLC Managers of Aquila Investment Management LLC. Note: The presumption of Access Person status may be rebutted under certain circumstances as described in Section III of this Code. Note: Persons associated with Aquila Distributors, Inc. whose job functions or duties involve them in Fund investment decisions or give them access to information regarding Fund investment transactions are Advisory Persons and also Access Persons of the Fund. "Advisory Person" shall mean any person who is: (1) An officer, director, trustee, LLC Manager or employee of the Fund or of any Aquila Entity who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the Purchase or Sale of Covered Securities (defined below) by the Fund or whose functions relate to the making of any recommendations with respect to such Purchases or Sales; or (2) a Control Person (defined below) who obtains information concerning recommendations made to the Fund with regard to the Purchase or Sale of Covered Securities by the Fund. "Aquila Entity" or "Aquila Entities" shall mean Aquila Management Corporation, Aquila Investment Management LLC (a registered investment adviser) and Aquila Distributors, Inc. (a registered broker-dealer). "Aquila Funds" (each an "Aquila Fund") shall mean all funds in The Aquila Group of Funds and any fund to which an Aquila Entity provides administrative, distribution or investment advisory services, including: Aquila Fund (Dormant) Aquila Rocky Mountain Equity Fund Capital Cash Management Trust (Dormant) Churchill Cash Reserves Trust (Dormant) Churchill Tax-Free Fund of Kentucky Hawaiian Tax-Free Trust Narragansett Insured Tax-Free Income Fund Tax-Free Fund for Utah Tax-Free Fund of Colorado Tax-Free Trust of Arizona Tax-Free Trust of Oregon Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Prime Cash Fund (Dormant) "Beneficial Owner" shall mean any person who has or shares, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, a direct or indirect pecuniary interest in a Security, within the meaning of Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 ("Exchange Act"). "Pecuniary interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Security. Securities in which you have an "indirect pecuniary interest" include, but are not limited to, securities held by members of your immediate family who share your household, including your spouse, children and stepchildren, parents, grandparents, brothers and sisters, and any of your in-laws. The presumption of beneficial ownership of Securities held by a family member sharing your household may be rebutted by successfully demonstrating to the CCO to the Fund, or to Fund Counsel if you are an Independent Trustee, that you do not have a beneficial ownership interest in the Securities. "Board" shall mean the Board of Trustees of the Fund. "CCO" shall mean the Chief Compliance Officer of the Fund. "Code of Ethics" or Code shall mean this Code of Ethics. "Control" shall mean the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. A person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. A person who does not own more than 25% of the voting securities of a company shall be presumed not to control such company. A person who has "control" under this definition shall be presumed to have "control" unless and until the Securities and Exchange Commission ("SEC") grants an order to the contrary. "Control Person" shall mean any individual who has a Control relationship with the Fund or an investment adviser of the Fund. "Covered Security" shall mean any Security, including shares issued by offshore funds, unregistered funds (such as hedge funds) and closed-end funds. It also includes options or a Security convertible or exchangeable into a Covered Security. It does not include direct obligations of the U.S. Government, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements)1 and shares of U.S.-registered open-end investment companies (including shares of the Aquila Funds and all money market funds).2 "Independent Trustee" shall mean a Trustee who is not an "interested person" of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940 ("1940 Act"). "Initial Public Offering" shall mean an offering of Securities registered under the Securities Act of 1933 ("Securities Act"), the issuer of which , immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. "Limited Offering" shall mean an offering of Securities that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) under the Securities Act, or Rule 504, Rule 505 or Rule 506 thereunder (e.g., private placements). "LLC Manager" shall mean a person who is named as a Manager of an Aquila Entity that is organized as a limited liability company in, or designated as a manager of a limited liability company pursuant to, a limited liability company agreement or similar instrument under which the limited liability company is formed. "Personal Trading" shall mean the Purchase or Sale of Securities by an individual for his or her own account, any other account in which he or she is a Beneficial Owner, or any account (other than an account of an Aquila Fund) for which the Aquila employee decides what securities transactions will be effected for the account, either by making recommendations to the account owner or by entering orders directly with the broker handling the account. "President" shall mean the current President of the Fund. "Purchase or Sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security. "Security" shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security or on any group or index of securities (including any interest therein based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or generally any interest or instrument commonly known as a "security" or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. "Security Held or to be Acquired" means: (A) any Security that within the most recent fifteen (15) days is being or has been (i) held by the Fund or (ii) "considered for purchase or sale" by or on behalf of the Fund; and (B) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security described in (A) above. A Security is "being considered" for Purchase or Sale if: (a) there is an outstanding order (this includes orders that are in the process of being executed) to Purchase or Sell that Security for an account or portfolio of the Fund; (b) there is an outstanding oral or written recommendation with respect to that Security that has not been acted upon or rejected; or (c) the person responsible for a portfolio intends to Purchase or Sell (i.e., has decided to but has not yet purchased or sold) that Security for the Fund's accounts or portfolios. III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS For the purposes of this Code, all officers and trustees of the Fund and all officers and LLC Managers of Aquila Investment Management LLC are presumed to be Access Persons and thus are subject to the personal trading restrictions and reporting requirements described in Sections VI and VII below unless and until the presumption is rebutted. This presumption may be rebutted as to these persons, but only if the CCO makes a finding that such person, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the Purchase or Sale of Covered Securities by the Fund and that his or her functions do not relate to the making of any recommendations with respect to such Purchases or Sales. Prior to making a determination rebutting the presumption that a person is an Access Person of the Fund, the CCO investigate all relevant facts and prepare a memorandum for the file which sets forth the facts demonstrating the rebuttal of the presumption, as well as the CCO's determination that such person is not, in fact, an Access Person for the purpose of this Code. The CCO shall retain a copy of this memorandum in the business records of the Aquila Entities and the Fund. The CCO also shall maintain a list of all persons deemed Access Persons for the purpose of this Code. The CCO shall review the list and reaffirm that it is accurate and complete no less frequently than on an annual basis. Although included in the definition of Access Person, Independent Trustees of the Fund are generally exempt from the personal trading restrictions and prohibitions, as well as the initial, annual, and quarterly reporting requirements described below. IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE As an officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities, you must read this Code carefully and then sign and date the attached Certification (Appendix A) acknowledging receipt of this Code and return it to the CCO promptly. The CCO will provide you with a copy of any updates or amendments to this Code. You must read any such updates or amendments, and then again sign and date the attached Certification acknowledging receipt of the updates or amendments. The CCO shall retain a copy of these Certifications in accordance with Section XII of this Code. V. COMPLIANCE WITH LAWS AND REGULATIONS A. General Prohibitions Applicable to All Personnel When buying or selling any Security (including shares of the Fund and any other Aquila Fund), no officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities shall: o Employ any device, scheme, or artifice to defraud the Fund; o Make to the Fund any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading; o Engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or o Engage in any manipulative practice with respect to the Fund. B. Front-Running The practice of trading on the basis of the anticipated market effect of trades for Aquila Fund accounts, which is known as "front-running" or "scalping," constitutes a violation of the Federal securities laws. Therefore, it is absolutely prohibited for any officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities to engage in such trading. C. Market Timing No officer, director, trustee, LLC Manager, Control Person or employee of the Fund or of any Aquila Entity shall purchase or redeem shares of the Fund in violation of the policies and restrictions set forth in the Fund's prospectus, including, but not limited to, the restrictions limiting the frequency of transfers into and out of the Fund that are designed to prevent so-called "market timing" and protect the interests of long-term investors in the Fund. VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING Note: These restrictions generally will not apply to Independent Trustees of the Fund. The prohibitions and restrictions on personal securities transactions discussed below apply to the securities accounts held by or under the control of an Advisory Person and/or Access Person, depending on the restriction, as well as those accounts held by or under the control of members of the Advisory or Access Person's immediate family living in the same household with the Advisory or Access Person. A. Pre-Clearance of Personal Securities Transactions Advisory Persons must apply for and receive prior written approval from the CCO or his or her designee before purchasing or selling more than 100 shares of any Covered Security (see definition in Section II). Advisory Persons must also receive prior written approval from the CCO, or his or her designee in the CCO's absence, before acquiring any number of shares through an Initial Public Offering or Limited Offering. Advisory Persons shall request approvals by submitting a request, electronically, on paper or by facsimile using the Personal Trading Request Form attached hereto as Appendix B. The CCO shall submit his or her Personal Trading Request Form to the President (or the President's designee, in his or her absence) for approval. Copies of all Personal Trading Request Forms submitted by Advisory Persons shall be retained by the CCO in accordance with Section XII of this Code. A record of all written approvals of, and rationale supporting, any direct or indirect acquisition by Advisory Persons of an investment in an Initial Public Offering or Limited Offering will be made and retained by the CCO. Advisory Persons who have acquired Limited Offering Securities pursuant to prior written approval from the CCO or his or her designee must immediately disclose that investment to the CCO or his or her designee before they participate at any level in any Aquila Fund's subsequent consideration of an investment in the same issuer. In such circumstance, the Aquila Fund's decision to purchase Securities of the issuer will be subject to independent review by other investment personnel with no personal interest in the issuer. In the case of requests for pre-clearance in a Security Held or to be Acquired for any Aquila Fund which is advised by an investment adviser that is not subject to this Code ("external investment adviser"), the President or CCO generally shall grant authorization to trade if the person seeking pre-clearance does not have access to or knowledge of current investment decisions or recommendations of such external investment adviser. B. Prohibited Trading Practices 1. Short-Term Trading An Advisory Person is generally prohibited from realizing a profit from the purchase and sale or sale and purchase of the same Covered Security, within a period of sixty (60) days. It is recognized that short-term trading is not necessarily indicative of whether an individual is trading on inside information. Accordingly, an Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and retain a record of all waivers granted (including any waivers granted by the President in the CCO's absence) under this provision, including a summary of the reasons for granting the waiver. 2. Short Sales An Advisory Person is prohibited from effecting short sales or acquiring short positions in any Covered Security held by the Fund. C. Blackout Periods An Advisory Person shall not Purchase or Sell, directly or indirectly, any Covered Security: (a) within five (5) days after the time that the same Covered Security is purchased or sold by the Fund; or (b) at any time when he or she has have actual knowledge that a Covered Security is being purchased or sold, or recommended or considered for Purchase or Sale, by the Fund until five (5) days after the Fund's Purchase or Sale transaction in such Covered Security has been completed or the Covered Security is no longer being recommended or considered for Purchase or Sale by the Fund. An Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and keep a record of all waivers granted under this provision, including a summary of the reasons for granting the waiver. D. Exempt Transactions The Purchase or Sale of a Security in one of the following types of transactions, shall be considered an "Exempt Transaction" for the purposes of the restrictions on short-term trading, short sales and Purchases or Sales during blackout periods set forth in this Section VI: o trading in Securities in an account over which the Access Person does not have direct or indirect control or influence (e.g., a blind trust); o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans);3 o purchases or sales made by payroll deduction through an employer-sponsored employee benefit plan; o purchases or sales which are non-volitional; or o purchases of Securities 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. Note: The above-listed Exempt Transactions and Covered Securities acquired in such transactions remain subject to initial, annual and quarterly holdings and transaction reporting requirements as set forth in Section VII. E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President In the event that the CCO or the President seeks to engage in a transaction for which pre-clearance is required or seeks a waiver from the blackout period or short-term trading restrictions of this Section of the Code, the approval shall, in the case of the CCO, be granted or denied by the President and, in the case of proposed transactions by the President, the approval or waiver shall be granted or denied by the CCO. In the absence of the President or the CCO, such requests for approval shall be submitted to Fund Counsel. A written record of the determination made and the reasons for it shall be made by the person making the determination and the original record retained in accordance with this Code. VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS Access Persons, other than Independent Trustees, are required to submit initial and annual Covered Securities holdings and accounts reports as well as quarterly transaction reports as outlined below. The CCO shall identify all Access Persons who are required to submit reports pursuant to this Section of the Code and shall inform those Access Persons of these reporting requirements. The CCO shall maintain a record of all Access Persons who are required to submit reports pursuant to this section. These reports are mandated by SEC regulations and, therefore, exceptions and waivers of these reporting requirements cannot be granted under any circumstances. However, Access Persons need not make separate reports under this Section VII, to the extent the information in such reports would duplicate information required to be reported to any Aquila Entity pursuant to the Code of Ethics of the Aquila Entity. All reports submitted pursuant to this Code will be reviewed by the CCO or his or her designee to seek to ensure that Access Persons have abided by this Code. Through these reviews, the CCO or his or her designee will seek to identify improper trades or patterns of abuse (including market timing) by Access Persons. When reviewing these reports, the CCO also will seek to ensure that Access Persons have received all necessary pre-clearances required by this Code. The CCO shall periodically provide summary reports of any violations of this Code to the President. No report required by this Section shall be construed as an admission by the Access Person that he or she is a Beneficial Owner of any Security on the report. A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports") All Access Persons (other than Independent Trustees) must, upon commencement of employment, disclose all holdings in Covered Securities (as defined in Section II) and personal brokerage, mutual fund or bank accounts through which Securities are held or traded and over which the Access Person has direct or indirect control or influence (including those of immediate family members living in the same household as the Access Person). All Initial Holdings and Accounts Reports (Exhibit C) shall be made in writing to the CCO within ten (10) days of becoming an Access Person and such information shall be current as of a date no more than forty-five (45) days prior to such person becoming an Access Person. Thereafter, Access Persons must submit Annual Holdings and Accounts Reports (Exhibit C) to the CCO no later than February 14th of each year and must be current as of December 31st of the previous calendar year. Annual Holdings and Accounts Reports must be filed even if there have been no changes in the information reported previously and even if the Access Person has arranged for brokers, banks and mutual funds to send duplicate account statements for his/her personal accounts to the CCO. Access Persons must disclose all Covered Securities holdings in the Initial and Annual Holdings and Accounts Reports including those resulting from transactions which are exempt from the transactional reports. The only holdings which are not required to be reported are Covered Securities held in accounts over which the Access Person does not have any direct or indirect influence or control (e.g., blind trusts). The Initial and Annual Holdings and Accounts Reports must include: (a) title, type of Covered Security and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security of which the Access Person is a direct or indirect Beneficial Owner; (b) the name of any broker, dealer, mutual fund company or bank with which the Access Person maintains an account used to hold or trade Securities, the account number, the title of the account and the names of all individuals who are Beneficial Owners of the account in which any Security is held for the Access Person's direct or indirect benefit; and (c) the date that the report is submitted by the Access Person. The CCO shall retain copies of the Initial and Annual Holdings and Accounts Reports in accordance with Section XII of this Code. B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports") Each Access Person (other than Independent Trustees) must submit a Quarterly Transaction and Accounts Report (Exhibit D) to the CCO containing the information described below with respect to transactions in any Covered Securities (as defined in Section II) in which such Access Person was a direct or indirect Beneficial Owner of a Covered Security. Access Persons are not required to report Exempt Transactions, as defined below. Access Persons are not required to report trades in accounts over which they do not have influence or control over investment decisions (e.g., a blind trust). Quarterly Transaction and Accounts Reports must be submitted in writing to the CCO no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected. The CCO shall retain the reports in accordance with Section XII of this Code. Quarterly Transaction and Accounts Reports must include the following information for each transaction in a Covered Security: (a) the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), and number of shares, and the principal amount of each Covered Security involved; (b) the nature of the transaction (e.g., purchase, sale, or any other type of acquisition or disposition); (c) the price at which the transaction was effected; (d) the name of the broker, dealer, mutual fund company or bank with or through which the transaction was effected; and (e) the date that the report is submitted by the Access Person. If during the calendar quarter, the Access Person established a new brokerage, mutual fund or bank account where Securities are held, the Quarterly Transaction and Accounts Report must include the following information: (a) the name of the broker, dealer, mutual fund company or bank with whom the Access Person established the account; (b) the date the account was established; and (c) the date that the report is submitted by the Access Person. The following transactions are "Exempt Transactions" for the purpose of the Quarterly Transaction and Accounts Report requirements (but still must be reported on Initial and Annual Holdings and Accounts