File Nos. 2-79722 and 811-3578
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 18 [ X ]
PRIME CASH FUND
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[_ _] on (date) pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[___] on (date) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new effec-
tive date for a previous post-effective amendment.
<PAGE>
PRIME CASH FUND
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............*
2..............*
3..............*
4..............Introduction; Investment of the Trust's
Assets; Investment Restrictions; General
Information
5..............Management Arrangements
5A.............*
6..............General Information; Dividend and Tax
Information
7..............Net Asset Value per Share; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............*
11.............*
12.............*
13.............Investment of the Trust's Assets; Investment
Restrictions; Loans of Portfolio
Securities
14.............Trustees and Officers
15.............General Information (Prospectus caption)
16.............Additional Information as to Management
Arrangements; General Information
17.............Investment of the Trust's Assets (Prospectus
caption)
18.............General Information
19.............Limitation of Redemptions in Kind; Amortized
Cost Valuation; Computation of Daily
Dividends; Automatic Withdrawal Plan
20.............*
21.............How to Invest in the Trust (Prospectus
caption); Distribution Plan; General
Information
22.............Yield Information; Per Share Income and
Capital Changes
*Not applicable or negative answer
<PAGE>
PRIME CASH FUND
380 Madison Avenue
Suite 2300
New York, New York 10017
212-697-6666
Part A
The Fund is an open-end diversified investment company
organized in 1982 as a Massachusetts business trust, designed to
suit the cash management needs of individuals, corporations,
institutions and fiduciaries.
Its investment objectives and policies and general method of
operations have been those of a "money market fund" since its
inception. Since February, 1996, however, the Fund has had only
nominal assets, has conducted no operations and has not offered
its shares to the public. When it resumes operations, the Fund
may chose to invest in other types of securities and if so the
fundamental and management policies set forth herein will be
changed by appropriate action of the Board of Trustees and
shareholders and will be reflected in an appropriate amendment to
its registration statement.
The following material represents the Fund's responses to
the applicable items of Form N1-A if it resumes operations as a
money-market fund.
Cash of investors may be invested in shares of the Fund as
an alternative to idle funds, direct investments in savings
deposits, or short-term debt securities. The Fund offers the
opportunity to keep cash reserves fully invested and provides you
with a professionally managed portfolio of money market
instruments which may be more diversified, higher yielding, more
stable and more liquid than you might be able to obtain on an
individual basis. Through the convenience of a single security
consisting of shares of the Fund, you are also relieved of the
inconvenience of making direct investments, including the
selection, purchasing and handling of securities.
INVESTMENT OF THE FUND'S ASSETS
The objective of the Fund is to achieve as high a level of
current income, liquidity and stability of capital as might be
obtained from investing in a diversified portfolio of short-term
money market securities meeting specific quality standards. There
is no assurance that the Fund will achieve this objective, which
is a fundamental policy of the Fund.
In addition to the requirements of the Fund's management
policies, all obligations and instruments purchased by the Fund
must meet the requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act"). The provisions of the Rule that
affect portfolio management are summarized under "Effect of the
Rule on Portfolio Management," below. In brief, the Rule's
provisions for quality, diversity and maturity require the Fund
to limit its investments to those instruments which TCW Funds
Management, Inc. (the "Adviser") determines (pursuant to
procedures approved by the Board of Trustees) present minimal
credit risks, and which, at the time of purchase, are Eligible
Securities. In general, the Rule defines as Eligible Securities
those that at the time of purchase are rated in the two highest
rating categories for short-term securities by any two of the
nationally recognized statistical rating organizations ("NRSROs")
or unrated securities determined by the Board of Trustees to be
of comparable quality. See Appendix A to the Part B for a
description of the NRSROs and the factors considered by them in
determining ratings. Eligible Securities so rated in the highest
rating category (or unrated securities of comparable quality) are
called "First Tier Securities"; all other Eligible Securities are
called "Second Tier Securities." The Rule also requires that the
dollar-weighted average maturity of the Fund's portfolio cannot
exceed 90 days and that the Fund cannot purchase any security
having a remaining maturity in excess of 397 days. The Rule also
contains limits on the percentage of the Fund's assets that can
be invested in the securities of any issuer. See "Effect of the
Rule on Portfolio Management," below.
Management Policies:
The Fund seeks to achieve its investment objective through
investments in the types of instruments described in the
management policies listed below. Under the current management
policies, the 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;
these obligations are referred to in this Part A as "U.S.
Government Securities"; see "Information On U.S. Government
Securities" below.
(2) Bank Obligations and Instruments Secured by Them: Bank
obligations that are First Tier Securities including time
deposits, certificates of deposit, bankers' acceptances and other
bank (see below for definition) obligations, and which are (i)
obligations of banks subject to regulation by the U.S. Government
having total assets of at least $1.5 billion, which may be
obligations issued by domestic banks, by foreign branches of such
banks or by U.S. subsidiaries of foreign banks; (ii) obligations
of any foreign bank having total assets equivalent to at least
$1.5 billion; or (iii) obligations ("insured bank obligations")
if such obligations are fully insured as to principal by the
Federal Deposit Insurance Corporation; (see "Information on
Insured Bank Obligations" in the Part B); the Fund may also
invest in obligations secured by any obligations set forth in (i)
or (ii) above if such investment meets the requirements of (6)
below. (In this Part A and in the Part B, a bank includes
commercial banks, savings banks and savings and loan
associations.)
(3) Commercial Paper Obligations: Commercial paper obligations
that are First Tier Securities; see "Effect of the Rule on
Portfolio Management," below.
(4) Corporate Debt Obligations: Corporate debt obligations (for
example, bonds and debentures) which are First Tier Securities
and which at the time of purchase have a remaining maturity of
not more than 397 days. See "Effect of the Rule on Portfolio
Management." See Appendix A to the Part B for information about
bond ratings.
(5) Variable Amount and Master Demand Notes: Variable amount
master demand notes that are First Tier Securities and which are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time. Variable amount
master demand notes may or may not be backed by bank letters of
credit. (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; see the Part B for further information
on these notes.) Variable amount master demand notes repayable in
more than seven days are securities which are not readily
marketable, and fall within the Fund's overall 10% limitation on
securities which are illiquid.
(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 Fund may invest (see 2 above) or a corporation in
whose commercial paper the Fund may invest (see 3 above). See
"Effect of the Rule on Portfolio Management." If the Fund invests
more than 5% of its net assets in such other obligations, the
Part A will be supplemented to describe them. See the Part B.
(7) Repurchase Agreements: The Fund may purchase securities
subject to repurchase agreements 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 the requisite NRSROs.
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 Fund.
See "Information about Repurchase Agreements," below.
(8) When-Issued or Delayed Delivery Securities: The Fund may buy
securities on a when-issued or delayed delivery basis; the
securities so purchased are subject to market fluctuation and no
interest accrues to the Fund until delivery and payment take
place; their value at the delivery date may be less than the
purchase price. The Fund may not enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
the Fund's total assets, less liabilities other than the
obligations created by when-issued commitments. See the Part B
for further information.
Shareholder approval is not required to change any of the
foregoing management policies.
Additional Management Policy as to Rating
In addition to the foregoing management policies, as a
non-fundamental policy, the Fund will purchase only those issues
that will enable it to achieve and maintain the highest rating
for a mutual fund by at least one NRSRO. There is no assurance
that the Fund will be able to maintain such rating. As a result
of this policy, the number of obligations in which the fund can
invest is reduced and the yield obtained by the Fund on such
obligations may be less than would be the case if this policy
were not in force.
Information On U.S. Government Securities
U.S. Government Securities (i.e., obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S.
Government, which in turn include Treasury Bills (which mature
within one year of the date they are issued) and Treasury Notes
and Bonds (which are issued with longer maturities). All Treasury
securities are backed by the full faith and credit of the United
States.
U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the
Export-Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal National Mortgage Association, Government
National Mortgage Association, 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 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. See "Effect of
the Rule on Portfolio Management," below, for a discussion of the
determination of minimal credit risks in connection with the
purchase of portfolio securities.
Information On Foreign Bank Obligations
Investments, which must be denominated in U.S. dollars, in
foreign banks and foreign branches of United States banks involve
certain risks in addition to those involved with investment in
domestic banks. While domestic banks are required to maintain
certain reserves and are subject to other regulations, such
requirements and regulations may not apply to foreign branches of
domestic banks. 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.
