File Nos. 2-92584 & 811-4083
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. 10 [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 14 [ X ]
SHORT TERM ASSET RESERVES
(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)
[_X_] on June 24, 1996 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.
Registrant hereby declares, pursuant to Section (a)(1) of Rule
24f-2 under the Investment Company Act of 1940, that Registrant has
registered an indefinite number of its shares under the Securities
Act of 1933 pursuant to that Section.
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights; General Information
4..............Introduction; Highlights; Investment of the
Trust's Assets; Investment Restrictions;
General Information
5..............Management Arrangements
5A.............*
6..............General Information; Alternative Purchase
Plans; Dividend and Tax Information
7..............Net Asset Value per Share; Alternative
Purchase Plans; 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.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Municipal
Bonds; Investment Restrictions
14.............Trustees and Officers
15.............General Information (Prospectus caption);
Trustees and Officers
16.............Additional Information as to Management
Arrangements; General Information
17.............Additional Information as to Management
Arrangements
18.............General Information
19.............Limitations of Redemptions in Kind; Computa-
tion of Net Asset Value; Automatic With-
drawal Plan; Distribution Plan
20.............Additional Tax Information
21.............How to Invest in the Trust (Prospectus cap-
tion); General Information
22.............Performance
* Not applicable or negative answer
<PAGE>
Aquila
Cascadia Pacific Equity Fund
A Regional Growth Fund
380 Madison Avenue
Suite 2300
New York, New York 10017
800-************
212-697-6666
Prospectus
Class A Shares
Class C Shares June 24, 1996
Aquila Cascadia Pacific Equity Fund (the "Fund") is a
mutual fund whose objective is capital appreciation. (See
"Investment of the Fund's Assets.") It seeks to achieve its
objective through investment in securities (primarily equity
securities) of companies having a significant business presence in
the region of our country, termed in this Prospectus the
Northwestern Region, consisting of Oregon, Washington, Idaho, Utah,
Nevada, Alaska and Hawaii. See "Investment of the Fund's
Assets."
This Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information dated June 24, 1996 about the Fund (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request to
Administrative Data Management Corp., the Fund's Shareholder
Servicing Agent, at the address given below, or by calling the
telephone number(s) given below. The Additional Statement contains
information about the Fund and its management not included in this
Prospectus. The Additional Statement is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
the Prospectus and the Additional Statement are all material facts
about the Fund available to you.
Shares of the Fund are not deposits in, obligations of or
guaranteed or endorsed by any bank. Shares of the Fund are not
insured or guaranteed by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other governmental agency or
government-sponsored agency of the Federal Government or any
State.
An investment in the Fund involves investment risks,
including possible loss of the principal amount invested.
For Purchase, Redemption or Account inquiries contact
The Fund's Transfer Agent: Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-*********** toll free or ***********
For General Inquiries
Call 800-********* toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future
Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
Aquila Cascadia Pacific Equity Fund (the "Fund") is a
diversified, open-end mutual fund which continuously offers to sell
or redeem its shares on any business day (see sections of the
Prospectus on "How to Purchase or Redeem Shares"). The Fund's
shares are designed to be a suitable investment for investors who
seek capital appreciation, primarily through the securities of
companies having a significant business presence in the general
Northwestern Region of the country.
The Fund's investment objective is capital appreciation. The
Fund seeks to achieve this objective by investing primarily in
equity securities of companies having a significant business
presence in the region of our country, termed in this Prospectus
the Northwestern Region, consisting of Oregon, Washington, Idaho,
Utah, Nevada, Alaska and Hawaii. It is anticipated that under
normal circumstances, the Fund will invest at least 65%, and
possibly up to 100%, of its total assets in equity securities
issued by such companies. Companies with a significant business
presence in the Northwestern Region are defined as those companies
(i) whose principal executive offices are located in the
Northwestern Region, (ii) which have more than 50% of their assets
located in the Northwestern Region or (iii) which derive a
significant portion of their revenues or profits from the
Northwestern Region. In the Prospectus these companies are called
"Northwestern Region Companies." Since the Fund's objective is
capital appreciation, it is not expected to provide any significant
current income to investors from dividend or interest payments and
during its first fiscal year it is not expected to provide any such
distributions. (See "Table of Expenses" and "Investment of the
Fund's Assets.")
Investment Selection Criteria - The Fund will acquire only
those equity securities which, at the time of purchase, the Sub-
Adviser considers to be reasonably priced issues of financially
sound companies possessing good growth characteristics and solid
management. The Fund may also make other types of investments. (See
"Investment of the Fund's Assets".)
Regional Portfolio Management - Ferguson, Wellman, Rudd,
Purdy & Van Winkle Inc. ("Ferguson, Wellman" or the "Sub-Adviser")
serves as the Fund's regionally-located portfolio management
organization. The firm provides professional investment advisory
services to a broad base of clients and currently manages over $1
billion of clients's assets of which approximately $400 million
consists of equity investments. The advisory facilities for the
Fund are located in Portland, Oregon. Ferguson, Wellman is an
employee owned full service investment firm, with 66% of all
employees holding equity in the company. It serves both
institutional and individual investors. The firm currently provides
professional investment advisory services to a broad base of
clients. Incorporated in 1975, Ferguson, Wellman has one central
office in Portland, Oregon and is a Registered Investment Adviser
under the Investment Advisers Act of 1940.
Aquila Management Corporation, the Fund's founder and
Adviser and Administrator, is a Registered Investment Adviser under
the Investment Advisers Act of 1940. It is the founder and serves
as administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $25 million, all as of May 15, 1996.
Diversification - The Fund will invest its assets in a
number of different securities. Additionally, investments will be
spread over a reasonably broad range of industries. Only the most
affluent investors can achieve such diversification on their own
among securities of Northwestern Region Companies. In general, a
diversified portfolio, such as is provided by the Fund, can be used
to reduce your investment risk as compared to less diversified
portfolios. See "Investment of the Fund's Assets."
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Fund," which includes applicable sales charge
information.)
Additional Investments - You may make additional
investments at any time and in any amount, directly or, if in an
amount of $50 or more, through the convenience of having your
investment electronically transferred from your financial
institution account into the Fund by Automatic Investment or
Telephone Investment. (See "How to Invest in the Fund.")
Alternative Purchase Plans - The Fund provides two
alternative ways for individuals to invest. (See "Alternative
Purchase Plans.") One way permits individual investors to pay
distribution and certain service charges principally at the time
they purchase shares; the other way permits investors to pay such
costs over a period of time, but without paying anything at time of
purchase, much as goods can be purchased on an installment plan.
For this purpose the Fund offers the following classes of shares,
which differ in their expense levels and sales charges:
* Front-Payment Class Shares ("Class A Shares")
are offered to anyone at net asset value plus
a sales charge, paid at the time of purchase,
at the maximum rate of 4.25% of the public
offering price, with lower rates for larger
purchases. (See "How to Purchase Class A
Shares.") Class A Shares are subject to an
asset retention service fee under the Fund's
Distribution Plan at the rate of 0.25 of 1% of
the average annual net assets represented by
the Class A Shares. (See "Distribution
Plan.")
* Level Payment Class Shares ("Class C Shares")
are offered to anyone at net asset value with
no sales charge payable at the time of
purchase but with a level charge for service
and distribution fees for six years after the
date of purchase at the aggregate annual rate
of 1% of the average annual net assets of the
Class C Shares. (See "Distribution Plan" and
"Service Plan.") Six years after the date of
purchase Class C Shares are automatically
converted to Class A Shares. In addition,
Class C Shares are subject to a contingent
deferred sales charge ("CDSC") if redeemed
before they have been held for 12 months from
the date of purchase; this charge is 1%,
calculated on the net asset value of the Class
C Shares at the time of purchase or at
redemption, whichever is less. There is no
CDSC after Class C Shares have been held
beyond the applicable period. (See
"Alternative Purchase Plans," "Computation of
the Holding Periods for Class C Shares" and
"How to Purchase Class C Shares.")
The Fund also issues Institutional Class Shares ("Class Y
Shares") that are sold only to certain institutional investors.
Class Y Shares are not offered by this Prospectus.
Liquidity - Redemption - You may redeem all or part of your
account on any business day at the next determined net asset value
by telephone, FAX or mail request, with proceeds being sent to a
predesignated financial institution, if you have elected Expedited
Redemption. Proceeds will be wired or transferred through the
facilities of the Automated Clearing House, wherever possible, upon
request, if in an amount of $1,000 or more, or will be mailed. For
these and other redemption procedures see "How to Redeem Your
Investment." There are no penalties or redemption fees for
redemption of Class A Shares. However, there is a contingent
deferred sales charge with respect to certain Class A Shares which
have been purchased in amounts of $1 million or more (see
"Purchases of $1 Million or More"). If you redeem Class C Shares
before you have held them for 12 months from the date of purchase
you will pay a Contingent Deferred Sales Charge ("CDSC") at the
rate of 1%. (See "Alternative Purchase Plans" -- "Class C
Shares.")
Distributions from the Fund - Distribution of any income net
of operating expenses or any net realized capital gains will be
made annually. The Fund's net income and short-term capital gains
are taxed as ordinary income, while long-term capital gains
distributions are taxed to you as long-term capital gains,
regardless of how long you have held your shares. See "Dividend and
Tax Information."
Exchanges - You may exchange Class A or Class C Shares of the
Fund into corresponding classes of shares of the Aquila-sponsored
tax-free municipal bond mutual funds or an equity fund. You may
also exchange them into shares of certain Aquila-sponsored money
market funds. The exchange prices will be the respective net asset
values of the shares. (See "Exchange Privilege.")
Convenience - Through ownership of a single security
consisting of shares of the Fund, you achieve investment
participation in a variety of Northwestern Region Companies and you
are relieved of all the various inconveniences including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping associated with direct investment in individual
securities of those companies. The Fund handles all paperwork
involved with share ownership, advising you of the Federal tax
status of dividends and capital gains, and providing you with
simplified records. You receive statements of your account
quarterly as well as each time you add to your investment or redeem
part or all of it. Additionally, you receive a semi-annual report
and an audited annual report.
Fee Arrangements - The Fund can pay fees at an annual rate of
up to 0.80 of 1% of average annual net assets to its Adviser and
Administrator and up to 0.70 of 1% of average annual net assets to
its Sub-Adviser (for total fees at a rate of up to 1.50% of the
first $15 million of average annual net assets). The overall rates
of these fees decline as the asset size of the Fund increases. See
"Advisory and Administration Fees." Some or all of these fees may
be waived in the early development phase of the Fund. In addition,
the Fund can pay a distribution fee of up to 0.25 of 1% of average
annual net assets to brokers and other investment professionals
with respect to assets represented by Class A Shares. (See "Table
of Expenses," "Management Arrangements" and "Distribution Plan").
Risk Factors - The Fund seeks to provide you with capital
appreciation over a period of time. The value of the Fund's shares
will fluctuate due to changes in the equity markets and the
proceeds of redemptions may be more or less than your cost. The
Fund's assets, being primarily or entirely invested in the
securities of Northwestern Region Companies, are subject to
economic and other conditions affecting that area and it may have
less diversification than funds without this investment policy.
The fund may invest in small capitalization securities in a market
value range of $100 million to $700 million per issue. Small
capitalization securities are historically more volatile than
securities of companies with larger market values. (See "Risks and
Special Considerations Regarding Investment in Northwestern Region
Companies.") The Fund may also to a limited degree buy put options
and buy and sell call options; there may be risks associated with
these practices. (See "Option Transactions.")
<PAGE>
<TABLE>
<CAPTION>
AQUILA CASCADIA PACIFIC EQUITY FUND
TABLE OF EXPENSES
Class A Class C
Shares Shares
Shareholder Transaction Expenses
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.25% None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None None
Deferred Sales Charge None(1) 1.00%(2)
Redemption Fees None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory and Administration Fee (4) 0.80% 0.80%
Sub-Advisory Fee (4) 0.70% 0.70%
12b-1 Fee 0.25% 0.75%
All Other Expenses (4) 0.35% 0.60%
Service Fee None 0.25%
Other Expenses 0.35% 0.35%
Total Fund Operating Expenses (4) 2.10% 2.85%
Example (5)
You would pay the following expenses on a $ 1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A Shares $63 $105 $151 $275
Class C Shares
With complete redemption
at end of period $39 $88 $150 $284 (6)
With no redemption $29 $88 $150 $284 (6)
<FN>
(1) Certain shares purchased in transactions of $1 million or more
without a sales charge may be subject to a contingent deferred sales
charge of up to 1% upon redemption during the first four years after
purchase. See "Purchases of $1 Million or More".
</FN>
<FN>
(2) A contingent deferred sales charge of 1% is imposed on the redemption
proceeds of the shares (or on the original price, whichever is lower)
if redeemed during the first 12 months after purchase.
</FN>
<FN>
(3) Based upon estimated expenses to be incurred during the first
fiscal year of the Fund.
</FN>
<FN>
(4) For the first fiscal year of the Fund, investment income is estimated
to be 1.50% of average net assets. It is anticipated that certain fees
will be waived (4) following a predetermined formula. The Adviser and
Administrator (the "Adviser") and the Sub-Adviser have undertaken to
waive some or all of their fees for the first fiscal year of the Fund
ending March 31, 1997 as required so that on an annualized basis for the
fiscal year, the excess, if any, of Total Fund Operating Expenses over
investment income is not greater than 1.50% of average net assets, except
that if all of such fees for the fiscal year have been waived expenses
may exceed that level. No fee waivers are currently in effect. If the
Adviser and Sub-Adviser determine that it would be advisable in the
future to waive some or all of their fees, it is anticipated that as the
asset size of the Fund increases, waivers would be progressively reduced
so that when total net assets exceed approximately $25 million a
substantial portion or all of these fees would be paid.
</FN>
<FN>
(5) The expense example is based upon the above shareholder transaction
expenses (in the case of Class A Shares, this includes a sales charge
of $42.50 for a $1,000 investment) and estimated annual Fund operating
expenses. It is also based upon amounts at the beginning of each year
which includes the prior year's assumed results. A year's results
consist of an assumed 5% annual return less total operating expenses;
the expense ratio was applied to an assumed average balance (the year's
starting investment plus one-half the year's results). Each figure
represents the cumulative expenses so determined for the period specified.
</FN>
<FN>
(6) Six years after the date of purchase, Class C Shares are
automatically converted to Class A Shares.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL
MUTUAL FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING
THE ABOVE EXAMPLE. THE ASSUMED 5% ANNUAL RETURN SHOULD NOT BE
INTERPRETED AS A PREDICTION OF AN ACTUAL RETURN, WHICH MAY BE HIGHER OR
LOWER. THE EXAMPLE ALSO REFLECTS THE MAXIMUM SALES CHARGE. SEE "HOW TO
INVEST IN THE FUND".
The purpose of the above table is to assist the investor in
understanding the various costs that an investor in the Fund will
bear directly or indirectly. Although not obligated to do so, those
entitled to investment advisory and administration fees expect to
waive a portion or all of those fees in the early stages of the Fund's
existence and Aquila Management Corporation, the organizer and Adviser
of the Fund, may reimburse the Fund for various expenses; the above
table reflects one possible such arrangement and should not be considered
as a commitment or prediction that any fees, or that any particular
portion of fees, will be waived, or that any particular expenses will be
reimbursed. (See "Management Arrangements" for a more complete
description of the various investment advisory and administration
fees.)
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
INTRODUCTION
Aquila Cascadia Pacific Equity Fund is a diversified, open-
end mutual fund which continuously offers to purchase or redeem its
shares on any business day (see sections of Prospectus on "How to
Purchase or Redeem Shares.") The Fund's shares are designed to be
a suitable investment for investors who seek capital appreciation
primarily through the equity securities of companies operating in
the Northwestern Region of the country.
The Fund provides you with the opportunity to have the
benefits of a diversified and professionally managed portfolio of
securities intended to allow participation in the economic
development of the Northwestern Region. Through the convenience of
a single security consisting of shares of the Fund, you are
relieved of all the various inconveniences -- including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping -- associated with direct investment in individual
securities of various companies in the Northwestern Region.
The Fund was organized by Aquila Management Corporation (the
"Adviser and Administrator") which has provided administrative
and/or investment advisory services to various mutual funds founded
by it since 1984. It currently acts as administrator to fourteen
Aquila-sponsored funds, including the Fund, with combined net
assets as of December 31, 1995 in excess of $2.7 billion.
Continuous and active local portfolio management of the Fund is
provided by its regionally-located sub-adviser, Ferguson, Wellman,
Rudd, Purdy & Van Winkle, Inc. (the Sub-Adviser").
INVESTMENT OF THE FUND'S ASSETS
The Fund's investment objective, which is a fundamental policy
of the Fund, is to purchase and hold securities for capital
appreciation. There is no assurance that the Fund will achieve its
objective. The Fund does not expect to receive dividends of
sufficient size to enable it to provide investors with any
significant amount of current income and during at least its first
fiscal year expects to apply all of such income to Fund operating
expenses so that none will be available for distribution to
shareholders.
As used in the Prospectus and Additional Statement, the
general area consisting of Oregon, Washington, Idaho, Utah, Nevada,
Alaska and Hawaii is called in the Prospectus the "Northwestern
Region." The Fund seeks to achieve its objective by investing
primarily in equity securities of companies ("Northwestern Region
Companies") having a significant business presence in the
Northwestern Region. It is anticipated that under normal
circumstances, the Fund will invest at least 65% and possibly up to
100%, of its total assets in securities issued by such
companies.
For purposes of this Prospectus, companies with a significant
business presence in the Northwestern Region are defined as those
companies (i) whose principal executive offices are located in the
Northwestern Region, (ii) which have more than 50% of their assets
located in the Northwestern Region or (iii) which derive a
significant portion of their revenues or profits from the
Northwestern Region. In determining which companies have a
significant business presence in the Northwestern Region, the Sub-
Adviser may rely on any publicly available information about those
companies that it considers reliable. There may be risks associated
with this investment policy. (See "Risk Factors and Special
Considerations.")
As used in the Prospectus, the term "equity securities" means
(i) common stocks and (ii) preferred stocks, bonds, debentures and
notes convertible into common stocks. Under normal conditions, it
is anticipated that the Fund will invest at least 65%, and possibly
up to 100%, of its total assets in such securities. The Fund may
also, to a limited extent make certain other types of investments.
(See below.)
In unusual market conditions when the Sub-Adviser believes a
defensive posture for the Fund's investments is warranted, the Fund
may temporarily invest a portion or all of its assets in high
quality fixed-income securities such as U.S. Treasury securities,
corporate bonds or high grade short-term money-market securities,
without geographic or percentage limitation. Only corporate
securities rated "A" or equivalent by a nationally recognized
statistical rating organization will be purchased. See the
Additional Statement for a description of these organizations and
an explanation of their ratings.
Since the practice of many growth-oriented companies in which
the Fund will invest is to reinvest most or all of their earnings
in the development of their business, the Fund does not expect to
receive dividends enabling it to provide investors with any
significant amount of current income. In addition, during at least
the first fiscal year of the Fund, it is anticipated that all of
such income will be applied to payment of Fund operating expenses
so that none will be available for distribution to
shareholders.
In general, the Fund will take a long-term approach toward
investing. Accordingly, the turnover rate will normally be
consistent with this approach. (See "Portfolio Turnover.") At times
the Fund may make investments for short-term purposes. Also, under
changing market conditions, the Fund may dispose of portfolio
securities whenever the Sub-Adviser deems such action advisable
without regard to the length of time the securities have been
held.
In selecting investments for the Fund, the Sub-Adviser will
generally employ the investment philosophy of seeking to invest in
established, financially sound, well-managed Northwestern Region
Companies whose securities it considers to be selling at a
reasonable price relative to their growth rate and anticipated
future values. Emphasis will be placed upon selection of
Northwestern Region Companies whose securities are selling at lower
than average prices; other securities may be selected whose issuers
the Sub-Adviser believes are experiencing better than average
growth. It is anticipated that a number of factors will be
considered in investment selection, including but not limited to:
product characteristics and market potential, operating ratios,
management abilities, intrinsic value of securities, securities'
market action, and the overall economic, monetary, political and
market environment. The Sub-Adviser currently focuses on
approximately 200-500 Northwestern Region Companies from which it
selects investments for the Fund's portfolio.
Although the Fund may invest in large capitalization
companies, it is anticipated that the companies represented in the
Fund's portfolio will include those companies, having market
capitalization of middle to smaller size, which the Sub-Adviser
believes offer the potential of capital appreciation due to their
overall characteristics. These companies are likely to be less well
known because they are smaller in size, have smaller
capitalizations, and have a lesser number of shares traded. The
prices of securities of such companies may be more volatile than
the prices of securities of issuers which are more mature, have
larger capitalizations and whose securities are more actively
traded.
Convertible Securities
The Fund may invest up to 25% of its assets in convertible
securities of Northwestern Region Companies, if the Sub-Adviser
believes there is potential of capital growth through the
conversion option and greater investment income prior to
conversion. Only convertible securities rated investment grade by
a nationally-recognized statistical rating organization will be
purchased. Not more than 5% of such securities can have the lowest
of the four investment grade ratings. Obligations rated in the
fourth such credit rating are considered by the rating agencies to
be of medium quality and thus may present investment risks not
present in more highly rated obligations. Such bonds lack
outstanding investment characteristics and may in fact have
speculative characteristics as well; changes in economic conditions
or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case
for higher grade bonds. See the Additional Statement for a
description of these organizations and an explanation of their
ratings.
A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within a
specified period of time into a certain quantity of the common
stock of the same or a different issuer. Convertible securities are
senior to common stocks in a corporation's capital structure, but
are usually subordinated to similar nonconvertible securities.