Reports): o transactions reported in duplicate broker monthly account statements or trade confirmations received by the Aquila Entities or the Fund, if all of the above required information is included and confirmations or account statements are received by the CCO within thirty (30) days of the close of the calendar quarter; and o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans).4 Trading in Covered Securities in an account over which a person does not have direct or indirect control or influence (e.g., a blind trust) are also Exempt Transactions and need not be reported on Quarterly Transaction and Accounts Reports, nor on Initial and Annual Holdings and Accounts Reports. VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND Independent Trustees of the Fund are not required to submit Initial and Annual Holdings and Accounts Reports. Independent Trustees are required to submit Quarterly Transaction and Accounts Reports only if the Independent Trustee knew or, in the ordinary course of fulfilling his or her duties as an Independent Trustee, should have known, that during the fifteen (15) day period before or after his or her transaction in a Covered Security, the Covered Security was purchased or sold, or was considered for Purchase or Sale, by or on behalf of the Fund. Required reports must be submitted no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected and must include the information described in Section VII. Independent Trustees also are not required to report Covered Securities trades in accounts for which they do not have influence or control over investment decisions (e.g., a blind trust). No such report shall be construed as an admission by an Independent Trustee that he or she is a Beneficial Owner of any Covered Security on the report, nor shall the making of a report be construed as an admission of a violation of this Code by the Independent Trustee. The CCO for the Fund will inform the Independent Trustees of the applicable reporting requirements under this Code. Copies of any reports received by the CCO from an Independent Trustee of the Fund will be provided to Fund Counsel and the originals maintained by the CCO as part of the Fund's records. IX. GIFTS AND GRATUITIES Advisory Persons may not seek or accept from, or offer to give or give to, any person that does business with any Aquila Entity or the Fund any item of material value or preferential treatment that is or appears to be connected with an Aquila Entity or Aquila Fund directing business to that person or receiving business from that person. For purposes of this prohibition, "items of material value" include but are not limited to: (a) gifts amounting in value to more than $100 per person per year; and (b) payment or reimbursement of travel expenses, including overnight lodging, in excess of $100 per person per year. "Items of material value" do not include: (a) an occasional meal, a ticket to a sporting event or the theater or comparable entertainment, which is not conditioned on directing business to the firm that provided such meal or entertainment and is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achieving a sales target; or (b) an unconditional gift of a typical item of reminder advertising such as a ball-point pen with the name of the advertiser inscribed, a calendar pad, or other gifts amounting in value to not more than $100 per person per year. Any invitations involving travel for more than one day where travel expenses will be paid or reimbursed by a person that does business with an Aquila Entity, the Fund or any other Aquila Fund must have advance approval from the CCO, or the President in the CCO's absence. The President must approve the CCO's invitations involving travel for more than one day. The CCO shall maintain a record of all such requests for travel and the reason for granting or denying all such requests in accordance with this Code. X. ADVISING NON-AQUILA ENTITIES Advisory Persons may not render investment advice to persons other than Aquila Entities or Aquila Funds, unless the advisory relationship, including the identity of those involved and any fee arrangements, has been disclosed to and approved by the President. Once cleared with the President, all transactions for such outside advisory clients are subject to the reporting requirements outlined above. This prohibition precludes Advisory Persons from providing investment advice to members of such person's immediate family without the prior approval of the President. XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES An Advisory Person who serves as a director or trustee of a publicly-traded company in which the Fund invests or may invest may have an inherent conflict between the fiduciary duty he or she owes to the Fund and that owed to the shareholders of the publicly-traded company. In addition, service on the board of directors or board of trustees of any company other than an Aquila Fund or Aquila Entity ("External Company") may present conflicts between the duties owed by the Advisory Person to that company and to the Fund and the Aquila Entities. To avoid the potential adverse consequences of such conflicts of interest or to ensure they are appropriately dealt with, effective January 7, 2005, all Advisory Persons must receive the prior written approval of the CCO and the President before serving as director or trustee of any External Company, which approval may be withheld in the President's sole discretion. If you are an Advisory Person and currently serve as a director or trustee of an External Company, you should notify the CCO immediately. Prior to commencement of employment with any Aquila Entity and annually thereafter, each Advisory Person shall provide the CCO with a written list of all positions held by the Advisory Person with any External Company. Advisory Persons who receive permission to serve as directors of publicly-traded External Companies will be isolated through "Fire Walls" or other procedures from making decisions regarding the Securities of those companies for which they serve as directors or trustees. An especially sensitive situation involves representation on a creditors' committee. Particular care will be taken to create a "Fire Wall" between portfolio management and creditors' committee representation. XII. RECORD KEEPING The CCO shall maintain the following records in the manner and for the time periods described under the 1940 Act and the Investment Advisers Act of 1940: (a) a copy of this Code of Ethics and any other Code of Ethics which is, or at any time within the past six (6) years has been in effect and all amendments to such Code(s); (b) a copy of each signed and dated Certification acknowledging receipt of the Code and any amendments or updates to the Code for a period of at least six (6) years after the individual acknowledging receipt is no longer affiliated with the Aquila Entities or the Fund; (c) records of any violations of this Code and any actions taken as a result of such violations for a period of six (6) years after the resolution of such violation; (d) each report, record or finding made under this Code, including any information provided in lieu of these reports (e.g., duplicate account statements) for a period of six (6) years after the date of the report, record or finding; (e) each Personal Trading Request Form (Exhibit B) submitted by an Advisory Person and a record of the decision regarding such request for a period of six (6) years after the date of the request (and for shares of an Initial Public Offering or Limited Offering, the reasoning for the decision); (f) each request for a waiver from any of the restrictions on Personal Trading by Advisory Persons (including requests that an Advisory Person not be deemed the Beneficial Owner of Securities held by another household member), including a description of the reason for the request and a brief summary of the reasons for granting or denying the waiver for a period of six (6) years after the last date on which the waiver was applied; (g) a list of all individuals who currently are, or within the past six (6) years have been deemed, Access Persons of the Aquila Entities or the Fund, as well as records of any decision by the CCO to exempt a person from the definition of "Access Person" and supporting documentation for and facts surrounding such a decision; (h) a list of all individuals who currently are, or within the past six (6) years have been, required to make Quarterly Transaction and Accounts Reports or Holdings and Accounts Reports pursuant to this Code; (i) a list of all persons who currently are or within the past six (6) years have been responsible for reviewing reports submitted pursuant to the Code; (j) a copy of all Quarterly Transaction and Accounts Reports and Initial and Annual Holdings and Accounts Reports submitted to the CCO for a period of six (6) years from the date of the report; (k) a record of all requests for travel pursuant to Section IX of this Code and the reason for granting or denying all such requests for a period of six (6) years from the date of the request; and (l) a copy of each report submitted to the Boards of Trustees of the Fund in connection with the Board's approval of a code of ethics or material changes to such a code for a period of six (6) years following the date of such report. XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS As required by Rule 17j-1 under the 1940 Act ("Rule 17j-1"), each external adviser, subadviser and external principal underwriter to the Fund shall adopt a written code of ethics governing personal investment activity that meets the requirements of Rule 17j-1. Any person that is an "access person" (as defined in Rule 17j-1) of an external adviser, subadviser or external principal underwriter shall be subject to and comply with the code of ethics of such external adviser, subadviser or external principal underwriter. XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES All officers, directors, trustees, LLC Managers, Control Persons or employees of the Fund or of any Aquila Entity shall promptly report any actual or suspected violations of this Code to the CCO. In the absence of the CCO, violations may be reported to the President but also must be separately reported to the CCO promptly following his or her return to the office. The identity of the person making such a report will be kept in confidence whenever possible. Persons who report actual or suspected violations will be protected from retaliation for making such reports. Violations of this Code may result in the imposition of criminal penalties or sanctions by the SEC, other law enforcement or regulatory authorities, or the Fund or Aquila Entities, including forfeiture of any profit from or loss avoided by a transaction, forfeiture of future discretionary salary increases or bonuses, and suspension or termination of employment. Determinations as to whether a violation has occurred, and the appropriate sanctions, if any, shall be made by the CCO and may be subject to review by the President or trustees of the Fund, as appropriate; provided however, that no person believed to have violated this Code shall participate in such determinations made with respect to his or her own conduct. XV. BOARD APPROVAL A. Initial Approval of Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any code of ethics of any new adviser, subadviser or principal underwriter to the Fund before initially retaining its services. Before the Board meeting at which a code is scheduled for approval, the affected adviser, subadviser or principal underwriter shall provide the Board with a copy of its code of ethics, a written certification that it has adopted procedures reasonably necessary to prevent its "access persons" from violating its code and any other information requested by the Board. B. Material Changes to Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any material changes to this Code, as well as to the codes of ethics of the Aquila Entities and each external adviser, subadviser and external principal underwriter to the Fund within six (6) months following the adoption of the change. The appropriate officers or LLC Managers of the Fund or other Aquila Entities or of the external adviser, subadviser or external principal underwriter will, on a timely basis, provide notice to the Board of the changes and provide the Board with the following information regarding the changes for which Board approval is sought: (1) a written description of the change and the reasons therefore; (2) a copy of the revised code of ethics, marked to show the changes; (3) a written certification that the entity has adopted procedures reasonably necessary to prevent its access persons from violating the code of ethics; and (4) any other information requested by the Board. C. Annual Reports to the Fund Board To assist the Board of the Fund in meeting its responsibilities under Rule 17j-1, the appropriate officers or LLC Managers of the Aquila Entities and any external adviser, subadviser or external principal underwriter to the Fund, at least annually, shall provide the Fund's Board with: (1) a written certification that the Aquila Entities or external adviser, subadviser or external principal underwriter have adopted procedures reasonably necessary to prevent their respective access persons from violating their codes of ethics; (2) a written report that describes any issues arising under such codes of ethics or related procedures since the last report to the Board; and (3) any other information requested by the Board. The report referred to in (2) above shall include, but not be limited to, information about: (a) material violations of the code or related procedures; (b) immaterial, individual violations (such as late filings of quarterly transactions reports) if such violations are material in the aggregate; and (c) sanctions imposed in response to such violations; significant conflicts of interest that arose involving personal trading, even if the conflicts did not result in a code violation (e.g., where an Access Person is a director of a company whose Securities are held by an Aquila Fund). Further, the Fund's Board will be provided with more frequent reports when there have been significant violations of a code of ethics or related procedures, or significant conflicts of interest arising under the code or related procedures. 1 "High quality short-term debt instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality. 2 Shares of the Fund, although excepted from the definition of "Covered Security" in this Code, will be subject to reporting, preclearance and other personal trading restrictions under the codes of ethics of the Aquila Entities and of any other investment advisers of the Fund. 3 Any transaction that overrides the pre-set schedule or allocations of the automatic investment plan is not exempt. 4 Any transaction, however, that overrides the pre-set schedule or allocations of the automatic investment plan must be included in a Quarterly Transaction Report. EX-99.P 7 pcatb05coepctfcat.txt CODE OF ETHICS OF PCTFCAT CODE OF ETHICS for PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST Effective: January 7, 2005 (revised January 25, 2005) ii TABLE OF CONTENTS I. INTRODUCTION.......................................................1 II. DEFINITIONS........................................................2 III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS................5 IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE.....................................................6 V. COMPLIANCE WITH LAWS AND REGULATIONS...............................6 A. General Prohibitions Applicable to All Personnel..........6 B. Front-Running.............................................6 C. Market Timing.............................................6 VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING........................7 A. Pre-Clearance of Personal Securities Transactions.........7 B. Prohibited Trading Practices..............................8 1. Short-Term Trading...............................8 2. Short Sales......................................8 C. Blackout Periods..........................................8 D. Exempt Transactions.......................................8 E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President...............9 VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS....................................................9 A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports")..........................10 B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports")...........................11 VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND..........................12 IX. GIFTS AND GRATUITIES..............................................13 X. ADVISING NON-AQUILA ENTITIES......................................14 XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES......................................................14 XII. RECORD KEEPING....................................................14 XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS.................................16 XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES...................16 XV. BOARD APPROVAL....................................................16 A. Initial Approval of Codes of Ethics......................16 B. Material Changes to Codes of Ethics......................16 C. Annual Reports to the Fund Board.........................17 APPENDICES Note: The forms set forth in the Appendices are not part of this Code of Ethics but are appended for convenience. Appendix A........CERTIFICATION OF RECEIPT OF CODE OF ETHICS Appendix B........PERSONAL TRADING REQUEST FORM Appendix C........INITIAL & ANNUAL HOLDINGS AND ACCOUNTS REPORT Appendix D........QUARTERLY TRANSACTION AND ACCOUNTS REPORT I. INTRODUCTION It is the policy of PACIFIC CAPITAL TAX-FREE CASH ASSETS TRUST (the "Fund") that conflicts, or even the appearance of conflicts, between the interests of the Fund and its shareholders, and the interests of the Fund's officers and trustees and of its service providers and their respective personnel, must be avoided at all times. This code of ethics (the "Code of Ethics" or the "Code") has been adopted to implement this policy. As an officer, trustee, director, LLC Manager, Control Person or employee of the Fund or an Aquila Entity, you are subject to all applicable provisions of this Code. Codes of ethics have been adopted by each of the Aquila Entities and each of the Aquila Funds, and cover every officer, trustee, director, LLC Manager, Control Person and employee of those entities. The Chief Compliance Officer ("CCO") of the Fund is responsible for enforcing and interpreting this Code, and is available to answer any questions you may have. Independent Trustees may contact the CCO or, in the alternative, Fund Counsel. DEFINITIONS "Access Person" shall mean any person who is an Advisory Person. In addition, the following persons are presumed to be Access Persons of the Fund: (1) all officers and trustees of the Fund; and (2) all officers and LLC Managers of Aquila Investment Management LLC. Note: The presumption of Access Person status may be rebutted under certain circumstances as described in Section III of this Code. Note: Persons associated with Aquila Distributors, Inc. whose job functions or duties involve them in Fund investment decisions or give them access to information regarding Fund investment transactions are Advisory Persons and also Access Persons of the Fund. "Advisory Person" shall mean any person who is: (1) An officer, director, trustee, LLC Manager or employee of the Fund or of any Aquila Entity who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the Purchase or Sale of Covered Securities (defined below) by the Fund or whose functions relate to the making of any recommendations with respect to such Purchases or Sales; or (2) a Control Person (defined below) who obtains information concerning recommendations made to the Fund with regard to the Purchase or Sale of Covered Securities by the Fund. "Aquila Entity" or "Aquila Entities" shall mean Aquila Management Corporation, Aquila Investment Management LLC (a registered investment adviser) and Aquila Distributors, Inc. (a registered broker-dealer). "Aquila Funds" (each an "Aquila Fund") shall mean all funds in The Aquila Group of Funds and any fund to which an Aquila Entity provides administrative, distribution or investment advisory services, including: Aquila Fund (Dormant) Aquila Rocky Mountain Equity Fund Capital Cash Management Trust (Dormant) Churchill Cash Reserves Trust (Dormant) Churchill Tax-Free Fund of Kentucky Hawaiian Tax-Free Trust Narragansett Insured Tax-Free Income Fund Tax-Free Fund for Utah Tax-Free Fund of Colorado Tax-Free Trust of Arizona Tax-Free Trust of Oregon Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Prime Cash Fund (Dormant) "Beneficial Owner" shall mean any person who has or shares, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, a direct or indirect pecuniary interest in a Security, within the meaning of Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 ("Exchange Act"). "Pecuniary interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Security. Securities in which you have an "indirect pecuniary interest" include, but are not limited to, securities held by members of your immediate family who share your household, including your spouse, children and stepchildren, parents, grandparents, brothers and sisters, and any of your in-laws. The presumption of beneficial ownership of Securities held by a family member sharing your household may be rebutted by successfully demonstrating to the CCO to the Fund, or to Fund Counsel if you are an Independent Trustee, that you do not have a beneficial ownership interest in the Securities. "Board" shall mean the Board of Trustees of the Fund. "CCO" shall mean the Chief Compliance Officer of the Fund. "Code of Ethics" or Code shall mean this Code of Ethics. "Control" shall mean the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. A person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. A person who does not own more than 25% of the voting securities of a company shall be presumed not to control such company. A person who has "control" under this definition shall be presumed to have "control" unless and until the Securities and Exchange Commission ("SEC") grants an order to the contrary. "Control Person" shall mean any individual who has a Control relationship with the Fund or an investment adviser of the Fund. "Covered Security" shall mean any Security, including shares issued by offshore funds, unregistered funds (such as hedge funds) and closed-end funds. It also includes options or a Security convertible or exchangeable into a Covered Security. It does not include direct obligations of the U.S. Government, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements)1 and shares of U.S.