Repurchase Agreements
Under a repurchase agreement, at the time the Fund purchases
a security, the Fund also resells it to the seller and must
deliver the security (or securities substituted for it) to the
seller on an agreed-upon date in the future. (The securities so
resold or substituted are referred to herein as the "Resold
Securities.") The resale price is in excess of the purchase price
in that it reflects an agreed-upon market interest rate effective
for the period of time during which the Fund's money is invested
in the Resold Securities. The majority of these transactions run
from day to day, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the 1940 Act. The return on such
"collateral" may be more or less than that from the repurchase
agreement. The Resold Securities under any repurchase agreement
will be marked to market every business day so that the value of
the "collateral" is at least equal to the resale price provided
in the agreement, including the accrued interest earned thereon,
plus sufficient additional market value as is considered
necessary to provide a margin of safety. During the term of the
repurchase agreement, the Fund or its custodian either has actual
physical possession of the Resold Securities or, in the case of a
security registered in book entry system, the book entry is
maintained in the name of the Fund or its custodian. The Fund
retains an unqualified right to possess and sell the Resold
Securities in the event of a default by the other party.
In the event of bankruptcy or other default by the other
party, there may be possible delays and expenses in liquidating
the Resold Securities, decline in their value and loss of
interest. If the maturity of the Resold Securities is such that
they cannot be owned by the Fund under the applicable provisions
of the Rule they will have to be sold, which could result in a
loss. See "Effect of the Rule on Portfolio Management."
10% Limitation as to Certain Investments
Due to their possible limited liquidity, the Fund may not
make certain investments if thereafter more than 10% of its net
assets would consist of such investments. The investments
included in this 10% limit are (i) repurchase agreements maturing
in more than seven days; (ii) fixed time deposits subject to
withdrawal penalties other than overnight deposits; (iii)
restricted securities, i.e., securities which cannot freely be
sold for legal reasons (which the Fund does not expect to own);
(iv) securities for which market quotations are not readily
available; and (v) insured bank obligations unless the Board of
Trustees determines that a readily available market exists for
such obligations. However, this 10% limit does not include any
obligations payable at principal amount plus accrued interest on
demand or within seven days after demand.
Factors Which May Affect the Value
of the Fund's Investments and Their Yields
The value of the obligations and instruments in which the
Fund invests will fluctuate depending in large part on changes in
prevailing interest rates. If the prevailing interest rates go up
after the Fund buys a security, the value of the security may go
down; if these rates go down, the value of the security may go
up. Changes in value and yield based on changes in prevailing
interest rates may have different effects on short-term
obligations than on long-term obligations. Long-term obligations
(which often have higher yields) may fluctuate in value more than
short-term ones.
Portfolio Transactions
The Fund will seek to obtain the best net price and the most
favorable execution of orders. Purchases will be made directly
from issuers or from underwriters, dealers or banks which
specialize in the types of securities invested in by the Fund. As
most purchases made by the Fund are principal transactions at net
prices, the Fund incurs little or no brokerage costs. Purchases
from underwriters will include a commission or concession paid by
the issuer to the underwriter and purchases from dealers may
include the spread between the bid and the asked price. If the
execution and price offered by more than one dealer are
comparable, the order may be allocated to a dealer which has
provided research advice, such as information on particular
companies and industries and market, economic and institutional
activity. By allocating transactions to obtain research services,
the Fund enables the Adviser to supplement its own research and
analyses with the views and information of other securities
firms. Such research services, whether or not useful to the Fund,
may be useful to other accounts managed by the Adviser or its
affiliates.
Effect of the Rule on Portfolio Management
As a money market fund, the Fund operates under the Rule,
which allows the Fund to use the "amortized cost" method of
valuing its securities and which contains certain risk limiting
provisions, including requirements as to maturity, quality and
diversification of the Fund's portfolio. Some of the most
important aspects of the Rule are described below.
Under the Rule, the Fund must limit its investments to those
instruments which are denominated in U.S. dollars, which are
determined by the Board of Trustees to present minimal credit
risks, and which, at the time of purchase, are Eligible
Securities. In accordance with the Rule, the Board of Trustees
has adopted investment procedures and has approved investment
policies pursuant to which all investment determinations have
been delegated to the Adviser, under the direction and control of
the Board of Trustees, except for those matters for which the
Rule requires Board determination.
In general, the Rule defines as Eligible Securities those
that at the time of purchase are rated in the two highest rating
categories for short-term securities by any two of the NRSROs, or
if unrated are determined by the Board of Trustees to be of
comparable quality. Eligible Securities so rated in the highest
rating category (and unrated securities determined by the Board
of Trustees to be of comparable quality) are called "First Tier
Securities"; all other Eligible Securities are called "Second
Tier Securities." Eligible Securities can in some cases include
securities rated by only one NRSRO and unrated obligations that
are determined by the Board of Trustees to be of comparable
quality to rated securities. A security that was long-term when
issued must at the time of purchase by the Fund have either a
short-term rating such that it is an Eligible Security, be
comparable in priority and security with a rated short-term
obligation of the same issuer that is an Eligible Security or if
it has no short-term rating (and does not have a long-term rating
from any NRSRO below the highest rating) if it is determined by
the Board of Trustees to be of comparable quality to rated
securities the Fund could purchase. Purchase of any security
rated by only one NRSRO and purchase of any unrated security
(except U.S. Government Securities) must be ratified by the Board
of Trustees.
The Rule requires (with limited exceptions) that immediately
after purchase of any security, the Fund have invested not more
than 5% of its assets in the securities of any one issuer.
Moreover, the Rule provides that the Fund cannot have more than
5% of its assets in the aggregate invested in Second Tier
Securities, nor more than the greater of 1% of its assets or
$1,000,000 invested in Second Tier Securities of any single
issuer. In general, the Fund does not intend to own Second Tier
Securities. The Rule has specific provisions relating to
determinations of the eligibility of certain types of instruments
such as repurchase agreements and instruments subject to a demand
feature. It also has specific provisions for determining the
issuer of a security for purposes of compliance with the
diversification requirements.
Generally, under the Rule, the maturity of an instrument is
considered to be its stated maturity (or in the case of an
instrument called for redemption, the date on which the
redemption payment must be made). There are special rules for
determining the maturity of certain kinds of instruments. The
Rule contains provisions as to the maturity of variable rate and
floating rate instruments. Repurchase agreements and securities
loan agreements are, in general, treated as having a maturity
equal to the period remaining until they can be executed.
The Rule has provisions requiring specific actions whenever
the rating of a portfolio security is downgraded. Generally,
these actions include a prompt reassessment by the Board of
Trustees of the credit risks associated with such a security. In
general, the Rule mandates prompt sale or other disposition,
e.g., by exercising a demand for payment, in certain cases, such
as when a security ceases to be an Eligible Security, no longer
presents minimal credit risks or suffers a financial default.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the Part A
and Part B as "fundamental policies," cannot be changed unless
the holders of a "majority," as defined in the 1940 Act, of the
Fund's outstanding shares vote to change them. (See the Part B
for a definition of such a majority.) All other policies can be
changed from time to time without shareholder approval. Some of
the more important of the Fund's fundamental policies, not
otherwise identified in the Part A, are set forth below; others
are listed in the Part B.
1. The Fund has diversification and anti-concentration
requirements.
The 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 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, the Rule limits
investment in Second Tier Securities to 5% of the Fund's assets
in the aggregate, and to no more than the greater of 1% of the
Fund's assets or $1,000,000 in the securities of any one issuer.
The 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 (see the Part
B); U.S. Government Securities and those domestic bank
obligations and instruments of domestic banks which the Fund may
purchase (see "Investment of the Fund's Assets") 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 Fund can make loans only by lending securities or entering
into repurchase agreements.
The Fund can buy those debt securities which it is permitted
to buy (see "Investment of the Fund's Assets"); this is
investing, not making a loan. The 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
(see the Part B) and enter into repurchase agreements (see
"Repurchase Agreements" above). The 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 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 Fund can borrow only in limited amounts for special
purposes.
The 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. The Fund will not borrow to purchase
securities or to increase its income but only to meet redemptions
so that it will not have to sell securities to pay for
redemptions. Interest on borrowings would reduce the Fund's
income. The 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 Fund will
not issue senior securities.
NET ASSET VALUE PER SHARE
The Fund's net asset value per share is determined as of
4:00 p.m. New York time on each day that the New York Stock
Exchange is open by dividing the value of the net assets of the
Fund (i.e., the value of the assets less liabilities, exclusive
of surplus) by the total number of shares outstanding.
The net asset value per share will normally remain constant
at $1.00 per share except under extraordinary circumstances; see
the Part B for a discussion of the extraordinary circumstances
which could result in a change in this fixed share value. The net
asset value per share is based on a valuation of the Fund's
investments at amortized cost; see the Part B.
HOW TO INVEST IN THE FUND
For Information only; shares are not currently being offered
for sale to the public.