While providing a fixed income stream (generally higher in yield
than the dividends received from a common stock but lower than that
afforded by a similar nonconvertible security), a convertible
security also affords the opportunity through its conversion
feature to participate in the capital appreciation attendant upon
a market price advance in the convertible security's underlying
common stock.
In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a fixed-
income security, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in value
when interest rates rise. However, the price of a convertible
security is also influenced by the market value of the security's
underlying common stock. The price of a convertible security tends
to increase as the market value of the underlying stock rises,
whereas it tends to decrease as the market value of the underlying
stock declines. While no securities investment is without some
risk, investments in convertible securities generally entail less
risk than investments in the common stock of the same issuer.
Warrants
The Fund may also invest up to 5% of its total net assets, as
determined at time of purchase, in warrants of Northwestern Region
Companies. Warrants entitle the holder to purchase a fixed number
of shares of the common stock of the issuer at a fixed price during
certain specified times. The value of the warrants from time to
time depends upon the market evaluation of the likelihood that
exercise of the warrants would be economically advantageous before
they expire. The market price of warrants tends to be more volatile
than that of the underlying common stock.
Options Transactions
The Fund may purchase put and write (i.e., sell) call options
and purchase call options for hedging purposes or in order to
generate additional income or for taking a position in a security
deemed attractive by the Sub-Adviser. The Fund will purchase or
write options only on equity securities that are traded on national
securities exchanges or that are listed on NASDAQ (NASDAQ options).
The Fund may purchase put and write call options only on equity
securities which are held in the Fund's investment portfolio or to
close out positions. Additionally, the Fund may purchase calls on
securities which are not in the Fund's portfolio or to close out
positions.
The Fund will not (a) write call options if immediately after
any such transaction, the aggregate value of the securities
underlying the calls would exceed 20% of the Fund's total net
assets, or (b) purchase put or call options if, immediately after
such purchases, the premiums paid for all such options owned at the
time would exceed 5% of the Fund's total net assets. The Fund will
not write put options except to close out positions. See the
Additional Statement for a description of these instruments and
their uses.
While the Fund may engage in puts and calls to a limited
extent, there are certain risks associated with this activity that
are different than investing in the underlying securities directly
(see the Additional Statement). Option transactions involve risks
and transaction costs which the Fund would not incur if it did not
engage in option transactions. If the Sub-Adviser's predictions of
movements in the direction of the securities markets are
inaccurate, the adverse consequences to the Fund may leave the Fund
in a worse position than if such strategies were not used. Risks
inherent in the use of options include dependence upon the Sub-
Adviser's ability to predict correctly movements in the direction
of securities prices and the possible absence of a liquid secondary
market for any particular instrument at any time. See the
Additional Statement for a description of these and other risks
with respect to option transactions.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend
portfolio securities, up to 25% of the total net assets, to broker-
dealers, banks or other financial borrowers of securities. As with
other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower of the
securities fail financially. However, the Fund will enter into loan
arrangements only with broker-dealers, banks, or other institutions
which the Investment Adviser has determined are creditworthy under
guidelines established by the Fund's Board of Trustees and will
receive collateral in the form of cash or short-term U.S.
Government securities equal at least to 100% of the value of the
securities loaned. The value of the collateral and the securities
loaned will be marked to market on a daily basis. During the time
portfolio securities are on loan, the borrower pays the Fund an
amount equivalent to any dividends or interest paid on the
securities and the Fund may invest the cash collateral and earn
additional income or receive an agreed upon amount of interest
income from the borrower. However, the amounts received by the Fund
may be reduced by any finders' fee paid to broker-dealers and any
other related expenses.
Borrowings by the Fund
The Fund can borrow money for temporary or emergency purposes
from a bank. The Fund will not borrow amounts in excess of 10% of
total net assets and will not purchase securities if borrowings are
equal to or greater than 5% of total net assets. The Fund intends
primarily to exercise such borrowing authority to meet any abnormal
level of shareholder redemptions and under circumstances where
redemptions exceed available cash.
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 at least one Nationally Recognized Statistical
Rating Organization. Repurchase agreements may be entered into only
with commercial banks or broker-dealers. Subject to the control of
the Board of Trustees, the Sub-Adviser will regularly review the
financial strength of all parties to repurchase agreements with the
Fund.
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 Investment Company Act of 1940 (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.
However, 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.
Shares of Investment Companies
The Fund may purchase shares of investment companies with
money market portfolios which are any of the money-market funds in
the Aquilasm Group of Funds. As of the date of the Prospectus,
these funds are Capital Cash Management Trust, Pacific Capital Cash
Assets Trust (Original Shares), Pacific Capital Tax-Free Cash
Assets Trust (Original Shares), Pacific Capital U.S. Treasuries
Cash Assets Trust (Original Shares) and Churchill Cash Reserves
Trust. The Fund will not purchase shares of an investment company
which imposes a sales or redemption charge of any sort; however, an
investment company in which the Fund invests may have a
distribution plan under which it may pay for distribution expenses
or services. Such investments will ordinarily be made to provide
additional liquidity and at the same time to earn higher yields
than are usually associated with the overnight or short-term
obligations in which the Fund might otherwise invest for this
purpose. While higher yields than those of alternative investments
may be obtainable, these yields will reflect management fees and
operating and distribution expenses of the investment companies and
will result in duplication of management fees with respect to
assets of the Fund so invested. The Fund may not invest in the
shares of investment companies if immediately thereafter it has
invested more than 10% of the value of its total assets in such
companies or more than 5% of the value of its total assets in any
one such company; it may not invest in such a company if
immediately thereafter it owns more than 3% of the total
outstanding voting stock of such a company.
Risk Factors and Special Considerations
While the Fund will be actively managed to seek growth of your
capital, the value of the Fund's shares will fluctuate as a result
of equity market factors. On redemption the value of your shares
may be more or less than your cost.
There are two types of risk generally associated with owning
equity securities: market risk and financial risk. Market risk is
the risk associated with the movement of the stock market in
general. Financial risk is associated with the financial conditions
and profitability of the underlying company. Smaller companies may
experience different growth rates and higher failure rates than
those of larger companies having longer operating histories.
Moreover, the stock price movements of smaller companies may
experience more volatility than those of larger and more mature
companies.
There are two types of risk associated with owning debt
securities: interest rate risk and credit risk. Interest rate risk
relates to fluctuations in market value arising from changes in
interest rates. If interest rates rise, the value of debt
securities will normally decline and if interest rates fall, the
value of debt securities will normally increase. All debt
securities, including U.S. Government securities, which are
generally considered to be the most creditworthy of all debt
obligations, are subject to interest rate risk. Securities with
longer maturities generally have a more pronounced reaction to
interest rate changes than shorter term securities. Credit risk
relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. The Fund does
not intend to hold corporate debt securities unless the
opportunities for capital appreciation and income, combined, remain
attractive.
Risks and Special Considerations regarding
the Northwestern Region
The Fund's assets, being primarily or entirely invested in the
securities of Northwestern Region Companies, are subject to
economic and other conditions affecting the various states which
comprise the Northwestern Region.
The states of the Northwestern Region are characterized by
wide differences in climate, great distances and diverse population
density. In some areas, availability of water is a factor of
considerable importance in economic development and water issues
will likely affect the growth and prosperity of much of the Region
in the future. Originally heavily oriented toward the exploitation
of natural resources, in recent years the economies of the states
of the Northwestern Region have shifted toward more diversity with
increases in tourism, high technology and the service sector. The
region has been characterized in recent years by population growth
and immigration from other areas of the United States. Some of the
states in the Northwestern Region have experienced growth rates
above the national averages.
Because of the large geographic size of the Northwestern
Region, the above factors may have varying importance from one
state to another. It is not possible to predict what effect they
may individually or collectively have on any particular company in
which the Fund may choose to invest.
In addition, companies with headquarters in the Northwestern
Region or with a significant business presence in the Region may
also have significant business interests, sales and assets outside
of the Region and may thus be subject to other economic influences.
Because the Fund will invest most, and may invest all, of its
assets in Northwestern Region Companies, it may have less
diversification than funds without this investment policy.
Portfolio Turnover
Given the Fund's orientation to capital appreciation, it is
not expected that the Fund's portfolio turnover rate will exceed
60%. See the Additional Statement.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and cannot
do. Certain of these policies, identified in the Prospectus and
Additional Statement 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. All other
policies can be changed from time to time by the Board of Trustees
without shareholder approval. Some of the more important of the
Fund's fundamental policies, not otherwise identified in the
Prospectus, are set forth below; others are listed in the
Additional Statement.
1. The Fund has industry investment requirements.
The Fund cannot buy securities in any one industry if more
than 25% of its total assets would then be invested in securities
of that industry.
2. The Fund can make loans only by lending securities or
entering into repurchase agreements.
The Fund can lend its portfolio securities (see "Lending
Portfolio Securities") and can enter into repurchase agreements
(see "Repurchase Agreements") but cannot otherwise make loans. The
Fund can buy debt securities as described above (see "Investment of
the Fund's Assets"); this is investing, not making a 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. Interest on borrowings would reduce the Fund's
income. Except in connection with borrowings, the Fund will not
issue senior securities. The Fund will not purchase any security
while it has any outstanding borrowings which exceed 5% of the
value of its total assets.
NET ASSET VALUE PER SHARE
The Fund's net asset value and offering price per share are
determined as of 4:00 p.m. New York time on each day that the New
York Stock Exchange is open (a "business day"). The close of the
principal exchanges or other markets on which some of the Fund's
portfolio securities are traded may be later than 4:00 p.m. The net
asset value per share is determined by dividing the value of the
net assets of the Fund (i.e., the value of the assets less
liabilities) by the total number of shares outstanding.
Determination of the value of the Fund's assets is subject to the
direction and control of the Fund's Board of Trustees. Securities
listed on a national securities exchange or designated as national
market system securities are valued at the last prior sale price
or, if there has been no sale that day, at the bid price. The value
of other securities is in general based on market value, except
that short-term investments maturing in 60 days or less are
generally valued at amortized cost; see the Additional Statement
for further information.
ALTERNATIVE PURCHASE PLANS
In this Prospectus, the Fund provides individual investors
with the option of two alternative ways to purchase shares, through
two separate classes of shares. All classes represent interests in
the same portfolio of securities. The primary distinction among
the classes of shares offered to individuals lies in their sales
charge structures and ongoing expenses, as described below. You
should choose the class that best suits your own circumstances and
needs.
If you choose to purchase Class A Shares you will pay the
applicable sales charge at the time of your purchase. By purchasing
Class C Shares, you will pay a sales charge over a period of six
years after purchase but without paying anything at time of
purchase, much as goods can be purchased on an installment plan.
You are subject to a conditional deferred sales charge, described
below, but only if you redeem your Class C Shares before they have
been held 12 months from your purchase. (See "Computation of
Holding Periods for Class C Shares.")
* Class A Shares, "Front-Payment Class Shares," are offered
to anyone at net asset value plus a sales charge, paid at
the time of purchase, at the maximum rate of 4.25% of the
public offering price, with lower rates for larger
purchases. Under the Fund's Distribution Plan, Class A
Shares are subject to a fee of 0.25 of 1% of the average
annual net assets of the Class A Shares. When you
purchase Class A Shares, the amount of your investment is
reduced by the applicable sales charge. Certain Class A
Shares purchased in transactions of $1 million or more
are subject to a contingent deferred sales charge. (See
"Purchases of $1 Million or More.")
* Class C Shares, "Level Payment Class Shares," are offered
to anyone at net asset value with no sales charge payable
at purchase but with a level charge for distribution fees
and service fees for six years after the date of purchase
at the aggregate annual rate of 1% of the average annual
net assets of the Class C Shares. (See "Distribution
Plan" and "Shareholder Services Plan.") Six years after
the date of purchase, Class C Shares, including Class C
Shares acquired in exchange for other Class C Shares
under the Exchange Privilege (see "Exchange Privilege"),
are automatically converted to Class A Shares. In
addition, if you redeem Class C Shares before you have
held them for 12 months from the date of purchase you
will pay a contingent deferred sales charge ("CDSC") at
the rate of 1%, calculated on the net asset value of the
Class C Shares redeemed at the time of purchase or of
redemption, whichever is less. The amount of any CDSC
will be paid to the Distributor. The CDSC does not apply
to shares acquired through the reinvestment of dividends
on Class C Shares or to any Class C Shares held for more
than 12 months after purchase. In the Prospectus, 12-
month and six-year holding periods are considered
modified by up to one month depending upon when during a
month your purchase of such shares is made. (See
"Computation of Holding Periods for Class C Shares" and
"How to Purchase Class C Shares.")
In determining whether a CDSC is payable on a redemption of
Class C Shares, it will be assumed that the redemption is made
first of any shares acquired as dividends or distributions, second
of any Class C Shares you have held for more than 12 months from
the date of purchase and finally of those Class C Shares as to
which the CDSC is payable which you have held the longest. This
will result in your paying the lowest possible CDSC.
Computation of Holding Periods for Class C Shares
For purposes of determining the holding period for Class C
Shares, all of your purchases made during a calendar month will be
deemed to have been made on the first business day of that month at
the average cost of all purchases made during that month. The 12-
month CDSC holding period will end on the first business day of the
12th calendar month after the date your purchase is deemed to have
been made. Accordingly, the CDSC holding period applicable to your
Class C Shares may be up to one month less than the full 12 months
depending upon when your actual purchase was made during a month.
Running of the 12-month CDSC holding period will be suspended for
one month for each period of thirty days during which you have held
shares of a money market fund you have received in exchange for
Class C Shares under the Exchange Privilege. (See "Exchange
Privilege.")
Your Class C Shares will automatically convert to Class A
Shares six years after the date of purchase, together with a pro-
rata portion of all Class C Shares representing dividends and other
distributions paid in additional Class C Shares. The Class C Shares
so converted will no longer be subject to the higher expenses borne
by the Class C Shares. The conversion will be effected at relative
net asset values on the first business day of the month following
that in which the sixth anniversary of your purchase of the Class
C Shares occurred, except as noted below. Accordingly, the holding
period applicable to your Class C Shares may be up to one month
more than the six years depending upon when your actual purchase
was made during a month. Because the per share value of Class A
Shares may be higher than that of Class C Shares at the time of
conversion, you may receive fewer Class A Shares than the number of
Class C Shares converted. If you have made one or more exchanges of
Class C Shares among the Aquila-sponsored tax-free municipal bond
funds or equity funds under the Exchange Privilege, the six-year
holding period is deemed to have begun on the date you purchased
your original Class C Shares of the Fund or of another of the
Aquila Bond or Equity funds. The six-year holding period will be
suspended by one month for each period of thirty days during which
you hold shares of a money market fund you have received in
exchange for Class C Shares under the Exchange Privilege. (See
"Exchange Privilege.")
The following chart summarizes the principal differences
between Class A Shares and Class C Shares:
<TABLE>
<S> <C> <C>
Class A Class C
Initial Sales Maximum of 4.25% None
Charge of the Public
Offering Price
Contingent None (except Maximum CDSC
Deferred for certain of 1% if shares
Sales Charge purchases over redeemed before
$1 million) 12 months; 0%
after 12 months
Distribution and 0.25 of 1% Distribution fee
Service Fees of 0.75 of 1% and
a service fee of
0.25 of 1% for a
total of 1%,
payable for six
years
Other Information Initial Sales Shares convert
Charge waived to Class A Shares
or reduced in after six years
some cases
</TABLE>
Factors to Consider in Choosing Classes of Shares
This discussion relates to the major differences between Class
A Shares and Class C Shares. It is recommended that any investment
in the Fund be considered long-term in nature.
Over time, the cumulative total cost of the 1% annual service
and distribution fees on the Class C Shares will equal or exceed
the total cost of the initial 4.25% maximum initial sales charges
and 0.25 of 1% annual fee payable for Class A Shares. For example,
if equal amounts were paid at the same time for Class A Shares
(where the amount invested is reduced by the amount of the sales
charge) and for Class C Shares (which carry no sales charge at the
time of purchase) and the net asset value per share remained
constant over time, the total of such costs for Class C Shares
would equal the total of such costs for Class A Shares after
approximately five and two-thirds years. This example assumes no
redemptions and disregards the time value of money. Purchasers of
Class C Shares have all of their investment dollars invested from
the time of purchase, without having their investment reduced at
the outset by the initial sales charge payable for Class A Shares.
If you invest in Class A Shares you will pay the entire sales
charge at the time of purchase. Accordingly, if you expect to
redeem your shares shortly after purchase, you should consider the
total cost of such an investment in Class A Shares compared with a
similar investment in Class C Shares. The example under "Table of
Expenses" shows the effect of Fund expenses for both classes if a
hypothetical investment in each of the classes is held for 1, 3, 5
and 10 years. (See the Table of Expenses.)
Dividends and other distributions paid by the Fund with
respect to shares of each class are calculated in the same manner
and at the same time. The dividends actually paid with respect to
Class C Shares will be lower than those paid on Class A because
Class C Shares bear higher distribution and service fees and will
have a higher expense ratio. In addition, the dividends of each
class can vary because each class will bear certain class-specific
charges. For example, each class will bear the costs of printing
and mailing annual reports to its own shareholders.
HOW TO INVEST IN THE FUND
The Fund's shares may be purchased through any investment
broker or dealer (a "selected dealer") which has a sales agreement
with Aquila Distributors, Inc. (the "Distributor") or through the
Distributor. There are two ways to make an initial investment: (i)
order the shares through your investment broker or dealer, if it is
a selected dealer; or (ii) mail the Application with payment to
Administrative Data Management Corp. (the "Agent") at the address
on the Application. If you purchase Class A Shares, the applicable
sales charge will apply in either instance. Subsequent investments
are also subject to the applicable sales charges. You are urged to
complete an Application and send it to the Agent so that expedited
shareholder services can be established at the time of your
investment. Unless your initial investment is specified to be made
in Class C Shares, it will be made in Class A Shares.
The minimum initial investment for Class A Shares and Class C
Shares is $1,000, except as otherwise stated in the Prospectus or
Additional Statement. You may also make an initial investment of at
least $50 by establishing an Automatic Investment Program for
automatic investments of at least $50 per month and paying at least
$50. (See below and "Automatic Investment Program" in the
Application.) Such investment must be drawn in United States
dollars on a United States commercial or savings bank, credit union
or a United States branch of a foreign commercial bank (each of
which is a "Financial Institution"). You may make subsequent
investments in the same class of shares in any amount (unless you
have an Automatic Withdrawal Plan). Your subsequent investment may
be made through a selected dealer or by forwarding payment to the
Agent, with the name(s) of account owner(s), the account number,
the name of the Fund and the class of shares to be purchased. With
subsequent investments, please send the pre-printed stub attached
to the Fund's confirmations.
Subsequent investments of $50 or more in shares of the same
class as your initial investment can be made by electronic funds
transfer from your demand account at a Financial Institution. To
use electronic funds transfer for your purchases, your Financial
Institution must be a member of the Automated Clearing House and
the Agent must have received your completed Application designating
this feature, or, after your account has been opened, a Ready
Access Features form available from the Distributor or the Agent.
A pre-determined amount can be regularly transferred for investment
("Automatic Investment"), or single investments can be made upon
receipt by the Agent of telephone instructions from anyone
("Telephone Investment"). The maximum amount of each Telephone
Investment is $50,000. Upon 30 days' written notice to
shareholders, the Fund may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
The offering price is the net asset value per share for Class
C Shares and the net asset value per share plus the applicable
sales charge for Class A Shares. The offering price determined on
any day applies to all purchase orders received by the Agent from
selected dealers that day, except that orders received by it after
4:00 p.m. New York time will receive that day's offering price only
if such orders were received by selected dealers from customers
prior to such time and transmitted to the Distributor prior to its
close of business that day (normally 5:00 p.m. New York time); if
not so transmitted, such orders will be filled at the next
determined offering price. Selected dealers are required to
transmit orders promptly. Investments by mail are made at the
offering price next determined after receipt of the purchase order
by the Agent. Purchase orders received on other than a business day
will be executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next business
day. In the case of Telephone Investment your order will be filled
at the next determined offering price. If your order is placed
after the time for determining the net asset value of the Fund
shares for any day it will be executed at the price determined on
the following business day. The sale of shares will be suspended
during any period when the determination of net asset value is
suspended and may be suspended by the Distributor when the
Distributor judges it in the Fund's best interest to do so.
How to Purchase Class A Shares (Front-Payment Class Shares)
The following table shows the amount of the sales charges to
a "single purchaser" (defined below) together with the dealer
discounts paid to dealers and the agency commissions paid to
brokers (collectively called the "commissions"):
<TABLE>
Sales Sales Commis-
Charge Charge sions
as as as
Percentage Approximate Percentage
of Public Percentage of
Amount of Offering of Amount Offering
Purchase Price Invested Price
<S> <C> <C> <C>
Less than $50,000...... 4.25% 4.43% 3.75%
$50,000 but less
than $100,000....... 4.00% 4.17% 3.50%
$100,000 but less
than $250,000....... 3.50% 3.63% 3.25%
$250,000 but less
than $500,000....... 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000..... 1.50% 1.52% 1.25%
</TABLE>
For purchases of $1 million or more see "Purchases of $1
Million or More," below.
The table of sales charges is applicable to purchases of
Class A Shares by a "single purchaser," i.e.: (a) an individual;
(b) an individual together with his or her spouse and their
children under the age of 21 purchasing shares for his or their own
accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; and (d) a tax-
exempt organization enumerated in Section 501(c)(3) or (13) of the
Code.
Upon notice to all selected dealers, the Distributor may
reallow up to the full amount of the applicable sales charge as
shown in the above schedule during periods specified in such
notice. During periods when all or substantially all of the entire
sales charge is reallowed, such selected dealers may be deemed to
be underwriters as that term is defined in the Securities Act of
1933.