-registered open-end investment companies (including shares of the Aquila Funds and all money market funds).2 "Independent Trustee" shall mean a Trustee who is not an "interested person" of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940 ("1940 Act"). "Initial Public Offering" shall mean an offering of Securities registered under the Securities Act of 1933 ("Securities Act"), the issuer of which , immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. "Limited Offering" shall mean an offering of Securities that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) under the Securities Act, or Rule 504, Rule 505 or Rule 506 thereunder (e.g., private placements). "LLC Manager" shall mean a person who is named as a Manager of an Aquila Entity that is organized as a limited liability company in, or designated as a manager of a limited liability company pursuant to, a limited liability company agreement or similar instrument under which the limited liability company is formed. "Personal Trading" shall mean the Purchase or Sale of Securities by an individual for his or her own account, any other account in which he or she is a Beneficial Owner, or any account (other than an account of an Aquila Fund) for which the Aquila employee decides what securities transactions will be effected for the account, either by making recommendations to the account owner or by entering orders directly with the broker handling the account. "President" shall mean the current President of the Fund. "Purchase or Sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security. "Security" shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security or on any group or index of securities (including any interest therein based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or generally any interest or instrument commonly known as a "security" or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. "Security Held or to be Acquired" means: (A) any Security that within the most recent fifteen (15) days is being or has been (i) held by the Fund or (ii) "considered for purchase or sale" by or on behalf of the Fund; and (B) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security described in (A) above. A Security is "being considered" for Purchase or Sale if: (a) there is an outstanding order (this includes orders that are in the process of being executed) to Purchase or Sell that Security for an account or portfolio of the Fund; (b) there is an outstanding oral or written recommendation with respect to that Security that has not been acted upon or rejected; or (c) the person responsible for a portfolio intends to Purchase or Sell (i.e., has decided to but has not yet purchased or sold) that Security for the Fund's accounts or portfolios. III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS For the purposes of this Code, all officers and trustees of the Fund and all officers and LLC Managers of Aquila Investment Management LLC are presumed to be Access Persons and thus are subject to the personal trading restrictions and reporting requirements described in Sections VI and VII below unless and until the presumption is rebutted. This presumption may be rebutted as to these persons, but only if the CCO makes a finding that such person, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the Purchase or Sale of Covered Securities by the Fund and that his or her functions do not relate to the making of any recommendations with respect to such Purchases or Sales. Prior to making a determination rebutting the presumption that a person is an Access Person of the Fund, the CCO investigate all relevant facts and prepare a memorandum for the file which sets forth the facts demonstrating the rebuttal of the presumption, as well as the CCO's determination that such person is not, in fact, an Access Person for the purpose of this Code. The CCO shall retain a copy of this memorandum in the business records of the Aquila Entities and the Fund. The CCO also shall maintain a list of all persons deemed Access Persons for the purpose of this Code. The CCO shall review the list and reaffirm that it is accurate and complete no less frequently than on an annual basis. Although included in the definition of Access Person, Independent Trustees of the Fund are generally exempt from the personal trading restrictions and prohibitions, as well as the initial, annual, and quarterly reporting requirements described below. IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE As an officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities, you must read this Code carefully and then sign and date the attached Certification (Appendix A) acknowledging receipt of this Code and return it to the CCO promptly. The CCO will provide you with a copy of any updates or amendments to this Code. You must read any such updates or amendments, and then again sign and date the attached Certification acknowledging receipt of the updates or amendments. The CCO shall retain a copy of these Certifications in accordance with Section XII of this Code. V. COMPLIANCE WITH LAWS AND REGULATIONS A. General Prohibitions Applicable to All Personnel When buying or selling any Security (including shares of the Fund and any other Aquila Fund), no officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities shall: o Employ any device, scheme, or artifice to defraud the Fund; o Make to the Fund any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading; o Engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or o Engage in any manipulative practice with respect to the Fund. B. Front-Running The practice of trading on the basis of the anticipated market effect of trades for Aquila Fund accounts, which is known as "front-running" or "scalping," constitutes a violation of the Federal securities laws. Therefore, it is absolutely prohibited for any officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities to engage in such trading. C. Market Timing No officer, director, trustee, LLC Manager, Control Person or employee of the Fund or of any Aquila Entity shall purchase or redeem shares of the Fund in violation of the policies and restrictions set forth in the Fund's prospectus, including, but not limited to, the restrictions limiting the frequency of transfers into and out of the Fund that are designed to prevent so-called "market timing" and protect the interests of long-term investors in the Fund. VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING Note: These restrictions generally will not apply to Independent Trustees of the Fund. The prohibitions and restrictions on personal securities transactions discussed below apply to the securities accounts held by or under the control of an Advisory Person and/or Access Person, depending on the restriction, as well as those accounts held by or under the control of members of the Advisory or Access Person's immediate family living in the same household with the Advisory or Access Person. A. Pre-Clearance of Personal Securities Transactions Advisory Persons must apply for and receive prior written approval from the CCO or his or her designee before purchasing or selling more than 100 shares of any Covered Security (see definition in Section II). Advisory Persons must also receive prior written approval from the CCO, or his or her designee in the CCO's absence, before acquiring any number of shares through an Initial Public Offering or Limited Offering. Advisory Persons shall request approvals by submitting a request, electronically, on paper or by facsimile using the Personal Trading Request Form attached hereto as Appendix B. The CCO shall submit his or her Personal Trading Request Form to the President (or the President's designee, in his or her absence) for approval. Copies of all Personal Trading Request Forms submitted by Advisory Persons shall be retained by the CCO in accordance with Section XII of this Code. A record of all written approvals of, and rationale supporting, any direct or indirect acquisition by Advisory Persons of an investment in an Initial Public Offering or Limited Offering will be made and retained by the CCO. Advisory Persons who have acquired Limited Offering Securities pursuant to prior written approval from the CCO or his or her designee must immediately disclose that investment to the CCO or his or her designee before they participate at any level in any Aquila Fund's subsequent consideration of an investment in the same issuer. In such circumstance, the Aquila Fund's decision to purchase Securities of the issuer will be subject to independent review by other investment personnel with no personal interest in the issuer. In the case of requests for pre-clearance in a Security Held or to be Acquired for any Aquila Fund which is advised by an investment adviser that is not subject to this Code ("external investment adviser"), the President or CCO generally shall grant authorization to trade if the person seeking pre-clearance does not have access to or knowledge of current investment decisions or recommendations of such external investment adviser. B. Prohibited Trading Practices 1. Short-Term Trading An Advisory Person is generally prohibited from realizing a profit from the purchase and sale or sale and purchase of the same Covered Security, within a period of sixty (60) days. It is recognized that short-term trading is not necessarily indicative of whether an individual is trading on inside information. Accordingly, an Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and retain a record of all waivers granted (including any waivers granted by the President in the CCO's absence) under this provision, including a summary of the reasons for granting the waiver. 2. Short Sales An Advisory Person is prohibited from effecting short sales or acquiring short positions in any Covered Security held by the Fund. C. Blackout Periods An Advisory Person shall not Purchase or Sell, directly or indirectly, any Covered Security: (a) within five (5) days after the time that the same Covered Security is purchased or sold by the Fund; or (b) at any time when he or she has have actual knowledge that a Covered Security is being purchased or sold, or recommended or considered for Purchase or Sale, by the Fund until five (5) days after the Fund's Purchase or Sale transaction in such Covered Security has been completed or the Covered Security is no longer being recommended or considered for Purchase or Sale by the Fund. An Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and keep a record of all waivers granted under this provision, including a summary of the reasons for granting the waiver. D. Exempt Transactions The Purchase or Sale of a Security in one of the following types of transactions, shall be considered an "Exempt Transaction" for the purposes of the restrictions on short-term trading, short sales and Purchases or Sales during blackout periods set forth in this Section VI: o trading in Securities in an account over which the Access Person does not have direct or indirect control or influence (e.g., a blind trust); o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans);3 o purchases or sales made by payroll deduction through an employer-sponsored employee benefit plan; o purchases or sales which are non-volitional; or o purchases of Securities 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. Note: The above-listed Exempt Transactions and Covered Securities acquired in such transactions remain subject to initial, annual and quarterly holdings and transaction reporting requirements as set forth in Section VII. E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President In the event that the CCO or the President seeks to engage in a transaction for which pre-clearance is required or seeks a waiver from the blackout period or short-term trading restrictions of this Section of the Code, the approval shall, in the case of the CCO, be granted or denied by the President and, in the case of proposed transactions by the President, the approval or waiver shall be granted or denied by the CCO. In the absence of the President or the CCO, such requests for approval shall be submitted to Fund Counsel. A written record of the determination made and the reasons for it shall be made by the person making the determination and the original record retained in accordance with this Code. VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS Access Persons, other than Independent Trustees, are required to submit initial and annual Covered Securities holdings and accounts reports as well as quarterly transaction reports as outlined below. The CCO shall identify all Access Persons who are required to submit reports pursuant to this Section of the Code and shall inform those Access Persons of these reporting requirements. The CCO shall maintain a record of all Access Persons who are required to submit reports pursuant to this section. These reports are mandated by SEC regulations and, therefore, exceptions and waivers of these reporting requirements cannot be granted under any circumstances. However, Access Persons need not make separate reports under this Section VII, to the extent the information in such reports would duplicate information required to be reported to any Aquila Entity pursuant to the Code of Ethics of the Aquila Entity. All reports submitted pursuant to this Code will be reviewed by the CCO or his or her designee to seek to ensure that Access Persons have abided by this Code. Through these reviews, the CCO or his or her designee will seek to identify improper trades or patterns of abuse (including market timing) by Access Persons. When reviewing these reports, the CCO also will seek to ensure that Access Persons have received all necessary pre-clearances required by this Code. The CCO shall periodically provide summary reports of any violations of this Code to the President. No report required by this Section shall be construed as an admission by the Access Person that he or she is a Beneficial Owner of any Security on the report. A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports") All Access Persons (other than Independent Trustees) must, upon commencement of employment, disclose all holdings in Covered Securities (as defined in Section II) and personal brokerage, mutual fund or bank accounts through which Securities are held or traded and over which the Access Person has direct or indirect control or influence (including those of immediate family members living in the same household as the Access Person). All Initial Holdings and Accounts Reports (Exhibit C) shall be made in writing to the CCO within ten (10) days of becoming an Access Person and such information shall be current as of a date no more than forty-five (45) days prior to such person becoming an Access Person. Thereafter, Access Persons must submit Annual Holdings and Accounts Reports (Exhibit C) to the CCO no later than February 14th of each year and must be current as of December 31st of the previous calendar year. Annual Holdings and Accounts Reports must be filed even if there have been no changes in the information reported previously and even if the Access Person has arranged for brokers, banks and mutual funds to send duplicate account statements for his/her personal accounts to the CCO. Access Persons must disclose all Covered Securities holdings in the Initial and Annual Holdings and Accounts Reports including those resulting from transactions which are exempt from the transactional reports. The only holdings which are not required to be reported are Covered Securities held in accounts over which the Access Person does not have any direct or indirect influence or control (e.g., blind trusts). The Initial and Annual Holdings and Accounts Reports must include: (a) title, type of Covered Security and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security of which the Access Person is a direct or indirect Beneficial Owner; (b) the name of any broker, dealer, mutual fund company or bank with which the Access Person maintains an account used to hold or trade Securities, the account number, the title of the account and the names of all individuals who are Beneficial Owners of the account in which any Security is held for the Access Person's direct or indirect benefit; and (c) the date that the report is submitted by the Access Person. The CCO shall retain copies of the Initial and Annual Holdings and Accounts Reports in accordance with Section XII of this Code. B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports") Each Access Person (other than Independent Trustees) must submit a Quarterly Transaction and Accounts Report (Exhibit D) to the CCO containing the information described below with respect to transactions in any Covered Securities (as defined in Section II) in which such Access Person was a direct or indirect Beneficial Owner of a Covered Security. Access Persons are not required to report Exempt Transactions, as defined below. Access Persons are not required to report trades in accounts over which they do not have influence or control over investment decisions (e.g., a blind trust). Quarterly Transaction and Accounts Reports must be submitted in writing to the CCO no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected. The CCO shall retain the reports in accordance with Section XII of this Code. Quarterly Transaction and Accounts Reports must include the following information for each transaction in a Covered Security: (a) the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), and number of shares, and the principal amount of each Covered Security involved; (b) the nature of the transaction (e.g., purchase, sale, or any other type of acquisition or disposition); (c) the price at which the transaction was effected; (d) the name of the broker, dealer, mutual fund company or bank with or through which the transaction was effected; and (e) the date that the report is submitted by the Access Person. If during the calendar quarter, the Access Person established a new brokerage, mutual fund or bank account where Securities are held, the Quarterly Transaction and Accounts Report must include the following information: (a) the name of the broker, dealer, mutual fund company or bank with whom the Access Person established the account; (b) the date the account was established; and (c) the date that the report is submitted by the Access Person. The following transactions are "Exempt Transactions" for the purpose of the Quarterly Transaction and Accounts Report requirements (but still must be reported on Initial and Annual Holdings and Accounts Reports): o transactions reported in duplicate broker monthly account statements or trade confirmations received by the Aquila Entities or the Fund, if all of the above required information is included and confirmations or account statements are received by the CCO within thirty (30) days of the close of the calendar quarter; and o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans).4 Trading in Covered Securities in an account over which a person does not have direct or indirect control or influence (e.g., a blind trust) are also Exempt Transactions and need not be reported on Quarterly Transaction and Accounts Reports, nor on Initial and Annual Holdings and Accounts Reports. VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND Independent Trustees of the Fund are not required to submit Initial and Annual Holdings and Accounts Reports. Independent Trustees are required to submit Quarterly Transaction and Accounts Reports only if the Independent Trustee knew or, in the ordinary course of fulfilling his or her duties as an Independent Trustee, should have known, that during the fifteen (15) day period before or after his or her transaction in a Covered Security, the Covered Security was purchased or sold, or was considered for Purchase or Sale, by or on behalf of the Fund. Required reports must be submitted no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected and must include the information described in Section VII. Independent Trustees also are not required to report Covered Securities trades in accounts for which they do not have influence or control over investment decisions (e.g., a blind trust). No such report shall be construed as an admission by an Independent Trustee that he or she is a Beneficial Owner of any Covered Security on the report, nor shall the making of a report be construed as an admission of a violation of this Code by the Independent Trustee. The CCO for the Fund will inform the Independent Trustees of the applicable reporting requirements under this Code. Copies of any reports received by the CCO from an Independent Trustee of the Fund will be provided to Fund Counsel and the originals maintained by the CCO as part of the Fund's records. IX. GIFTS AND GRATUITIES Advisory Persons may not seek or accept from, or offer to give or give to, any person that does business with any Aquila Entity or the Fund any item of material value or preferential treatment that is or appears to be connected with an Aquila Entity or Aquila Fund directing business to that person or receiving business from that person. For purposes of this prohibition, "items of material value" include but are not limited to: (a) gifts amounting in value to more than $100 per person per year; and (b) payment or reimbursement of travel expenses, including overnight lodging, in excess of $100 per person per year. "Items of material value" do not include: (a) an occasional meal, a ticket to a sporting event or the theater or comparable entertainment, which is not conditioned on directing business to the firm that provided such meal or entertainment and is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achieving a sales target; or (b) an unconditional gift of a typical item of reminder advertising such as a ball-point pen with the name of the advertiser inscribed, a calendar pad, or other gifts