The Fund's shares are sold on a continuous basis at the net
asset value next determined after an order is entered and deemed
effective. There is no sales charge. The minimum initial
investment is $1,000. Subsequent investments may be in any
amount. Aquila Distributors, Inc. (the "Distributor") is the
exclusive Distributor of the Fund's shares. The Distributor sells
shares only for purchase orders received.
Opening an Account
To open a new account, you must send a properly completed
Application to Administrative Data Management Corp. (the
"Agent"). Redemption of shares purchased by wire payment will not
be honored until a properly completed Application has been
received by the Agent.
Initial investments may be made in any of these three ways:
1. By Mail. Payment may be made by check, money order,
Federal Reserve Draft, or other negotiable bank draft
payable to the order of Prime Cash Fund mailed to:
Prime Cash Fund
Administrative Data Management Corp.,
Transfer Agent
Attn: Aquilasm Group of Funds
10 Woodbridge Center Drive
Woodbridge, NJ 07095-1198
2. By Wire. Payment may be wired in Federal funds (monies
credited to a bank's account with a Federal Reserve Bank) to
Bank One Trust Company, N.A., which serves as the Custodian
of the assets of the Fund.
To insure prompt and proper crediting to your account, you
should instruct your bank to wire funds to:
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Prime Cash Fund A/C 6801358700
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. You may invest in the Fund by purchasing
shares through registered broker-dealers.
There is no sales or service charge imposed by the Fund,
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 also determine to establish, as
to accounts serviced by them, higher initial or subsequent
investment requirements than those required by the Fund.
Broker-dealers are responsible for prompt transmission of orders
placed through them.
Additional Investments
You may make additional investments in any amount after an
account has been established by mailing directly to the Agent a
check, money order or other negotiable bank draft made payable to
Prime Cash Fund, or by wiring funds as described above. In each
case you should indicate your name and account number to insure
prompt and proper crediting of your account. The pre-printed stub
attached to the Fund's confirmations is provided as a convenient
identification method to accompany additional investments made by
mail.
When Shares Are Issued and Dividends Are Declared On Them
There are three methods as to when shares are issued. Under
each method, shares are issued at the net asset value per share
next determined after the purchase order is effective, as
discussed below. Under each method, the Application must be
properly completed and have been received and accepted by the
Agent; the Fund or the Distributor may also reject any purchase
order. Under each method, Federal funds (see above) must either
be available to the Fund or the payment thereof must be
guaranteed to the Fund so that the Fund can be as fully invested
as practicable.
The first method under which shares are issued involves
ordinary investments. Under this method, payments transmitted by
wire in Federal funds and payments made by Federal Reserve Draft
received by the Custodian prior to 4:00 p.m. New York time on any
day on which the New York Stock Exchange is open will be invested
(i.e., the purchase order will be effective) at the net asset
value per share determined as of 4:00 p.m. on that day; if either
such type of payment is received after that time, the purchase
order will be effective as of 4:00 p.m. on the next day that the
exchange is open. Wire payments not in Federal funds will
normally be converted into Federal funds on the next day such
exchange is open and the purchase order will be effective as of
4:00 p.m. on such next day. Payments transmitted by check will
normally be converted to Federal funds by the Agent, as your
agent, within two business days for checks drawn on a member bank
of the Federal Reserve System, and longer for most other checks,
and the purchase orders will be effective as of 4:00 p.m. after
such conversion. 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. Dividends on shares issued under this first
investment method are declared starting on the day (whether or
not a business day) after the purchase order is effective and are
declared on the day on which the shares are redeemed.
The second method under which shares are issued involves a
bank or broker-dealer making special arrangements with the Fund
under which (i) either (a) payment is made in Federal funds or by
check in New York Clearing House funds delivered to the Agent
prior to 5:00 p.m. New York time or (b) the Agent is advised
prior to that time of a dollar amount to be invested; (ii) the
Agent is advised prior to that time of the form of registration
of the shares to be issued; (iii) the bank or broker-dealer will,
prior to noon New York time on the next business day, wire
Federal funds to the Custodian (but in the case of prior payment
by check under (i)(a) above only if the check is not converted
into Federal funds in the normal course on the next business
day); and (iv) arrangements satisfactory to the Fund are made
between it and the bank or broker-dealer under which if Federal
funds are not so received by the Custodian, the Fund is
reimbursed for any costs or loss of income arising out of such
non-receipt. New York Clearing House funds are funds represented
by a check drawn on a bank which is a member of the New York
Clearing House. Under this second method, the purchase order is
effective on the day the check or the advice is received under
(i) above. Dividends on shares issued under this second method
are declared starting on the day (whether or not a business day)
after the purchase order is effective and are declared on the day
on which such shares are redeemed.
The third method under which shares are issued involves
broker-dealers or banks which have requested that this method be
used, to which request the Fund has consented. Under this third
method (i) the Agent must be advised prior to noon New York time
on any business day of a dollar amount to be invested; and (ii)
Federal funds must be wired to the Custodian on that day; under
this method, the purchase order is effective on that day.
Dividends on shares issued under this third investment method are
declared beginning on that day but not on the day such shares are
redeemed.
This third investment method is available to prospective
investors in Fund shares 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 to the
Fund by such a prospective investor, the Fund will advise as to
the broker-dealers or banks through which such purchases may be
made.
Confirmations and Share Certificates
All purchases of 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 (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 below will not be available and delay and
expense may be incurred if you lose the certificates. No
certificates will be issued for fractional shares or to
shareholders who have elected the checking account or
predesignated bank account methods of withdrawing cash from their
accounts. (See "How to Redeem Your Investment" below.)
The Fund and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
Distribution Plan
The Fund has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act. No payments are made by the
Fund under the Plan. 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 part of the Distribution Plan 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 part of the Distribution Plan
authorizes the Administrator and/or the Adviser, not the Fund, to
make certain payments not exceeding 0.10 of 1% of the average
annual net assets of the Fund 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. See
the Part B for further information.
The Fund's Distribution Plan is solely a defensive plan
designed to protect the Fund and its affiliates against any claim
described above. The Distribution Plan does not involve payments
out of assets or income of the Fund designed to recognize sales
of shares of the Fund or to pay advertising expenses.
HOW TO REDEEM YOUR INVESTMENT
For Information only; shares are not currently being offered
for sale to the public.
The Fund provides day-to-day liquidity. You may redeem all
or any part of your shares at any time at the net asset value
next determined after acceptance of your redemption request at
the Agent. Redemptions can be made by the various methods
described below. Except for shares recently purchased by check as
discussed below, there is no minimum time period for any
investment in the Fund. There are no redemption fees or
withdrawal penalties. If you purchase shares of the 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. In all other cases, you may redeem directly,
but a completed purchase Application must have been received by
the Agent before redemption requests can be honored. A redemption
may result in a taxable transaction to you, but only if there has
been a change in the net asset value per share, which will occur
only under extraordinary circumstances.
For your convenience the Fund offers expedited redemption to
provide you with a high level of liquidity for your investment.
Expedited Redemption Methods (Non-Certificate Shares)
You have the flexibility of three expedited methods of
initiating redemptions. These are available as to shares not
represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payment
to a predesignated commercial bank account. See
"Redemption Payments," below for payment methods. Your
name and your account number must be supplied.
To redeem an investment by this method, telephone:
800-952-6666 toll-free or 908-855-5731
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name and number;
name(s) and social security number registered to the account and
personal identification; the Agent may also record calls.
Shareholders should verify the accuracy of confirmation
statements immediately upon receipt.
2. By FAX or Mail. Requests for redemption payments to
a predesignated commercial bank account may also be
made by a sending a letter of instruction to:
Administrative Data Management Corp., Attn: Aquilasm
Group of Funds, by Fax to 908-855-5730 or by mail at 10
Woodbridge Center Drive, Woodbridge, NJ 07095-1198,
indicating account number, amount to be redeemed, and
any payment directions, signed by the registered
holder(s). Signature guarantees are not required. See
"Redemption Payments," below for payment methods.
If you wish to use the above procedures you should so elect
on the Expedited Redemption section of your Application and
provide the required information concerning your commercial bank
account number. The bank account must be in the exclusive name(s)
of the shareholder(s) as registered with the Fund. You may change
the designated bank account at any time by completing and
returning a form available from the Fund. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
3. By Check. The Agent will, upon request, provide you
with forms of drafts ("checks") drawn on the Custodian.
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 $500. If you wish to use this check
writing redemption procedure, you should notify the
Agent or so indicate on the Application. You will be
issued special checks to be drawn against the Custodian
for this purpose. You will be subject to the
Custodian'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 Application.
There is no charge to the shareholder for the maintenance of
this special check writing privilege or for the clearance of any
checks.