Purchases of $1 Million or More
Class A Shares issued in purchases of $1 million or more by
a single purchaser are called "CDSC Class A Shares." CDSC Class A
Shares also include certain Class A Shares issued in purchases of
$1 million or more under the program captioned "Certain Investment
Companies - Special Dealer Arrangements," below. (CDSC Class A
Shares do not include (i) Class A Shares purchased without sales
charge pursuant to the terms described under "General," below and
(ii) Class A Shares purchased in transactions of less than $1
million and when certain special dealer arrangements are not in
effect under "Certain Investment Companies" set forth under
"Reduced Sales Charges," below.)
When you purchase CDSC Class A Shares you will not pay a
sales charge at the time of purchase, and the Distributor will pay
to any dealer effecting such a purchase an amount equal to 1% of
the sales price of the shares purchased for purchases of $1 million
but less than $2.5 million, 0.50 of 1% for purchases of $2.5
million but less than $5 million, and 0.25 of 1% for purchases of
$5 million or more, if the CDSC Class A Shares remain outstanding
for a period of at least one year. A pro-rata portion of this fee
will be payable for each day the CDSC Class A Shares are
outstanding in the first one-year period following issuance of such
shares. The fee payable for each calendar quarter will be made
within fifteen days of the end of that quarter.
If you redeem all or part of your CDSC Class A Shares
during the four years after your purchase of such shares, at the
time of redemption you will be required to pay to the Distributor
a special contingent deferred sales charge based on the lesser of
(i) the net asset value of your redeemed CDSC Class A Shares at the
time of purchase or (ii) the net asset value of your redeemed CDSC
Class A Shares at the time of redemption (the "Redemption Value").
The special charge will be an amount equal to 1% of the Redemption
Value if the redemption occurs within the first two years after
purchase, and 0.50 of 1% of the Redemption Value if the redemption
occurs within the third or fourth year after purchase. The special
charge will apply to redemptions of CDSC Class A Shares purchased
without a sales charge pursuant to a Letter of Intent, as described
below under "Reduced Sales Charges." The special charge does not
apply to shares acquired through the reinvestment of dividends on
CDSC Class A Shares or to any CDSC Class A Shares held for more
than four years after purchase. In determining whether the special
charge is applicable, it will be assumed that the CDSC Class A
Shares you have held the longest are the first CDSC Class A Shares
to be redeemed, unless you instruct the Agent otherwise. It will
also be assumed that if you have both CDSC Class A Shares and non-
CDSC Class A Shares the non-CDSC Class A Shares will be redeemed
first.
For purposes of determining the holding period for CDSC Class
A Shares, all of your purchases made during a calendar month will
be deemed to have been made on the first business day of that month
at the average cost of all purchases made during that month. The
four-year holding period will end on the first business day of the
48th calendar month after the date your purchase is deemed to have
been made. Accordingly, the CDSC holding period applicable to your
CDSC Class A Shares may be up to one month less than the full 48
months depending upon when your actual purchase was made during a
month. Running of the 48-month CDSC holding period will be
suspended for one month for each period of thirty days during which
you have held shares of a money market fund you have received in
exchange for CDSC Class A Shares under the Exchange Privilege. (See
"Exchange Privilege.")
Reduced Sales Charges for Certain Purchases of Class A
Shares
Right of Accumulation: If you are a "single purchaser" you may
benefit from a reduction of the sales charge in accordance with the
above schedule for subsequent purchases of Class A Shares if the
cumulative value (at cost or current net asset value, whichever is
higher) of Class A Shares you have previously purchased with a
sales charge, together with Class A Shares of your subsequent
purchase with such a charge, amounts to $50,000 or more.
Letters of Intent: The foregoing schedule of reduced sales
charges will also be available to "single purchasers" who enter
into a written Letter of Intent (included in the Application)
providing for the purchase, within a thirteen-month period, of
Class A Shares of the Fund through a single selected dealer or
through the Distributor. Class A Shares of the Fund which you
previously purchased during a 90-day period prior to the date of
receipt by the Distributor of your Letter of Intent and which you
still own may also be included in determining the applicable
reduction. For further details, including escrow provisions, see
the Letter of Intent provisions of the Application.
General: Class A Shares may be purchased at the next
determined net asset value by the Fund's Trustees and officers, by
the Trustees and officers of any other fund in the Aquilasm Group
of Funds, by the directors, officers and certain employees, retired
employees and representatives of the Sub-Adviser and its
affiliates, the Adviser and the Distributor, by selected dealers
and brokers and their officers and employees, by a pension,
profit-sharing or other employee benefit plan qualified or
non-qualified under Section 401 of the Code, by tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of the Code,
by certain persons connected with firms providing legal,
advertising or public relations assistance, by certain family
members of, and plans for the benefit of, the foregoing, and for
the benefit of trust or similar clients of banking institutions
over which these institutions have full investment authority if the
Distributor has entered into an agreement relating to such
purchases. Except for the last category, purchasers must give
written assurance that the purchase is for investment and that the
Class A Shares will not be resold except through redemption. There
may be tax consequences of these purchases. Such purchasers should
consult their own tax counsel. Class A Shares may also be issued at
net asset value in a merger, acquisition or exchange offer made
pursuant to a plan of reorganization to which the Fund is a party.
If you own shares of any other fund in the Aquilasm Group of Funds
(see "Exchange Privilege") and have an account in the Fund,
arrangements may be made to have dividends paid by that other fund
automatically invested in shares of the Fund at net asset
value.
The Fund permits the sale of its Class A Shares at prices that
reflect the reduction or elimination of the sales charge to
investors who are members of certain qualified groups meeting the
following requirements. A qualified group (i) is a group or
association, or a category of purchasers who are represented by a
fiduciary, professional or other representative (other than a
registered broker-dealer), which (ii) satisfies uniform criteria
which enable the Distributor to realize economies of scale in its
costs of distributing shares; (iii) gives its endorsement or
authorization (if it is a group or association) to an investment
program to facilitate solicitation of its membership by a broker or
dealer; and (iv) complies with the conditions of purchase that are
set forth in any agreement entered into between the Fund and the
group, representative or broker or dealer. At the time of purchase
you must furnish the Distributor with information sufficient to
permit verification that the purchase qualifies for a reduced sales
charge, either directly or through a broker or dealer.
Certain Investment Companies: Class A Shares of the Fund may
be purchased at net asset value without sales charge (except as set
forth below under "Special Dealer Arrangements") to the extent that
the aggregate net asset value of such Class A Shares does not
exceed the proceeds from a redemption (a "Qualified Redemption"),
made within 120 days prior to such purchase, of shares of another
investment company on which a sales charge, including a contingent
deferred sales charge, has been paid. Additional information is
available from the Distributor.
To qualify, the following special procedures must be
followed:
1. A completed Application (included in the Prospectus) and
payment for the shares to be purchased must be sent to the
Distributor, Aquila Distributors, Inc., 380 Madison Avenue,
Suite 2300, New York, NY 10017 and should not be sent to the
Shareholder Servicing Agent of the Fund, Administrative Data
Management Corp. (This instruction replaces the mailing
address contained on the Application.)
2. The Application must be accompanied by evidence
satisfactory to the Distributor that the prospective
shareholder has made a Qualified Redemption in an amount at
least equal to the net asset value of the Class A Shares to be
purchased. Satisfactory evidence includes a confirmation of
the date and the amount of the redemption from the investment
company, its transfer agent or the investor's broker or
dealer, or a copy of the investor's account statement with the
investment company reflecting the redemption transaction.
3. You must complete and return to the Distributor a Transfer
Request Form, which is available from the Distributor.
The Fund reserves the right to alter or terminate this
privilege at any time without notice. The Prospectus will be
supplemented to reflect such alteration or termination.
Special Dealer Arrangements: During certain periods determined
by the Distributor, the Distributor (not the Fund) will pay to any
dealer effecting a purchase of Class A Shares of the Fund using the
proceeds of a Qualified Redemption the lesser of 1% of such
proceeds or the same amounts described under "Purchases of $1
Million or More" above on the same terms and conditions. Class A
Shares of the Fund issued in such a transaction will be CDSC Class
A Shares and if you thereafter redeem all or part of such shares
during the four-year period from the date of purchase you will be
subject to the special contingent deferred sales charge described
under "Purchases of $1 Million or More," above, on the same terms
and conditions. Whenever the Special Dealer Arrangements are in
effect the Prospectus will be supplemented.
How to Purchase Class C Shares (Level Payment Class Shares)
Level Payment Class Shares (Class C Shares) are offered at net
asset value with no sales charge payable at purchase. A level
charge is imposed for service and distribution fees for the first
six years after the date of purchase at the aggregate annual rate
of 1% of the average annual net assets of the Fund represented by
the Class C Shares. In addition, Class C Shares are subject to a
contingent deferred sales charge ("CDSC") if redeemed before you
have held them for 12 months from the date of purchase at the rate
of 1%, calculated on the net asset value of the Class C Shares at
the time of purchase or of redemption, whichever is less. There is
no CDSC after Class C Shares have been held beyond the applicable
period. The CDSC does not apply to shares acquired through the
reinvestment of dividends on Class C Shares.
The Distributor will pay to any dealer effecting a purchase of
Class C Shares an amount equal to 1% of the sales price of the
Class C Shares purchased.
Additional Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of any
class of shares of the Fund. Additional compensation may include
payment or partial payment for advertising of the Fund's shares,
payment of travel expenses, including lodging, incurred in
connection with attendance at sales seminars taken by qualifying
registered representatives to locations within or outside of the
United States, other prizes or financial assistance to securities
dealers in offering their own seminars or conferences. In some
instances, such compensation may be made available only to certain
dealers whose representatives have sold or are expected to sell
significant amounts of such shares. Dealers may not use sales of
the Fund's shares to qualify for the incentives to the extent such
may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers,
Inc. The cost to the Distributor of such promotional activities and
such payments to participating dealers will not exceed the amount
of the sales charges in respect of sales of all classes of shares
of the Fund effected through such participating dealers, whether
retained by the Distributor or reallowed to participating dealers.
No such additional compensation to dealers in connection with sales
of shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and Dealers may receive different levels of
compensation for selling different classes of shares.
Systematic Payroll Investments
If your employer has established with the Fund a Systematic
Payroll Investment Plan ("Payroll Plan") you may arrange for
systematic investments into the Fund through a Payroll Plan.
Investments can be made in either Class A Shares or Class C Shares.
In order to participate in a Payroll Plan, you should make
arrangements with your own employer's payroll department, and you
must complete and sign any special application forms which may be
required by your employer. You must also complete the Application
included in the Prospectus. Once your application is received and
put into effect, under a Payroll Plan the employer will make a
deduction from payroll checks in an amount you determine, and will
remit the proceeds to the Fund. An investment in the Fund will be
made for you at the offering price, which includes applicable sales
charges determined as described above, when the Fund receives the
funds from your employer. The Fund will send a confirmation of each
transaction to you. To change the amount of or to terminate your
participation in the Payroll Plan (which could take up to ten
days), you must notify your employer.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to you
in an account maintained for you at the Agent in full and
fractional shares of the Fund (rounded to the nearest 1/1000th of
a share).
No share certificates will be issued for Class C Shares. Share
certificates for Class A Shares will be issued only if you so
request in writing to the Agent. All share certificates previously
issued by the Fund represent Class A Shares. No certificates will
be issued for fractional Class A shares or if you have elected
Automatic Investment or Telephone Investment for Class A Shares
(see "How to Invest in the Fund" above) or Expedited Redemption
(see "How to Redeem Your Investment" below). If certificates for
Class A Shares are issued at your request, Expedited Redemption
Methods described below will not be available. In addition, you may
incur delay and expense if you lose the certificates.
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 (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule 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 written plan
adopted under the Rule. The Plan has three parts.
Under the Plan, the Fund is authorized to make payments with
respect to Class A Shares ("Class A Permitted Payments") to
Qualified Recipients, which Permitted Payments shall be made
through the Distributor or shareholder servicing agent as
disbursing agent, which may not exceed, for any fiscal year of the
Fund (as adjusted for any part or parts of a fiscal year during
which payments under the Plan are not accruable or for any fiscal
year which is not a full fiscal year), 0.25 of 1% of the average
annual net assets represented by the Class A Shares of the Fund.
Such payments shall be made only out of the Fund's assets allocable
to the Class A Shares. "Qualified Recipients" means broker-dealers
or others selected by the Distributor, including but not limited to
any principal underwriter of the Fund, with which the Distributor
has entered into written agreements and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Fund's Class A Shares or
servicing of accounts of shareholders owning Class A Shares.
Under another part of the Plan, the Fund is authorized to make
payments with respect to Class C Shares ("Class C Permitted
Payments"), to Qualified Recipients. Class C Permitted Payments
shall be made through the Distributor or shareholder servicing
agent as disbursing agent, and may not exceed, for any fiscal year
of the Fund (as adjusted for any part or parts of a fiscal year
during which payments under the Plan are not accruable or for any
fiscal year which is not a full fiscal year), 0.75 of 1% of the
average annual net assets represented by the Class C Shares of the
Fund. Such payments shall be made only out of the Fund's assets
allocable to the Class C Shares. "Class C Qualified Recipients"
means broker-dealers or others selected by the Distributor,
including but not limited to any principal underwriter of the Fund,
with which the Distributor has entered into written agreements and
which have rendered assistance (whether direct, administrative, or
both) in the distribution and/or retention of the Fund's Class C
Shares or servicing of accounts of shareholders owning Class C
Shares. Payments with respect to Class C Shares during the first
year after purchase are paid to the Distributor and thereafter to
other Qualified Recipients.
Another part of the Plan is designed to protect against any
claim against or involving the Fund that some of the expenses which
might be considered to be sales-related which the Fund pays or may
pay come within the purview of the Rule. The Fund believes that
except for Permitted Payments it is not financing any such activity
and does not consider any payment enumerated in this part of 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 the Rule. If and to the extent that any payment as
specifically listed in the Plan (see the Additional Statement) is
considered to be primarily intended to result in or as indirect
financing of any activity which is primarily intended to result in
the sale of Fund shares, these payments are authorized under the
Plan. In addition, if the Administrator, out of its own funds,
makes payment for distribution expenses such payments are
authorized. See the Additional Statement.
Shareholder Services Plan for Class C Shares
Under a Shareholder Services Plan, the Fund is authorized
to make payments with respect to Class C Shares ("Service Fees") to
Qualified Recipients. Service Fees shall be paid through the
Distributor or shareholder servicing agent as disbursing agent, and
may not exceed, for any fiscal year of the Fund (as adjusted for
any part or parts of a fiscal year during which payments under the
Plan are not accruable or for any fiscal year which is not a full
fiscal year), 0.25 of 1% of the average annual net assets
represented by the Class C Shares of the Fund. Such payments shall
be made only out of the Fund's assets represented by the Class C
Shares. "Qualified Recipients" means broker-dealers or others
selected by the Distributor, including but not limited to any
principal underwriter of the Fund, with which the Distributor has
entered into written agreements and which have agreed to provide
personal services to holders of Class C Shares and/or maintenance
of Class C shareholder accounts. See the Additional Statement.
Service Fees with respect to Class C Shares will be paid to the
Distributor.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your shares at the net asset
value next determined after acceptance of your redemption request
at the Agent (subject to any applicable contingent deferred sales
charge for redemptions of Class C Shares and CDSC Class A Shares).
For redemptions of Class C Shares and CDSC Class A Shares, at the
time of redemption a sufficient number of additional shares will be
redeemed to pay for any applicable contingent deferred sales
charge. Redemptions can be made by the various methods described
below. There is no minimum period for any investment in the Fund,
except for shares recently purchased by check, Automatic Investment
or Telephone Investment as discussed below. Except for CDSC Class
A Shares (see "Purchases of $1 Million or More") there are no
redemption fees or withdrawal penalties for Class A Shares. Class
C Shares are subject to a contingent deferred sales charge if
redeemed before they have been held 12 months from the date of
purchase. (See "Alternative Purchase Plans.") A redemption may
result in a transaction taxable to you. If you own both Class A
Shares and Class C Shares and do not specify which you wish to
redeem, it will be assumed that you wish to redeem Class A
Shares.
For your convenience the Fund offers expedited redemption for
all classes of shares to provide you with a high level of liquidity
for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares of any
class not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed
to you, if your shares are registered in your name at the
Fund and the check is sent to your address of record,
provided that there has not been a change of your address
of record during the 30 days preceding your redemption
request. You can make only one request for telephone
redemption by check in any 7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-************* toll free or ****************
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(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 908-855-5730 or by
mail at 581 Main Street, Woodbridge, NJ 07095-1198, indicating
account name(s), 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 the Application or the Ready
Access Features form and provide the required information
concerning your Financial Institution account number. The Financial
Institution account must be in the exclusive name(s) of the
shareholder(s) as registered with the Fund. You may change the
designated Financial Institution account at any time by completing
and returning a Ready Access Features form. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Class A
Shares to be redeemed should be sent in blank (unsigned) to
the Fund's Shareholder Servicing Agent: Administrative Data
Management Corp., Attn: Aquilasm Group of Funds, 581 Main
Street, 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 Shareholder Servicing Agent.
For your own protection, it is essential that certificates be
mailed separately from signed redemption documentation. Because of
possible mail problems, it is also recommended that certificates be
sent by registered mail, return receipt requested.
For a 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. Signature guarantees may be required if sufficient
documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
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
Expedited Redemption to a predesignated Financial Institution
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, 581 Main Street, Woodbridge, NJ 07095-1198,
containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the
Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
above.
Redemption Payments
Redemption payments will ordinarily be mailed to you at
your address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. The Fund may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. The Fund
has no present intention of making this charge. Upon 30 days'
written notice to shareholders, the Fund may modify or terminate
the use of the Automated Clearing House to make redemption payments
at any time or charge a service fee, although no such fee is
presently contemplated. If any such changes are made, the
Prospectus will be supplemented to reflect them. If you use a
broker or dealer to arrange for a redemption, it may charge you a
fee for this service.
The Fund will normally make payment for all shares redeemed on
the next business day (see "Net Asset Value Per Share") following
acceptance of the redemption request made in compliance with one of
the redemption methods specified above. Except as set forth below,
in no event will payment be made more than seven days after
acceptance of such a redemption request. 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 of shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the Financial
Institution on which the purchase check was drawn, or from which
the funds for Automatic Investment or Telephone Investment were
transferred, satisfactory to the Agent and the Fund, that the
purchase check or Automatic Investment or Telephone Investment will
be honored. Possible delays in payment of redemption proceeds can
be eliminated by using wire payments or Federal Reserve drafts to
pay for purchases.
If the Trustees determine 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
Additional Statement 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 as a result of shareholder redemptions or failure to
meet the minimum investment level under an Automatic Purchase
Program. If the Board 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.
Reinvestment Privilege
You may reinvest without payment of any additional sales
charge all or part of any redemption proceeds within 120 days of a
redemption of shares in shares of the Fund of the same class as the
shares redeemed at the net asset value next determined after the
Agent receives your reinvestment order. In the case of Class C
Shares or CDSC Class A Shares on which a contingent deferred sales
charges was deducted at the time of redemption, the Distributor
will refund to you the amount of such sales charge, which will be
added to the amount of the reinvestment. The Class C Shares or CDSC
Class A Shares issued on reinvestment will be deemed to have been
outstanding from the date of your original purchase of the redeemed
shares, less the period from redemption to reinvestment. The
reinvestment privilege for any class may be exercised only once a
year, unless otherwise approved by the Distributor. If you have
realized a gain on the redemption of your shares, the redemption
transaction is taxable, and reinvestment will not alter any capital
gains tax payable. If there has been a loss on the redemption, some
or all of the loss may be tax deductible, depending on the amount
reinvested and the length of time between the redemption and the
reinvestment. You should consult your own tax advisor on this
matter.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own
or purchase shares Class A Shares of the Fund having a net asset
value of at least $5,000. The Automatic Withdrawal Plan is not
available for Class C Shares.
Under an Automatic Withdrawal Plan 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. Redemption of Class A
Shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.
Purchase of additional Class A Shares concurrently with
withdrawals are undesirable because of sales charges when purchases
are made. Accordingly, a Planholder may not maintain an Automatic
Withdrawal Plan while simultaneously making regular purchases.
While an occasional lump sum investment may be made, such
investment should normally be an amount at least equal to three
times the annual withdrawal or $5,000, whichever is less.
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 Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
The Sub-Advisory Agreement
Ferguson, Wellman, Rudd, Purdy & Van Winkle, Inc. (the "Sub-
Adviser") supervises the investment program of the Fund and the
composition of its portfolio.
The services of the Sub-Adviser are rendered under an
Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement")
which provides, subject to the control of the Board of Trustees,
for investment supervision. The Sub-Advisory Agreement states that
the Sub-Adviser shall, at its expense, provide to the Fund all
office space and facilities, equipment and clerical personnel
necessary for the carrying out of the Sub-Adviser's duties under
the Sub-Advisory Agreement. At the Sub-Adviser's expense the Sub-
Adviser shall provide for pricing of the Fund's portfolio daily
using a pricing service or other source of pricing information
satisfactory to the Fund and, unless otherwise directed by the
Board of Trustees, for pricing of the Fund's portfolio at least
quarterly using another such source satisfactory to the Fund.
Under the Sub-Advisory Agreement, the Sub-Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Sub-Adviser.
Under the Sub-Advisory Agreement, the Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to shareholders and the costs
of printing or otherwise producing and distributing those copies of
such prospectuses, statements of additional information and reports
as are sent to its shareholders. Under the Sub-Advisory Agreement,
all costs and expenses not expressly assumed by the Sub-Adviser or
by the Adviser under the Advisory and Administration Agreement or
by the Fund's Distributor (principal underwriter) are paid by the
Fund. The Sub-Advisory Agreement lists examples of such expenses
borne by the Fund, the major categories of such expenses being:
legal and audit expenses, custodian and transfer agent, or
shareholder servicing agent fees and expenses, stock issuance and
redemption costs, certain printing costs, registration costs of the
Fund and its shares under Federal and State securities laws,
interest, taxes and brokerage commissions, and non-recurring
expenses, including litigation.