amounting in value to not more than $100 per person per year. Any invitations involving travel for more than one day where travel expenses will be paid or reimbursed by a person that does business with an Aquila Entity, the Fund or any other Aquila Fund must have advance approval from the CCO, or the President in the CCO's absence. The President must approve the CCO's invitations involving travel for more than one day. The CCO shall maintain a record of all such requests for travel and the reason for granting or denying all such requests in accordance with this Code. X. ADVISING NON-AQUILA ENTITIES Advisory Persons may not render investment advice to persons other than Aquila Entities or Aquila Funds, unless the advisory relationship, including the identity of those involved and any fee arrangements, has been disclosed to and approved by the President. Once cleared with the President, all transactions for such outside advisory clients are subject to the reporting requirements outlined above. This prohibition precludes Advisory Persons from providing investment advice to members of such person's immediate family without the prior approval of the President. XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES An Advisory Person who serves as a director or trustee of a publicly-traded company in which the Fund invests or may invest may have an inherent conflict between the fiduciary duty he or she owes to the Fund and that owed to the shareholders of the publicly-traded company. In addition, service on the board of directors or board of trustees of any company other than an Aquila Fund or Aquila Entity ("External Company") may present conflicts between the duties owed by the Advisory Person to that company and to the Fund and the Aquila Entities. To avoid the potential adverse consequences of such conflicts of interest or to ensure they are appropriately dealt with, effective January 7, 2005, all Advisory Persons must receive the prior written approval of the CCO and the President before serving as director or trustee of any External Company, which approval may be withheld in the President's sole discretion. If you are an Advisory Person and currently serve as a director or trustee of an External Company, you should notify the CCO immediately. Prior to commencement of employment with any Aquila Entity and annually thereafter, each Advisory Person shall provide the CCO with a written list of all positions held by the Advisory Person with any External Company. Advisory Persons who receive permission to serve as directors of publicly-traded External Companies will be isolated through "Fire Walls" or other procedures from making decisions regarding the Securities of those companies for which they serve as directors or trustees. An especially sensitive situation involves representation on a creditors' committee. Particular care will be taken to create a "Fire Wall" between portfolio management and creditors' committee representation. XII. RECORD KEEPING The CCO shall maintain the following records in the manner and for the time periods described under the 1940 Act and the Investment Advisers Act of 1940: (a) a copy of this Code of Ethics and any other Code of Ethics which is, or at any time within the past six (6) years has been in effect and all amendments to such Code(s); (b) a copy of each signed and dated Certification acknowledging receipt of the Code and any amendments or updates to the Code for a period of at least six (6) years after the individual acknowledging receipt is no longer affiliated with the Aquila Entities or the Fund; (c) records of any violations of this Code and any actions taken as a result of such violations for a period of six (6) years after the resolution of such violation; (d) each report, record or finding made under this Code, including any information provided in lieu of these reports (e.g., duplicate account statements) for a period of six (6) years after the date of the report, record or finding; (e) each Personal Trading Request Form (Exhibit B) submitted by an Advisory Person and a record of the decision regarding such request for a period of six (6) years after the date of the request (and for shares of an Initial Public Offering or Limited Offering, the reasoning for the decision); (f) each request for a waiver from any of the restrictions on Personal Trading by Advisory Persons (including requests that an Advisory Person not be deemed the Beneficial Owner of Securities held by another household member), including a description of the reason for the request and a brief summary of the reasons for granting or denying the waiver for a period of six (6) years after the last date on which the waiver was applied; (g) a list of all individuals who currently are, or within the past six (6) years have been deemed, Access Persons of the Aquila Entities or the Fund, as well as records of any decision by the CCO to exempt a person from the definition of "Access Person" and supporting documentation for and facts surrounding such a decision; (h) a list of all individuals who currently are, or within the past six (6) years have been, required to make Quarterly Transaction and Accounts Reports or Holdings and Accounts Reports pursuant to this Code; (i) a list of all persons who currently are or within the past six (6) years have been responsible for reviewing reports submitted pursuant to the Code; (j) a copy of all Quarterly Transaction and Accounts Reports and Initial and Annual Holdings and Accounts Reports submitted to the CCO for a period of six (6) years from the date of the report; (k) a record of all requests for travel pursuant to Section IX of this Code and the reason for granting or denying all such requests for a period of six (6) years from the date of the request; and (l) a copy of each report submitted to the Boards of Trustees of the Fund in connection with the Board's approval of a code of ethics or material changes to such a code for a period of six (6) years following the date of such report. XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS As required by Rule 17j-1 under the 1940 Act ("Rule 17j-1"), each external adviser, subadviser and external principal underwriter to the Fund shall adopt a written code of ethics governing personal investment activity that meets the requirements of Rule 17j-1. Any person that is an "access person" (as defined in Rule 17j-1) of an external adviser, subadviser or external principal underwriter shall be subject to and comply with the code of ethics of such external adviser, subadviser or external principal underwriter. XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES All officers, directors, trustees, LLC Managers, Control Persons or employees of the Fund or of any Aquila Entity shall promptly report any actual or suspected violations of this Code to the CCO. In the absence of the CCO, violations may be reported to the President but also must be separately reported to the CCO promptly following his or her return to the office. The identity of the person making such a report will be kept in confidence whenever possible. Persons who report actual or suspected violations will be protected from retaliation for making such reports. Violations of this Code may result in the imposition of criminal penalties or sanctions by the SEC, other law enforcement or regulatory authorities, or the Fund or Aquila Entities, including forfeiture of any profit from or loss avoided by a transaction, forfeiture of future discretionary salary increases or bonuses, and suspension or termination of employment. Determinations as to whether a violation has occurred, and the appropriate sanctions, if any, shall be made by the CCO and may be subject to review by the President or trustees of the Fund, as appropriate; provided however, that no person believed to have violated this Code shall participate in such determinations made with respect to his or her own conduct. XV. BOARD APPROVAL A. Initial Approval of Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any code of ethics of any new adviser, subadviser or principal underwriter to the Fund before initially retaining its services. Before the Board meeting at which a code is scheduled for approval, the affected adviser, subadviser or principal underwriter shall provide the Board with a copy of its code of ethics, a written certification that it has adopted procedures reasonably necessary to prevent its "access persons" from violating its code and any other information requested by the Board. B. Material Changes to Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any material changes to this Code, as well as to the codes of ethics of the Aquila Entities and each external adviser, subadviser and external principal underwriter to the Fund within six (6) months following the adoption of the change. The appropriate officers or LLC Managers of the Fund or other Aquila Entities or of the external adviser, subadviser or external principal underwriter will, on a timely basis, provide notice to the Board of the changes and provide the Board with the following information regarding the changes for which Board approval is sought: (1) a written description of the change and the reasons therefore; (2) a copy of the revised code of ethics, marked to show the changes; (3) a written certification that the entity has adopted procedures reasonably necessary to prevent its access persons from violating the code of ethics; and (4) any other information requested by the Board. C. Annual Reports to the Fund Board To assist the Board of the Fund in meeting its responsibilities under Rule 17j-1, the appropriate officers or LLC Managers of the Aquila Entities and any external adviser, subadviser or external principal underwriter to the Fund, at least annually, shall provide the Fund's Board with: (1) a written certification that the Aquila Entities or external adviser, subadviser or external principal underwriter have adopted procedures reasonably necessary to prevent their respective access persons from violating their codes of ethics; (2) a written report that describes any issues arising under such codes of ethics or related procedures since the last report to the Board; and (3) any other information requested by the Board. The report referred to in (2) above shall include, but not be limited to, information about: (a) material violations of the code or related procedures; (b) immaterial, individual violations (such as late filings of quarterly transactions reports) if such violations are material in the aggregate; and (c) sanctions imposed in response to such violations; significant conflicts of interest that arose involving personal trading, even if the conflicts did not result in a code violation (e.g., where an Access Person is a director of a company whose Securities are held by an Aquila Fund). Further, the Fund's Board will be provided with more frequent reports when there have been significant violations of a code of ethics or related procedures, or significant conflicts of interest arising under the code or related procedures. 1 "High quality short-term debt instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality. 2 Shares of the Fund, although excepted from the definition of "Covered Security" in this Code, will be subject to reporting, preclearance and other personal trading restrictions under the codes of ethics of the Aquila Entities and of any other investment advisers of the Fund. 3 Any transaction that overrides the pre-set schedule or allocations of the automatic investment plan is not exempt. 4 Any transaction, however, that overrides the pre-set schedule or allocations of the automatic investment plan must be included in a Quarterly Transaction Report. EX-99.P 8 pcatb05coepcusgcat.txt CODE OF ETHICS OF PCUSGSCAT CODE OF ETHICS for PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST Effective: January 7, 2005 (revised January 25, 2005) ii TABLE OF CONTENTS I. INTRODUCTION.......................................................1 II. DEFINITIONS........................................................2 III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS................5 IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE.....................................................6 V. COMPLIANCE WITH LAWS AND REGULATIONS...............................6 A. General Prohibitions Applicable to All Personnel..........6 B. Front-Running.............................................6 C. Market Timing.............................................6 VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING........................7 A. Pre-Clearance of Personal Securities Transactions.........7 B. Prohibited Trading Practices..............................8 1. Short-Term Trading...............................8 2. Short Sales......................................8 C. Blackout Periods..........................................8 D. Exempt Transactions.......................................8 E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President...............9 VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS....................................................9 A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports")..........................10 B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports")...........................11 VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND..........................12 IX. GIFTS AND GRATUITIES..............................................13 X. ADVISING NON-AQUILA ENTITIES......................................14 XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES......................................................14 XII. RECORD KEEPING....................................................14 XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS.................................16 XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES...................16 XV. BOARD APPROVAL....................................................16 A. Initial Approval of Codes of Ethics......................16 B. Material Changes to Codes of Ethics......................16 C. Annual Reports to the Fund Board.........................17 APPENDICES Note: The forms set forth in the Appendices are not part of this Code of Ethics but are appended for convenience. Appendix A........CERTIFICATION OF RECEIPT OF CODE OF ETHICS Appendix B........PERSONAL TRADING REQUEST FORM Appendix C........INITIAL & ANNUAL HOLDINGS AND ACCOUNTS REPORT Appendix D........QUARTERLY TRANSACTION AND ACCOUNTS REPORT I. INTRODUCTION It is the policy of PACIFIC CAPITAL U.S. GOVERNMENT SECURITIES CASH ASSETS TRUST (the "Fund") that conflicts, or even the appearance of conflicts, between the interests of the Fund and its shareholders, and the interests of the Fund's officers and trustees and of its service providers and their respective personnel, must be avoided at all times. This code of ethics (the "Code of Ethics" or the "Code") has been adopted to implement this policy. As an officer, trustee, director, LLC Manager, Control Person or employee of the Fund or an Aquila Entity, you are subject to all applicable provisions of this Code. Codes of ethics have been adopted by each of the Aquila Entities and each of the Aquila Funds, and cover every officer, trustee, director, LLC Manager, Control Person and employee of those entities. The Chief Compliance Officer ("CCO") of the Fund is responsible for enforcing and interpreting this Code, and is available to answer any questions you may have. Independent Trustees may contact the CCO or, in the alternative, Fund Counsel. DEFINITIONS "Access Person" shall mean any person who is an Advisory Person. In addition, the following persons are presumed to be Access Persons of the Fund: (1) all officers and trustees of the Fund; and (2) all officers and LLC Managers of Aquila Investment Management LLC. Note: The presumption of Access Person status may be rebutted under certain circumstances as described in Section III of this Code. Note: Persons associated with Aquila Distributors, Inc. whose job functions or duties involve them in Fund investment decisions or give them access to information regarding Fund investment transactions are Advisory Persons and also Access Persons of the Fund. "Advisory Person" shall mean any person who is: (1) An officer, director, trustee, LLC Manager or employee of the Fund or of any Aquila Entity who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the Purchase or Sale of Covered Securities (defined below) by the Fund or whose functions relate to the making of any recommendations with respect to such Purchases or Sales; or (2) a Control Person (defined below) who obtains information concerning recommendations made to the Fund with regard to the Purchase or Sale of Covered Securities by the Fund. "Aquila Entity" or "Aquila Entities" shall mean Aquila Management Corporation, Aquila Investment Management LLC (a registered investment adviser) and Aquila Distributors, Inc. (a registered broker-dealer). "Aquila Funds" (each an "Aquila Fund") shall mean all funds in The Aquila Group of Funds and any fund to which an Aquila Entity provides administrative, distribution or investment advisory services, including: Aquila Fund (Dormant) Aquila Rocky Mountain Equity Fund Capital Cash Management Trust (Dormant) Churchill Cash Reserves Trust (Dormant) Churchill Tax-Free Fund of Kentucky Hawaiian Tax-Free Trust Narragansett Insured Tax-Free Income Fund Tax-Free Fund for Utah Tax-Free Fund of Colorado Tax-Free Trust of Arizona Tax-Free Trust of Oregon Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Prime Cash Fund (Dormant) "Beneficial Owner" shall mean any person who has or shares, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, a direct or indirect pecuniary interest in a Security, within the meaning of Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 ("Exchange Act"). "Pecuniary interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Security. Securities in which you have an "indirect pecuniary interest" include, but are not limited to, securities held by members of your immediate family who share your household, including your spouse, children and stepchildren, parents, grandparents, brothers and sisters, and any of your in-laws. The presumption of beneficial ownership of Securities held by a family member sharing your household may be rebutted by successfully demonstrating to the CCO to the Fund, or to Fund Counsel if you are an Independent Trustee, that you do not have a beneficial ownership interest in the Securities. "Board" shall mean the Board of Trustees of the Fund. "CCO" shall mean the Chief Compliance Officer of the Fund. "Code of Ethics" or Code shall mean this Code of Ethics. "Control" shall mean the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. A person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. A person who does not own more than 25% of the voting securities of a company shall be presumed not to control such company. A person who has "control" under this definition shall be presumed to have "control" unless and until the Securities and Exchange Commission ("SEC") grants an order to the contrary. "Control Person" shall mean any individual who has a Control relationship with the Fund or an investment adviser of the Fund. "Covered Security" shall mean any Security, including shares issued by offshore funds, unregistered funds (such as hedge funds) and closed-end funds. It also includes options or a Security convertible or exchangeable into a Covered Security. It does not include direct obligations of the U.S. Government, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements)1 and shares of U.S.