When such a check is presented to the Custodian 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
Custodian for payment.
As these checks are redemption drafts relating to Fund
shares, you should be certain that adequate shares for which
certificates have not been issued and which were not recently
purchased by check are in the account to cover the amount of the
check. See "Redemption Payments" below for more details as to
special problems as to Fund shares recently purchased by 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.
Checks may not be directly presented to any branch of the
Custodian. This does not affect checks used for the payment of
bills or cashed at other banks. You may not use checks to close
your account, since the number of shares in an account changes
daily through dividend payments which are automatically
reinvested in full and fractional shares. Consequently, you may
not present a check directly to the Custodian and request
redemption for all or substantially all shares held in your
account. 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 bank account and
check writing are desired, you must so elect on your Application,
or by subsequent written notification to the Agent with
signatures guaranteed, if required (see below).
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates in blank (unsigned)
representing shares to be redeemed should be sent to:
Administrative Data Management Corp., Attn: Aquilasm
Group of Funds, 10 Woodbridge Center Drive, Woodbridge,
NJ 07095-1198, with payment instructions. A stock
assignment form signed by the registered shareholder(s)
exactly as the account is registered must also be sent
to the Agent.
For your protection, certificates and signed redemption
documentation should be sent separately if mailed.
For the redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Additional documentation may be
required where shares are held by a corporation, a partnership,
trustee or executor, or if redemption is requested by other than
the shareholder of record. If redemption proceeds of less than
$25,000 are payable to the record holder and are to be sent to
the record address, no signature guarantee is required. In all
other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent
bank, a participant in the Securities Transfer Association
Medallion Program (STAMP), The Stock Exchanges Medallion Program
(SEMP) or The New York Stock Exchange, Inc. Medallion Signature
Program (MSP). A notary public is not an acceptable signature
guarantor.
2. Non-Certificate Shares. If you own non-certificate
shares registered on the books of the Fund and you have
not elected check writing redemption or Expedited
Redemption to a predesignated bank account you must use
the Regular Redemption Method. Under this redemption
method, you should send a letter of instruction to:
Administrative Data Management Corp., Attn: Aquilasm
Group of Funds, 10 Woodbridge Center Drive, Woodbridge,
NJ 07095-1198, containing:
Account Number;
Dollar amount or number of shares to be redeemed
or a statement that all shares held in the account
are to be redeemed;
Payment instructions (normally redemption proceeds
will be mailed to the shareholder's address as
registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
above.
Redemption Payments
For redemptions other than by checks you have written,
payment will ordinarily be mailed to you at your address of
record. Upon your request, redemption proceeds will also be wired
to a predesignated bank, wherever possible, if in the amount of
$1,000 or more. The Fund may impose a charge, not exceeding $5.00
per wire redemption, after written notice to investors who have
elected this redemption procedure. The Fund has no present
intention of making this charge.
Redemption proceeds on shares issued under the third method
under which shares are issued (see "When Shares Are Issued and
Dividends Are Declared on Them" under "How to Invest in the
Fund") will be wired in Federal funds on the date of redemption,
if practicable, and, if not practicable, as soon thereafter as
practicable, irrespective of amount. Redemption requests as to
such shares may be made by telephone.
Except as indicated above, the Fund will normally make
payment for all shares redeemed on the next business day
following receipt of request. Except as set forth below, in no
event will payment be made more than seven days after receipt of
a redemption request made in compliance with one of the
redemption methods specified above. However, the right of
redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for
other than weekends and holidays or when trading on such exchange
is restricted as determined by the Securities and Exchange
Commission by rule or regulation; (ii) during periods in which an
emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption by any method (including redemption by check) of
shares recently purchased by check (irrespective of whether the
check is a regular check or a certified, cashier's or official
bank check) may be delayed up to 15 days or until (i) the
purchase check has been honored or (ii) the Agent has received
assurances by telephone or in writing from the bank on which the
purchase check was drawn, satisfactory to the Agent and the Fund,
that the purchase check will be honored. Shares so purchased
within the prior 15 days will not be redeemed under the check
writing redemption procedure and a shareholder must not write a
check if (i) it will be presented to the Custodian for payment
within 15 days of a share purchase by check and (ii) the
redemption check would cause the redemption of some or all of
those shares. Possible delays in payment of redemption proceeds
can be eliminated by using wire payments or Federal Reserve
drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders
of the Fund to make payment wholly or partly in cash, the Fund
may pay the redemption price in whole or in part by the
distribution in kind of securities from the portfolio of the
Fund, in lieu of cash, in conformity with applicable rules of the
Securities and Exchange Commission. See the Part B for details.
The Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 due to shareholder redemptions. If the
Board of Trustees elects to do this, shareholders who are
affected will receive prior written notice and will be permitted
60 days to bring their accounts up to the minimum before this
redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase shares of the 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. If such a
plan is established, all dividends and distributions must be
reinvested in your shareholder account. See the Automatic
Withdrawal Plan provisions of the Application included in this
Part A, the Part B under "Automatic Withdrawal Plan" and
"Dividend and Tax Information" below.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Part B lists
the Fund's Trustees and officers and provides further information
about them.
The Advisory Agreement
Since February 1, 1996, the Administrator has been acting as
interim adviser for the Fund. As such the Administrator keeps the
accounting books and records of the Fund and computes its daily
net asset value and dividends. The Administrator acts as interim
adviser on a basis not exceeding its cost.
All arrangements with a new investment adviser will be
subject to approval of a new investment advisory agreement by the
Board of Trustees and will be submitted for approval by the
shareholders of the Fund as required by the 1940 Act.
The Administration Agreement
Under an Administration Agreement (the "Administration
Agreement"), Aquila Management Corporation as Administrator, at
its own expense, provides office space, personnel, facilities and
equipment for the performance of its functions thereunder and as
is necessary in connection with the maintenance of the
headquarters of the Fund and pays all compensation of the Fund's
Trustees, officers and employees who are affiliated persons of
the Administrator.
Under the Administration Agreement, subject to the control
of the Fund's Board of Trustees, the Administrator provides all
administrative services to the 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 Fund, and overseeing all
relationships between the Fund and its transfer agent, custodian,
legal counsel, auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the supervision
and coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary or
desirable for effective operation of the Fund and for the sale,
servicing or redemption of the Fund's shares. See the Part B for
a further description of functions listed in the Administration
Agreement as part of such duties.
Under the Administration Agreement, the Fund pays a fee
payable monthly and computed on the net asset value of the Fund
at the end of each business day at the annual rate of 0.25 of 1%
of such net assets for the first $300 million of net assets and
at the annual rate of 0.15 of 1% on net assets above $300
million. The Administrator has agreed that the above fee shall be
reduced, but not below zero, by an amount equal to its pro-rata
portion (based on the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest and
brokerage fees, exceed the lesser of (i) 2.5% of the first $30
million of average annual net assets of the Fund plus 2% of the
next $70 million of such assets plus 1.5% of its average annual
net assets in excess of $100 million, or (ii) 25% of the Fund's
total annual investment income.
During the period when the Fund is not conducting operations
and has only nominal assets it is anticipated that all fees
accrued to the Administrator will be waived.
Information as to the Adviser,
the Administrator and the Distributor
The Fund's Administrator is administrator to the Aquilasm
Group of Funds, which consists of tax-free municipal bond funds
and money market funds. As of December 31, 1997, these funds had
aggregate assets of approximately $2.8 billion, of which over
$800 million consisted of assets of money market funds. The
Administrator, which was founded in 1984, is controlled by Mr.
Lacy B. Herrmann (directly, through a trust and through share
ownership by his wife).
No fees were paid or accrued to the Administrator during the
year ended December 31, 1997.
The Distributor currently handles the distribution of the
shares of 14 funds (five money market funds, seven tax-free
municipal bond funds and two equity funds) not including the
Fund. 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.
DIVIDEND AND TAX INFORMATION
For Information only; shares are not currently being offered
for sale to the public.
All of the Fund's net income for dividend purposes (see
below) will be declared daily as dividends; see "When Shares Are
Issued and Dividends Are Declared on Them" under "How to Invest
in the Fund" for information as to when dividends are declared.
Dividends are paid within a week before or after the end of each
month and invested in additional shares at net asset value on the
payable date, or, at your election, paid in cash by check. This
election may be made in the Application or by subsequent written
notice to the Agent. When 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 on which income dividends were declared on the same day
on which the shares were issued.
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. Such a summary may be provided directly by the Fund or
by a Qualified Recipient as a part of the shareholder services it
has undertaken to provide under a related agreement. (See
"Distribution Plan" above and the Part B.)