Under the Sub-Advisory Agreement, the Fund pays a Sub-Advisory
fee computed on the net asset value of the Fund as set forth in the
table that appears below.
The Sub-Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. In general, the primary consideration in
effecting transactions for the Fund is obtaining the most favorable
prices and efficient execution. This means that the Sub-Adviser
will seek to execute each transaction at a price and commission, if
any, which provide the most favorable total cost or proceeds
reasonably attainable in the circumstances. While the Sub-Adviser
generally seeks reasonably competitive spreads or commissions, the
Fund will not necessarily be paying the lowest spread or commission
available. The Sub-Adviser has complete freedom as to the markets
in which and the broker-dealers through whom (acting on an agency
basis or as principal) it operates to seek this result. The Sub-
Adviser may consider a number of factors in determining which
broker-dealers to use. These factors, which are more fully
discussed in the Additional Statement, include, but are not limited
to, research services, the reasonableness of commissions and
quality of services and execution. The Sub-Adviser is authorized to
consider sales of shares of the Fund.
The Advisory and Administration Agreement
Aquila Management Corporation, founder of the Fund, serves as
Adviser and Administrator (the "Adviser") for the Fund under an
Advisory and Administration Agreement (the "Advisory and
Administration Agreement"). The Adviser is the founder and serves
as administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $*** million, all as of May 15, 1996.
At its own expense, the Adviser 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 Adviser.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
such advisory services to the Fund, in addition to those services
provided by the Sub-Adviser, as the Adviser deems appropriate.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
all administrative services to the Fund other than those relating
to its investment portfolio handled by the Sub-Adviser under the
Sub-Advisory Agreement. Such administrative services include, but
are not limited to, overseeing all relationships between the Fund
and its various support organizations including the transfer agent,
custodian, legal counsel, auditors and principal underwriter. Its
services include 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.
Additionally, the Adviser either keeps the accounting and other
books and records of the Fund, including the computation of net
asset value per share and the dividends (utilizing daily pricing of
the securities in the Fund's portfolio performed by the Sub-Adviser
under the Sub-Advisory Agreement) or, at its expense and
responsibility, delegates such duties in whole or in part to a
company satisfactory to the Fund. See the Additional Statement for
a further description of functions listed in the Advisory and
Administration Agreement as part of such duties.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
sub-advisory services to the Fund, which include review of the
investment activities of the Fund, and may include providing the
Sub-Adviser and the Fund with material relevant to the investment
in securities of issuers in various states. Although such event is
not anticipated, if the Sub-Advisory Agreement were terminated, the
Adviser would assume the duties of managerial investment adviser,
in addition to continuing its duties as adviser and administrator,
subject to and in compliance with the 1940 Act and the
rules thereunder. In such event, it would be paid an additional fee
at the rate currently paid to the Sub-Adviser. See the Additional
Statement.
The Advisory and Administration Agreement contains provisions
as to the Adviser's allocation of the portfolio transactions of the
Fund similar to those in the Sub-Advisory Agreement; see the
Additional Statement.
Under the Advisory and Administration Agreement, the Fund pays
an advisory and administration fee computed on the net asset value
of the Fund as described in the table below.
Sub-Advisory and Advisory and Administration Fees
Under the Sub-Advisory Agreement and the Advisory and
Administration Agreement, the Fund pays fees to the Sub-Adviser and
Adviser which are payable monthly and computed on the net asset
value of the Fund at the end of each business day at different
levels, depending on the net assets of the Fund. The aggregate
annual rate of the fees payable with respect to net assets at
different levels are set forth in the following table:
<TABLE>
<CAPTION>
Aggregate Annual Rates
Sub- Advisory and
Fund Net Assets Advisory Fee Administration Fee Total Fees
<S> <C> <C> <C>
Up to $15 million..... 0.70 of 1% 0.80 of 1% 1.50%
$15 million up to
$50 million........ 0.55 of 1% 0.65 of 1% 1.20%
Above $50 million..... 0.40 of 1% 0.50 of 1% 0.90 of 1%
</TABLE>
The Sub-Adviser and the Adviser may each waive all or part of
their respective fees during the early development phase of the
Fund. The combined fees paid by the Fund to the Sub-Adviser and the
Adviser are higher than those paid by most other investment
companies. In authorizing such fees, the Board of Trustees
considered a number of factors including the difficulties of
managing a portfolio oriented primarily to the Northwestern Region,
and the expertise with respect to that area possessed by both the
Sub-Adviser and the Adviser.
The Sub-Adviser and Adviser have each agreed that their
respective fees shall be reduced, but not below zero, by an amount
equal to their respective pro-rata portions (based upon the
aggregate fees of the Sub-Adviser and the Adviser) 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 most
restrictive expense limitation imposed upon the Fund in the states
in which shares are then eligible for sale. At the present time
none of the states in which the Fund's shares will be sold have any
such limitation.
Information about the Adviser and Administrator,
the Sub-Adviser and the Distributor
The Fund's founder, Adviser and Administrator is administrator
to the Aquilasm Group of Funds, which consists of 14 funds: seven
tax-free municipal bond funds, five money market funds and two
equity funds including the Fund. As of December 31, 1995, these
funds had aggregate assets of approximately $2.7 billion, of which
approximately $800 million consisted of assets of money market
funds and $1.9 billion consisted of assets of the tax-free bond
funds.
The Adviser and Administrator, which was founded in 1984, is
controlled by Mr. Lacy B. Herrmann (directly, through a trust and
through share ownership by his wife). See the Additional Statement
for information on Mr. Herrmann and these arrangements. The Fund's
founder and Adviser and Administrator is the founder and serves as
administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $25 million, all as of May 15, 1996.
The Sub-Adviser is Ferguson, Wellman, Rudd, Purdy & Van
Winkle, Inc. As the Fund's local investment-adviser, it provides
professional investment advisory services to a broad base of
clients and currently manages over $1 billion in clients' assets,
of which approximately $400 million consists of equity investments.
Ferguson, Wellman is a full service investment advisory firm
serving institutional and individual investors with investments in
publicly traded stocks, bonds and cash securities.
Founded in 1975, Ferguson, Wellman operates as a private
corporation from their offices in Portland, Oregon. The Sub-Adviser
is employee owned, with over two-thirds of the company's employees
owning stock. The Sub-Adviser manages a conservative mix of
publicly traded stocks, government and corporate bonds as well as
other fixed income investments and cash management securities for
a diversified group of investors including corporate, union, public
and individual retirement funds, taxable corporate and individual
investors, family trusts, endowments, foundations and special
investment accounts. The Sub-Adviser has enjoyed consistent,
controlled growth of assets managed since beginning operations
twenty years ago.
Ferguson, Wellman implements a team-oriented equity investment
process utilizing the collective experience and knowledge of each
of five equity portfolio managers/analysts. The equity team divides
research by industry classification and each manager/analyst
prepares both industry research and research and recommendations on
individual issues within the industry and presents all research at
regular meetings of the equity team. Two Senior Vice Presidents and
Portfolio Managers, George W. Hosfield, CFA and Dean M. Dordevic,
share final responsibility for implementation of the investment
process for the Fund. Mr. Hosfield joined Ferguson, Wellman in
1991. He holds a B.S. in management and MBA in finance from the
University of Oregon. He is a Chartered Financial Analyst and a
member and past president of the Portland Society of Financial
Analysts. Prior to joining Ferguson, Wellman, Mr. Hosfield served
as Vice President and Portfolio Manager with Qualivest Capital
Management and an account executive with Smith Barney, Harris Upham
& Co. Mr. Dordevic came to Ferguson, Wellman in 1994 after serving
eleven years as Senior Vice President and Portfolio Manager with
Kidder Peabody Asset Management in New York City. Mr. Dordevic
holds a B.A. in finance from Trinity University in San Antonio,
Texas and is a member of the New York Society of Securities
Analysts. Mr. Dordevic began his career as a consultant for high-
net-worth individuals with E.F. Hutton & Co. in New York.
The Distributor currently handles the distribution of the
shares of fourteen funds, five money market funds, seven tax-free
municipal bond funds, another regionally-oriented equity fund and
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.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned by Mr. Herrmann, will be owned by certain directors
and/or officers of the Sub-Adviser and/or the Distributor including
Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
The Fund distributes dividends from net investment income on
an annual basis following the end of its fiscal year which is
December 31 in each year. If the Fund has had net long-term capital
gains or net short-term capital gains for the year, it distributes
dividends on those items at the same time. Short-term capital gains
include the gains from the disposition of securities held less than
one year, the premiums from expired call options written by the
Fund and net gains from closing transactions with respect to such
options. If required by tax laws to avoid excise or other taxes,
dividends and/or capital gains distributions may be made more
frequently. Dividends and other distributions paid by the Fund with
respect to Class A Shares and Class C Shares are calculated at the
same time and in the same manner. The per-share dividends of Class
C Shares will be lower than the per-share dividends on the Class A
Shares as a result of the higher service and distribution fees
applicable to those shares. In addition, the dividends of each
class can vary because each class will bear certain class-specific
charges.
Unless you request otherwise by letter addressed to the Agent
or by filing an appropriate application prior to a given ex-
dividend date, dividends and distributions will be automatically
reinvested in full and fractional shares of the Fund at net asset
value on the record date for the dividend or distribution or other
date fixed by the Board of Trustees. An election to receive cash
will continue in effect until written notification of a change is
received by the Agent. All shareholders, whether their dividends
are received in cash or are being reinvested, will receive a
quarterly account summary indicating the current status of their
investment. There is no fixed dividend rate.
Tax Information
The Fund intends to qualify for taxation as a regulated
investment company under the provisions of Subchapter M of the
Internal Revenue Code. As such, the Fund will not be taxed on its
net investment income or its net realized capital gains, if any, to
the extent they have been distributed to the Fund's shareholders.
Distribution from the Fund's net income and net short-term capital
gains are taxed as ordinary income. If the Fund has net long-term
capital gains which are greater than its net short-term capital
loses, it will distribute the excess and such distribution will be
taxed to you as long-term capital gains, regardless of how long you
have held your shares. Although distributions will be made in
January, you must report the income or capital gain on your return
for the prior calendar year, assuming you file your returns on a
calendar year basis.
For purposes of Federal income tax, certain options, if any,
held by the Fund at the end of its fiscal year generally will be
treated as having been sold at market value. As a general rule any
gain or loss on such contracts will be treated as 60% long-term and
40% short-term. See the Additional Statement for more detail on the
tax aspects of options. Dividends paid by the Fund will qualify for
the dividends received deduction for corporations only to the
extent that they represent payment of qualifying dividend income
received by the Fund. Shortly after the end of each calendar year,
the Fund will send you a statement of the amount and nature of net
income and capital gains.
Distributions from the Fund, whether ordinary income or
capital gain in nature, will be taxable to you whether you take
them in cash or have them automatically reinvested in shares of the
Fund.
The Fund will be obliged to withhold certain percentages of
distributions and pay over the amounts to the Internal Revenue
Service in either of two instances:
(1) if you do not supply the Fund or the institution through
which you receive distributions with your correct taxpayer
identification number, which for most individuals is their Social
Security number, the Fund will have to withhold 31% on ordinary
income dividends, capital gains dividends and redemption payments;
and
(2) if you are a non-resident alien or foreign entity, the
Fund will have to withhold 30% (or lower rate provided by treaty
with the country in which the alien or entity resides).
As of the date of the Prospectus, Congress is considering a
number of changes affecting taxation. It is not possible to predict
which, if any, of such changes will become law.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid for
the shares. If you are required to pay a conditional deferred sales
charge at the time of redemption, the amount of that charge will
reduce the amount of your gain or increase the amount of your loss
as the case may be. The gain or loss will be long-term if you held
the redeemed shares for over a year, and short-term, if for a year
or less. However, if shares held for six months or less are
redeemed and you have a loss, two special rules apply: the loss is
reduced by the amount of exempt-interest dividends, if any, which
you received on the redeemed shares, and any loss over and above
the amount of such exempt-interest dividends is treated as a long-
term loss to the extent you have received capital gains dividends
on the redeemed shares.
Tax Effect of Conversion
Class C Shares will automatically convert to Class A Shares
approximately six years after purchase. No gain or loss will be
recognized by the Fund or its shareholders upon such conversions;
each shareholder's adjusted tax basis in the Class A Shares
received upon conversion will equal the shareholder's adjusted tax
basis in the Class C Shares held immediately before the conversion;
and each shareholder's holding period for the Class A Shares
received upon conversion will include the period for which the
shareholder held as capital assets the converted Class C Shares
immediately before conversion.
The above information is a summary of the tax treatment that
will be applied to the Fund and its distributions. If you have any
questions, you should contact your tax adviser, particularly in
connection with state and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Fund and certain tax-free municipal bond funds and an equity
fund (the "Bond or Equity Funds") and certain money market funds
(the "Money-Market Funds"), all of which are sponsored by Aquila
Management Corporation and Aquila Distributors, Inc., and have the
same Administrator and Distributor as the Fund. All exchanges are
subject to certain conditions described below. As of the date of
the Prospectus, the Aquila Bond or Equity Funds are this Fund,
Aquila Rocky Mountain Equity Fund, Hawaiian Tax-Free Trust, Tax-
Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For
Utah and Narragansett Insured Tax-Free Income Fund; the Aquila
Money-Market Funds are Capital Cash Management Trust, Pacific
Capital Cash Assets Trust (Original Shares), Pacific Capital Tax-
Free Cash Assets Trust (Original Shares), Pacific Capital U.S.
Treasuries Cash Assets Trust (Original Shares) and Churchill Cash
Reserves Trust.
Class A Shares of the Fund can be exchanged only into Class A
Shares of any Bond or Equity Fund or into shares of the Money-
Market Funds. Class C Shares can be exchanged only into Class C
Shares of any Bond or Equity Fund that offers Class C Shares or
into shares of the Money-Market Funds.
Class A Shares Exchange Privilege
Under the Class A Shares exchange privilege, once any
applicable sales charge has been paid on Class A Shares of any Bond
or Equity Fund, those shares (and any shares acquired as a result
of reinvestment of dividends and/or distributions) may be exchanged
any number of times between Money-Market Funds and Bond or Equity
Funds without the payment of any additional sales charge.
CDSC Class A Shares of the Fund (see "Purchases of $1 Million
or More" and Special Dealer Arrangements") can be exchanged for
CDSC Class A Shares of a Bond or Equity Fund or into a Money-Market
Fund. The CDSC Class A Shares will not be subject to a contingent
deferred sales charge at the time of exchange, but the contingent
deferred sales charge will be payable upon a redemption which
occurs before the expiration of the applicable holding period of
any CDSC Class A Shares or any shares of a Money-Market Fund
received on exchange for CDSC Class A Shares. (The contingent
deferred sales charge does not apply to any shares acquired as a
result of reinvestment of dividends and/or distributions.) For
purposes of computing the time period for the applicable contingent
deferred sales charge, the length of time of ownership of CDSC
Class A Shares will be determined by the time of original purchase
and not by the time of the exchange. Any period of 30 days or more
during which any Money-Market shares received on an exchange of
CDSC Class A Shares are held is not counted in computing the period
of ownership of CDSC Class A Shares. (See "Alternative Purchase
Plans.")
Class C Shares Exchange Privilege
Under the Class C Shares exchange privilege, Class C Shares
(and any shares acquired as a result of reinvestment of dividends
and/or distributions) may be exchanged any number of times between
Money-Market Funds and for Class C Shares of Bond or Equity Funds.
Class C Shares will not be subject to a contingent deferred sales
charge at the time of exchange, but the contingent deferred sales
charge will be payable upon redemption which occurs before the
expiration of the applicable holding period of any Class C Shares
or any shares of a Money-Market Fund received on exchange for Class
C Shares. (The contingent deferred sales charge does not apply to
any shares acquired as a result of reinvestment of dividends and/or
distributions.) For purposes of computing the time period for the
applicable contingent deferred sales charge or for the conversion
of Class C Shares into Class A Shares, the length of time of
ownership of Class C Shares will be determined by time of original
purchase and not by the time of the exchange. Any period of 30 days
or more during which any Money-Market shares received on an
exchange of Class C Shares are held is not counted in computing the
period of ownership of Class C Shares. (See "Alternative Purchase
Plans.")
Eligible Shares
The "Class A Eligible Shares" of any Bond or Equity Fund are
those Class A Shares which were (a) acquired by direct purchase
with payment of any applicable sales charge, or which were received
in exchange for shares of another Bond or Equity Fund on which any
applicable sales charge was paid; (b) acquired by exchange for
shares of a Money-Market Fund with payment of the applicable sales
charge; (c) acquired in one or more exchanges between shares of a
Money-Market Fund and a Bond or Equity Fund so long as the shares
of the Bond or Equity Fund were originally purchased as set forth
in (a) or (b); (d) acquired on conversion of Class C Shares or (e)
acquired as a result of reinvestment of dividends and/or
distributions on otherwise Class A Eligible Shares.
The "CDSC Class A Eligible Shares" of any Bond or Equity Fund
are those CDSC Class A Shares which were (a) acquired by direct
purchase in the amount of $1 million or more without a sales charge
or in certain purchases when Special Dealer Arrangements are in
effect or which were received in exchange for CDSC Class A Shares
of another Bond or Equity Fund acquired under the same conditions;
(b) acquired by exchange for shares of a Money-Market Fund under
the same conditions; (c) acquired in one or more exchanges between
shares of a Money-Market Fund and a Bond or Equity Fund so long as
the shares of the Bond or Equity Fund were originally purchased as
set forth in (a) or (b); or (d) acquired as a result of
reinvestment of dividends and/or distributions on otherwise CDSC
Class A Eligible Shares.
The "Class C Eligible Shares" of any Bond or Equity Fund are
those shares which were (a) acquired by direct purchase including
by exchange from a Money-Market Fund, or which were received in
exchange for shares of Class C Shares of another Bond or Equity
Fund; or (b) acquired as a result of reinvestment of dividends
and/or distributions on otherwise Class C Eligible Shares.
If you own Class A or Class C Eligible Shares of any Bond or
Equity Fund, you may exchange them for shares of any Money Market
Fund or the Class A or Class C Shares, respectively, of any other
Bond or Equity Fund without payment of any sales charge or CDSC.
The shares received will continue to be Class A or Class C Eligible
shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class A Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares acquired
as a result of reinvestment of dividends and/or distributions on
these shares, for Class A Shares of any Bond or Equity Fund without
payment of any sales charge.
If you own shares of a Money-Market Fund which you have
acquired by exchange for CDSC Class A Eligible Shares of any Bond
or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for CDSC Class A shares of any Bond
or Equity Fund but you will be required to pay the applicable
contingent deferred sales charge if you redeem such shares before
you have held CDSC Class A Shares for four years. You will also be
required to pay the applicable contingent deferred sales charge if
you redeem such shares of a Money-Market Fund before you have held
CDSC Class A Shares for four years. The running of the four-year
period is suspended during the period you hold shares of a Money-
Market Fund received in exchange for CDSC Class A Shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class C Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares acquired
as a result of reinvestment of dividends and/or distributions on
these shares, for Class C Shares of any Bond or Equity Fund, but
you will be required to pay the applicable contingent deferred
sales charge if you redeem such Class C Shares before you have held
Class C Shares for 12 months. You will also be required to pay the
applicable contingent deferred sales charge if you redeem such
shares of a Money-Market Fund before you have held Class C Shares
for 12 months. The running of the 12-month CDSC period and the six-
year conversion period for Class C Shares is suspended during the
period you hold shares of a Money-Market Fund received in exchange
for Class C Shares. (See "Alternative Purchase Plans.")
Shares of a Money-Market Fund may be exchanged for shares of
another Money-Market Fund or for Class A Shares or Class C Shares
of a Bond or Equity Fund; however, if the shares of a Money-Market
Fund were not acquired by exchange of Eligible Shares of a Bond or
Equity Fund or of shares of a Money-Market Fund acquired in such an
exchange, they may be exchanged for Class A Shares of a Bond or
Equity Fund only upon payment of the applicable sales charge.
This Fund, as well as the Money-Market Funds and other Bond or
Equity Funds, reserves the right to reject any exchange into its
shares, if shares of the fund into which exchange is desired are
not available for sale in your state of residence. The Fund may
also modify or terminate this exchange privilege at any time. In
the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-*********** toll free or *************
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(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
Exchanges will be effected at the relative exchange prices of
the shares being exchanged next determined after receipt by the
Agent of your exchange request. The exchange prices will be the
respective net asset values of the shares, unless a sales charge is
to be deducted in connection with an exchange of shares, in which
case the exchange price of shares of a Bond or Equity Fund will be
their public offering price. Prices for exchanges are determined in
the same manner as for purchases of the Fund's shares. See "How to
Invest in the Fund."
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see the Additional
Statement); no representation is made as to the deductibility of
any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable, except
to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free Money-Market
Fund) are exempt from regular Federal income tax, and to the extent
that a portion or all of the dividends paid by Pacific Capital U.S.
Treasuries Cash Assets Trust (which invests in U.S. Treasury
obligations) are exempt from state income taxes. Dividends paid by
Aquila Rocky Mountain Equity Fund are taxable. If your state of
residence is not the same as that of the issuers of obligations in
which a tax-free municipal Bond Fund or a tax-free Money-Market
Fund invests, the dividends from that fund may be subject to income
tax of the state in which you reside. Accordingly, you should
consult your tax adviser before acquiring shares of such a Bond
Fund or a tax-free Money-Market Fund under the exchange privilege
arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including various expressions of total return.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes the applicable sales charge) for 1- and 5-year periods and
for a period since the inception of the Fund, to the extent
applicable, through the end of such periods, assuming reinvestment
(without sales charge) of all distributions. The Fund may also
furnish total return quotations for other periods or based on
investments at various applicable sales charge levels or at net
asset value. For such purposes total return equals the total of all
capital gains and income paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in
the value of the original investment, expressed as a percentage of
the purchase price. See the Additional Statement.