-registered open-end investment companies (including shares of the Aquila Funds and all money market funds).2 "Independent Trustee" shall mean a Trustee who is not an "interested person" of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940 ("1940 Act"). "Initial Public Offering" shall mean an offering of Securities registered under the Securities Act of 1933 ("Securities Act"), the issuer of which , immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. "Limited Offering" shall mean an offering of Securities that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) under the Securities Act, or Rule 504, Rule 505 or Rule 506 thereunder (e.g., private placements). "LLC Manager" shall mean a person who is named as a Manager of an Aquila Entity that is organized as a limited liability company in, or designated as a manager of a limited liability company pursuant to, a limited liability company agreement or similar instrument under which the limited liability company is formed. "Personal Trading" shall mean the Purchase or Sale of Securities by an individual for his or her own account, any other account in which he or she is a Beneficial Owner, or any account (other than an account of an Aquila Fund) for which the Aquila employee decides what securities transactions will be effected for the account, either by making recommendations to the account owner or by entering orders directly with the broker handling the account. "President" shall mean the current President of the Fund. "Purchase or Sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security. "Security" shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security or on any group or index of securities (including any interest therein based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or generally any interest or instrument commonly known as a "security" or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. "Security Held or to be Acquired" means: (A) any Security that within the most recent fifteen (15) days is being or has been (i) held by the Fund or (ii) "considered for purchase or sale" by or on behalf of the Fund; and (B) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security described in (A) above. A Security is "being considered" for Purchase or Sale if: (a) there is an outstanding order (this includes orders that are in the process of being executed) to Purchase or Sell that Security for an account or portfolio of the Fund; (b) there is an outstanding oral or written recommendation with respect to that Security that has not been acted upon or rejected; or (c) the person responsible for a portfolio intends to Purchase or Sell (i.e., has decided to but has not yet purchased or sold) that Security for the Fund's accounts or portfolios. III. REBUTTAL OF THE PRESUMPTION OF ACCESS PERSON STATUS For the purposes of this Code, all officers and trustees of the Fund and all officers and LLC Managers of Aquila Investment Management LLC are presumed to be Access Persons and thus are subject to the personal trading restrictions and reporting requirements described in Sections VI and VII below unless and until the presumption is rebutted. This presumption may be rebutted as to these persons, but only if the CCO makes a finding that such person, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the Purchase or Sale of Covered Securities by the Fund and that his or her functions do not relate to the making of any recommendations with respect to such Purchases or Sales. Prior to making a determination rebutting the presumption that a person is an Access Person of the Fund, the CCO investigate all relevant facts and prepare a memorandum for the file which sets forth the facts demonstrating the rebuttal of the presumption, as well as the CCO's determination that such person is not, in fact, an Access Person for the purpose of this Code. The CCO shall retain a copy of this memorandum in the business records of the Aquila Entities and the Fund. The CCO also shall maintain a list of all persons deemed Access Persons for the purpose of this Code. The CCO shall review the list and reaffirm that it is accurate and complete no less frequently than on an annual basis. Although included in the definition of Access Person, Independent Trustees of the Fund are generally exempt from the personal trading restrictions and prohibitions, as well as the initial, annual, and quarterly reporting requirements described below. IV. RECEIPT AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE As an officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities, you must read this Code carefully and then sign and date the attached Certification (Appendix A) acknowledging receipt of this Code and return it to the CCO promptly. The CCO will provide you with a copy of any updates or amendments to this Code. You must read any such updates or amendments, and then again sign and date the attached Certification acknowledging receipt of the updates or amendments. The CCO shall retain a copy of these Certifications in accordance with Section XII of this Code. V. COMPLIANCE WITH LAWS AND REGULATIONS A. General Prohibitions Applicable to All Personnel When buying or selling any Security (including shares of the Fund and any other Aquila Fund), no officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities shall: o Employ any device, scheme, or artifice to defraud the Fund; o Make to the Fund any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading; o Engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or o Engage in any manipulative practice with respect to the Fund. B. Front-Running The practice of trading on the basis of the anticipated market effect of trades for Aquila Fund accounts, which is known as "front-running" or "scalping," constitutes a violation of the Federal securities laws. Therefore, it is absolutely prohibited for any officer, director, trustee, LLC Manager, Control Person, or employee of the Fund or one or more of the Aquila Entities to engage in such trading. C. Market Timing No officer, director, trustee, LLC Manager, Control Person or employee of the Fund or of any Aquila Entity shall purchase or redeem shares of the Fund in violation of the policies and restrictions set forth in the Fund's prospectus, including, but not limited to, the restrictions limiting the frequency of transfers into and out of the Fund that are designed to prevent so-called "market timing" and protect the interests of long-term investors in the Fund. VI. RESTRICTIONS ON PERSONAL SECURITIES TRADING Note: These restrictions generally will not apply to Independent Trustees of the Fund. The prohibitions and restrictions on personal securities transactions discussed below apply to the securities accounts held by or under the control of an Advisory Person and/or Access Person, depending on the restriction, as well as those accounts held by or under the control of members of the Advisory or Access Person's immediate family living in the same household with the Advisory or Access Person. A. Pre-Clearance of Personal Securities Transactions Advisory Persons must apply for and receive prior written approval from the CCO or his or her designee before purchasing or selling more than 100 shares of any Covered Security (see definition in Section II). Advisory Persons must also receive prior written approval from the CCO, or his or her designee in the CCO's absence, before acquiring any number of shares through an Initial Public Offering or Limited Offering. Advisory Persons shall request approvals by submitting a request, electronically, on paper or by facsimile using the Personal Trading Request Form attached hereto as Appendix B. The CCO shall submit his or her Personal Trading Request Form to the President (or the President's designee, in his or her absence) for approval. Copies of all Personal Trading Request Forms submitted by Advisory Persons shall be retained by the CCO in accordance with Section XII of this Code. A record of all written approvals of, and rationale supporting, any direct or indirect acquisition by Advisory Persons of an investment in an Initial Public Offering or Limited Offering will be made and retained by the CCO. Advisory Persons who have acquired Limited Offering Securities pursuant to prior written approval from the CCO or his or her designee must immediately disclose that investment to the CCO or his or her designee before they participate at any level in any Aquila Fund's subsequent consideration of an investment in the same issuer. In such circumstance, the Aquila Fund's decision to purchase Securities of the issuer will be subject to independent review by other investment personnel with no personal interest in the issuer. In the case of requests for pre-clearance in a Security Held or to be Acquired for any Aquila Fund which is advised by an investment adviser that is not subject to this Code ("external investment adviser"), the President or CCO generally shall grant authorization to trade if the person seeking pre-clearance does not have access to or knowledge of current investment decisions or recommendations of such external investment adviser. B. Prohibited Trading Practices 1. Short-Term Trading An Advisory Person is generally prohibited from realizing a profit from the purchase and sale or sale and purchase of the same Covered Security, within a period of sixty (60) days. It is recognized that short-term trading is not necessarily indicative of whether an individual is trading on inside information. Accordingly, an Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and retain a record of all waivers granted (including any waivers granted by the President in the CCO's absence) under this provision, including a summary of the reasons for granting the waiver. 2. Short Sales An Advisory Person is prohibited from effecting short sales or acquiring short positions in any Covered Security held by the Fund. C. Blackout Periods An Advisory Person shall not Purchase or Sell, directly or indirectly, any Covered Security: (a) within five (5) days after the time that the same Covered Security is purchased or sold by the Fund; or (b) at any time when he or she has have actual knowledge that a Covered Security is being purchased or sold, or recommended or considered for Purchase or Sale, by the Fund until five (5) days after the Fund's Purchase or Sale transaction in such Covered Security has been completed or the Covered Security is no longer being recommended or considered for Purchase or Sale by the Fund. An Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and keep a record of all waivers granted under this provision, including a summary of the reasons for granting the waiver. D. Exempt Transactions The Purchase or Sale of a Security in one of the following types of transactions, shall be considered an "Exempt Transaction" for the purposes of the restrictions on short-term trading, short sales and Purchases or Sales during blackout periods set forth in this Section VI: o trading in Securities in an account over which the Access Person does not have direct or indirect control or influence (e.g., a blind trust); o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans);3 o purchases or sales made by payroll deduction through an employer-sponsored employee benefit plan; o purchases or sales which are non-volitional; or o purchases of Securities 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. Note: The above-listed Exempt Transactions and Covered Securities acquired in such transactions remain subject to initial, annual and quarterly holdings and transaction reporting requirements as set forth in Section VII. E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President In the event that the CCO or the President seeks to engage in a transaction for which pre-clearance is required or seeks a waiver from the blackout period or short-term trading restrictions of this Section of the Code, the approval shall, in the case of the CCO, be granted or denied by the President and, in the case of proposed transactions by the President, the approval or waiver shall be granted or denied by the CCO. In the absence of the President or the CCO, such requests for approval shall be submitted to Fund Counsel. A written record of the determination made and the reasons for it shall be made by the person making the determination and the original record retained in accordance with this Code. VII. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS Access Persons, other than Independent Trustees, are required to submit initial and annual Covered Securities holdings and accounts reports as well as quarterly transaction reports as outlined below. The CCO shall identify all Access Persons who are required to submit reports pursuant to this Section of the Code and shall inform those Access Persons of these reporting requirements. The CCO shall maintain a record of all Access Persons who are required to submit reports pursuant to this section. These reports are mandated by SEC regulations and, therefore, exceptions and waivers of these reporting requirements cannot be granted under any circumstances. However, Access Persons need not make separate reports under this Section VII, to the extent the information in such reports would duplicate information required to be reported to any Aquila Entity pursuant to the Code of Ethics of the Aquila Entity. All reports submitted pursuant to this Code will be reviewed by the CCO or his or her designee to seek to ensure that Access Persons have abided by this Code. Through these reviews, the CCO or his or her designee will seek to identify improper trades or patterns of abuse (including market timing) by Access Persons. When reviewing these reports, the CCO also will seek to ensure that Access Persons have received all necessary pre-clearances required by this Code. The CCO shall periodically provide summary reports of any violations of this Code to the President. No report required by this Section shall be construed as an admission by the Access Person that he or she is a Beneficial Owner of any Security on the report. A. Initial and Annual Reports of Holdings and Accounts ("Holdings and Accounts Reports") All Access Persons (other than Independent Trustees) must, upon commencement of employment, disclose all holdings in Covered Securities (as defined in Section II) and personal brokerage, mutual fund or bank accounts through which Securities are held or traded and over which the Access Person has direct or indirect control or influence (including those of immediate family members living in the same household as the Access Person). All Initial Holdings and Accounts Reports (Exhibit C) shall be made in writing to the CCO within ten (10) days of becoming an Access Person and such information shall be current as of a date no more than forty-five (45) days prior to such person becoming an Access Person. Thereafter, Access Persons must submit Annual Holdings and Accounts Reports (Exhibit C) to the CCO no later than February 14th of each year and must be current as of December 31st of the previous calendar year. Annual Holdings and Accounts Reports must be filed even if there have been no changes in the information reported previously and even if the Access Person has arranged for brokers, banks and mutual funds to send duplicate account statements for his/her personal accounts to the CCO. Access Persons must disclose all Covered Securities holdings in the Initial and Annual Holdings and Accounts Reports including those resulting from transactions which are exempt from the transactional reports. The only holdings which are not required to be reported are Covered Securities held in accounts over which the Access Person does not have any direct or indirect influence or control (e.g., blind trusts). The Initial and Annual Holdings and Accounts Reports must include: (a) title, type of Covered Security and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security of which the Access Person is a direct or indirect Beneficial Owner; (b) the name of any broker, dealer, mutual fund company or bank with which the Access Person maintains an account used to hold or trade Securities, the account number, the title of the account and the names of all individuals who are Beneficial Owners of the account in which any Security is held for the Access Person's direct or indirect benefit; and (c) the date that the report is submitted by the Access Person. The CCO shall retain copies of the Initial and Annual Holdings and Accounts Reports in accordance with Section XII of this Code. B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports") Each Access Person (other than Independent Trustees) must submit a Quarterly Transaction and Accounts Report (Exhibit D) to the CCO containing the information described below with respect to transactions in any Covered Securities (as defined in Section II) in which such Access Person was a direct or indirect Beneficial Owner of a Covered Security. Access Persons are not required to report Exempt Transactions, as defined below. Access Persons are not required to report trades in accounts over which they do not have influence or control over investment decisions (e.g., a blind trust). Quarterly Transaction and Accounts Reports must be submitted in writing to the CCO no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected. The CCO shall retain the reports in accordance with Section XII of this Code. Quarterly Transaction and Accounts Reports must include the following information for each transaction in a Covered Security: (a) the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), and number of shares, and the principal amount of each Covered Security involved; (b) the nature of the transaction (e.g., purchase, sale, or any other type of acquisition or disposition); (c) the price at which the transaction was effected; (d) the name of the broker, dealer, mutual fund company or bank with or through which the transaction was effected; and (e) the date that the report is submitted by the Access Person. If during the calendar quarter, the Access Person established a new brokerage, mutual fund or bank account where Securities are held, the Quarterly Transaction and Accounts Report must include the following information: (a) the name of the broker, dealer, mutual fund company or bank with whom the Access Person established the account; (b) the date the account was established; and (c) the date that the report is submitted by the Access Person. The following transactions are "Exempt Transactions" for the purpose of the Quarterly Transaction and Accounts Report requirements (but still must be reported on Initial and Annual Holdings and Accounts Reports): o transactions reported in duplicate broker monthly account statements or trade confirmations received by the Aquila Entities or the Fund, if all of the above required information is included and confirmations or account statements are received by the CCO within thirty (30) days of the close of the calendar quarter; and o purchases of Covered Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans).4 Trading in Covered Securities in an account over which a person does not have direct or indirect control or influence (e.g., a blind trust) are also Exempt Transactions and need not be reported on Quarterly Transaction and Accounts Reports, nor on Initial and Annual Holdings and Accounts Reports. VIII. APPLICATION OF PERSONAL TRADING RESTRICTIONS AND REPORTING TO INDEPENDENT TRUSTEES OF THE FUND Independent Trustees of the Fund are not required to submit Initial and Annual Holdings and Accounts Reports. Independent Trustees are required to submit Quarterly Transaction and Accounts Reports only if the Independent Trustee knew or, in the ordinary course of fulfilling his or her duties as an Independent Trustee, should have known, that during the fifteen (15) day period before or after his or her transaction in a Covered Security, the Covered Security was purchased or sold, or was considered for Purchase or Sale, by or on behalf of the Fund. Required reports must be submitted no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected and must include the information described in Section VII. Independent Trustees also are not required to report Covered Securities trades in accounts for which they do not have influence or control over investment decisions (e.g., a blind trust). No such report shall be construed as an admission by an Independent Trustee that he or she is a Beneficial Owner of any Covered Security on the report, nor shall the making of a report be construed as an admission of a violation of this Code by the Independent Trustee. The CCO for the Fund will inform the Independent Trustees of the applicable reporting requirements under this Code. Copies of any reports received by the CCO from an Independent Trustee of the Fund will be provided to Fund Counsel and the originals maintained by the CCO as part of the Fund's records. IX. GIFTS AND GRATUITIES Advisory Persons may not seek or accept from, or offer to give or give to, any person that does business with any Aquila Entity or the Fund any item of material value or preferential treatment that is or appears to be connected with an Aquila Entity or Aquila Fund directing business to that person or receiving business from that person. For purposes of this prohibition, "items of material value" include but are not limited to: (a) gifts amounting in value to more than $100 per person per year; and (b) payment or reimbursement of travel expenses, including overnight lodging, in excess of $100 per person per year. "Items of material value" do not include: (a) an occasional meal, a ticket to a sporting event or the theater or comparable entertainment, which is not conditioned on directing business to the firm that provided such meal or entertainment and is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achieving a sales target; or (b) an unconditional gift of a typical item of reminder advertising such as a ball-point pen with the name of the advertiser inscribed, a calendar pad, or other gifts amounting in value to not more than $100 per person per year. Any invitations involving travel for more than one day where travel expenses will be paid or reimbursed by a person that does business with an Aquila Entity, the Fund or any other Aquila Fund must have advance approval from the CCO, or the President in the CCO's absence. The President must approve the CCO's invitations involving travel for more than one day. The CCO shall maintain a record of all such requests for travel and the reason for granting or denying all such requests in accordance with this Code. X. ADVISING NON-AQUILA ENTITIES Advisory Persons may not render investment advice to persons other than Aquila Entities or Aquila Funds, unless the advisory relationship, including the identity of those involved and any fee arrangements, has been disclosed to and approved by the President. Once cleared with the President, all transactions for such outside advisory clients are subject to the reporting requirements outlined above. This prohibition precludes Advisory Persons from providing investment advice to members of such person's immediate family without the prior approval of the President. XI. ADVISORY PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES An Advisory Person who serves as a director or trustee of a publicly-traded company in which the Fund invests or may invest may have an inherent conflict between the fiduciary duty he or she owes to the Fund and that owed to the shareholders of the publicly-traded company. In addition, service on the board of directors or board of trustees of any company other than an Aquila Fund or Aquila Entity ("External Company") may present conflicts between the duties owed by the Advisory Person to that company and to the Fund and the Aquila Entities. To avoid the potential adverse consequences of such conflicts of interest or to ensure they are appropriately dealt with, effective January 7, 2005, all Advisory Persons must receive the prior written approval of the CCO and the President before serving as director or trustee of any External Company, which approval may be withheld in the President's sole discretion. If you are an Advisory Person and currently serve as a director or trustee of an External Company, you should notify the CCO immediately. Prior to commencement of employment with any Aquila Entity and annually thereafter, each Advisory Person shall provide the CCO with a written list of all positions held by the Advisory Person with any External Company. Advisory Persons who receive permission to serve as directors of publicly-traded External Companies will be isolated through "Fire Walls" or other procedures from making decisions regarding the Securities of those companies for which they serve as directors or trustees. An especially sensitive situation involves representation on a creditors' committee. Particular care will be taken to create a "Fire Wall" between portfolio management and creditors' committee representation. XII. RECORD KEEPING The CCO shall maintain the following records in the manner and for the time periods described under the 1940 Act and the Investment Advisers Act of 1940: (a) a copy of