Daily dividends will be calculated as follows: the net
income for dividend purposes will be calculated immediately prior
to the calculation of net asset value and will include accrued
interest and original issue and market discount earned since the
last valuation, less the estimated expenses of the Fund and
amortized original issue and market premium for the period.
However, the calculation of the dividend could change under
certain circumstances under the procedures adopted by the Board
of Trustees relating to "amortized cost" valuation; see the Part
B.
Dividends so paid will be taxable to you as ordinary income,
even though reinvested, unless the net income, computed as above,
exceeds "earnings and profits," as determined for tax purposes;
this could occur because net income as so determined will include
certain unrealized appreciation and discount which is not
included for tax purposes. If dividends exceed your ratable share
of "earnings and profits," the excess will reduce the cost or
other tax basis for your shares; any reduction which would
otherwise result in a negative basis will cause the basis to be
reduced to zero, with any remaining amount being taxed as capital
gain. The dividends paid by the Fund will not be eligible for the
70% dividends received deduction for corporations. Statements as
to the tax status of your dividends will be mailed annually.
It is possible but unlikely that the Fund may have realized
long-term capital gains or losses in a year. If it has any net
long-term gains realized through October 31st of a year, it will
pay a capital gains distribution after that date. It may also pay
a supplemental distribution after the end of its fiscal year. Any
capital gains distribution will be taxed at the same rate as
ordinary income, except that for individuals, trusts and estates
the maximum tax rate on capital gains distributions is 28% even
if the applicable rate on ordinary income for such taxpayers is
higher than 28%.
The Fund will be required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to you
and on redemption proceeds, if you have not filed with the Fund a
correct Taxpayer Identification Number, certified when required.
The 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 it.
GENERAL INFORMATION
Description of 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 Fund. Each share represents an equal proportionate
interest in the Fund with each other share. Upon liquidation of
the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
All shares are presently of the same class; however, if they deem
it advisable and in the best interests of shareholders, the Board
of Trustees of the Fund may create additional classes of shares
which may differ from each other only as to dividends (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"). See
the Part B 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 Part B; the
holders of shares have no pre-emptive or conversion rights.
On March 31, 1998, the Administrator held of record 1001 of
the Fund's shares, all of the shares then outstanding.
Voting Rights
Shareholders are entitled to one vote for each full share
held (and fractional votes for fractional shares held) and 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 Fund. The Fund may
be terminated (i) upon the sale of its assets to another issuer,
or (ii) upon liquidation and distribution of the assets of the
Fund, in either case if such action is approved by the vote of
the holders of a majority of the outstanding shares of the Fund.
If not so terminated, the Fund will continue indefinitely.
<PAGE>
PRIME CASH FUND
380 Madison Avenue
Suite 2300
New York, New York 10017
212-697-6666
Part B
This Part B is referred to herein as the "Additional
Statement."
INVESTMENT OF THE FUND'S ASSETS
The Fund is not conducting any operations or currently
offering its shares for sale. See "Introduction" in Part A. Its
assets consist entirely of cash.
Information on Variable Amount Master Demand Notes
The Fund may buy variable amount master demand notes. The
nature and terms of these obligations are as follows. They permit
the investment of fluctuating amounts by the Fund at varying
rates of interest pursuant to direct arrangements between the
Fund, as lender, and the borrower. They permit daily changes in
the amounts borrowed. The 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. Because these 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, although they are redeemable (and thus immediately
repayable by the borrower) at principal amount, plus accrued
interest, at any time. The Fund has no limitations on the amount
of its assets invested in these notes. 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 and in
connection with such purchases and on an ongoing basis, the
"Adviser, pursuant to procedures approved by the Board of
Trustees, must determine that such obligations present minimal
credit risks. In connection with such purchases and on an ongoing
basis, 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 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 On Insured Bank Obligations
The Federal Deposit Insurance Corporation ("FDIC") insures
the deposits of Federally insured banks, and effective August 9,
1989, savings institutions (collectively herein, "banks") up to
$100,000. On that date the FDIC assumed the insurance functions
of the Federal Savings and Loan Insurance Corporation, which was
abolished. The 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 the Board of Trustees determines that a
readily available market exists for such obligations, the Fund
will invest in them only within the 10% limit mentioned in Part A
unless such obligations are payable at principal amount plus
accrued interest on demand or within seven days after demand.
Information about Certain Other Obligations
The Fund may purchase obligations other than those listed in
categories 1 through 5 under "Investment of the Fund's Assets,"
in Part A, but only if such other obligations are guaranteed as
to principal and interest by either a bank in whose obligations
the Fund may invest or a corporation in whose commercial paper
the Fund may invest. If any such guarantee is unconditional and
is itself an Eligible Security, 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 the Rule. See "Effect of the Rule on
Portfolio Management" in Part A. As of the date of the Additional
Statement the 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 Fund invests
in these assets, they will be identified in the Fund's Part A;
and described in the Additional Statement.
Turnover
In general, the Fund will purchase securities with the
expectation of holding them to maturity. However, the Fund may to
some degree engage in short-term trading to attempt to take
advantage of short-term market variations. The Fund may also sell
securities prior to maturity to meet redemptions or as a result
of a revised management evaluation of the issuer. The Fund 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 Fund invests. (In the usual calculation
of portfolio turnover, securities of the type in which the Fund
invests are excluded; consequently, the high turnover which the
Fund will have is not comparable to the turnover of
non-money-market investment companies.)
When-Issued and Delayed Delivery Securities
The 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 the Fund makes the
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 Fund will make commitments for such
when-issued transactions only when it has the intention of
actually acquiring the securities. The Fund will 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
Fund will meet its obligations from maturities or sales of the
securities held in the separate account and/or from cash flow. If
the Fund chooses to dispose of the 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. The Fund may not enter into
when-issued commitments exceeding in the aggregate 15% of the
market value of the Fund's total assets, less liabilities other
than the obligations created by when-issued commitments.
Diversification and Certain Industry Requirements
The Fund has a rule, set forth in Part A, 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.
YIELD INFORMATION
From time to time, the Fund may advertise its "current
yield" and its "effective yield" (also referred to as "effective
compound yield"). Both yield figures are based on historical
earnings and are not intended to indicate future performance. The
current yield of a Fund refers to the net income generated by an
investment in that Fund over a stated seven-day period. This
income is then "annualized". That is, the amount of income
generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a
percentage of the investment. The Fund may also advertise or
quote its effective yield, which is calculated similarly, but,
when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective yield will be slightly
higher than the current yield because of the compounding effect
of this assumed reinvestment.
In addition, the Fund may also compare its performance to
other income-producing securities such as (i) money market funds;
(ii) various bank products, including both those that are insured
(e.g., deposit obligations) and those that are not (e.g.,
investment instruments offered by affiliates of banks); and (iii)
U.S. Treasury Bills or Notes. There are differences between these
income-producing alternatives and the Fund other than their
yields, some of which are summarized below.
The yield of the Fund is not fixed and will fluctuate. In
addition, your investment is not insured and its yield is not
guaranteed. There can be no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share. Although
the yields of bank money market deposit accounts and NOW accounts
will fluctuate, principal will not fluctuate and is insured by
the Federal Deposit Insurance Corporation up to $100,000. Bank
passbook savings accounts normally offer a fixed rate of
interest, and their principal and interest are also guaranteed
and insured. Bank certificates of deposit offer fixed or variable
rates for a set term. Principal and fixed rates are guaranteed
and insured. There is no fluctuation in principal value.
Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. Investment instruments, such as Repurchase
Agreements and Commercial Paper, offered by affiliates of banks
are not insured by the Federal Deposit Insurance Corporation. In
comparing the yields of one money market fund to another,
consideration should be given to each fund's investment policy,
portfolio quality, portfolio maturity, type of instruments held
and operating expenses.
INVESTMENT RESTRICTIONS
The 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 Investment Company Act of 1940 (the "1940 Act"),
of the Fund's outstanding shares vote to change them. Under the
1940 Act, the vote of the holders of a majority of the
outstanding shares of the Fund means the vote of the holders of
the lesser of (a) 67% or more of the Fund's shares present at a
meeting or represented by proxy if the holders of more than 50%
of its shares are so present or represented, or (b) more than 50%
of its outstanding shares. Those fundamental policies not set
forth in Part A are set forth below.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any voting securities, any commodities
or commodity contracts, any mineral related programs or leases,
any shares of other investment companies or any warrants, puts,
calls or combinations thereof.
The Fund cannot purchase or hold the securities of any
issuer if, to its knowledge, Trustees, Directors or officers of
the Fund or its Adviser individually owning beneficially more
than 0.5% of the securities of that issuer together own in the
aggregate more than 5% of such securities.