Performance figures are based upon past performance, reflect
as appropriate all recurring charges against Fund income net of fee
waivers and reimbursement of expenses, if any, and will assume the
payment of the maximum sales charge on the purchase of shares, but
not on reinvestment of income dividends for which the Fund does not
impose a sales charge.
The investment results of the Fund, like those of all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's total return may be in
any future period.
Description of the Fund and its Shares
The Fund is an open-end, diversified management investment
company originally organized in 1982 under the name Short Term
Asset Reserves, as a Massachusetts business trust. From that date
until 1993 it operated as a money-market fund. In 1993 it ceased
operations. In 1996, its name was changed to Aquila Cascadia
Pacific Equity Fund. 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). The Board of Trustees may also, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such series
will have a designation including the word "Series"). See the
Additional Statement for further information about possible
additional series. Shares are fully paid and non-assessable, except
as set forth under the caption "General Information" in the
Additional Statement; the holders of shares have no pre-emptive or
conversion rights.
In addition to Class A and Class C Shares, which are offered
by this Prospectus, the Fund also has Institutional Class Shares
("Class Y Shares"), which are offered only to institutions acting
for investors in a fiduciary, advisory, agency, custodial or
similar capacity and are not offered directly to retail customers.
Class Y Shares are offered by means of a separate prospectus, which
can be obtained by calling the Fund at 800-*********.
The primary distinction among the Fund's three classes of
shares lies in their different sales charge structures and ongoing
expenses, which are likely to be reflected in differing yields and
other measures of investment performance. All three classes
represent interests in the same portfolio of securities and have
the same rights, except that each class bears the separate
expenses, if any, of its Distribution Plan and has exclusive voting
rights with respect to its Plan.
See the notes to the "Statement of Assets and Liabilities" in
the Additional Statement for information as to the amortization of
the Fund's organizational and start-up expenses.
Voting Rights
At any meeting of shareholders, shareholders of the Fund are
entitled to one (1) vote for each dollar of net asset value
(determined as of the record date for such meeting) for each full
share held (and fractional votes for fractional shares held).
Shareholders will vote on the election of Trustees and on other
matters submitted to the vote of shareholders. See the Additional
Statement for information about shareholder voting if the Fund were
in the future to have more than one portfolio (series). 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 except that the Fund's Board of Trustees may
change the name 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>
Application for Aquila Cascadia Pacific Equity Fund
For Class A or Class C Shares only
Please complete steps 1 through 4 and mail to:
ADM, Attn: AquilaSM Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
Tel.# *************
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for ____________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** _____________________________________
Name of State Minor's Social Security Number
4. ____________________________________________________
____________________________________________________
(Name of Corporation or Partnership. If a Trust, include the name(s)
of Trustees in which account will be registered and the name and date
of the Trust Instrument. Account for a Pension or Profit Sharing Plan
or Trust may be registered in the name of the Plan or Trust itself.)
___________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
____________________________________________________
Street or PO Box City
_______________________________(______)______________
State Zip Daytime Phone Number
Occupation:________________________Employer:________________________
Employer's Address:__________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you
are a non-U.S. Citizen or resident and not subject to back-up
withholding (See certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
_______________________ _____________________________
Dealer Name Branch Number
_______________________ _____________________________
Street Address Rep. Number/Name
_______________________ (_______)_____________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
Indicate method of payment (For either method, make check
payment to: Aquila Cascadia Pacific Equity Fund)
Indicate class of shares:
__ Class A Shares (Front-Payment Class)
__ Class C Shares (Level-Payment Class)
IF NO SHARE CLASS IS MARKED, INVESTMENT WILL AUTOMATICALLY BE MADE
IN CLASS A SHARES.
__ Initial Investment $_________ (Minimum $1,000)
__ Automatic Investment $________ (Minimum $50)
For Automatic Investments of at least $50 per month, you must
complete Step 3, Section A, Step 4, Sections A & B and ATTACH
A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are
automatically reinvested in additional shares at Net Asset
Value unless otherwise indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK showing the
Financial Institution account where I/we would like you to deposit
the dividend. (A Financial Institution is a commercial bank,
savings bank or credit union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your Aquila Cascadia Pacific Equity Fund Account. To establish
this program, please complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or
on the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your
account (minimum $50 and maximum $50,000) at any time you wish by
simply calling the Fund toll-free at **************. To establish
this program, please complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. LETTER OF INTENT
APPLICABLE TO CLASS A SHARES ONLY.
See Terms of Letter of Intent and Escrow at the end of this application
___ Yes ___ No
I/We intend to invest in Class A Shares of the Fund during the
13-month period from the date of my/our first purchase pursuant
to this Letter (which purchase cannot be more than 90 days prior
to the date of this Letter), an aggregate amount (excluding any
reinvestment of dividends or distributions) of at least $25,000
which, together with my/our present holdings of Fund shares (at
public offering price on date of this Letter), will equal or
exceed the minimum amount checked below:
___ $25,000 ___ $50,000 ___ $100,000 ___ $250,000
___ $500,000 ___ $1,000,000 ___ $2,500,000 ___ $5,000,000
D. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
APPLICABLE TO CLASS A SHARES ONLY.
Application must be received in good order at least 2 weeks prior
to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions
set forth below. To realize the amount stated below, Administrative
Data Management Corp. (the Agent) is authorized to redeem sufficient
shares from this account at the then current Net Asset Value, in
accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning________________ .
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is
payable to a Financial Institution for your account, indicate
Financial Institution name, address and your account number.
_______________________________ ______________________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ______________________________________
Street Financial Institution Street Address
_______________________________ ______________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
E. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the AquilaSM Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
persons telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent,
each of the Aquila Funds, and their respective officers, directors,
trustees, employees, agents and affiliates against any liability,
damage, expense, claim or loss, including reasonable costs and
attorneys fees, resulting from acceptance of, or acting or failure to
act upon, this Authorization.
F. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
Cash proceeds in any amount from the redemption of shares will
be mailed or wired, whenever possible, upon request, if in an amount
of $1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this
Fund account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ ____________________________________
Account Registration Financial Institution Account Number
_______________________________ ____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ ____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits. I/We understand that this authority
will remain in effect until you receive my/our written instructions to
cancel this service. I/We also agree that if any such drafts or debits
are dishonored, for any reason, you shall have no liabilities.
Financial Institution Account Number _______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account is
registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila
Distributors, Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted
pursuant to the above authorization shall be subject to the
provisions of the Operating Rules of the National Automated
Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer
in connection with the execution and issuance of any electronic
debit in the normal course of business initiated by the Agent
(except any loss due to your payment of any amount drawn against
insufficient or uncollected funds), provided that you promptly
notify us in writing of any claim against you with respect to
the same, and further provided that you will not settle or
pay or agree to settle or pay any such claim without the written
permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause,
any such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is
of legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Fund and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Fund account to make up any deficiency resulting
from any decline in the net asset value of shares so purchased and any
dividends paid on those shares. I/We authorize the Fund and its agents
to correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Fund account and to charge the account for
any related charges. I/We acknowledge that shares purchased either
through Automatic Investment or Telephone Investment are subject to
applicable sales charges.
- - The Fund, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify the identity of the caller.
The Agent will request some or all of the following information:
account name and number; name(s) and social security number registered
to the account and personal identification; the Agent may also record
calls. Shareholders should verify the accuracy of confirmation
statements immediately upon receipt. Under penalties of perjury, the
undersigned whose Social Security (Tax I.D.) Number is shown above
certifies (i) that Number is my correct taxpayer identification number
and (ii) currently I am not under IRS notification that I am subject
to backup withholding (line out (ii) if under notification). If no
such Number is shown, the undersigned further certifies, under
penalties of perjury, that either (a) no such Number has been issued,
and a Number has been or will soon be applied for; if a Number is not
provided to you within sixty days, the undersigned understands that
all payments (including liquidations) are subject to 31% withholding
under federal tax law, until a Number is provided and the undersigned
may be subject to a $50 I.R.S. penalty; or (b) that the undersigned is
not a citizen or resident of the U.S.; and either does not expect to
be in the U.S. for 183 days during each calendar year and does not
conduct a business in the U.S. which would receive any gain from the
Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be
accompanied by proof of authority to sign, such as a certified
copy of the corporate resolution or a certificate of incumbency
under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment,
Expedited Redemption and Direct Deposit of Dividends) are
effective 15 days after this form is received in good order
by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after
the Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or
all features or to charge a service fee upon 30 days written notice
to shareholders except if additional notice is specifically
required by the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete
a Ready Access features form which may be obtained from Aquila
Distributors at ************** and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Fund's Agent.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 2c and signing the Application, the investor
is entitled to make each purchase at the public offering price
applicable to a single transaction of the dollar amount checked
above, and agrees to be bound by the terms and conditions applicable
to Letters of Intent appearing below.
The investor is making no commitment to purchase shares, but
if the investor's purchases within thirteen months from the date of
the investor's first purchase do not aggregate $25,000, or, if such
purchases added to the investor's present holdings do not aggregate
the minimum amount specified above, the investor will pay the increased
amount of sales charge prescribed in the terms of escrow below.
The commission to the dealer or broker, if any, named herein
shall be at the rate applicable to the minimum amount of the
investor's specified intended purchases checked above. If the
investor's actual purchases do not reach this minimum amount, the
commissions previously paid to the dealer will be adjusted to the
rate applicable to the investor's total purchases. If the investor's
purchases exceed the dollar amount of the investor's intended
purchases and pass the next commission break-point, the investor
shall receive the lower sales charge, provided that the dealer
returns to the Distributor the excess of commissions previously
allowed or paid to him over that which would be applicable to the
amount of the investor's total purchases.
The investor's dealer or broker shall refer to this Letter
of Intent in placing any future purchase orders for the investor
while this Letter is in effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary),
3% of the dollar amount specified in the Letter of Intent (computed
to the nearest full share) shall be held in escrow in shares of the
Fund by the Agent. All dividends and any capital distributions on
the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within a thirteen-month period, the escrowed shares
will be promptly released to the investor. However, shares
disposed of prior to completion of the purchase requirement
under the Letter will be deducted from the amount required to
complete the investment commitment.
3. If the total purchases pursuant to the Letter are less than the
amount specified in the Letter as the intended aggregate purchases,
the investor must remit to the Distributor an amount equal to the
difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. If such
difference in sales charges is not paid within twenty days after
receipt of a request from the Distributor or the dealer, the
Distributor will, within sixty days after the expiration of the
Letter, redeem the number of escrowed shares necessary to realize
such difference in sales charges. Full shares and any cash proceeds
for a fractional share remaining after such redemption will be
released to the investor. The escrow of shares will not be released
until any additional sales charge due has been paid as stated in
this section.
4. By checking Box 2c and signing the Application, the investor
irrevocably constitutes and appoints the Agent or the Distributor
as his attorney to surrender for redemption any or all escrowed
shares on the books of the Fund.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan
(the "Plan") as agent for the person (the "Planholder") who
executed the Plan authorization.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Agent will credit all such
shares to the Planholder on the records of the Fund. Any share
certificates now held by the Planholder may be surrendered
unendorsed to the Agent with the application so that the shares
represented by the certificate may be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the
Fund at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments
will be made at the Net Asset Value per share in effect at the
close of business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed, at
any time, by the Planholder on written notification to the
Agent. The Planholder should allow at least two weeks time in
mailing such notification before the requested change can be
put in effect.
6. The Planholder may, at any time, instruct the Agent by written
notice (in proper form in accordance with the requirements of
the then current Prospectus of the Fund) to redeem all, or any
part of, the shares held under the Plan. In such case the Agent
will redeem the number of shares requested at the Net Asset
Value per share in effect in accordance with the Fund's usual
redemption procedures and will mail a check for the proceeds of
such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on
written notice to the Agent, or by the Agent upon receiving
directions to that effect from the Fund. The Agent will also
terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon
termination of the Plan by the Agent or the Fund, shares
remaining unredeemed will be held in an uncertificated account
in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder,
his executor or guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any
action taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer
agent for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as his agent
in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals
are undesirable because of sales charges when purchases are
made. Accordingly, a Planholder may not maintain this Plan while
simultaneously making regular purchases. While an occasional
lump sum investment may be made, such investment should normally
be an amount equivalent to three times the annual withdrawal or
$5,000, whichever is less.
<PAGE>
INVESTMENT ADVISER
Ferguson, Wellman, Rudd, Purdy & Van Winkle Inc.
888 SW Fifth Avenue, Suite 1200
Portland, OR 97204-2026
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
James A. Gardner
Diana P. Herrmann
Ann R. Leven
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
William C. Wallace, Senior Vice President
Sally Wilson Church, Vice President
Nancy L. Kayani, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................
Table of Expenses................................
Financial Highlights.............................
Introduction.....................................
Investment Of The Fund's Assets..................
Investment Restrictions..........................
Net Asset Value Per Share........................
How To Invest In The Fund........................
How To Redeem Your Investment....................
Automatic Withdrawal Plan........................
Management Arrangements..........................
Dividend And Tax Information.....................
Exchange Privilege...............................
General Information..............................
Application and Letter of Intent
Aquila
Cascadia Pacific
Equity Fund
PROSPECTUS
One Of The
Aquilasm Group Of Funds
<PAGE>
Aquila
Cascadia Pacific Equity Fund
A Regional Growth Fund
380 Madison Avenue
Suite 2300
New York, New York 10017
800-******* 212-697-6666
Institutional Class Shares
Class Y Shares June 24, 1996
Prospectus
Aquila Cascadia Pacific Equity Fund (the "Fund") is a mutual
fund whose objective is capital appreciation. (See "Investment of
the Fund's Assets.") It seeks to achieve its objective through
investment in securities (primarily equity securities) of companies
having a significant business presence in the region of our
country, termed in this Prospectus the Northwestern Region,
consisting of Oregon, Washington, Idaho, Utah, Nevada, Alaska and
Hawaii. See "Investment of the Fund's Assets."
There are three classes of shares of the Fund: Institutional
Class Shares ("Class Y Shares") are offered only to institutions
acting for investors in a fiduciary, advisory, agency, custodial or
similar capacity, and are not offered directly to retail customers.
Class Y Shares are offered at net asset value with no sales charge,
no redemption fee, no contingent deferred sales charge and no
distribution fee. (See "How to Purchase Class Y Shares.") The other
classes, Front Payment Class Shares ("Class A Shares") and Level
Payment Class Shares ("Class C Shares"), are not offered by this
Prospectus. See "General Information - Description of Classes."
This Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information dated June 24, 1996 about the Fund (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request to
Administrative Data Management Corp., the Fund's Shareholder
Servicing Agent, at the address given below, or by calling the
telephone number(s) given below. The Additional Statement contains
information about the Fund and its management not included in this
Prospectus. The Additional Statement is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
the Prospectus and the Additional Statement are all material facts
about the Fund available to you.
Shares of the Fund are not deposits in, obligations of or
guaranteed or endorsed by any bank. Shares of the Fund are not
insured or guaranteed by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other governmental agency or
government-sponsored agency of the Federal Government or any
State.
An investment in the Fund involves investment risks,
including possible loss of the principal amount invested.
For Purchase, Redemption or Account inquiries contact
The Fund's Transfer Agent: Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-************ toll free or ************
For General Inquiries
Call 800-****** toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future
Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS.ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
Aquila Cascadia Pacific Equity Fund (the "Fund") is a
diversified, open-end mutual fund which continuously offers to sell
or redeem its shares on any business day (see sections of the
Prospectus on "How to Purchase or Redeem Shares"). The Fund's
shares are designed to be a suitable investment for investors who
seek capital appreciation, primarily through the securities of
companies having a significant business presence in the general
Northwestern Region of the country.
The Fund's investment objective is capital appreciation. The
Fund seeks to achieve this objective by investing primarily in
equity securities of companies having a significant business
presence in the region of our country, termed in this Prospectus
the Northwestern Region, consisting of Oregon, Washington, Idaho,
Utah, Nevada, Alaska and Hawaii. It is anticipated that under
normal circumstances, the Fund will invest at least 65%, and
possibly up to 100%, of its total assets in equity securities
issued by such companies. Companies with a significant business
presence in the Northwestern Region are defined as those companies
(i) whose principal executive offices are located in the
Northwestern Region, (ii) which have more than 50% of their assets
located in the Northwestern Region or (iii) which derive a
significant portion of their revenues or profits from the
Northwestern Region. In the Prospectus these companies are called
"Northwestern Region Companies." Since the Fund's objective is
capital appreciation, it is not expected to provide any significant
current income to investors from dividend or interest payments and
during its first fiscal year it is not expected to provide any such
distributions. (See "Table of Expenses" and "Investment of the
Fund's Assets.")
Investment Selection Criteria - The Fund will acquire only
those equity securities which, at the time of purchase, the Sub-
Adviser considers to be reasonably priced issues of financially
sound companies possessing good growth characteristics and solid
management. The Fund may also make other types of investments. (See
"Investment of the Fund's Assets".)
Regional Portfolio Management - Ferguson, Wellman, Rudd, Purdy
& Van Winkle Inc. ("Ferguson, Wellman" or the "Sub-Adviser") serves
as the Fund's regionally-located portfolio management organization.
The firm provides professional investment advisory services to a
broad base of clients and currently manages over $1 billion of
clients's assets of which approximately $400 million consists of
equity investments. The advisory facilities for the Fund are
located in Portland, Oregon. Ferguson, Wellman is an employee owned
full service investment firm, with 66% of all employees holding
equity in the company. It serves both institutional and individual
investors. The firm currently provides professional investment
advisory services to a broad base of clients. Incorporated in 1975,
Ferguson, Wellman has one central office in Portland, Oregon and is
a Registered Investment Adviser under the Investment Advisers Act
of 1940.
Aquila Management Corporation, the Fund's founder and Adviser
and Administrator, is a Registered Investment Adviser under the
Investment Advisers Act of 1940. It is the founder and serves as
administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $*** million, all as of May 15, 1996.
Diversification - The Fund will invest its assets in a number
of different securities. Additionally, investments will be spread
over a reasonably broad range of industries. Only the most affluent
investors can achieve such diversification on their own among
securities of Northwestern Region Companies. In general, a
diversified portfolio, such as is provided by the Fund, can be used
to reduce your investment risk as compared to less diversified
portfolios. See "Investment of the Fund's Assets."
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Fund," which includes applicable sales charge
information.)
Additional Investments - You may make additional investments
at any time and in any amount, directly or, if in an amount of $50
or more, through the convenience of having your investment
electronically transferred from your financial institution account
into the Fund by Automatic Investment or Telephone Investment. (See
"How to Invest in the Fund.")
Alternative Purchase Plans - The Fund provides alternative
ways to invest. (See "Description of the Fund and its Shares.") For
this purpose the Fund offers classes of shares, which differ in
their expense levels and sales charges:
Institutional Class Shares ("Class Y Shares")
are offered by this Prospectus. Class Y Shares
are offered only to institutions acting for
investors in a fiduciary, advisory, agency,
custodial or similar capacity, and are not
offered directly to retail customers. Class Y
Shares are offered at net asset value with no
sales charge, no redemption fee, no contingent
deferred sales charge and no distribution fee.
(See "How to Purchase Class Y Shares.")
The other classes, Front-Payment Class Shares ("Class A
Shares") and Level Payment Class Shares ("Class C Shares") are not
offered by this prospectus. See "General Information - Description
of Classes."
Liquidity - Redemption - You may redeem all or part of your
account on any business day at the next determined net asset value,
by telephone, FAX or mail request, with proceeds being sent to a
predesignated financial institution, if you have elected Expedited
Redemption. Proceeds will be wired or transferred through the
facilities of the Automated Clearing House, wherever possible, upon
request, if in an amount of $1,000 or more, or will be mailed. For
these and other redemption procedures see "How to Redeem Your
Investment." There are no penalties or redemption fees for
redemption of Class Y shares.
Distributions from the Fund - Distribution of any income net
of operating expenses or any net realized capital gains will be
made annually. The Fund's net income and short-term capital gains
are taxed as ordinary income, while long-term capital gains
distributions are taxed to you as long-term capital gains,
regardless of how long you have held your shares. See "Dividend and
Tax Information."
Exchanges - You may exchange Class Y Shares of the Fund into
Class Y Shares of the Aquila-sponsored tax-free municipal bond
mutual funds, or an equity fund. You may also exchange them into
shares of the Aquila sponsored money market funds. The exchange
prices will be the respective net asset values of the shares. (See
"Exchange Privilege.")
Convenience - Through ownership of a single security
consisting of shares of the Fund, you achieve investment
participation in a variety of Northwestern Region Companies and you
are relieved of all the various inconveniences including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping associated with direct investment in individual
securities of those companies. The Fund handles all paperwork
involved with share ownership, advising you of the Federal tax
status of dividends and capital gains, and providing you with
simplified records. You receive statements of your account
quarterly as well as each time you add to your investment or redeem
part or all of it. Additionally, you receive a semi-annual report
and an audited annual report.
Fee Arrangements - The Fund can pay fees at an annual rate of
up to 0.80 of 1% of average annual net assets to its Adviser and
Administrator and up to 0.70 of 1% of average annual net assets to
its Sub-Adviser (for total fees at a rate of up to 1.50% of the
first $15 million of average annual net assets). The overall rates
of these fees decline as the asset size of the Fund increases. See
"Advisory and Administration Fees." Some or all of these fees may
be waived in the early development phase of the Fund. In addition,
the Fund can pay a distribution fee of up to 0.25 of 1% of average
annual net assets to brokers and other investment professionals
with respect to assets represented by Class A Shares. (See "Table
of Expenses," "Management Arrangements" and "Distribution
Plan").