this Code of Ethics and any other Code of Ethics which is, or at any time within the past six (6) years has been in effect and all amendments to such Code(s); (b) a copy of each signed and dated Certification acknowledging receipt of the Code and any amendments or updates to the Code for a period of at least six (6) years after the individual acknowledging receipt is no longer affiliated with the Aquila Entities or the Fund; (c) records of any violations of this Code and any actions taken as a result of such violations for a period of six (6) years after the resolution of such violation; (d) each report, record or finding made under this Code, including any information provided in lieu of these reports (e.g., duplicate account statements) for a period of six (6) years after the date of the report, record or finding; (e) each Personal Trading Request Form (Exhibit B) submitted by an Advisory Person and a record of the decision regarding such request for a period of six (6) years after the date of the request (and for shares of an Initial Public Offering or Limited Offering, the reasoning for the decision); (f) each request for a waiver from any of the restrictions on Personal Trading by Advisory Persons (including requests that an Advisory Person not be deemed the Beneficial Owner of Securities held by another household member), including a description of the reason for the request and a brief summary of the reasons for granting or denying the waiver for a period of six (6) years after the last date on which the waiver was applied; (g) a list of all individuals who currently are, or within the past six (6) years have been deemed, Access Persons of the Aquila Entities or the Fund, as well as records of any decision by the CCO to exempt a person from the definition of "Access Person" and supporting documentation for and facts surrounding such a decision; (h) a list of all individuals who currently are, or within the past six (6) years have been, required to make Quarterly Transaction and Accounts Reports or Holdings and Accounts Reports pursuant to this Code; (i) a list of all persons who currently are or within the past six (6) years have been responsible for reviewing reports submitted pursuant to the Code; (j) a copy of all Quarterly Transaction and Accounts Reports and Initial and Annual Holdings and Accounts Reports submitted to the CCO for a period of six (6) years from the date of the report; (k) a record of all requests for travel pursuant to Section IX of this Code and the reason for granting or denying all such requests for a period of six (6) years from the date of the request; and (l) a copy of each report submitted to the Boards of Trustees of the Fund in connection with the Board's approval of a code of ethics or material changes to such a code for a period of six (6) years following the date of such report. XIII. EXTERNAL ADVISERS, SUBADVISERS AND EXTERNAL PRINCIPAL UNDERWRITERS' CODES OF ETHICS As required by Rule 17j-1 under the 1940 Act ("Rule 17j-1"), each external adviser, subadviser and external principal underwriter to the Fund shall adopt a written code of ethics governing personal investment activity that meets the requirements of Rule 17j-1. Any person that is an "access person" (as defined in Rule 17j-1) of an external adviser, subadviser or external principal underwriter shall be subject to and comply with the code of ethics of such external adviser, subadviser or external principal underwriter. XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES All officers, directors, trustees, LLC Managers, Control Persons or employees of the Fund or of any Aquila Entity shall promptly report any actual or suspected violations of this Code to the CCO. In the absence of the CCO, violations may be reported to the President but also must be separately reported to the CCO promptly following his or her return to the office. The identity of the person making such a report will be kept in confidence whenever possible. Persons who report actual or suspected violations will be protected from retaliation for making such reports. Violations of this Code may result in the imposition of criminal penalties or sanctions by the SEC, other law enforcement or regulatory authorities, or the Fund or Aquila Entities, including forfeiture of any profit from or loss avoided by a transaction, forfeiture of future discretionary salary increases or bonuses, and suspension or termination of employment. Determinations as to whether a violation has occurred, and the appropriate sanctions, if any, shall be made by the CCO and may be subject to review by the President or trustees of the Fund, as appropriate; provided however, that no person believed to have violated this Code shall participate in such determinations made with respect to his or her own conduct. XV. BOARD APPROVAL A. Initial Approval of Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any code of ethics of any new adviser, subadviser or principal underwriter to the Fund before initially retaining its services. Before the Board meeting at which a code is scheduled for approval, the affected adviser, subadviser or principal underwriter shall provide the Board with a copy of its code of ethics, a written certification that it has adopted procedures reasonably necessary to prevent its "access persons" from violating its code and any other information requested by the Board. B. Material Changes to Codes of Ethics The Board of the Fund, including a majority of Independent Trustees, shall approve any material changes to this Code, as well as to the codes of ethics of the Aquila Entities and each external adviser, subadviser and external principal underwriter to the Fund within six (6) months following the adoption of the change. The appropriate officers or LLC Managers of the Fund or other Aquila Entities or of the external adviser, subadviser or external principal underwriter will, on a timely basis, provide notice to the Board of the changes and provide the Board with the following information regarding the changes for which Board approval is sought: (1) a written description of the change and the reasons therefore; (2) a copy of the revised code of ethics, marked to show the changes; (3) a written certification that the entity has adopted procedures reasonably necessary to prevent its access persons from violating the code of ethics; and (4) any other information requested by the Board. C. Annual Reports to the Fund Board To assist the Board of the Fund in meeting its responsibilities under Rule 17j-1, the appropriate officers or LLC Managers of the Aquila Entities and any external adviser, subadviser or external principal underwriter to the Fund, at least annually, shall provide the Fund's Board with: (1) a written certification that the Aquila Entities or external adviser, subadviser or external principal underwriter have adopted procedures reasonably necessary to prevent their respective access persons from violating their codes of ethics; (2) a written report that describes any issues arising under such codes of ethics or related procedures since the last report to the Board; and (3) any other information requested by the Board. The report referred to in (2) above shall include, but not be limited to, information about: (a) material violations of the code or related procedures; (b) immaterial, individual violations (such as late filings of quarterly transactions reports) if such violations are material in the aggregate; and (c) sanctions imposed in response to such violations; significant conflicts of interest that arose involving personal trading, even if the conflicts did not result in a code violation (e.g., where an Access Person is a director of a company whose Securities are held by an Aquila Fund). Further, the Fund's Board will be provided with more frequent reports when there have been significant violations of a code of ethics or related procedures, or significant conflicts of interest arising under the code or related procedures. 1 "High quality short-term debt instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality. 2 Shares of the Fund, although excepted from the definition of "Covered Security" in this Code, will be subject to reporting, preclearance and other personal trading restrictions under the codes of ethics of the Aquila Entities and of any other investment advisers of the Fund. 3 Any transaction that overrides the pre-set schedule or allocations of the automatic investment plan is not exempt. 4 Any transaction, however, that overrides the pre-set schedule or allocations of the automatic investment plan must be included in a Quarterly Transaction Report. EX-99.P 9 pcatb05coeboh.txt CODE OF ETHICS OF THE ADVISER BANK OF HAWAII ASSET MANAGEMENT GROUP CODE OF ETHICS Employees of Bank of Hawaii's Asset Management Group (AMG) and certain other employees of Bank of Hawaii in positions identified in the definition of an Access Person in Appendix A have duties, responsibilities and access to information that give rise to ethical concerns that are not common to all Bank of Hawaii employees. This Code of Ethics (the "Code") has been adopted in accordance with Rule 17j-1(c) under the Investment Company Act of 1940 (the "Investment Company Act") and Rule 204A-1 under the Investment Advisers Act of 1940 (the "Advisers Act") to provide Access Persons with guidance in dealing with these additional ethical concerns, primarily in the area of their own investment activities. It supplements and does not replace the Bank of Hawaii Employee Code of Conduct and the Bank of Hawaii Corporation Code of Business Conduct & Ethics, which are in the Employee Handbook and applicable to all employees. Currently, all Supervised Persons, as defined in Appendix A, are also AMG employees, and therefore Access Persons. Limited Access Persons, as defined in Appendix A, who have access to Non-Public Information, are not included in this Code because they are covered in the Investment Services Group (ISG) Trust Policy TPOL 10-31, entitled Personal Securities Transaction Reporting. That policy requires Limited Access Persons to agree to general principles of conduct similar to those in Section I of the Code and to follow specific personal securities reporting procedures under the supervision of the ISG compliance officers. Capitalized terms used but not defined in the Code are defined in Appendix A. Appendix B establishes procedures related to certain requirements of the Code. All Appendices are part of the Code. The Code is, among other things, designed to assist in compliance with certain provisions of the Act that are set forth in Appendix C for background information. I. GENERAL PRINCIPLES. The Code sets forth AMG's requirements regarding the conduct of Access Persons in certain specified situations. Access Persons must promote honest and ethical conduct, including the ethical handling or apparent conflicts of interest between personal and professional relationships and to encourage the prompt internal reporting to the Chief Compliance Officer of violations of the Code. There are fundamental fiduciary and other principles that underlie the specific guidelines of the Code and each Access Person is expected to also adhere to these fundamental principles: A. Access Persons must always observe the highest standards of business conduct and act in accordance with all applicable federal securities laws. B. Access Persons owe a fiduciary responsibility to AMG Clients and must not take actions that harm AMG Client interests or engage in any conduct that places or appears to place their own interests in conflict with the interests of AMG Clients or their investors C. Access Persons must avoid taking any action that would compromise or call into question their exercise of fully independent judgment in the interests of AMG Clients. D. No Access Person, in connection with his or her purchase or sale of any Security held or to be acquired by an AMG Client, shall: 1. Employ any device, scheme or artifice to defraud an AMG Client; 2. Engage in any act, practice or course of business that operates or would operate as a fraud or deceit on an AMG Client; 3. Make any untrue statement of a material fact to an AMG Client, or omit to state a material fact which would make an otherwise true statement, misleading; or 4. Engage in any manipulative practice with respect to an AMG Client. E. No Access Person shall engage in market timing transactions, which are defined as trading shares of an open-end mutual fund with the intent of arbitraging an inefficiency in the valuation of that fund, including but not limited to transactions for his or her own benefit or the benefit of a Portfolio. In addition, all Access Persons shall adhere to the market timing and share trading policies of all open-end mutual funds in which they invest. The above restrictions apply to all such trades, including those executed through omnibus or retirement accounts. F. No Access Person shall engage in late trading of open-end mutual funds (i.e., the submission of a trade after the daily pricing time for net asset value with an intent or agreement to obtain that day's net asset value). G. Access Persons are expected to adhere to both the letter and spirit of the Code and must avoid any actions designed to achieve indirectly a result that the Code seeks to prevent or discourage. This includes effecting transactions in an omnibus account, a 401(k) plan or other retirement plan, variable annuity or variable life insurance policy investing in mutual fund assets, or any other alternative investment vehicle, or by means of any other person or entity. H. Any Access Person who has any doubt as to whether his or her contemplated conduct would violate the Code should first discuss the proposed conduct with the Compliance Officer. II. EXEMPT PERSONAL SECURITIES TRANSACTIONS. Section III of the Code shall not apply to the following Exempt Transactions. A. Purchases or sales of Bank of Hawaii Corporation stock and options on Bank of Hawaii Corporation stock. B. Purchases or sales of a Security in any account over which the Access Person has no direct or indirect influence or Control. C. Gifts of Securities made by an Access Person. D. Purchases or sales of a Security which are non-volitional on the part of either the Access Person or the AMG Client. Non-volitional transactions include gifts to an Access Person and transactions over which the Access Person has no control of the timing (such as open options contracts exercised by the other party to the contract), or transactions which result from corporate action applicable to all similar security holders (such as splits, tender offers, mergers, stock dividends, etc.). E. Purchases of Securities which are part of an automated investment program, such as an automatic dividend reinvestment plan, automated employee stock ownership program (ESOP) or automated investment program of an account subject to ERISA, as well as sales of Securities which are part of an automated withdrawal from an ERISA or ESOP program. F. Purchases of Securities effected upon the exercise of rights issued pro rata to all holders of a class of Securities, to the extent such rights were acquired from the issuer, and sales of such rights so acquired. III. PROHIBITED PERSONAL SECURITIES TRANSACTIONS. Unless it is an Exempt Transaction as listed in Section II of the Code: A. No Access Person shall purchase or sell any Security, excluding shares of a Fund, without first obtaining a Pre-clearance Authorization as provided in Appendix B, part A.2. The Compliance Officer may also grant an exemption as provided in Appendix B, part A.1. B. No Access Person shall purchase or sell any Security, excluding shares of a Fund, if at the time of such purchase or sale the Access Person has actual knowledge that the Security is being purchased or sold, or is being considered for purchase or sale, by AMG for an AMG Client. C. No Access Person shall purchase or sell a Security, excluding shares of a Fund, during a Blackout Period for that Security (any day during which an AMG Client has a pending buy or sell order for the same Security, or during the trading day before and trading day after the AMG Client's order is executed or withdrawn). D. No Investment Person for a Fund shall purchase or sell a Security, excluding shares of a Fund, during an Extended Blackout Period for that Security. E. Public offerings give rise to potential conflicts of interest as to whether the Access Person is misappropriating an investment opportunity that should be first offered to AMG clients. No Access Person shall acquire any Security in an Initial Public Offering or a Private Placement without the prior written approval of the Compliance Officer. F. No Access Person shall profit from the purchase and sale, or sale and purchase, of the same (or equivalent) Security, which includes shares of Funds, within 60 calendar days. Any purchase and sale of the same (or equivalent) Security within a 60 calendar day period is prohibited even if the Access Person holds more of the Security. For purposes of this rule, exempted purchases or sales in Section II of the Code are not considered a transaction. IV. USE OF NON-PUBLIC INFORMATION. No Access Person shall: A. Disclose to any other person, except to the extent permitted by law and necessary to carry out his or her duties as an Access Person and as part of those duties, any Non-Public Information regarding any AMG Client, including any Security holdings or transactions of an AMG Client, any Security recommendation made to an AMG Client, and any Security Transaction by an AMG Client or under consideration by or for an AMG Client, including information about actual or contemplated investment decisions. This restriction does not preclude an Access Person from disclosing to any AMG client any of that client's Portfolio information, including holdings and transactions. B. Use any Non-Public Information regarding any AMG Client in any way which might be contrary to or in competition with the interests of such AMG Client. C. Use any Non-Public Information regarding any AMG Client in any way for personal gain. V. OTHER. No Access Person shall: A. Recommend any Security transaction, excluding a transaction in shares of a Fund, for execution by an AMG Client without first disclosing to the Compliance Officer such Access Person's interest, if any, in such Security 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 Access Person in such Security; (iii) any position of such Access Person with such issuer or its affiliates; and (iv) any present or proposed business relationship between such Access Person and such issuer or its affiliates. B. Seek or accept preferential treatment or any gift of more than de minimus value ($100) from any person or entity that to his or her knowledge does business with or on behalf of Bank of Hawaii or any AMG Client. C. Serve as an officer of, or on the Board of Directors or investment committee of, or as a paid consultant or advisor to any corporation or other business entity without the prior written approval of the Compliance Officer. D. Open a brokerage account, variable annuity, or direct account with a registered open-end investment company (open-end mutual fund), unless it is through Bankoh Investment Services, Inc. or directly with a Fund, without the prior written approval of both the Compliance Officer and the Manager of AMG. VI. COMPLIANCE REPORTING. In order to facilitate the process of monitoring compliance with the Code, each Access Person shall: A. Notify the Compliance Officer, by submission of an initial or updated brokerage account report, of all brokerage accounts he or she maintains, directly or indirectly controls or in which he or she or a related Interested Person [as defined under Act Section 2(a)(19)(B)(ii)] has a Beneficial Ownership interest, and of the opening or closing of any such brokerage account. B. Instruct each broker-dealer where any such account is maintained to send directly to the Compliance Officer a duplicate copy of all transactions confirmations and periodic statements generated by that broker-dealer for that account. The Compliance Department treats all transaction confirmations and statements as confidential. In order to ensure that duplicate brokerage confirmations are received from all employee trading accounts, all employees are required to complete a Disclosure of Brokerage Account form at the commencement of employment and to submit an updated Brokerage Account Form whenever an account is added or deleted. C. File a quarterly transaction report with the Compliance Officer no later than 30 calendar days after the end of each calendar quarter, whether or not the Access Person purchased or sold any Securities during that quarter. D. Within 10 days of becoming an Access Person submit an initial holdings report (which information must be current as of a date no more than 45 days prior to the date the person becomes an Access Person), and no later than January 30th of each year thereafter, submit an annual holdings report (which information must be current as of a date no more than 45 days prior to the date the person becomes an Access Person)to the Compliance Officer listing all known Securities in which the Access Person has a Beneficial Interest. VII. ACKNOWLEDGED RECEIPT OF CODE. A. The Compliance Officer shall provide each Access Person, upon his or her becoming an Access Person, with a copy of this Code. B. Within 10 days of becoming an Access Person, and no later than January 30th of each year thereafter, each Access Person shall submit a signed compliance certification to the Compliance Officer that he or she has (1) read and understood the Code and recognizes that he or she is subject to the Code and (2) complied with the requirements of the Code. C. Within 10 days of receiving any subsequent amendment to this Code, each Access Person shall submit a signed compliance certification to the Compliance Officer that he or she has (1) read and understood the Code, as amended, and recognizes that he or she is subject to the Code, as amended, and (2) complied with the requirements of the Code, as amended. D. Within 10 days of becoming an Access Person, and no later than January 30th of each year thereafter, each Access Person shall submit a signed compliance certification to the Compliance Officer he or she has complied with the market timing and share trading policies of all of the mutual funds in which he or she invests. E. Each Access Person shall promptly report any apparent violation of the Code to the Compliance Officer. VIII. REPORTING VIOLATIONS - RESPONSIBILITIES OF SUPERVISORS AMG regards violations of the Code as a serious breach of firm rules. Therefore, any employee who violates the Code may be subject to appropriate disciplinary action, up to and including dismissal. All employees are trained to be aware that failure to comply with certain elements of the Code may constitute a violation of federal and/or state law, and may subject that employee and the firm to criminal and/or civil liability. Federal securities laws require AMG and supervisors to supervise employees for violations of the law and the Code. All employees who have supervisory responsibility should see to it that the employees they supervise are familiar with and remain in compliance with the requirements of the Code. Supervisors who report violations or suspected violations in good faith will not be subject to retaliation or any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially. The Compliance Officer to whom a potential violation is reported will take all appropriate action to investigate any potential violations reported to him/her. Any matter that the Compliance Officer believes is a material violation will be reported to the Chief Compliance Officer. If the Chief Compliance Officer concurs that a material violation has occurred, he/she will make a recommendation to have the matter reviewed by the Review Committee. IX. ADMINISTRATION The Chief Compliance Officer is responsible for administering this Code. Any Access Person who has knowledge of misconduct relating to, or wish to express concern relating to, accounting, internal accounting controls or auditing matters and/or a violation of any federal or state securities law or provisions of the Code, should submit a written complaint expressing such facts and/or concerns to the Chief Compliance Officer. Any such complaint submitted will be held in the strictest of confidence. X. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained accordingly by the Compliance Department. EX-99.P 10 pcatb05coeadi.txt CODE OF ETHICS OF DISTRIBUTOR CODE OF ETHICS for AQUILA MANAGEMENT CORPORATION AQUILA INVESTMENT MANAGEMENT LLC AQUILA DISTRIBUTORS, INC. February 1, 2005 TABLE OF CONTENTS I. STATEMENT OF BUSINESS ETHICS.........................................1 II. DEFINITIONS..........................................................2 III. APPLICATION OF THE CODE..............................................6 IV. DELIVERY AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE........................................6 V. COMPLIANCE WITH LAWS AND REGULATIONS.................................6 A. Compliance with the Federal Securities Laws.................6 B. General Prohibitions Applicable to All Personnel............7 C. Front-Running...............................................7 D. Market Timing...............................................7 VI. INSIDER TRADING......................................................7 VII. CONFIDENTIALITY OF SECURITIES RECOMMENDATIONS, INVESTMENT DECISIONS AND SECURITIES HOLDINGS............................8 VIII. RESTRICTIONS ON PERSONAL SECURITIES TRADING..........................9 A. Pre-Clearance of Personal Securities Transactions...........9 B. Prohibited Trading Practices...............................10 1. Short-Term Trading................................10 2. Short Sales.......................................10 C. Blackout Periods...........................................10 D. Exempt Transactions........................................10 E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President..............11 IX. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS.................................................11 A. Initial and Annual Reports of Securities Holdings ("Securities Holdings and Accounts Reports").......................................12 B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports")......................................13 X. GIFTS AND GRATUITIES................................................14 XI. ADVISING NON-AQUILA ENTITIES........................................15 XII. SUPERVISED PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES........................................................15 XIII. RECORD KEEPING......................................................16 XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES.....................17 APPENDICES Note: The forms set forth in the Appendices are not part of this Code of Ethics but are appended for convenience. Appendix A........CERTIFICATION OF RECEIPT OF CODE OF ETHICS Appendix B........PERSONAL TRADING REQUEST FORM Appendix C........INITIAL & ANNUAL HOLDINGS AND ACCOUNTS REPORT Appendix D........QUARTERLY TRANSACTION AND ACCOUNTS REPORT I. STATEMENT OF BUSINESS ETHICS Aquila Management Corporation, Aquila Investment Management LLC and Aquila Distributors, Inc. are committed to maintaining the highest legal and ethical standards in the conduct of our business. We have a reputation based on investor trust and confidence in our professional abilities and integrity. We place the interests of our advisory clients above our own. Conflicts, or even the appearance of conflicts, between the interests of our advisory clients and our own must be avoided at all times. Meeting this commitment is a top priority and the responsibility of each and every one of us. This Code of Ethics (the "Code"), has been adopted by each of the Aquila Entities to implement our statement of business ethics. As a Supervised Person (as defined in Section II) you are subject to this Code. A code of ethics similar to this Code has been adopted by each of the funds of The Aquila Group of Funds. The CCO (as defined in Section II) is responsible for enforcing and interpreting this Code, and is available to answer any questions you may have. II. DEFINITIONS Listed below are definitions of some of the terms used in this Code, many of which are defined by law. "Access Person" shall mean any Supervised Person who: (a) has access to non-public information regarding an Aquila Fund's or other advisory client's Purchase or Sale of Securities or nonpublic information regarding the portfolio holdings of any of the Aquila Funds or other advisory client, or (b) is involved in making securities recommendations to any of the Aquila Funds or other advisory client or who has access to such recommendations that are nonpublic. Note: All officers and LLC Managers of Aquila Investment Management LLC are presumed to be Access Persons for the purposes of this Code. This presumption may be rebutted as described in Section III of this Code. "Advisory Person" shall mean any person who is: (1) A Supervised Person who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding, the Purchase or Sale of Reportable Securities by an Aquila Fund or other advisory client of Aquila Investment Management LLC or whose functions relate to the making of any recommendations with respect to such Purchases or Sales; or (2) a Control Person who obtains information concerning recommendations made to an Aquila Fund or other advisory client of Aquila Investment Management LLC with regard to the Purchase or Sale of Reportable Securities by an Aquila Fund or other advisory client of Aquila Investment Management LLC. "Aquila Entity" or "Aquila Entities" shall mean Aquila Management Corporation, Aquila Investment Management LLC (a registered investment adviser) and Aquila Distributors, Inc. (a registered broker-dealer). "Aquila Funds" or "Funds" (each an "Aquila Fund" or "Fund") shall mean all funds in The Aquila Group of Funds and any other fund to which an Aquila Entity provides administrative, distribution or investment advisory services, including: Aquila Fund (Dormant) Aquila Rocky Mountain Equity Fund Capital Cash Management Trust (Dormant) Churchill Cash Reserves Trust (Dormant) Churchill Tax-Free Fund of Kentucky Hawaiian Tax-Free Trust Narragansett Insured Tax-Free Income Fund Tax-Free Fund for Utah Tax-Free Fund of Colorado Tax-Free Trust of Arizona Tax-Free Trust of Oregon Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Securities Cash Assets Trust Prime Cash Fund (Dormant) "Beneficial Owner" shall mean any person who has or shares, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, a direct or indirect pecuniary interest in a Security, within the meaning of Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 ("Exchange Act"). "Pecuniary interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Security. Securities in which you have an "indirect pecuniary interest" include, but are not limited to, securities held by members of your immediate family who share your household, including your spouse, children and stepchildren, parents, grandparents, brothers and sisters, and any of your in-laws. The presumption of beneficial ownership of Securities held by a family member sharing your household may be rebutted by successfully demonstrating to the CCO that you do not have a beneficial ownership interest in the Securities. "CCO" shall mean the Chief Compliance Officer of Aquila Investment Management LLC. "Code of Ethics" or Code shall mean this Code of Ethics. "Control" shall mean the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. A person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. A person who does not own more than 25% of the voting securities of a company shall be presumed not to control such company. A person who has "control" under this definition shall be presumed to have "control" unless and until the Securities and Exchange Commission grants an order to the contrary. "Control Person" shall mean any individual who has a Control relationship with an Aquila Fund or an investment adviser of an Aquila Fund. "Initial Public Offering" shall mean an offering of Securities registered under the Securities Act of 1933 ("Securities Act"), the issuer of which , immediately before registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. "Limited Offering" shall mean an offering of Securities that is exempt from registration under the Securities Act pursuant to Section 4(2), Section 4(6) or Rule 504, Rule 505 or Rule 506 (e.g., private placements). "LLC Manager" shall mean a person who is named as a Manager of an Aquila Entity that is organized as a limited liability company in, or designated as a manager of a limited liability company pursuant to, a limited liability company agreement or similar instrument under which the limited liability company is formed. "Personal Trading" shall mean the Purchase or Sale of Securities by an individual for his or her own account, any other account in which he or she is a Beneficial Owner, or any account (other than an account of an Aquila Fund or other advisory client of Aquila Investment Management LLC) for which the Aquila employee decides what securities transactions will be effected for the account, either by making recommendations to the account owner or by entering orders directly with the broker handling the account. "President" shall mean the current President of Aquila Investment Management LLC. "Purchase or Sale of a Security" includes, among other things, the writing of an option to purchase or sell a Security. "Reportable Security" shall mean any Security, including shares of an Aquila Fund (other than an Aquila money market fund) or any fund for which Aquila Investment Management LLC serves as an investment adviser, or any fund whose investment adviser or principal underwriter controls, is controlled by, or is under common control with Aquila Investment Management LLC. ("Control" has the same meaning as in Section 2(a)(9) of the Investment Company Act of 1940 ("1940 Act").) Reportable Security also includes shares issued by offshore funds, unregistered funds (such as hedge funds), and closed-end funds. It also includes options or a Security convertible or exchangeable into a Reportable Security. It does not include a direct obligations of the U.S. Government, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements),1 and shares of third-party U.S.-registered open-end investment companies (including money market funds). "Security" shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security or on any group or index of securities (including any interest therein based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or generally any interest or instrument commonly known as a "security" or any certificate of interest or participation in, temporary or interim certificate for, receipt for guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. "Security Held or to be Acquired" means: (A) any Security that within the most recent fifteen (15) days is being or has been (i) held by an Aquila Fund or other advisory client or (ii) "considered for purchase or sale" by or on behalf of any of the Aquila Funds or other advisory client; and (B) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security described in (A) above. A Security is "being considered" for Purchase or Sale if: (a) there is an outstanding order (this includes orders that are in the process of being executed) to Purchase or Sell that Security for an account or portfolio of any of the Aquila Funds or other advisory client; (b) there is an outstanding oral or written recommendation with respect to that Security that has not been acted upon or rejected; or (c) the person responsible for a portfolio intends to Purchase or Sell (i.e., has decided to but has not yet purchased or sold) that Security for any of the accounts or portfolios of the Aquila Funds or other advisory clients. "Supervised Person" means any partner, officer, director, LLC Manager (or other person occupying a similar status or performing similar functions), or employee of the Aquila Entities, or any other person who provides investment advice on behalf of Aquila Investment Management LLC and is subject to the supervision and control of Aquila Investment Management LLC. III. III. APPLICATION OF THE CODE Although this Code generally applies to all Supervised Persons, some of the provisions that restrict personal securities transactions apply only to Access Persons and/or Advisory Persons, as defined in Section II of this Code. The CCO will maintain a list of all persons deemed Access Persons for the purpose of this Code. The CCO shall review the list and reaffirm that it is accurate and complete no less frequently than on an annual basis. For the purposes of this Code, all officers and LLC Managers of Aquila Investment Management LLC are presumed to be Access Persons and thus are subject to the personal trading restrictions and reporting requirements that apply to Access Persons under Sections VIII and IX of this Code unless and until the presumption is rebutted. This presumption may be rebutted as to these persons, but only if the CCO makes a finding that such person does not have access to non-public information regarding the Purchase or Sale of Securities by an Aquila Fund or other advisory client or nonpublic information regarding the portfolio holdings of any of the Aquila Funds or other advisory clients, and is not involved in making securities recommendations to any of the Aquila Funds and does not have access to such nonpublic recommendations. Prior to making a determination rebutting the presumption that a person is an Access Person, the CCO shall investigate all relevant facts and prepare a memorandum for the file which sets forth the facts demonstrating the rebuttal of the presumption, as well as the CCO's determination that such person is not, in fact, an Access Person for the purpose of this Code. The CCO shall retain a copy of this memorandum in the business records of the Aquila Entities. IV. DELIVERY AND ACKNOWLEDGEMENT OF THE CODE AND AMENDMENTS TO THE CODE The CCO will provide each Supervised Person with a copy of this Code and any updates or amendments. All Supervised Persons shall read this Code and any updates and amendments carefully and then sign and date the attached Certification acknowledging receipt and return it to the CCO promptly. The CCO shall retain a copy of these Certifications in accordance with Section XIII of this Code. V. COMPLIANCE WITH LAWS AND REGULATIONS A. Compliance with the Federal Securities Laws Supervised Persons are required at all times to comply with the federal securities laws, as defined in Rule 204A-1 of the Investment Advisers Act of 1940 ("Advisers Act"), both in conducting the business of the Aquila Entities and when acting in their personal capacities or outside the scope of their employment or association with the Aquila Entities. Accordingly, any violation of the federal securities laws will be a violation of this Code and may subject the Supervised Person to sanctions or other appropriate remedial action under the Code. B. General Prohibitions Applicable to All Personnel As a registered investment adviser, Aquila Investment Management LLC, has a fiduciary obligation to the Aquila Funds and any other advisory clients. This Code is based on the principle that Supervised Persons owe a fiduciary duty to clients and at all times must conduct the Aquila Entities' business and their own affairs, including personal securities transactions, in accordance with the high ethical and legal standards that apply to those acting in a fiduciary capacity. This means, among other things, that Supervised Persons must avoid: (i) placing the interests of the Aquila Entities or their own personal interests ahead of the Aquila Funds or other advisory clients, (ii) taking in appropriate advantage of their position with the Aquila Entities; or (iii) any actual or potential conflicts with the interests of the Funds or other advisory clients or even the appearance of such conflicts. When buying or selling any Security (including shares of the Aquila Funds), no Supervised Person shall: o Employ any device, scheme, or artifice to defraud; o Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they are made, not misleading; o Engage in any act, practice or course of business that operates or would operate as a fraud or deceit; or o Engage in any manipulative practice. C. Front-Running The practice of trading on the basis of the anticipated market effect of trades for the accounts of investment advisory clients, which is known as "front-running" or "scalping," constitutes a violation of the Federal securities laws. Therefore, it is absolutely prohibited for any Supervised Person to engage in such trading. D. Market Timing No Supervised Person shall purchase or redeem shares of the Aquila Funds in violation of the policies and restrictions set forth in each Fund's prospectuses, including, but not limited to, the restrictions limiting the frequency of transfers into and out of a Fund that are designed to prevent so-called "market timing" and protect the interests of long-term investors in the Fund. VI. INSIDER TRADING No Supervised Person may Purchase or Sell any Security, or be involved in any way in the Purchase or Sale of a Security, while in possession of material non-public information about the Security or its issuer, regardless of the manner in which such information was obtained. This prohibition covers transactions for the Aquila Funds or other advisory clients made in the course of your employment with an Aquila Entity, as well as transactions in your Personal Trading accounts. As used in this Code, material non-public information includes corporate information, such as undisclosed financial information about a corporation, and market information, such as a soon-to-be-published article about a corporation. Material non-public information also includes securities recommendations and securities holdings and transactions of any of the Aquila Funds or other advisory clients. Material information is defined as information which an investor would consider important in making an investment decision, or which would substantially affect the market price of a Security if generally disclosed. Non-public information is defined as information which has not been effectively made available to the marketplace. Any questions as to whether certain information is material non-public information should be directed to the CCO. VII. CONFIDENTIALITY OF SECURITIES RECOMMENDATIONS, INVESTMENT DECISIONS AND SECURITIES HOLDINGS Supervised Persons must maintain the utmost confidentiality with respect to proprietary information of the Aquila Entities or other advisory clients, including recommendations, investments decisions and securities holdings of the Aquila Funds or other advisory clients. Such information may be deemed "material nonpublic information" by the SEC and other regulatory authorities. Proprietary information may include, but is not limited to: (1) an anticipated recommendation to purchase or sell a Security for an Aquila Fund or other advisory client; (2) the timing of a Purchase or Sale of a Security for an Aquila Fund or other advisory client; and (3) nonpublic information regarding securities holdings of the Aquila Funds or other advisory clients. The subject and content of a recommendation or investment decision remains proprietary information through the time that all trades based on that recommendation or decision have been consummated, and may only be used for the benefit of the Aquila Funds or other advisory clients. Accordingly, Supervised Persons must not discuss a contemplated recommendation, investment decision, or securities holdings with persons outside of the Aquila Entities, except for persons who provide services to the Aquila Entities and the Aquila Funds who themselves have an obligation to keep the information they receive confidential (e.g., transfer agents, outside counsel, auditors, custodians, etc.). Supervised Persons shall take steps to ensure that proprietary information is safeguarded. All computers containing access to proprietary information should be password protected and Supervised Persons and other employees should keep all such passwords strictly confidential. Paper files containing proprietary information should be kept in locked filing cabinets or locked rooms which are not accessible by visitors to the offices of the Aquila Entities. Any questions regarding the safeguarding of proprietary information should be directed to the CCO. VIII. RESTRICTIONS ON PERSONAL SECURITIES TRADING The prohibitions and restrictions on personal securities transactions discussed below apply to the securities accounts held by or under the control of Access Persons or Advisory Persons, as well as those accounts held by or under the control of members of the Access Person's or Advisory Person's immediate family members living in the same household with the Access Person or Advisory Person, respectively. A. Pre-Clearance of Personal Securities Transactions Advisory Persons must apply for and receive prior written approval from the CCO or his or her designee before purchasing or selling more than 100 shares of any Reportable Security (see definition in Section II), other than purchases or sales of shares of the Aquila Funds. Access Persons and Advisory Persons must receive prior written approval from the CCO, or his or her designee in the CCO's absence, before acquiring any shares through an Initial Public Offering or Limited Offering. Approvals shall be requested by submitting a request, electronically, on paper or by facsimile using the Personal Trading Request Form attached hereto as Appendix B. The CCO shall submit his or her Personal Trading Request Form to the President (or the President's designee, in his or her absence) for approval. Copies of all Personal Trading Request Forms submitted by Access Persons and Advisory Persons shall be retained by the CCO in accordance with Section XIII of this Code. A record of all written approvals of, and rationale supporting, any direct or indirect acquisition by Access Persons and Advisory Persons of an investment in an Initial Public Offering or Limited Offering will be made and retained by the CCO. Access Persons or Advisory Persons who have acquired Limited Offering Securities pursuant to prior written approval from the CCO or his or her designee must immediately disclose that investment to the CCO or his or her designee before they participate at any level in any Aquila Fund's or other advisory client's subsequent consideration of an investment in the same issuer. In such circumstance, the Aquila Fund's or other advisory client's decision to purchase Securities of the issuer will be subject to independent review by other investment personnel with no personal interest in the issuer. In the case of requests for pre-clearance in a Security Held or to be Acquired for any Aquila Fund or other advisory client which is advised by an investment adviser that is not subject to this Code ("external investment adviser"), the President or CCO generally shall grant authorization to trade if the person seeking pre-clearance does not have access to or knowledge of current investment decisions or recommendations of such external investment adviser. B. Prohibited Trading Practices 1. Short-Term Trading A Advisory Persons is generally prohibited from realizing a profit from the purchase and sale or sale and purchase of the same Reportable Security, within a period of sixty (60) days. It is recognized that short-term trading is not necessarily indicative of whether an individual is trading on inside information. Accordingly, a Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and retain a record of all waivers granted (including any waivers granted by the President in the CCO's absence) under this provision, including a summary of the reasons for granting the waiver. 