The Fund cannot buy real estate or any non-liquid interests
in real estate investment trusts; however, it can buy any
securities which it could otherwise buy even though the issuer
invests in real estate or interests in real estate.
2. Almost all of the Fund's assets must be in established
companies.
Only 5% of the 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.
3. The Fund does not buy for control.
The Fund cannot invest for the purpose of exercising control
or management of other companies.
4. The Fund does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin.
5. The Fund is not an underwriter.
The Fund cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, it cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
LOANS OF PORTFOLIO SECURITIES
The Fund may, to increase its income, lend its securities on
a short- or long-term basis to broker-dealers, banks or certain
other financial institutions (see below) if (i) the loan is
collateralized in accordance with applicable regulatory
requirements (the "Guidelines") and if (ii) after any loan, the
value of the securities loaned does not exceed 10% of the value
of its total assets. As of the date of this Additional Statement,
the Fund does not foresee lending securities if after any loan
the value of loaned securities exceeds 5% of the value of its
total assets. The financial institutions other than
broker-dealers or banks to which the Fund can lend its securities
are limited to "accredited investors," as that term is defined in
Section 2(15) of the Securities Act of 1933. (In general, such
institutions are insurance companies, investment companies and
certain employee benefit plans.) Under the present Guidelines
(which are subject to change) the loan collateral must, on each
business day, at least equal the value of the loaned securities
and must consist of cash, bank letters of credit or U.S.
Government securities. To be acceptable as collateral, a letter
of credit must obligate a bank to pay amounts demanded by the
Fund if the demand meets the terms of the letter. Such terms and
the issuing banks would have to be satisfactory to the Fund. Any
loan might be secured by any one or more of the three types of
collateral. In addition, any such investment must meet the
applicable requirements of the Rule. See "Effect of the Rule on
Portfolio Management" in Part A.
The Fund receives amounts equal to the interest or other
distributions on loaned securities and also receives one or more
of the negotiated loan fees, interest on securities used as
collateral or interest on the securities purchased with such
collateral, either of which types of interest may be shared with
the borrower. The Fund may also pay reasonable finder's,
custodian and administrative fees but only to persons not
affiliated with the Fund. The terms of the Fund's loans will meet
certain tests under the Internal Revenue Code and permit the Fund
to terminate the loan and thus reacquire loaned securities on
five days' notice.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "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 Rule 12b-1.
The Plan is designed to protect against any claim involving
the Fund that some of the expenses which the Fund pays or may pay
come within the purview of Rule 12b-1. The Fund believes that it
is not financing any such activity and does not consider any
payment enumerated in the Plan as so financing any such activity.
However, it might be claimed that some of the expenses the Fund
pays come within the purview of Rule 12b-1. If and to the extent
that any payments (including fees) as specifically listed in 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 Fund shares, these payments are authorized
under the Plan.
As used in the Plan, "Qualified Recipients" means
broker-dealers or others selected by the Fund's Adviser and/or
Administrator, including but not limited to any principal
underwriter of the Fund (other than a principal underwriter which
is an affiliated person, or an affiliated person of an affiliated
person, of the administrator) with which the administrator has
entered into written agreements ("Related Agreements")
contemplated by the Rule and which have rendered assistance
(whether direct, administrative, or both) in the distribution
and/or retention of the Fund's shares or servicing of shareholder
accounts. As used in the Plan, "Administrator" includes any
sub-adviser which may in the future be retained by the Fund and
which performs the functions now being performed by the
Administrator.
"Qualified Holdings" means, as to any Qualified Recipient,
all Fund shares beneficially owned by such Qualified Recipient,
or beneficially owned by its brokerage customers, other
customers, other contacts, investment advisory clients, or other
clients, if the Qualified Recipient was, in the judgment of the
Adviser and/or Administrator instrumental in the purchase and/or
retention of such Fund shares and/or in providing administrative
assistance in relation thereto.
Under the Plan, the Adviser and/or the Administrator, but
not the Fund itself, is authorized to make payments ("Permitted
Payments") to Qualified Recipients. Permitted Payments can be
made by the Adviser and/or Administrator, directly or through the
Distributor as disbursing agent, and shall not be the subject of
reimbursement by the Fund to the Adviser or Administrator.
Permitted Payments may not exceed 0.10 of 1% of the average
annual net assets of the Fund for any full fiscal year of the
Fund during which the Plan is in effect. If the plan is not in
effect for the whole of any fiscal year the amount of Permitted
Payments shall be pro-rated for such part or parts of that fiscal
year during which the Plan is in effect, and shall also be
pro-rated for any fiscal year which is not a full fiscal year.
Under the Plan the Adviser and/or Administrator have
authority (i) as to the selection of any Qualified Recipient or
Recipients; (ii) not to select any Qualified Recipient; and (iii)
the amount of Permitted Payments, if any, to each Qualified
Recipient provided that the total Permitted Payments to all
Qualified Recipients do not exceed the amount set forth above.
The Adviser and Administrator will consult with each other as to
persons appropriate to be or become Qualified Recipients and the
amounts of Permitted Payments to be made to these Qualified
Recipients.
The Adviser and/or Administrator are authorized under the
Plan, but not directed, to take into account, in addition to any
other factors deemed relevant by them, 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, in view of the foregoing payments by
the Administrator and/or the Adviser and the bearing by them of
certain distribution expenses, it is recognized that the profits,
if any, of the Administrator or Adviser are dependent primarily
on the administration fees paid by the Fund to the Administrator
and the advisory fees paid by the Fund to the Adviser and that
their profits, if any, would be less or losses, if any, would be
increased due to such payments and expenses. If and to the extent
that any such 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. In
taking any action contemplated by Section 15 of the 1940 Act as
to any contract with the Adviser to which the Fund is a party,
the Fund's Trustees, including its Trustees who are not
"interested persons" as defined in the 1940 Act, shall, in acting
on the terms of any such contract apply the "fiduciary duty"
standard contained in Section 36(b) of the 1940 Act.
The Plan states that if and to the extent that any of the
payments listed below are considered to be "primarily intended to
result in the sale of shares" issued by the 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, printing and mailing of 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 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.
The Plan states that while it is in effect, the Fund's
Adviser and Administrator shall report at least quarterly to the
Fund's Trustees in writing for their review on the following
matters: (i) all Permitted Payments made under the Plan, the
identity of the Qualified Recipient of each Payment, and the
purposes for which the amounts were expended; (ii) all costs of
each item specified in Section 4 of the Plan (making estimates of
such costs where necessary or desirable) during the preceding
calendar or fiscal quarter; and (iii) all fees paid or accrued by
the Fund to the Adviser or Administrator during such quarter.
While the Plan is in effect, the selection and nomination of
those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of such disinterested
Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
The Plan, 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 of those Trustees (the "Independent
Trustees") who are not "interested persons" (as defined in the
1940 Act) of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the
purpose of voting on the Plan. In voting on the implementation or
continuance of the Plan, those Trustees who vote to approve such
implementation or continuance must conclude that there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund. The Plan may not be
amended to increase materially the amount of payments to be made
without such a shareholder vote, and all amendments must be
approved by a vote of the Trustees of the Fund and of the
Independent Trustees, with votes cast in person at a meeting
called for the purpose of voting on the Plan.
During the Fund's fiscal year ended December 31, 1996, no
Qualified Payments were made to Qualified Recipients.
The formula under which the payments described above may be
made under the Plan 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 provide the only incentive
for Qualified Recipients to do so since there is no sales charge
on the sale of the Fund's shares. Another factor is that the Fund
is one of several 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
does not invest assets over which it has investment authority in
any money-market fund which it advises, but for this purpose uses
such 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.
LIMITATION OF REDEMPTIONS IN KIND
The 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 Part A, and such valuation will be made as of the same
time the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Fund, their affiliations,
if any, with the Adviser or the Distributor and their principal
occupations during at least the past five years are set forth
below. Mr. Herrmann is an "interested person" of the Fund as that
term is defined in the 1940 Act as an officer of the Fund and as
a Director, officer and shareholder of the Distributor; Mr. Mason
is an interested person of the Fund as an officer of the Fund.
They are so designated by an asterisk. As of April 1, 1997, all
of the Trustees and officers as a group owned less than 1% of the
Fund's outstanding shares.