Risk Factors - The Fund seeks to provide you with capital
appreciation over a period of time. The value of the Fund's shares
will fluctuate due to changes in the equity markets and the
proceeds of redemptions may be more or less than your cost. The
Fund's assets, being primarily or entirely invested in the
securities of Northwestern Region Companies, are subject to
economic and other conditions affecting that area and it may have
less diversification than funds without this investment policy.
The fund may invest in small capitalization securities in a market
value range of $100 million to $700 million per issue. Small
capitalization securities are historically more volatile than
securities of companies with larger market values. (See "Risks and
Special Considerations Regarding Investment in Northwestern Region
Companies.") The Fund may also to a limited degree buy put options
and buy and sell call options; there may be risks associated with
these practices. (See "Option Transactions.")
<PAGE>
<TABLE>
<CAPTION>
AQUILA CASCADIA PACIFIC EQUITY FUND
TABLE OF EXPENSES
Class Y
Shareholder Transaction Expenses Shares
<S> <C>
Maximum Sales Charge Imposed on Purchases None
(as a percentage of the offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None
Deferred Sales Charge None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses (1)(2)
(as a percentage of average net assets)
Investment Advisory and Administration Fee 0.80%
Sub-Advisory Fee 0.70%
Other Expenses 0.35%
Total Fund Operating Expenses 1.85%
Example (3)
You would pay the following expenses on a $1,000 investment, assuming
a 5% annual return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$19 $58 $100 $217
<FN>
(1) Based upon estimated expenses to be incurred during the first
fiscal year of the Fund.
</FN>
<FN>
(2) For the first fiscal year of the Fund, investment income is
estimated to be 1.50% of average net assets. It is anticipated that
certain fees will be waived following a predetermined formula. The
Adviser and Administrator (the "Adviser") and the Sub-Adviser have
undertaken to waive some or all of their fees for the first fiscal
year of the Fund ending March 31, 1997 as required so that on an
annualized basis for the fiscal year, the excess, if any, of Total
Fund Operating Expenses over investment income is not greater than
1.50% of average net assets, except that if all of such fees for the
fiscal year have been waived expenses may exceed that level.
No fee waivers are currently in effect. If the Adviser and Sub-
Adviser determine that it would be advisable in the future to waive
some or all of their fees, it is anticipated that as the asset size
of the Fund increases, waivers would be progressively reduced so
that when total net assets exceed approximately $25 million a
substantial portion or all of these fees would be paid.
</FN>
<FN>
(3) The expense example is based upon the above estimated annual Fund
operating expenses. It is also based upon amounts at the beginning of
each year which includes the prior year's assumed results. A year's
results consist of an assumed 5% annual return less total annual
operating expenses; the expense ratio was applied to an assumed average
balance (the year's starting investment plus one-half the year's
results). Each figure represents the cumulative expenses so determined
for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES
THAT ALL MUTUAL FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES
OF PREPARING THE ABOVE EXAMPLE.
The purpose of the above table is to assist the investor in
understanding the various costs that an investor in the Fund will
bear directly or indirectly. The assumed 5% annual return should
not be interpreted as a prediction of an actual return, which may
be higher or lower.
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
INTRODUCTION
Aquila Cascadia Pacific Equity Fund is a diversified, open-
end mutual fund which continuously offers to purchase or redeem its
shares on any business day (see sections of Prospectus on "How to
Purchase or Redeem Shares.") The Fund's shares are designed to be
a suitable investment for investors who seek capital appreciation
primarily through the equity securities of companies operating in
the Northwestern Region of the country.
The Fund provides you with the opportunity to have the
benefits of a diversified and professionally managed portfolio of
securities intended to allow participation in the economic
development of the Northwestern Region. Through the convenience of
a single security consisting of shares of the Fund, you are
relieved of all the various inconveniences -- including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping -- associated with direct investment in individual
securities of various companies in the Northwestern Region.
The Fund was organized by Aquila Management Corporation (the
"Adviser and Administrator") which has provided administrative
and/or investment advisory services to various mutual funds founded
by it since 1984. It currently acts as administrator to fourteen
Aquila-sponsored funds, including the Fund, with combined net
assets as of December 31, 1995 in excess of $2.7 billion.
Continuous and active local portfolio management of the Fund is
provided by its regionally-located sub-adviser, Ferguson, Wellman,
Rudd, Purdy & Van Winkle, Inc. (the Sub-Adviser").
INVESTMENT OF THE FUND'S ASSETS
The Fund's investment objective, which is a fundamental policy
of the Fund, is to purchase and hold securities for capital
appreciation. There is no assurance that the Fund will achieve its
objective. The Fund does not expect to receive dividends of
sufficient size to enable it to provide investors with any
significant amount of current income and during at least its first
fiscal year expects to apply all of such income to Fund operating
expenses so that none will be available for distribution to
shareholders.
As used in the Prospectus and Additional Statement, the
general area consisting of Oregon, Washington, Idaho, Utah, Nevada,
Alaska and Hawaii is called in the Prospectus the "Northwestern
Region." The Fund seeks to achieve its objective by investing
primarily in equity securities of companies ("Northwestern Region
Companies") having a significant business presence in the
Northwestern Region. It is anticipated that under normal
circumstances, the Fund will invest at least 65% and possibly up to
100%, of its total assets in securities issued by such
companies.
For purposes of this Prospectus, companies with a significant
business presence in the Northwestern Region are defined as those
companies (i) whose principal executive offices are located in the
Northwestern Region, (ii) which have more than 50% of their assets
located in the Northwestern Region or (iii) which derive a
significant portion of their revenues or profits from the
Northwestern Region. In determining which companies have a
significant business presence in the Northwestern Region, the Sub-
Adviser may rely on any publicly available information about those
companies that it considers reliable. There may be risks associated
with this investment policy. (See "Risk Factors and Special
Considerations.")
As used in the Prospectus the term "equity securities" means
(i) common stocks and (ii) preferred stocks, bonds, debentures and
notes convertible into common stocks. Under normal conditions, it
is anticipated that the Fund will invest at least 65%, and possibly
up to 100%, of its total assets in such securities. The Fund may
also, to a limited extent make certain other types of investments.
(See below.)
In unusual market conditions when the Sub-Adviser believes a
defensive posture for the Fund's investments is warranted, the Fund
may temporarily invest a portion or all of its assets in high
quality fixed-income securities such as U.S. Treasury securities,
corporate bonds or high grade short-term money-market securities,
without geographic or percentage limitation. Only corporate
securities rated "A" or equivalent by a nationally recognized
statistical rating organization will be purchased. See the
Additional Statement for a description of these organizations and
an explanation of their ratings.
Since the practice of many growth-oriented companies in which
the Fund will invest is to reinvest most or all of their earnings
in the development of their business, the Fund does not expect to
receive dividends enabling it to provide investors with any
significant amount of current income. In addition, during at least
the first fiscal year of the Fund, it is anticipated that all of
such income will be applied to payment of Fund operating expenses
so that none will be available for distribution to
shareholders.
In general, the Fund will take a long-term approach toward
investing. Accordingly, the turnover rate will normally be
consistent with this approach. (See "Portfolio Turnover.") At times
the Fund may make investments for short-term purposes. Also, under
changing market conditions, the Fund may dispose of portfolio
securities whenever the Sub-Adviser deems such action advisable
without regard to the length of time the securities have been
held.
In selecting investments for the Fund, the Sub-Adviser will
generally employ the investment philosophy of seeking to invest in
established, financially sound, well-managed Northwestern Region
Companies whose securities it considers to be selling at a
reasonable price relative to their growth rate and anticipated
future values. Emphasis will be placed upon selection of
Northwestern Region Companies whose securities are selling at lower
than average prices; other securities may be selected whose issuers
the Sub-Adviser believes are experiencing better than average
growth. It is anticipated that a number of factors will be
considered in investment selection, including but not limited to:
product characteristics and market potential, operating ratios,
management abilities, intrinsic value of securities, securities'
market action, and the overall economic, monetary, political and
market environment. The Sub-Adviser currently focuses on
approximately 200-500 Northwestern Region Companies from which it
selects investments for the Fund's portfolio.
Although the Fund may invest in large capitalization
companies, it is anticipated that the companies represented in the
Fund's portfolio will include those companies, having market
capitalization of middle to smaller size, which the Sub-Adviser
believes offer the potential of capital appreciation due to their
overall characteristics. These companies are likely to be less well
known because they are smaller in size, have smaller
capitalizations, and have a lesser number of shares traded. The
prices of securities of such companies may be more volatile than
the prices of securities of issuers which are more mature, have
larger capitalizations and whose securities are more actively
traded.
Convertible Securities
The Fund may invest up to 25% of its assets in convertible
securities of Northwestern Region Companies, if the Sub-Adviser
believes there is potential of capital growth through the
conversion option and greater investment income prior to
conversion. Only convertible securities rated investment grade by
a nationally-recognized statistical rating organization will be
purchased. Not more than 5% of such securities can have the lowest
of the four investment grade ratings. Obligations rated in the
fourth such credit rating are considered by the rating agencies to
be of medium quality and thus may present investment risks not
present in more highly rated obligations. Such bonds lack
outstanding investment characteristics and may in fact have
speculative characteristics as well; changes in economic conditions
or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case
for higher grade bonds. See the Additional Statement for a
description of these organizations and an explanation of their
ratings.
A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within a
specified period of time into a certain quantity of the common
stock of the same or a different issuer. Convertible securities are
senior to common stocks in a corporation's capital structure, but
are usually subordinated to similar nonconvertible securities.
While providing a fixed income stream (generally higher in yield
than the dividends received from a common stock but lower than that
afforded by a similar nonconvertible security), a convertible
security also affords the opportunity through its conversion
feature to participate in the capital appreciation attendant upon
a market price advance in the convertible security's underlying
common stock.
In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a fixed-
income security, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in value
when interest rates rise. However, the price of a convertible
security is also influenced by the market value of the security's
underlying common stock. The price of a convertible security tends
to increase as the market value of the underlying stock rises,
whereas it tends to decrease as the market value of the underlying
stock declines. While no securities investment is without some
risk, investments in convertible securities generally entail less
risk than investments in the common stock of the same issuer.
Warrants
The Fund may also invest up to 5% of its total net assets,
as determined at time of purchase, in warrants of Northwestern
Region Companies. Warrants entitle the holder to purchase a fixed
number of shares of the common stock of the issuer at a fixed price
during certain specified times. The value of the warrants from time
to time depends upon the market evaluation of the likelihood that
exercise of the warrants would be economically advantageous before
they expire. The market price of warrants tends to be more volatile
than that of the underlying common stock.
Options Transactions
The Fund may purchase put and write (i.e., sell) call
options and purchase call options for hedging purposes or in order
to generate additional income or for taking a position in a
security deemed attractive by the Sub-Adviser. The Fund will
purchase or write options only on equity securities that are traded
on national securities exchanges or that are listed on NASDAQ
(NASDAQ options). The Fund may purchase put and write call options
only on equity securities which are held in the Fund's investment
portfolio or to close out positions. Additionally, the Fund may
purchase calls on securities which are not in the Fund's portfolio
or to close out positions.
The Fund will not (a) write call options if immediately after
any such transaction, the aggregate value of the securities
underlying the calls would exceed 20% of the Fund's total net
assets, or (b) purchase put or call options if, immediately after
such purchases, the premiums paid for all such options owned at the
time would exceed 5% of the Fund's total net assets. The Fund will
not write put options except to close out positions. See the
Additional Statement for a description of these instruments and
their uses.
While the Fund may engage in puts and calls to a limited
extent, there are certain risks associated with this activity that
are different than investing in the underlying securities directly
(see the Additional Statement). Option transactions involve risks
and transaction costs which the Fund would not incur if it did not
engage in option transactions. If the Sub-Adviser's predictions of
movements in the direction of the securities markets are
inaccurate, the adverse consequences to the Fund may leave the Fund
in a worse position than if such strategies were not used. Risks
inherent in the use of options include dependence upon the Sub-
Adviser's ability to predict correctly movements in the direction
of securities prices and the possible absence of a liquid secondary
market for any particular instrument at any time. See the
Additional Statement for a description of these and other risks
with respect to option transactions.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend
portfolio securities, up to 25% of the total net assets, to broker-
dealers, banks or other financial borrowers of securities. As with
other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower of the
securities fail financially. However, the Fund will enter into loan
arrangements only with broker-dealers, banks, or other institutions
which the Investment Adviser has determined are creditworthy under
guidelines established by the Fund's Board of Trustees and will
receive collateral in the form of cash or short-term U.S.
Government securities equal at least to 100% of the value of the
securities loaned. The value of the collateral and the securities
loaned will be marked to market on a daily basis. During the time
portfolio securities are on loan, the borrower pays the Fund an
amount equivalent to any dividends or interest paid on the
securities and the Fund may invest the cash collateral and earn
additional income or receive an agreed upon amount of interest
income from the borrower. However, the amounts received by the Fund
may be reduced by any finders' fee paid to broker-dealers and any
other related expenses.
Borrowings by the Fund
The Fund can borrow money for temporary or emergency
purposes from a bank. The Fund will not borrow amounts in excess of
10% of total net assets and will not purchase securities if
borrowings are equal to or greater than 5% of total net assets. The
Fund intends primarily to exercise such borrowing authority to meet
any abnormal level of shareholder redemptions and under
circumstances where redemptions exceed available cash.
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 at least one Nationally Recognized Statistical
Rating Organization. Repurchase agreements may be entered into only
with commercial banks or broker-dealers. Subject to the control of
the Board of Trustees, the Sub-Adviser will regularly review the
financial strength of all parties to repurchase agreements with the
Fund.
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 Investment Company Act of 1940 (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.
However, 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.
Shares of Investment Companies
The Fund may purchase shares of investment companies with
money market portfolios which are any of the money-market funds in
the Aquilasm Group of Funds. As of the date of the Prospectus,
these funds are Capital Cash Management Trust, Pacific Capital Cash
Assets Trust (Original Shares), Pacific Capital Tax-Free Cash
Assets Trust (Original Shares), Pacific Capital U.S. Treasuries
Cash Assets Trust (Original Shares) and Churchill Cash Reserves
Trust. The Fund will not purchase shares of an investment company
which imposes a sales or redemption charge of any sort; however, an
investment company in which the Fund invests may have a
distribution plan under which it may pay for distribution expenses
or services. Such investments will ordinarily be made to provide
additional liquidity and at the same time to earn higher yields
than are usually associated with the overnight or short-term
obligations in which the Fund might otherwise invest for this
purpose. While higher yields than those of alternative investments
may be obtainable, these yields will reflect management fees and
operating and distribution expenses of the investment companies and
will result in duplication of management fees with respect to
assets of the Fund so invested. The Fund may not invest in the
shares of investment companies if immediately thereafter it has
invested more than 10% of the value of its total assets in such
companies or more than 5% of the value of its total assets in any
one such company; it may not invest in such a company if
immediately thereafter it owns more than 3% of the total
outstanding voting stock of such a company.
Risk Factors and Special Considerations
While the Fund will be actively managed to seek growth of your
capital, the value of the Fund's shares will fluctuate as a result
of equity market factors. On redemption the value of your shares
may be more or less than your cost.
There are two types of risk generally associated with owning
equity securities: market risk and financial risk. Market risk is
the risk associated with the movement of the stock market in
general. Financial risk is associated with the financial conditions
and profitability of the underlying company. Smaller companies may
experience different growth rates and higher failure rates than
those of larger companies having longer operating histories.
Moreover, the stock price movements of smaller companies may
experience more volatility than those of larger and more mature
companies.
There are two types of risk associated with owning debt
securities: interest rate risk and credit risk. Interest rate risk
relates to fluctuations in market value arising from changes in
interest rates. If interest rates rise, the value of debt
securities will normally decline and if interest rates fall, the
value of debt securities will normally increase. All debt
securities, including U.S. Government securities, which are
generally considered to be the most creditworthy of all debt
obligations, are subject to interest rate risk. Securities with
longer maturities generally have a more pronounced reaction to
interest rate changes than shorter term securities. Credit risk
relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. The Fund does
not intend to hold corporate debt securities unless the
opportunities for capital appreciation and income, combined, remain
attractive.
Risks and Special Considerations regarding
the Northwestern Region
The Fund's assets, being primarily or entirely invested in
the securities of Northwestern Region Companies, are subject to
economic and other conditions affecting the various states which
comprise the Northwestern Region.
The states of the Northwestern Region are characterized by
wide differences in climate, great distances and diverse population
density. In some areas, availability of water is a factor of
considerable importance in economic development and water issues
will likely affect the growth and prosperity of much of the Region
in the future. Originally heavily oriented toward the exploitation
of natural resources, in recent years the economies of the states
of the Northwestern Region have shifted toward more diversity with
increases in tourism, high technology and the service sector. The
region has been characterized in recent years by population growth
and immigration from other areas of the United States. Some of the
states in the Northwestern Region have experienced growth rates
above the national averages.
Because of the large geographic size of the Northwestern
Region, the above factors may have varying importance from one
state to another. It is not possible to predict what effect they
may individually or collectively have on any particular company in
which the Fund may choose to invest.
In addition, companies with headquarters in the Northwestern
Region or with a significant business presence in the Region may
also have significant business interests, sales and assets outside
of the Region and may thus be subject to other economic influences.
Because the Fund will invest most, and may invest all, of its
assets in Northwestern Region Companies, it may have less
diversification than funds without this investment policy.
Portfolio Turnover
Given the Fund's orientation to capital appreciation, it is
not expected that the Fund's portfolio turnover rate will exceed
60%. See the Additional Statement.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and cannot
do. Certain of these policies, identified in the Prospectus and
Additional Statement 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. All other
policies can be changed from time to time by the Board of Trustees
without shareholder approval. Some of the more important of the
Fund's fundamental policies, not otherwise identified in the
Prospectus, are set forth below; others are listed in the
Additional Statement.
1. The Fund has industry investment requirements.
The Fund cannot buy securities in any one industry if more
than 25% of its total assets would then be invested in securities
of that industry.
2. The Fund can make loans only by lending securities or
entering into repurchase agreements.
The Fund can lend its portfolio securities (see "Lending
Portfolio Securities") and can enter into repurchase agreements
(see "Repurchase Agreements") but cannot otherwise make loans. The
Fund can buy debt securities as described above (see "Investment of
the Fund's Assets"); this is investing, not making a 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. Interest on borrowings would reduce the Fund's
income. Except in connection with borrowings, the Fund will not
issue senior securities. The Fund will not purchase any security
while it has any outstanding borrowings which exceed 5% of the
value of its total assets.
NET ASSET VALUE PER SHARE
The Fund's net asset value and offering price per share are
determined as of 4:00 p.m. New York time on each day that the New
York Stock Exchange is open (a "business day"). The close of the
principal exchanges or other markets on which some of the Fund's
portfolio securities are traded may be later than 4:00 p.m. The net
asset value per share is determined by dividing the value of the
net assets of the Fund (i.e., the value of the assets less
liabilities) by the total number of shares outstanding.
Determination of the value of the Fund's assets is subject to the
direction and control of the Fund's Board of Trustees. Securities
listed on a national securities exchange or designated as national
market system securities are valued at the last prior sale price
or, if there has been no sale that day, at the bid price. The value
of other securities is in general based on market value, except
that short-term investments maturing in 60 days or less are
generally valued at amortized cost; see the Additional Statement
for further information.
HOW TO INVEST IN THE FUND
Institutional Class Shares (Class Y Shares) are offered only
to institutional investors for investments held in a fiduciary,
advisory, agency, custodial or similar capacity, or through them to
their clients, and are not offered to directly to retail customers.
Class Y Shares are offered at net asset value with no sales charge,
no redemption fee, no contingent deferred sales charge and no
distribution fee. (See "How to Purchase Class Y Shares" and
"Alternative Purchase Plans.")
How to Purchase Class Y Shares
Class Y Shares of the Fund may be purchased through any
investment broker or dealer (a "selected dealer") which has a sales
agreement with Aquila Distributors, Inc. (the "Distributor") or
through the Distributor. There are two ways to make an initial
investment: (i) order the shares through your investment broker or
dealer, if it is a selected dealer; or (ii) mail the Application
with payment to Administrative Data Management Corp. (the "Agent")
at the address on the Application. There is no sales charge on
initial or subsequent investments. You are urged to complete an
Application and send it to the Agent so that expedited shareholder
services can be established at the time of your investment.
The minimum initial investment for Class Y Shares is $1,000,
except as otherwise stated in the Prospectus or Additional
Statement. You may also make an initial investment of at least $50
by establishing an Automatic Investment Program for automatic
investments of at least $50 per month and paying at least $50. (See
below and "Automatic Investment Program" in the Application.) Such
investment must be drawn in United States dollars on a United
States commercial or savings bank, credit union or a United States
branch of a foreign commercial bank (each of which is a "Financial
Institution"). You may make subsequent investments in Class Y
Shares any amount (unless you have an Automatic Withdrawal Plan).
Your subsequent investment may be made through a selected dealer or
by forwarding payment to the Agent, with the name(s) of account
owner(s), the account number and the name of the Fund. With
subsequent investments, please send the pre-printed stub attached
to the Fund's confirmations.