2. Short Sales Advisory Persons are prohibited from effecting short sales or acquiring short positions in any Security Held by an Aquila Fund or other advisory client. C. Blackout Periods Advisory Persons shall not Purchase or Sell, directly or indirectly, any Reportable Security: (a) within five (5) days after the time that the same Reportable Security is purchased or sold by an Aquila Fund or other advisory client; or (b) at any time when he or she has actual knowledge that a Reportable Security is being purchased or sold, or recommended or considered for Purchase or Sale, by an Aquila Fund or other advisory client until five (5) days after the Fund's Purchase or Sale transaction in such Reportable Security has been completed or the Reportable Security is no longer being recommended or considered for Purchase or Sale by the Fund or other advisory client. An Advisory Person may apply to the CCO, or the President in the CCO's absence, for an exception from this provision, which shall be granted if the CCO or President reasonably believes that the Advisory Person will suffer undue hardship as a result of not being permitted to do the trade and that the trade does not violate the principles of this Code. The CCO shall make and keep a record of all waivers granted under this provision, including a summary of the reasons for granting the waiver. D. Exempt Transactions The Purchase or Sale of a Security in one of the following types of transactions, shall be considered an "Exempt Transaction" for the purposes of the restrictions on short-term trading, short sales and Purchases or Sales during blackout periods set forth in this Section VIII: o trading in Securities in an account over which the Supervised Person does not have direct or indirect control or influence (e.g., a blind trust); o purchases of Reportable Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans);2 o purchases or sales made by payroll deduction through an employer-sponsored employee benefit plan; o purchases or sales which are non-volitional; or o purchases of Securities 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. Note: The above-listed Exempt Transactions and Reportable Securities acquired in such transactions remain subject to the initial, annual and quarterly holdings and transaction reporting requirements as set forth in Section IX. E. Approvals of Transactions or Requests for Waivers of Restrictions by the CCO or the President In the event that the CCO or the President seeks to engage in a transaction for which pre-clearance is required or seeks a waiver from the blackout period or short-term trading restrictions of this Section of the Code, the approval shall, in the case of the CCO, be granted or denied by the President and, in the case of proposed transactions by the President, the approval or waiver shall be granted or denied by the CCO. In the absence of the President or the CCO, such requests for approval shall be submitted to Counsel to the Aquila Funds. A written record of the determination made and the reasons for it shall be made by the person making the determination, a copy provided to the CCO and the original record retained in accordance with this Code. IX. REPORTING AND REVIEW OF PERSONAL SECURITIES HOLDINGS AND TRANSACTIONS Access Persons are required to submit initial and annual Reportable Securities holdings reports as well as quarterly transaction reports as outlined below. The CCO shall identify all Access Persons who are required to submit reports pursuant to this Section of the Code and shall inform those Access Persons of these reporting requirements. The CCO shall maintain a record of all Access Persons who are required to submit reports pursuant to this section. These reports are mandated by SEC regulations and, therefore, exceptions and waivers of these reporting requirements cannot be granted under any circumstances. However, Access Persons who make reports pursuant the code of ethics of any Aquila Fund, need not make separate reports under this Code to the extent the information in such reports would duplicate information required to be reported pursuant to this Code. All reports submitted pursuant to this Code will be reviewed by the CCO or his or her designee as soon as practical after receipt to seek to ensure that Access Persons have abided by this Code. Through these reviews, the CCO or his or her designee will seek to identify any improper trades or patterns of abuse (including market timing) by Access Persons. When reviewing these reports, the CCO also will seek to ensure that Access Persons and Advisory have received all necessary pre-clearances required by this Code. The CCO shall periodically provide summary reports of any violations of this Code to the President. No report required by this section shall be construed as an admission by the Access Person that he or she is a Beneficial Owner of any Security on the report. A. Initial and Annual Reports of Securities Holdings ("Securities Holdings and Accounts Reports") All Access Persons must, upon commencement of employment, disclose all holdings in Reportable Securities (as defined in Section II) and personal brokerage, mutual fund or bank accounts through which Securities are held or traded and over which the Access Person has direct or indirect control or influence (including those of immediate family members living in the same household as the Access Person). All Initial Holdings and Accounts Reports (Exhibit C) shall be made in writing to the CCO within ten (10) days of becoming an Access Person and such information shall be current as of a date no more than forty-five (45) days prior to such person becoming an Access Person. Thereafter, Access Persons must submit Annual Holdings and Accounts Reports (Exhibit C) to the CCO no later than February 14th of each year and the information in these reports must be current as of December 31st of the previous calendar year. Annual Holdings and Accounts Reports must be filed even if there have been no changes in the information reported previously and even if the Access Person has arranged for brokers, banks and mutual funds to send duplicate account statements for his/her personal accounts to the CCO. Access Persons must disclose all Reportable Securities holdings in the Initial and Annual Holdings and Accounts Reports including those resulting from transactions which are exempt from the transaction reporting requirements. The only holdings which are not required to be reported are Reportable Securities held in accounts over which the Access Person does not have any direct or indirect influence or control (e.g., blind trusts). The Initial and Annual Holdings and Accounts Reports must include: (a) title, type of Reportable Security and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Reportable Security of which the Access Person is a direct or indirect Beneficial Owner; (b) the name of any broker, dealer, mutual fund company or bank with which the Access Person maintains an account used to hold or trade Securities, the account number, the title of the account and the names of all individuals who are Beneficial Owners of the account in which any Security is held for the Access Person's direct or indirect benefit; and (c) the date that the report is submitted by the Access Person. The CCO shall retain copies of Initial and Annual Holdings and Accounts Reports in accordance with Section XIII of this Code. B. Quarterly Reports of Securities Transactions ("Quarterly Transaction and Accounts Reports") Each Access Person must submit a Quarterly Transaction and Accounts Report (Exhibit D) to the CCO containing the information described below with respect to transactions in any Reportable Securities (as defined in Section II) and any Securities account in which such Access Person was a direct or indirect Beneficial Owner of a Reportable Security. Access Persons are not required to report Exempt Transactions, as defined below. Access Persons are not required to report trades in accounts over which they do not have influence or control over investment decisions (e.g., a blind trust). Quarterly Transaction and Accounts Reports must be submitted in writing to the CCO no later than thirty (30) days after the end of the calendar quarter in which the transaction(s) were effected. The CCO shall retain the reports in accordance with Section XIII of this Code. Quarterly Transaction and Accounts Reports must include the following information for each transaction in a Reportable Security: (a) the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), and number of shares, and the principal amount of each Reportable Security involved; (b) the nature of the transaction (e.g., purchase, sale, or any other type of acquisition or disposition); (c) the price at which the transaction was effected; (d) the name of the broker, dealer, mutual fund company or bank with or through which the transaction was effected; and (e) the date that the report is submitted by the Access Person. If during the calendar quarter, the Access Person established a new brokerage, mutual fund or bank account where Securities are held, the Quarterly Transaction and Accounts Report must include the following information: (a) the name of the broker, dealer, mutual fund company or bank with whom the Access Person established the account; (b) the date the account was established; and (c) the date that the report is submitted by the Access Person. The following transactions are "Exempt Transactions" for the purpose of the Quarterly Transaction and Accounts Report requirements (but still must be reported on Initial and Annual Holdings and Accounts Reports): o transactions reported in duplicate broker monthly account statements or trade confirmations received by the Aquila Entities, if all of the above required information is included and confirmations or account statements are received by the CCO within thirty (30) days of the close of the calendar quarter; and o purchases of Reportable Securities pursuant to an automatic investment plan (i.e., a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans).3 Trading in Reportable Securities in an account over which a person does not have direct or indirect control or influence (e.g., a blind trust) are also Exempt Transactions and need not be reported on Quarterly Transaction and Accounts Reports, nor on Initial and Annual Holdings and Accounts Reports. X. GIFTS AND GRATUITIES No Supervised Person may seek or accept from, or offer to give or give to, any person that does business with any Aquila Entity or Aquila Fund any item of material value or preferential treatment that is or appears to be connected with an Aquila Entity or Aquila Fund or other advisory client directing business to that person or receiving business from that person. For purposes of this prohibition, "items of material value" include but are not limited to: (a) gifts amounting in value to more than $100 per person per year; and (b) payment or reimbursement of travel expenses, including overnight lodging, in excess of $100 per person per year. "Items of material value" do not include: (a) an occasional meal, a ticket to a sporting event or the theater or comparable entertainment, which is not conditioned on directing business to the firm that provided such meal or entertainment and is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achieving a sales target; or (b) an unconditional gift of a typical item of reminder advertising such as a ball-point pen with the name of the advertiser inscribed, a calendar pad, or other gifts amounting in value to not more than $100 per person per year. Any invitations involving travel for more than one day where travel expenses will be paid or reimbursed by a person that does business with an Aquila Entity or any Aquila Fund or other advisory client must have advance approval from the CCO, or the President in the CCO's absence. The President must approve the CCO's invitations involving travel for more than one day. The CCO shall maintain a record of all such requests for travel and the reason for granting or denying all such requests in accordance with this Code. XI. ADVISING NON-AQUILA ENTITIES Supervised Persons may not render investment advice to persons other than the Aquila Entities, Aquila Funds or other advisory clients of the Aquila Entities unless the advisory relationship, including the identity of those involved and any fee arrangements, has been disclosed to and approved by the President. Once cleared with the President, all transactions for such outside advisory clients are subject to the reporting requirements outlined above. This prohibition precludes Supervised Persons from providing investment advice to members of such person's immediate family without the prior approval of the President. XII. SUPERVISED PERSONS SERVING AS DIRECTORS OF PUBLICLY-TRADED COMPANIES A Supervised Person who serves as a director or trustee of a publicly-traded company in which any of the Aquila Funds or other advisory client invests or may invest may have an inherent conflict between the fiduciary duty he or she owes to the Funds or other advisory clients and that owed to the shareholders of the publicly-traded company. In addition, service on the board of directors or board of trustees of any company other than an Aquila Fund or Aquila Entity ("External Company") may present conflicts between the duties owed by the Supervised Person to that company and to the Aquila Funds or other advisory clients. To avoid the potential adverse consequences of such conflicts of interest or to ensure they are appropriately dealt with, effective February 1, 2005, all Supervised Persons must receive the prior written approval of the CCO and the President before serving as director or trustee of any External Company, which approval may be withheld in the President's sole discretion. If you are a Supervised Person and currently serve as a director or trustee of an External Company, you should notify the CCO immediately. Prior to commencement of employment with any Aquila Entity and annually thereafter, each Supervised Person shall provide the CCO with a written list of all positions held by the Supervised Person with any External Company. Supervised Persons who receive permission to serve as directors of publicly-traded External Companies will be isolated through "Fire Walls" or other procedures from making decisions regarding the Securities of those companies for which they serve as directors or trustees. An especially sensitive situation involves representation on a creditors' committee. Particular care will be taken to create a "Fire Wall" between portfolio management and creditors' committee representation. XIII. RECORD KEEPING The CCO shall maintain the following records in the manner and for the time periods described under the Investment Company Act of 1940 and the Investment Advisers Act of 1940: (a) a copy of this Code of Ethics and any other Code of Ethics which is, or at any time within the past six (6) years has been in effect and all amendments to such Code(s); (b) a copy of each signed and dated Certification acknowledging receipt of the Code and any amendments or updates to the Code for a period of at least six (6) years after the individual acknowledging receipt is no longer affiliated with the Aquila Entities; (c) records of any violations of this Code and any actions taken as a result of such violations for a period of six (6) years after the resolution of such violation; (d) each report, record or finding made under this Code, including any information provided in lieu of these reports (e.g., duplicate account statements) for a period of six (6) years after the date of the report, record or finding; (e) each Personal Trading Request Form (Exhibit B) submitted by a Supervised Person and a record of the decision regarding such request for a period of six (6) years after the date of the request (and for shares of an Initial Public Offering or Limited Offering, the reasoning for the decision); (f) each request for a waiver from any of the restrictions on Personal Trading by Advisory Persons (including requests that a Advisory Person not be deemed the Beneficial Owner of Securities held by another household member), including a description of the reason for the request and a brief summary of the reasons for granting or denying the waiver for a period of six (6) years after the last date on which the waiver was applied; (g) a list of all individuals who currently are or within the past six (6) years have been deemed Advisory Persons and Access Persons, as well as records of any decision by the CCO to exempt a person from the definition of "Access Person" and supporting documentation for and facts surrounding such a decision; (h) a list of all individuals who currently are, or within the past six (6) years have been, required to make Quarterly Transaction and Accounts Reports or Initial and Annual Securities Holdings and Accounts Reports pursuant to this Code; (i) a list of all persons who currently are or within the past six (6) years have been responsible for reviewing reports submitted pursuant to the Code; (j) a copy of all Quarterly Transaction and Accounts Reports or Securities Holdings and Accounts Reports submitted to the CCO for a period of six (6) years from the date of the report; and (k) a record of all requests for travel pursuant to Section X of this Code and the reason for granting or denying all such requests for a period of six (6) years from the date of the request. XIV. REPORTING VIOLATIONS OF THIS CODE AND PENALTIES All Supervised Persons shall promptly report any actual or suspected violations of this Code to the CCO. In the absence of the CCO, violations may be reported to the President but also must be separately reported to the CCO promptly following his or her return to the office. The identity of the person making such a report will be kept in confidence whenever possible. Supervised Persons who report actual or suspected violations will be protected from retaliation for making such reports. Violations of this Code may result in the imposition of criminal penalties or sanctions by the SEC, or other law enforcement or regulatory authorities, or remedial action by the Aquila Entities, including forfeiture of any profit from or loss avoided by a transaction, forfeiture of future discretionary salary increases or bonuses, and suspension or termination of employment. Determinations as to whether a violation has occurred, and the appropriate sanctions, if any, shall be made by the CCO and may be subject to review by the President, as appropriate; provided however, that no person believed to have violated this Code shall participate in such determinations made with respect to his or her own conduct. 1 "High quality short-term debt instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality. 2 Any transaction that overrides the pre-set schedule or allocations of the automatic investment plan is not exempt. 3 Any transaction, however, that overrides the pre-set schedule or allocations of the automatic investment plan must be included in a Quarterly Transaction Report. -----END PRIVACY-ENHANCED MESSAGE-----