Lacy B. Herrmann*, President and Chairman of the Board of
Trustees, 380 Madison Avenue, New York, New York 10017
Founder, President and Chairman of the Board of Aquila Management
Corporation since 1984, the sponsoring organization and
Administrator and/or Adviser or Sub-Adviser to the following
open-end investment companies, and Founder, Chairman of the Board
of Trustees, and President of each: Pacific Capital Cash Assets
Trust since 1984; Churchill Cash Reserves Trust since 1985;
Pacific Capital U.S. Treasuries Cash Assets Trust since 1988;
Pacific Capital Tax-Free Cash Assets Trust since 1988; each of
which is a money market fund, and together with Capital Cash
Management Trust ("CCMT") are called the Aquila Money-Market
Funds; and Hawaiian Tax-Free Trust since 1984; Tax-Free Trust of
Arizona since 1986; Tax-Free Trust of Oregon since 1986; Tax-Free
Fund of Colorado since 1987; Churchill Tax-Free Fund of Kentucky
since 1987; Tax-Free Fund For Utah since 1992; and Narragansett
Insured Tax-Free Income Fund since 1992; each of which is a tax-
free municipal bond fund, and two equity funds, Aquila Rocky
Mountain Equity Fund since 1993 and Aquila Cascadia Equity Fund,
since 1996, which are called the Aquila Bond and Equity Funds;
Vice President, Director, Secretary and formerly Treasurer of
Aquila Distributors, Inc. since 1981, distributor of the above
funds; President and Chairman of the Board of Trustees of CCMT, a
money market fund since 1981, and an Officer and Trustee/Director
of its predecessors since 1974; Chairman of the Board of Trustees
and President of Short Term Asset Reserves 1984-1996; President
and a Director of STCM Management Company, Inc., sponsor and sub-
adviser to CCMT; Chairman, President, and a Director since 1984,
of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves,
and Founder and Chairman of several other money market funds;
Director or Trustee of OCC Cash Reserves, Inc., Oppenheimer Quest
Global Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and
Trustee of Quest For Value Accumulation Trust, The Saratoga
Advantage Trust, and of the Rochester Group of Funds, each of
which is an open-end investment company; Trustee of Brown
University, 1990-1996 and currently Trustee Emeritus; actively
involved for many years in leadership roles with university,
school and charitable organizations.
Theodore T. Mason*, Vice Chairman and Trustee, 26 Circle Drive,
Hastings-on-Hudson, New York 10706
Managing Director of EastWind Power Partners, Ltd. since 1994;
Director of Cogeneration Development of Willamette Industries,
Inc., a forest products company, 1991-1993; Vice President of
Corporate Development of Penntech Papers, Inc., 1978-1991; Vice
President of Capital Projects for the same company, 1977-1978;
Vice Chairman of the Board of Trustees of CCMT since 1981;
Trustee and Vice President, 1976-1981, and formerly Director of
its predecessor; Director of STCM Management Company, Inc.;
Trustee of Short Term Asset Reserves, 1984-1986 and 1989-1996, of
Hawaiian Tax-Free Trust and Pacific Capital Cash Assets Trust
since 1984, of Churchill Cash Reserves Trust since 1985, of
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988 and of Churchill
Tax-Free Fund of Kentucky since 1992; Vice President and Trustee
of Oxford Cash Management Fund, 1983-1989; Vice President of
Trinity Liquid Assets Trust, 1983-1985; President and Director of
Ted Mason Venture Associates, Inc., a venture capital consulting
firm, 1972-1980; Advisor to the Commander, U.S. Maritime Defense
Zone Atlantic, 1984-1988; National Vice President,
Surface/Subsurface, Naval Reserve Association, 1985-1987;
National Vice President, Budget and Finance, for the same
Association, 1983-1985; Commanding Officer of four Naval Reserve
Units, 1974-1985; Captain, USNR, 1978-1988.
Paul Y. Clinton, Trustee, 946 Morris Avenue, Bryn Mawr,
Pennsylvania 19010
Principal of Clinton Management Associates, a financial and
venture capital consulting firm; formerly Director of External
Affairs of Kravco Corporation, a national real estate owner and
developer, 1984-1995; formerly President of Essex Management
Corporation, a management and financial consulting company, 1979-
1983; Trustee of Capital Cash Management Trust since 1979 and of
Narragansett Insured Tax-Free Income Fund since 1996; Trustee of
Short Term Asset Reserves 1984-1996; general partner of Capital
Growth Fund, a venture capital partnership, 1979-1982; President
of Geneve Corp., a venture capital fund, 1970-1978; formerly
Chairman of Woodland Capital Corp., a small business investment
company; formerly Vice President, W.R. Grace & Co; Director or
Trustee of OCC Cash Reserves, Inc., Oppenheimer Quest Global
Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and Trustee
of Quest For Value Accumulation Trust, and of the Rochester Group
of Funds, each of which is an open-end investment company.
Diana P. Herrmann, Vice President, 380 Madison Avenue, New York,
New York 10017
Senior Vice President and Secretary and formerly Vice President
of the Administrator since 1986 and Director since 1984; Trustee
of Tax-Free Trust of Arizona and Tax-Free Trust of Oregon since
1994, of Churchill Tax-Free Fund of Kentucky and Churchill Cash
Reserves Trust since 1995 and of Aquila Cascadia Equity Fund
since 1996; Vice President of InCap Management Corporation since
1986 and Director since 1983; Senior Vice President or Vice
President and formerly Assistant Vice President of the Money
Funds since 1986; Vice-President of Cascades Cash Fund, 1989-
1994, and of Short Term Asset Management Fund, 1986-1988;
Assistant Vice President of Oxford Cash Management Fund, 1986-
1988; Assistant Vice President and formerly Loan Officer of
European American Bank, 1981-1986; daughter of the Fund's
President; Trustee of the Leopold Schepp Foundation (academic
scholarships) since 1995; actively involved in mutual fund and
trade associations and in college and other volunteer
organizations.
Charles E. Childs, III, Vice President, 380 Madison Avenue, New
York, New York 10017
Vice President - Administration and formerly Assistant Vice
President and Associate of the Administrator since 1987; Vice
President or Assistant Vice President of the Money Funds since
1988; Northeastern University, 1986-1987 (M.B.A., 1987);
Financial Analyst, Unisys Corporation, 1986; Associate Analyst at
National Economic Research Associates, Inc. (NERA), a micro-
economic consulting firm, 1979-1985.
John M. Herndon, Vice President and Assistant Secretary, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995 and Vice President of the
Aquila Money-Market Funds since 1990; Vice President of the
Administrator since 1990; Investment Services Consultant and Bank
Services Executive of Wright Investors' Service, a registered
investment adviser, 1983-1989; Member of the American Finance
Association, the Western Finance Association and the Society of
Quantitative Analysts.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer
of Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of
the Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New
York 10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond
and Equity Funds and of Aquila Distributors, Inc. since 1992;
Associate Director of Furman Selz Incorporated, 1991-1992; Vice
President of Scudder, Stevens & Clark, Inc. and Treasurer of
Scudder Institutional Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer of Lazard Freres
Group of Investment Companies and HT Insight Funds, Inc., 1986-
1988; Vice President of Lehman Management Co., Inc. and Assistant
Treasurer of Lehman Money Market Funds, 1981-1985; Controller of
Seligman Group of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New
York 10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust, 1982-
1985 and Trustee of that Trust, 1985-1986; Secretary of Oxford
Cash Management Fund, 1982-1988.
Patricia A. Craven, Assistant Secretary & Compliance Officer, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995; Counsel to the
Administrator and the Distributor since 1995; formerly a Legal
Associate for Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
The Fund does not pay fees to Trustees affiliated with the
Administrator or Adviser or to any of the Fund's officers. During
the fiscal year ended December 31, 1997, the Fund accrued no
compensation or reimbursement of expenses to its other Trustees.
None of such Trustees has any pension or retirement benefits from
the Fund or any of the other funds in the Aquila group.
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Administration Agreement
The Administration Agreement between Aquila Management
Corporation, as Administrator, and the Fund (the "Administration
Agreement") contains the provisions described below in addition
to those described in Part A.
Subject to the control of the Fund's Board of Trustees, the
Administrator provides all administrative services to the Fund
other than those relating to its investment portfolio and the
maintenance of its accounting books and records (see below for
discussion); as part of such duties, the Administrator (i)
provides office space, personnel, facilities and equipment for
the performance of the following functions and for the
maintenance of the Fund's headquarters; (ii) oversees all
relationships between the Fund and its transfer agent, custodian,
legal counsel, auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the supervision
and coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary or
desirable for effective operation of the Fund and for the sale,
servicing, or redemption of the Fund's shares; (iii) provides to
the Adviser and to the Fund statistical and other factual
information and advice regarding economic factors and trends, but
does not generally furnish advice or make recommendations
regarding the purchase or sale of securities; (iv) maintains the
Fund's books and records (other than accounting books and
records), and prepares (or assists counsel and auditors in the
preparation of) all required proxy statements, reports to
shareholders and Trustees, reports to and other filings with the
Securities and Exchange Commission and any other governmental
agencies, and tax returns, and oversees the Fund's insurance
relationships; (v) prepares, on the Fund's behalf and at its
expense, such applications and reports as may be necessary to
register or maintain its registration or that of its shares under
the securities or "Blue-Sky" laws of all such jurisdictions as
may be required from time to time; and (vi) responds to any
inquiries or other communications from shareholders and
broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Fund's shareholder servicing
and transfer agent or distributor, oversees such shareholder
servicing and transfer agent's or distributor's response thereto.