Subsequent investments of $50 or more in Class Y Shares can be
made by electronic funds transfer from your demand account at a
Financial Institution. To use electronic funds transfer for your
purchases, your Financial Institution must be a member of the
Automated Clearing House and the Agent must have received your
completed Application designating this feature, or, after your
account has been opened, a Ready Access Features form available
from the Distributor or the Agent. A pre-determined amount can be
regularly transferred for investment ("Automatic Investment"), or
single investments can be made upon receipt by the Agent of
telephone instructions from anyone ("Telephone Investment"). The
maximum amount of each Telephone Investment is $50,000. Upon 30
days' written notice to shareholders, the Fund may modify or
terminate these investment methods at any time or charge a service
fee, although no such fee is currently contemplated.
The offering price for Class Y Shares is the net asset value
per share. The offering price determined on any day applies to all
purchase orders received by the Agent from selected dealers that
day, except that orders received by it after 4:00 p.m. New York
time will receive that day's offering price only if such orders
were received by selected dealers from customers prior to such time
and transmitted to the Distributor prior to its close of business
that day (normally 5:00 p.m. New York time); if not so transmitted,
such orders will be filled at the next determined offering price.
Selected dealers are required to transmit orders promptly.
Investments by mail are made at the offering price next determined
after receipt of the purchase order by the Agent. Purchase orders
received on other than a business day will be executed on the next
succeeding business day. Purchases by Automatic Investment and
Telephone Investment will be executed on the first business day
occurring on or after the date an order is considered received by
the Agent at the price determined on that day. In the case of
Automatic Investment your order will be executed on the date you
specified for investment at the price determined on that day. If
that day is not a business day your order will be executed at the
price determined on the next business day. In the case of Telephone
Investment your order will be filled at the next determined
offering price. If your order is placed after the time for
determining the net asset value of the Fund shares for any day it
will be executed at the price determined on the following business
day. The sale of shares will be suspended during any period when
the determination of net asset value is suspended and may be
suspended by the Distributor when the Distributor judges it in the
Fund's best interest to do so.
Possible Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of any
class of shares of the Fund. Additional compensation may include
payment or partial payment for advertising of the Fund's shares,
payment of travel expenses, including lodging, incurred in
connection with attendance at sales seminars taken by qualifying
registered representatives to locations within or outside of the
United States, other prizes or financial assistance to securities
dealers in offering their own seminars or conferences. In some
instances, such compensation may be made available only to certain
dealers whose representatives have sold or are expected to sell
significant amounts of such shares. Dealers may not use sales of
the Fund's shares to qualify for the incentives to the extent such
may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers,
Inc. The cost to the Distributor of such promotional activities and
such payments to participating dealers will not exceed the amount
of the sales charges in respect of sales of all classes of shares
of the Fund effected through such participating dealers, whether
retained by the Distributor or reallowed to participating dealers.
No such additional compensation to dealers in connection with sales
of shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and Dealers may receive different levels of
compensation for selling different classes of shares.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to you
in an account maintained for you at the Agent in full and
fractional shares of the Fund (rounded to the nearest 1/1000th of
a share). No Share certificates will be issued for Class Y
Shares.
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 (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule 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 written plan
adopted under the Rule. No payments under the Plan from assets
represented by Class Y Shares are authorized.
The Plan contains provisions designed to protect against any
claim against or involving the Fund that some of the expenses which
might be considered to be sales-related which the Fund pays or may
pay come within the purview of the Rule. The Fund believes that
except for payments made with respect to Class A Shares and Class
C Shares it is not financing any such activity and does not
consider any payment enumerated in such provisions as so financing
any such activity. If and to the extent that any payment as
specifically listed in the Plan (see the Additional Statement) is
considered to be primarily intended to result in or as indirect
financing of any activity which is primarily intended to result in
the sale of Fund shares, these payments are authorized under the
Plan. In addition, if the Administrator, out of its own funds,
makes payment for distribution expenses such payments are
authorized. See the Additional Statement.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your Class Y Shares 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. There is no minimum period for any
investment in the Fund, except for shares recently purchased by
check, Automatic Investment or Telephone Investment as discussed
below. There are no redemption fees or penalties on redemption of
Class Y Shares. A redemption may result in a transaction taxable to
you.
For your convenience the Fund offers expedited redemption for
Class Y Shares to provide you with a high level of liquidity for
your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares of any
class not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed to
you, if your shares are registered in your name at the
Fund and the check is sent to your address of record,
provided that there has not been a change of your address
of record during the 30 days preceding your redemption
request. You can make only one request for telephone
redemption by check in any 7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-********** toll free or ***************
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(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 908-855-5730 or by
mail at 581 Main Street, Woodbridge, NJ 07095-1198, indicating
account name(s), 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 the Application or the Ready
Access Features form and provide the required information
concerning your Financial Institution account number. The Financial
Institution account must be in the exclusive name(s) of the
shareholder(s) as registered with the Fund. You may change the
designated Financial Institution account at any time by completing
and returning a Ready Access Features form. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
Regular Redemption Method
If you own Class Y shares registered on the books of the
Fund, and you have not elected Expedited Redemption to a
predesignated Financial Institution 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, 581 Main Street, Woodbridge,
NJ 07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
below.
For a 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. Signature guarantees may be required if sufficient
documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
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.
Redemption Payments
Redemption payments will ordinarily be mailed to you at your
address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. The Fund may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. The Fund
has no present intention of making this charge. Upon 30 days'
written notice to shareholders, the Fund may modify or terminate
the use of the Automated Clearing House to make redemption payments
at any time or charge a service fee, although no such fee is
presently contemplated. If any such changes are made, the
Prospectus will be supplemented to reflect them. If you use a
broker or dealer to arrange for a redemption, it may charge you a
fee for this service.
The Fund will normally make payment for all shares redeemed on
the next business day (see "Net Asset Value Per Share") following
acceptance of the redemption request made in compliance with one of
the redemption methods specified above. Except as set forth below,
in no event will payment be made more than seven days after
acceptance of such a redemption request. 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 of shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the Financial
Institution on which the purchase check was drawn, or from which
the funds for Automatic Investment or Telephone Investment were
transferred, satisfactory to the Agent and the Fund, that the
purchase check or Automatic Investment or Telephone Investment will
be honored. Possible delays in payment of redemption proceeds can
be eliminated by using wire payments or Federal Reserve drafts to
pay for purchases.
If the Trustees determine 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
Additional Statement 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 as a result of shareholder redemptions or failure to
meet the minimum investment level under an Automatic Purchase
Program. If the Board 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
You may establish an Automatic Withdrawal Plan if you own or
purchase shares Class Y Shares of the Fund having a net asset value
of at least $5,000. Under an Automatic Withdrawal Plan 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.
Redemption of shares to make payments under the Automatic
Withdrawal Plan will give rise to a gain or loss for tax purposes.
See the Automatic Withdrawal Plan provisions of the Application
included in the Prospectus, the Additional Statement 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 Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
The Sub-Advisory Agreement
Ferguson, Wellman, Rudd, Purdy & Van Winkle, Inc. (the "Sub-
Adviser") supervises the investment program of the Fund and the
composition of its portfolio.
The services of the Sub-Adviser are rendered under an
Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement")
which provides, subject to the control of the Board of Trustees,
for investment supervision. The Sub-Advisory Agreement states that
the Sub-Adviser shall, at its expense, provide to the Fund all
office space and facilities, equipment and clerical personnel
necessary for the carrying out of the Sub-Adviser's duties under
the Sub-Advisory Agreement. At the Sub-Adviser's expense the Sub-
Adviser shall provide for pricing of the Fund's portfolio daily
using a pricing service or other source of pricing information
satisfactory to the Fund and, unless otherwise directed by the
Board of Trustees, for pricing of the Fund's portfolio at least
quarterly using another such source satisfactory to the Fund.
Under the Sub-Advisory Agreement, the Sub-Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Sub-Adviser.
Under the Sub-Advisory Agreement, the Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to shareholders and the costs
of printing or otherwise producing and distributing those copies of
such prospectuses, statements of additional information and reports
as are sent to its shareholders. Under the Sub-Advisory Agreement,
all costs and expenses not expressly assumed by the Sub-Adviser or
by the Adviser under the Advisory and Administration Agreement or
by the Fund's Distributor (principal underwriter) are paid by the
Fund. The Sub-Advisory Agreement lists examples of such expenses
borne by the Fund, the major categories of such expenses being:
legal and audit expenses, custodian and transfer agent, or
shareholder servicing agent fees and expenses, stock issuance and
redemption costs, certain printing costs, registration costs of the
Fund and its shares under Federal and State securities laws,
interest, taxes and brokerage commissions, and non-recurring
expenses, including litigation.
Under the Sub-Advisory Agreement, the Fund pays a Sub-Advisory
fee computed on the net asset value of the Fund as set forth in the
table that appears below.
The Sub-Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. In general, the primary consideration in
effecting transactions for the Fund is obtaining the most favorable
prices and efficient execution. This means that the Sub-Adviser
will seek to execute each transaction at a price and commission, if
any, which provide the most favorable total cost or proceeds
reasonably attainable in the circumstances. While the Sub-Adviser
generally seeks reasonably competitive spreads or commissions, the
Fund will not necessarily be paying the lowest spread or commission
available. The Sub-Adviser has complete freedom as to the markets
in which and the broker-dealers through whom (acting on an agency
basis or as principal) it operates to seek this result. The Sub-
Adviser may consider a number of factors in determining which
broker-dealers to use. These factors, which are more fully
discussed in the Additional Statement, include, but are not limited
to, research services, the reasonableness of commissions and
quality of services and execution. The Sub-Adviser is authorized to
consider sales of shares of the Fund.
The Advisory and Administration Agreement
Aquila Management Corporation, founder of the Fund, serves as
Adviser and Administrator (the "Adviser") for the Fund under an
Advisory and Administration Agreement (the "Advisory and
Administration Agreement"). The Adviser is the founder and serves
as administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $*** million, all as of May 15, 1996.
At its own expense, the Adviser 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 Adviser.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
such advisory services to the Fund, in addition to those services
provided by the Sub-Adviser, as the Adviser deems appropriate.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
all administrative services to the Fund other than those relating
to its investment portfolio handled by the Sub-Adviser under the
Sub-Advisory Agreement. Such administrative services include, but
are not limited to, overseeing all relationships between the Fund
and its various support organizations including the transfer agent,
custodian, legal counsel, auditors and principal underwriter. Its
services include 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.
Additionally, the Adviser either keeps the accounting and other
books and records of the Fund, including the computation of net
asset value per share and the dividends (utilizing daily pricing of
the securities in the Fund's portfolio performed by the Sub-Adviser
under the Sub-Advisory Agreement) or, at its expense and
responsibility, delegates such duties in whole or in part to a
company satisfactory to the Fund. See the Additional Statement for
a further description of functions listed in the Advisory and
Administration Agreement as part of such duties.
Under the Advisory and Administration Agreement, subject to
the control of the Fund's Board of Trustees, the Adviser provides
sub-advisory services to the Fund, which include review of the
investment activities of the Fund, and may include providing the
Sub-Adviser and the Fund with material relevant to the investment
in securities of issuers in various states. Although such event is
not anticipated, if the Sub-Advisory Agreement were terminated, the
Adviser would assume the duties of managerial investment adviser,
in addition to continuing its duties as adviser and administrator,
subject to and in compliance with the 1940 Act and the
rules thereunder. In such event, it would be paid an additional fee
at the rate currently paid to the Sub-Adviser. See the Additional
Statement.
The Advisory and Administration Agreement contains provisions
as to the Adviser's allocation of the portfolio transactions of the
Fund similar to those in the Sub-Advisory Agreement; see the
Additional Statement.
Under the Advisory and Administration Agreement, the Fund pays
an advisory and administration fee computed on the net asset value
of the Fund as described in the table below.
Sub-Advisory and Advisory and Administration Fees
Under the Sub-Advisory Agreement and the Advisory and
Administration Agreement, the Fund pays fees to the Sub-Adviser and
Adviser which are payable monthly and computed on the net asset
value of the Fund at the end of each business day at different
levels, depending on the net assets of the Fund. The aggregate
annual rate of the fees payable with respect to net assets at
different levels are set forth in the following table:
<TABLE>
<CAPTION>
Aggregate Annual Rates
Sub- Advisory and
Fund Net Assets Advisory Fee Administration Fee Total Fees
<S> <C> <C> <C>
Up to $15 million..... 0.70 of 1% 0.80 of 1% 1.50%
$15 million up to
$50 million........ 0.55 of 1% 0.65 of 1% 1.20%
Above $50 million..... 0.40 of 1% 0.50 of 1% 0.90
</TABLE>
The Sub-Adviser and the Adviser may each waive all or part of
their respective fees during the early development phase of the
Fund. The combined fees paid by the Fund to the Sub-Adviser and the
Adviser are higher than those paid by most other investment
companies. In authorizing such fees, the Board of Trustees
considered a number of factors including the difficulties of
managing a portfolio oriented primarily to the Northwestern Region,
and the expertise with respect to that area possessed by both the
Sub-Adviser and the Adviser.
The Sub-Adviser and Adviser have each agreed that their
respective fees shall be reduced, but not below zero, by an amount
equal to their respective pro-rata portions (based upon the
aggregate fees of the Sub-Adviser and the Adviser) 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 most
restrictive expense limitation imposed upon the Fund in the states
in which shares are then eligible for sale. At the present time
none of the states in which the Fund's shares will be sold have any
such limitation.
Information about the Adviser and Administrator,
the Sub-Adviser and the Distributor
The Fund's founder, Adviser and Administrator is administrator
to the Aquilasm Group of Funds, which consists of 14 funds: seven
tax-free municipal bond funds, five money market funds and two
equity funds including the Fund. As of December 31, 1995, these
funds had aggregate assets of approximately $2.7 billion, of which
approximately $800 million consisted of assets of money market
funds and $1.9 billion consisted of assets of the tax-free bond
funds.
The Adviser and Administrator, which was founded in 1984, is
controlled by Mr. Lacy B. Herrmann (directly, through a trust and
through share ownership by his wife). See the Additional Statement
for information on Mr. Herrmann and these arrangements. The Fund's
founder and Adviser and Administrator is the founder and serves as
administrator for three other funds oriented to the Northwestern
Region: Tax-Free Trust of Oregon with assets of $ _____ , Hawaiian
Tax-Free Trust with Assets of $_______ and Tax-Free Fund For Utah,
with assets of $25 million, all as of May 15, 1996.
The Sub-Adviser is Ferguson, Wellman, Rudd, Purdy & Van
Winkle, Inc. As the Fund's local investment-adviser, it provides
professional investment advisory services to a broad base of
clients and currently manages over $1 billion in clients' assets,
of which approximately $400 million consists of equity investments.
Ferguson, Wellman is a full service investment advisory firm
serving institutional and individual investors with investments in
publicly traded stocks, bonds and cash securities.
Founded in 1975, Ferguson, Wellman operates as a private
corporation from their offices in Portland, Oregon. The Sub-Adviser
is employee owned, with over two-thirds of the company's employees
owning stock. The Sub-Adviser manages a conservative mix of
publicly traded stocks, government and corporate bonds as well as
other fixed income investments and cash management securities for
a diversified group of investors including corporate, union, public
and individual retirement funds, taxable corporate and individual
investors, family trusts, endowments, foundations and special
investment accounts. The Sub-Adviser has enjoyed consistent,
controlled growth of assets managed since beginning operations
twenty years ago.
Ferguson, Wellman implements a team-oriented equity investment
process utilizing the collective experience and knowledge of each
of five equity portfolio managers/analysts. The equity team divides
research by industry classification and each manager/analyst
prepares both industry research and research and recommendations on
individual issues within the industry and presents all research at
regular meetings of the equity team. Two Senior Vice Presidents and
Portfolio Managers, George W. Hosfield, CFA and Dean M. Dordevic,
share final responsibility for implementation of the investment
process for the Fund. Mr. Hosfield joined Ferguson, Wellman in
1991. He holds a B.S. in management and MBA in finance from the
University of Oregon. He is a Chartered Financial Analyst and a
member and past president of the Portland Society of Financial
Analysts. Prior to joining Ferguson, Wellman, Mr. Hosfield served
as Vice President and Portfolio Manager with Qualivest Capital
Management and an account executive with Smith Barney, Harris Upham
& Co. Mr. Dordevic came to Ferguson, Wellman in 1994 after serving
eleven years as Senior Vice President and Portfolio Manager with
Kidder Peabody Asset Management in New York City. Mr. Dordevic
holds a B.A. in finance from Trinity University in San Antonio,
Texas and is a member of the New York Society of Securities
Analysts. Mr. Dordevic began his career as a consultant for high-
net-worth individuals with E.F. Hutton & Co. in New York.
The Distributor currently handles the distribution of the
shares of fourteen funds, five money market funds, seven tax-free
municipal bond funds, another regionally-oriented equity fund and
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.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned by Mr. Herrmann, will be owned by certain directors
and/or officers of the Sub-Adviser and/or the Distributor including
Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
The Fund distributes dividends from net investment income on
an annual basis following the end of its fiscal year which is
December 31 in each year. If the Fund has had net long-term capital
gains or net short-term capital gains for the year, it distributes
dividends on those items at the same time. Short-term capital gains
include the gains from the disposition of securities held less than
one year, the premiums from expired call options written by the
Fund and net gains from closing transactions with respect to such
options. If required by tax laws to avoid excise or other taxes,
dividends and/or capital gains distributions may be made more
frequently.
Unless you request otherwise by letter addressed to the Agent
or by filing an appropriate application prior to a given ex-
dividend date, dividends and distributions will be automatically
reinvested in full and fractional shares of the Fund at net asset
value on the record date for the dividend or distribution or other
date fixed by the Board of Trustees. An election to receive cash
will continue in effect until written notification of a change is
received by the Agent. All shareholders, whether their dividends
are received in cash or are being reinvested, will receive a
quarterly account summary indicating the current status of their
investment. There is no fixed dividend rate.
Tax Information
The Fund intends to qualify for taxation as a regulated
investment company under the provisions of Subchapter M of the
Internal Revenue Code. As such, the Fund will not be taxed on its
net investment income or its net realized capital gains, if any, to
the extent they have been distributed to the Fund's shareholders.
Distribution from the Fund's net income and net short-term capital
gains are taxed as ordinary income. If the Fund has net long-term
capital gains which are greater than its net short-term capital
loses, it will distribute the excess and such distribution will be
taxed to you as long-term capital gains, regardless of how long you
have held your shares. Although distributions will be made in
January, you must report the income or capital gain on your return
for the prior calendar year, assuming you file your returns on a
calendar year basis.
For purposes of Federal income tax, certain options, if any,
held by the Fund at the end of its fiscal year generally will be
treated as having been sold at market value. As a general rule any
gain or loss on such contracts will be treated as 60% long-term and
40% short-term. See the Additional Statement for more detail on the
tax aspects of options. Dividends paid by the Fund will qualify for
the dividends received deduction for corporations only to the
extent that they represent payment of qualifying dividend income
received by the Fund. Shortly after the end of each calendar year,
the Fund will send you a statement of the amount and nature of net
income and capital gains.
Distributions from the Fund, whether ordinary income or
capital gain in nature, will be taxable to you whether you take
them in cash or have them automatically reinvested in shares of the
Fund.
The Fund will be obliged to withhold certain percentages of
distributions and pay over the amounts to the Internal Revenue
Service in either of two instances:
(1) if you do not supply the Fund or the institution through
which you receive distributions with your correct taxpayer
identification number, which for most individuals is their Social
Security number, the Fund will have to withhold 31% on ordinary
income dividends, capital gains dividends and redemption payments;
and
(2) if you are a non-resident alien or foreign entity, the
Fund will have to withhold 30% (or lower rate provided by treaty
with the country in which the alien or entity resides).
As of the date of the Prospectus, Congress is considering a
number of changes affecting taxation. It is not possible to predict
which, if any, of such changes will become law.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid for
the shares. If you are required to pay a conditional deferred sales
charge at the time of redemption, the amount of that charge will
reduce the amount of your gain or increase the amount of your loss
as the case may be. The gain or loss will be long-term if you held
the redeemed shares for over a year, and short-term, if for a year
or less. However, if shares held for six months or less are
redeemed and you have a loss, two special rules apply: the loss is
reduced by the amount of exempt-interest dividends, if any, which
you received on the redeemed shares, and any loss over and above
the amount of such exempt-interest dividends is treated as a long-
term loss to the extent you have received capital gains dividends
on the redeemed shares.
The above information is a summary of the tax treatment that
will be applied to the Fund and its distributions. If you have any
questions, you should contact your tax adviser, particularly in
connection with state and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among this
Fund and certain tax-free municipal bond funds and an equity fund
(the "Bond or Equity Funds") and certain money market funds (the
"Money-Market Funds"), all of which are sponsored by Aquila
Management Corporation and Aquila Distributors, Inc., and have the
same Administrator and Distributor as the Fund. All exchanges are
subject to certain conditions described below. As of the date of
the Prospectus, the Aquila Bond or Equity Funds are this Fund,
Aquila Rocky Mountain Equity Fund, Hawaiian Tax-Free Trust, Tax-
Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of
Colorado, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund For
Utah and Narragansett Insured Tax-Free Income Fund; the Aquila
Money-Market Funds are Capital Cash Management Trust, Pacific
Capital Cash Assets Trust (Original Shares), Pacific Capital Tax-
Free Cash Assets Trust (Original Shares), Pacific Capital U.S.
Treasuries Cash Assets Trust (Original Shares) and Churchill Cash
Reserves Trust.
Class Y Shares of the Fund may be exchanged only for Class Y
Shares of the Bond or Equity Funds or for shares of a Money-Market
Fund.
Under the Class Y exchange privilege, once Class Y Shares of
any Bond or Equity Fund have been purchased, those shares (and any
shares acquired as a result of reinvestment of dividends and/or
distributions) may be exchanged any number of times between Money-
Market Funds and Class Y Shares of the Bond or Equity Funds without
the payment of any sales charge.