Since the Fund pays its own legal and audit expenses, to the
extent that the Fund's counsel and accountants prepare or assist
in the preparation of prospectuses, proxy statements and reports
to shareholders, the costs of such preparation or assistance are
paid by the Fund.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Fund and the Adviser; it may be terminated by the
Fund at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Fund shall be directed or approved by a vote of a majority of the
Trustees in office at the time, including a majority of the
Trustees who are not interested persons of the Fund. In either
case the notice provision may be waived.
The expense limitation referred to in Part A, if in effect,
is implemented monthly so that at no time is there any unpaid
liability under the limitation subject, to readjustment during
the year.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Fund in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Fund agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
The Fund paid or accrued no fees to the Administrator for the
year ended December 31, 1997. The fees which the Fund has paid or
which have been accrued
for the year ended December 31, 1996 to the former Adviser and to
the Administrator were each $5,481, of which $1,108 and $3,295,
respectively were waived. In addition the Administrator
reimbursed Fund expenses of $2,188. For the year ended December 31,
1995, the Fund paid or accrued $173,614 to its former Adviser of
which $12,315 was
waived.
AMORTIZED COST VALUATION
The following provisions are for information only and are
applicable only if the Fund operates as a money market fund. At
the present time the Fund is not conducting any operations.
The Fund operates under Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission which permits it to value its
portfolio 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 the Fund
would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on the 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, the Fund's Board of Trustees must establish,
and if the Fund resumes operations as a money market fund will re
establish 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 include changes in the dividends payable by
the 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
The following provisions are for information only and are
applicable only if the Fund operates as a money market fund.
Under the Procedures which the Fund's Board of Trustees has
adopted relating to amortized cost valuation, the calculation of
the Fund's daily dividends will change under certain
circumstances from that indicated in Part A. 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
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, if you own or purchase shares of the Fund
having a net asset value of at least $5,000. 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 your account. Monthly or quarterly payments paid
to shareholders may not be considered as a yield or income on
investment.
GENERAL INFORMATION
Net Asset Value Per Share
As indicated in Part A, the net asset value per share of the
Fund's shares will be determined on each day that the New York
Stock Exchange is open. That Exchange annually announces the days
on which it will not be open; the most recent announcement
indicates that it will not open on the following days: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, that
Exchange may close on days not included in that announcement.
Voting by Series of Shares
If additional series (as discussed in Part A) were created
by the Board of Trustees, shares of each such Series would be
entitled to vote as a Series only to the extent permitted by the
1940 Act (see below) or as permitted by the Board of Trustees.
Income and operating expenses would be allocated among two or
more series in a manner acceptable to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, any matter required to
be submitted to shareholders vote is not deemed to have been
effectively acted upon unless approved by the holders of a
majority (as defined in that Rule) of the voting securities of
each series affected by the matter. Such separate voting
requirements do not apply to the election of Trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, series. A change in
investment policy may go into effect as to one or more series
whose holders so approve the change even though the required vote
is not obtained as to the holders of other affected series.
Shareholder and Trustee Indemnification
The Fund is an entity of the type commonly known as a
Massachusetts business trust. Under Massachusetts law,
shareholders of a trust such as the Fund 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 Fund and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed
by the Fund or the Trustees. The Declaration of Trust provides
for indemnification out of the Fund's property of any shareholder
held personally liable for the obligations of the Fund. The
Declaration of Trust also provides that the Fund shall, upon
request, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund 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 Fund itself
would be unable to meet its obligations. In the event that the
Fund had two or more series and any such series of shares were to
be unable to meet the obligations attributable to it (which, as
in the case of the Fund, is relatively remote), any other series
would be subject to such obligations with corresponding increase
in the risk of the shareholder liability mentioned in the prior
sentence.
The Declaration of Trust further indemnifies the Trustees
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.
Custodian and Auditors
The Fund's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Fund's assets.
The Fund's auditors, KPMG Peat Marwick LLP, perform an
annual audit of the Fund's financial statements.
The financial statements for the Fund for the year ended
December 31, 1997, which are contained in the Annual Report for
that fiscal year, are hereby incorporated by reference into the
Additional Statement. Those financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors, whose
report thereon is incorporated herein by reference.
<PAGE>
PRIME CASH FUND
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Incorporated by reference into Part B:
Financial Highlights
Report of Independent Certified Public
Accountants
Statement of Investments as of
December 31, 1997
Statement of Assets and Liabilities as of
December 31, 1997
Statement of Operations for the year
ended December 31, 1997
Statement of Changes in Net Assets for the
years ended December 31, 1997 and 1996
Notes to Financial Statements
Included in Part C:
Consent of Independent Certified Public
Accountants
(b) Exhibits:
(1) Supplemental Declaration of Trust (ii)
(2) By-laws (ii)
(3) Not applicable
(4) Specimen share certificate (ii)
(5) Not Applicable (ii)
(6) Not applicable
(7) Not applicable
(8) Custody Agreement (ii)
(9) (a) Transfer Agency Agreement (ii)
(9) (b) Administration Agreement (ii)
(10) Opinion and consent of counsel to the Fund
regarding share issuance (ii)
(11) Not applicable
(12) Not applicable
(13) Not Applicable
(14) Not applicable
(15) Distribution Plan (ii)
(17) Financial Data Schedule (iii)
(i) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 17 dated April 30, 1996 and incorporated
herein by reference.
(ii) Filed as an exhibit to Registrant's Amendment No. 17
dated April 17, 1997 to its Registration Statement
under the Investment Company Act of 1940
and incorporated herein by reference.
(iii) Filed herewith.
ITEM 25. Persons Controlled By Or Under Common Control with
Registrant
Registrant's shares are 100% owned by Aquila
Management Corporation. Aquila Management
Corporation (the Trust's Administrator) and Aquila
Distributors, Inc. (the Trust's Distributor) are
under the common control of Mr. Lacy B. Herrmann
(the Trust's President and Chairman).
ITEM 26. Number of Holders of Securities
As of March 31, 1998, Registrant had 1 holder
of record of its shares.
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Supplemental 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 28. Business and Other Connections of Investment
Adviser
Not applicable
ITEM 29. Principal Underwriters
a. Aquila Distributors, Inc. serves as principal
underwriter to Aquila Rocky Mountain Equity Fund,
Capital Cash Management Trust, Churchill Cash Reserves
Trust, Churchill Tax-Free Fund of Kentucky, Hawaiian
Tax-Free Trust, Narragansett Insured Tax-Free Income
Fund, Pacific Capital Cash Assets Trust, Pacific
Capital Tax-Free Cash Assets Trust, Pacific Capital
U.S. Treasuries Cash Assets Trust, Short Term Asset
Reserves, Tax-Free Fund For Utah, Tax-Free Fund of
Colorado, Tax-Free Trust of Arizona, Tax-Free Trust of
Oregon, in addition to serving as the Registrant's
principal underwriter, if the Registrant makes a public
offering.
(b) For information about the Directors and officers of
Aquila Distributors, Inc., reference is made to the
Form BD filed by it under the Securities Exchange
Act of 1934.
(c) Not applicable.
ITEM 30. 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 Prospectus
and Statement of Additional Information.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
<PAGE>
Consent of Independent Auditors
To The Shareholders and Board of Trustees
Prime Cash Fund:
We consent to the use of our report dated February 6, 1998,
incorporated herein by reference, and to the reference to our firm
under the heading "Custodian and Auditors" in the Statement of
Additional Information.
New York, New York KPMG Peat Marwick LLP
April 24, 1998 /s/KPMG Peat Marwick LLP
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all the requirements for effectiveness of this Amendment
to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and has caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 24th day of April, 1998.
PRIME CASH FUND
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the
following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 4/24/98
______________________ President, Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Theodore T. Mason 4/24/98
______________________ Trustee ___________
Theodore T. Mason
/s/Paul Y. Clinton 4/24/98
______________________ Trustee ___________
Paul Y. Clinton
/s/Rose F. Marotta 4/24/98
______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer
<PAGE>
PRIME CASH FUND
EXHIBIT INDEX
Exhibit Exhibit Page
Number Name Number
17 Financial Data Schedule
Correspondence
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's Annual report dated December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000707800
<NAME> PRIME CASH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<PER-SHARE-NII> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