The "Class Y Eligible Shares" of any Bond or Equity Fund are
those shares which were (a) acquired by direct purchase including
by exchange by an institutional investor from a Money-Market Fund,
or which were received in exchange for shares of Class Y Shares
another Bond or Equity Fund; or (b) acquired as a result of
reinvestment of dividends and/or distributions on otherwise Class
Y Eligible Shares. Shares of a Money-Market Fund not acquired in
exchange of Class Y Eligible Shares of a Bond or Equity Fund can be
exchanged for Class Y Shares of a Bond or Equity Fund only by
persons eligible to make an initial purchase of Class Y Shares.
This Fund, as well as the Money-Market Funds and other Bond or
Equity Funds, reserves the right to reject any exchange into its
shares, if shares of the fund into which exchange is desired are
not available for sale in your state of residence. The Fund may
also modify or terminate this exchange privilege at any time. In
the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-********** toll free or **************
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(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
Exchanges of Class Y Shares will be effected at the relative
net asset values of the Class Y Shares being exchanged next
determined after receipt by the Agent of your exchange request.
Prices for exchanges are determined in the same manner as for
purchases of the Fund's shares. See "How to Invest in the
Fund".
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see the Additional
Statement); no representation is made as to the deductibility of
any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable, except
to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free Money-Market
Fund) are exempt from regular Federal income tax, and to the extent
that a portion or all of the dividends paid by Pacific Capital U.S.
Treasuries Cash Assets Trust (which invests in U.S. Treasury
obligations) are exempt from state income taxes. Dividends paid by
Aquila Rocky Mountain Equity Fund are taxable. If your state of
residence is not the same as that of the issuers of obligations in
which a tax-free municipal Bond Fund or a tax-free Money-Market
Fund invests, the dividends from that fund may be subject to income
tax of the state in which you reside. Accordingly, you should
consult your tax adviser before acquiring shares of such a Bond
Fund or a tax-free Money-Market Fund under the exchange privilege
arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including various expressions of total return.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes sales charge) for 1- and 5-year periods and for a period
since the inception of the Fund, to the extent applicable, through
the end of such periods, assuming reinvestment (without sales
charge) of all distributions. The Fund may also furnish total
return quotations for other periods or based on investments at
various sales charge levels or at net asset value. For such
purposes total return equals the total of all capital gains and
income paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the
original investment, expressed as a percentage of the purchase
price. See the Additional Statement.
Performance figures are based upon past performance, reflect
as appropriate all recurring charges against Fund income net of fee
waivers and reimbursement of expenses, if any, and will assume the
payment of the maximum sales charge on the purchase of shares, but
not on reinvestment of income dividends for which the Fund does not
impose a sales charge.
The investment results of the Fund, like those of all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's total return may be in
any future period.
Description of the Fund and its Shares
The Fund is an open-end, diversified management investment
company originally organized in 1982 under the name Short Term
Asset Reserves, as a Massachusetts business trust. From that date
until 1993 it operated as a money-market fund. In 1993 it ceased
operations. In 1996, its name was changed to Aquila Cascadia
Pacific Equity Fund. 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). The Board of Trustees may also, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such series
will have a designation including the word "Series"). See the
Additional Statement for further information about possible
additional series. Shares are fully paid and non-assessable, except
as set forth under the caption "General Information" in the
Additional Statement; the holders of shares have no pre-emptive or
conversion rights.
The other two classes of shares of the Fund are Front Payment
Class Shares ("Class A Shares") and Level Payment Class Shares
("Class C Shares"), which are fully described in a separate
prospectus that can be obtained by calling the Fund at 800-
***********.
The primary distinction among the Fund's three classes of
shares lies in their different sales charge structures and ongoing
expenses, which are likely to be reflected in differing yields and
other measures of investment performance. All three classes
represent interests in the same portfolio of securities and have
the same rights, except that each class bears the separate
expenses, if any, of its Distribution Plan and has exclusive voting
rights with respect to its Plan. There are no Distribution fees
with respect to Class Y Shares.
Dividends and other distributions paid by the Fund with
respect to shares of each Class are calculated in the same manner
and at the same time, but may differ depending upon the
distribution and service fees, if any, and other class-specific
expenses borne by each Class.
The Fund's Distribution Plan has three parts. In addition to
the defensive provisions described above, Parts I and II of the
Plan authorize payments, to certain "Qualified Recipients," out of
the Fund's assets allocable to the Class A Shares and Class C
Shares, respectively. See the Additional Statement. The Fund has
also adopted a Shareholder Services Plan under which the Fund is
authorized to make certain payments out of the Fund's assets
allocable to the Class C Shares. See the Additional Statement.
See the notes to the "Statement of Assets and Liabilities" in
the Additional Statement for information as to the amortization of
the Fund's organizational and start-up expenses.
Voting Rights
At any meeting of shareholders, shareholders of the Fund
are entitled to one (1) vote for each dollar of net asset value
(determined as of the record date for such meeting) for each full
share held (and fractional votes for fractional shares held).
Shareholders will vote on the election of Trustees and on other
matters submitted to the vote of shareholders. See the Additional
Statement for information about shareholder voting if the Fund were
in the future to have more than one portfolio (series). 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 except that the Fund's Board of Trustees may
change the name 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>
Application for Aquila Cascadia Pacific Equity Fund
For Class Y Shares only
Please complete steps 1 through 4 and mail to:
ADM, Attn: AquilaSM Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
Tel.# *************
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for ____________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** _____________________________________
Name of State Minor's Social Security Number
4. ____________________________________________________
____________________________________________________
(Name of Corporation or Partnership. If a Trust, include the name(s)
of Trustees in which account will be registered and the name and date
of the Trust Instrument. Account for a Pension or Profit Sharing Plan
or Trust may be registered in the name of the Plan or Trust itself.)
___________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
____________________________________________________
Street or PO Box City
_______________________________(______)______________
State Zip Daytime Phone Number
Occupation:________________________Employer:________________________
Employer's Address:__________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you
are a non-U.S. Citizen or resident and not subject to back-up
withholding (See certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
_______________________ _____________________________
Dealer Name Branch Number
_______________________ _____________________________
Street Address Rep. Number/Name
_______________________ (_______)_____________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
Indicate Method of Payment (For either method, make check
payable to: Aquila Cascadia Pacific Equity Fund)
___Initial Investment $ ______________ (Minimum investment $1,000)
___Automatic Investment $______________ (Minimum $50)
For Automatic Investment of at least $50 per month, you must
complete Step 3, Section A, Step 4, Sections A & B and ATTACH
A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like you
to deposit the dividend. (A Financial Institution is a commercial
bank, savings bank or credit union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your Aquila Cascadia Pacific Equity Fund Account. To establish this
program, please complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or on
the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your
account (minimum $50 and maximum $50,000) at any time you wish by
simply calling the Fund toll-free at **************. To establish
this program, please complete Step 4, Sections A & B of this
Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks
prior to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, Administrative
Data Management Corp. (the Agent) is authorized to redeem sufficient
shares from this account at the then current Net Asset Value, in
accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning________________ .
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is
payable to a Financial Institution for your account, indicate
Financial Institution name, address and your account number.
_______________________________ ______________________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ______________________________________
Street Financial Institution Street Address
_______________________________ ______________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the AquilaSM Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any
other persons telephone instructions to execute the exchange of
shares of one Aquila-sponsored fund for shares of another Aquila-
sponsored fund with identical shareholder registration in the manner
described in the Prospectus. Except for gross negligence in acting
upon such telephone instructions to execute an exchange, and subject
to the conditions set forth herein, I/we understand and agree to
hold harmless the Agent, each of the Aquila Funds, and their
respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss,
including reasonable costs and attorneys fees, resulting from
acceptance of, or acting or failure to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
Cash proceeds in any amount from the redemption of shares will
be mailed or wired, whenever possible, upon request, if in an amount
of $1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this
Fund account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ ____________________________________
Account Registration Financial Institution Account Number
_______________________________ ____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ ____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits. I/We understand that this authority
will remain in effect until you receive my/our written instructions to
cancel this service. I/We also agree that if any such drafts or debits
are dishonored, for any reason, you shall have no liabilities.
Financial Institution Account Number _______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila
Distributors, Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted
pursuant to the above authorization shall be subject to the
provisions of the Operating Rules of the National Automated
Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer
in connection with the execution and issuance of any electronic
debit in the normal course of business initiated by the Agent
(except any loss due to your payment of any amount drawn against
insufficient or uncollected funds), provided that you promptly
notify us in writing of any claim against you with respect to
the same, and further provided that you will not settle or pay
or agree to settle or pay any such claim without the written
permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs
and expenses in the event that you dishonor, with or without
cause, any such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is
of legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment
or Telephone Investment, if my/our account at the Financial
Institution has insufficient funds, the Fund and its agents may
cancel the purchase transaction and are authorized to liquidate
other shares or fractions thereof held in my/our Fund account to
make up any deficiency resulting from any decline in the net
asset value of shares so purchased and any dividends paid on
those shares. I/We authorize the Fund and its agents to correct
any transfer error by a debit or credit to my/our Financial
Institution account and/or Fund account and to charge the account
for any related charges. I/We acknowledge that shares purchased
either through Automatic Investment or Telephone Investment are
subject to applicable sales charges.
- - The Fund, the Agent and the Distributor and their Trustees,
directors, employees and agents will not be liable for acting
upon instructions believed to be genuine, and will not be
responsible for any losses resulting from unauthorized
telephone transactions if the Agent follows reasonable
procedures designed to verify the identity of the caller. The
Agent will request some or all of the following information:
account name and number; name(s) and social security number
registered to the account and personal identification; the
Agent may also record calls. Shareholders should verify the
accuracy of confirmation statements immediately upon receipt.
Under penalties of perjury, the undersigned whose Social
Security (Tax I.D.) Number is shown above certifies (i) that
Number is my correct taxpayer identification number and (ii)
currently I am not under IRS notification that I am subject to
backup withholding (line out (ii) if under notification). If no
such Number is shown, the undersigned further certifies, under
penalties of perjury, that either (a) no such Number has been
issued, and a Number has been or will soon be applied for; if
a Number is not provided to you within sixty days, the
undersigned understands that all payments (including
liquidations) are subject to 31% withholding under federal tax
law, until a Number is provided and the undersigned may be
subject to a $50 I.R.S. penalty; or (b) that the undersigned is
not a citizen or resident of the U.S.; and either does not
expect to be in the U.S. for 183 days during each calendar year
and does not conduct a business in the U.S. which would receive
any gain from the Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be
accompanied by proof of authority to sign, such as a certified
copy of the corporate resolution or a certificate of incumbency
under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment,
Expedited Redemption and Direct Deposit of Dividends) are
effective 15 days after this form is received in good order
by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after
the Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without
prior notice, if in its judgment your use of any feature involves
unusual effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or
all features or to charge a service fee upon 30 days written notice
to shareholders except if additional notice is specifically
required by the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete
a Ready Access features form which may be obtained from Aquila
Distributors at ************** and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Fund's Agent.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan
(the "Plan") as agent for the person (the "Planholder") who
executed the Plan authorization.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Agent will credit all such
shares to the Planholder on the records of the Fund. Any share
certificates now held by the Planholder may be surrendered
unendorsed to the Agent with the application so that the shares
represented by the certificate may be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the
Fund at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments
will be made at the Net Asset Value per share in effect at the
close of business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed, at any
time, by the Planholder on written notification to the Agent.
The Planholder should allow at least two weeks time in mailing
such notification before the requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written
notice (in proper form in accordance with the requirements of the
then current Prospectus of the Fund) to redeem all, or any part of,
the shares held under the Plan. In such case the Agent will redeem
the number of shares requested at the Net Asset Value per share in
effect in accordance with the Fund's usual redemption procedures
and will mail a check for the proceeds of such redemption to the
Planholder.
7. The Plan may, at any time, be terminated by the Planholder on
written notice to the Agent, or by the Agent upon receiving
directions to that effect from the Fund. The Agent will also
terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon
termination of the Plan by the Agent or the Fund, shares
remaining unredeemed will be held in an uncertificated account
in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder,
his executor or guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any
action taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent
for the Fund, the Planholder will be deemed to have appointed
any successor transfer agent to act as his agent in administering
the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously making regular purchases. While an occasional lump
sum investment may be made, such investment should normally be an
amount equivalent to three times the annual withdrawal or $5,000,
whichever is less.
<PAGE>
INVESTMENT ADVISER
Ferguson, Wellman, Rudd, Purdy & Van Winkle Inc.
888 SW Fifth Avenue, Suite 1200
Portland, OR 97204-2026
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
James A. Gardner
Diana P. Herrmann
Ann R. Leven
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
William C. Wallace, Senior Vice President
Sally Wilson Church, Vice President
Nancy L. Kayani, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................
Table of Expenses................................
Financial Highlights.............................
Introduction.....................................
Investment Of The Fund's Assets..................
Investment Restrictions..........................
Net Asset Value Per Share........................
How To Invest In The Fund........................
How To Redeem Your Investment....................
Automatic Withdrawal Plan........................
Management Arrangements..........................
Dividend And Tax Information.....................
Exchange Privilege...............................
General Information..............................
Application
Aquila
Cascadia Pacific
Equity Fund
PROSPECTUS
One Of The
AquilaSM Group Of Funds
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
380 Madison Avenue
Suite 2300
New York, New York 10017
800-***** (800-****)
212-697-6666
STATEMENT OF ADDITIONAL INFORMATION
June 24, 1996
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. The Additional Statement should be
read in conjunction with the Prospectus (the "Prospectus") dated
June 24, 1996 of Aquila Cascadia Pacific Equity Fund (the "Fund"),
which may be obtained from the Fund's Sharehoder Servicing Agent,
Administrative Data Management Corp. by writing to it at: 581 Main
Street, Woodbridge, NJ 07095-1198 or by calling it at the following
numbers:
800-*********** toll free or 908-855-5731
or from Aquila Distributors, Inc., the Fund's Distributor, by
writing to it at 380 Madison Avenue, Suite 2300, New York, New York
10017; or by calling:
800-*********** toll free
or 212-697-6666
TABLE OF CONTENTS
Investment of the Fund's Assets . . . . . . . . . . . . . . . .2
Performance . . . . . . . . . . . . . . . . . . . . . . . . . .7
Investment Restrictions . . . . . . . . . . . . . . . . . . . .8
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . .9
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 12
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 12
Additional Information as to Management Arrangements . . . . . 15
Computation of Net Asset Value . . . . . . . . . . . . . . . . 19
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 20
Additional Tax Information . . . . . . . . . . . . . . . . . . 20
General Information . . . . . . . . . . . . . . . . . . . . . 21
Financial Statements . . . . . . . . . . . . . . . . . . . . . 23
Appendix A
<PAGE>
INVESTMENT OF THE FUND'S ASSETS
The investment objective and policies of the Fund are
described in the Prospectus, which refers to the matters described
below.
Additional Information regarding Options Transactions, Risks
Associated with such Transactions and Tax Consequences.
Writing Covered Call Options
The Fund may write (sell) "covered" call options and purchase
options to close out options previously written by the Fund to
generate additional income from option premiums. This premium
income will serve to enhance the Fund's total return and will
reduce the effect of any price decline of the security involved in
the option. Covered call options will generally be written on
securities which, in the opinion of the Adviser are not expected to
make any major price moves in the near future but which, over the
long term, are deemed to be attractive investments for the
Fund.
A call option gives the holder (buyer) the "right to purchase"
a security at a specified price (the exercise price) at any time
prior to a certain date (the expiration date). So long as the
obligation of the writer of a call option continues, he may be
assigned an exercise notice by the broker-dealer through whom such
option was sold, requiring him to deliver the underlying security
against payment of the exercise price. This obligation terminates
upon the expiration of the call option, or such earlier time at
which the writer effects a closing purchase transaction by
repurchasing the option which he previously sold. To secure his
obligation to deliver the underlying security in the case of a call
option, a writer is required to deposit in escrow the underlying
security or other assets in accordance with the rules of the
Options Clearing Corporation (OCC) and of the Exchanges. The Fund
will write only covered call options. This means that the Fund will
only write a call option on a security which the Fund already owns.
The Fund will not write call options on when-issued securities. In
order to comply with the requirements of the securities laws in
several states, the Fund will not write a covered call option if,
as a result, the aggregate market value of all portfolio securities
covering call options exceeds 20% of the market value of the Fund's
assets.
Portfolio securities on which call options may be written will
be purchased solely on the basis of investment considerations
consistent with the Fund's investment objectives. The writing of
covered call options is a conservative investment technique
believed to involve relatively little risk (in contrast to the
writing of naked or uncovered options, which the Fund will not do),
but capable of enhancing the Fund's total return. When writing a
covered call option, the Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying
security above the exercise price, but conversely retains the risk
of loss should the price of the security decline. Unlike one who
owns securities not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities,
since it may be assigned an exercise notice at any time prior to
the expiration date of its obligation as a writer. If a call option
which the Fund has written expires, the Fund will realize a gain in
the amount of the premium; however, such gain may be offset by a
decline in the market value of the underlying security during the
option period. If the call option is exercised, the Fund will
realize a gain or a loss from the sale of the underlying security.
The security covering the call will be maintained in a segregated
account of the Fund's custodian. The Fund does not consider a
security covered by a call to be "pledged" as that term is used in
the Fund's policy which limits the pledging or mortgaging of its
assets.
The premium received is the market value of an option. The
premium the Fund will receive from writing a call option will
reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to such
market price, the historical price volatility of the underlying
security, and the length of the option period. In determining
whether a particular call option should be written on a particular
security, the Adviser will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary
market will exist for those options. The premium received by the
Fund for writing covered call options will be recorded as a
liability of the Fund. This liability will be adjusted daily to the
option's current market value, which will be the latest sale price
at the time at which the net asset value per share of the Fund is
computed (close of the New York Stock Exchange), or, in the absence
of such sale, the latest asked price. The option will be terminated
upon expiration of the option, the purchase of an identical option
in a closing transaction, or delivery of the underlying security
upon the exercise of the option.
Closing transactions will be effected in order to realize a
profit on an outstanding call option, to prevent an underlying
security from being called, or, to permit the sale of the
underlying security. Furthermore, effecting a closing transaction
will permit the Fund to write another call option on the underlying
security with either a different exercise price or expiration date
or both. If the Fund desires to sell a particular security from its
portfolio on which it has written a call option, or purchased a put
option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. There is, no assurance
that the Fund will be able to effect such closing transactions at
a favorable price. If the Fund cannot enter into such a
transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at
market risk on the security. This could result in higher
transaction costs, including brokerage commissions. The Fund will
pay brokerage commissions in connection with the writing of options
to close out previously written options. Such brokerage commissions
are normally higher than those applicable to purchases and sales of
portfolio securities.
If the writer of an option wishes to terminate the obligation,
he or she may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option
previously written. The effect of the purchase is that the writer's
position will be canceled by the clearing corporation. However, a
writer may not effect a closing purchase transaction after he or
she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her
position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected. To secure
the obligation to deliver the underlying security in the case of a
call option, the writer of the option (whether an exchange-traded
option or a NASDAQ option) is required to pledge for the benefit of
the broker the underlying security or other assets in accordance
with rules of the OCC, which is an institution created to interpose
itself between buyers and sellers of options. Technically, the OCC
assumes the other side of every purchase and sale transaction on an
exchange and, by doing so, guarantees the transaction.
Call options written by the Fund will normally have expiration
dates of less than nine months from the date written. From time to
time, the Fund may purchase an underlying security for delivery in
accordance with an exercise notice of a call option assigned to it,
rather than delivering such security from its portfolio. In such
cases additional brokerage commissions will be incurred.
The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from the writing of the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be
offset in whole or in part by appreciation of the underlying
security owned by the Fund.
Federal Income Tax Treatment of Covered Call Options.
Expiration of an option or entry into a closing purchase
transaction will result in a capital gain. If the option is "in-
the-money" (i.e., the option strike price is less than the market
value of the security covering the option) at the time it was
written, any gain or loss realized as a result of the closing
purchase transaction will be long-term capital gain or loss, if the
security covering the option was held for more than 12 months prior
to the writing of the option. The holding period of the securities
covering an "in-the-money" option will not include the period of
time the option is outstanding. If the option is exercised, the
Fund will realize a gain or loss from the sale of the security
covering the call option, and in determining such gain or loss the
premium will be included in the proceeds of the sale.
If the Fund writes options other than "qualified covered call
options," as defined in the Internal Revenue Code, any losses on
such options transactions, to the extent they do not exceed the
unrealized gains on the securities covering the options, may be
subject to deferral until the securities covering the options have
been sold. In addition, any options written against securities
other than stocks will be considered to have been closed out at the
end of the Fund's fiscal year and any gains or losses will be
recognized for tax purposes at that time. Such gains or losses
would be characterized as 60% long-term capital gain or loss and
40% short-term capital gain or loss.
Purchasing Put Options
The Fund may purchase put options on an underlying security
owned by the Fund. As the holder of a put option, the Fund has the
right to sell the underlying security at the exercise price at any
time during the option period. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit
them to expire. The Fund may purchase put options for defensive
purposes in order to protect against an anticipated decline in the
value of its securities. The example of such use of put options is
provided below. The Fund will not purchase options for leverage
purposes.
The Fund may purchase a put option on an underlying security
(a "protective put") owned by the Fund as a defensive technique in
order to protect against an anticipated decline in the value of its
security. Such hedge protection is provided only during the life of
the put option when the Fund as the holder of the put option is
able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market
price. For example, a put option may be purchased in order to
protect unrealized appreciation of a security where the Adviser
deems it desirable to continue to hold the security because of tax
considerations. The premium paid for the put option and any
transaction costs would reduce any capital gain otherwise available
for distribution when the security is eventually sold.
The Fund will commit no more than 5% of its assets to premiums
when purchasing put options. The premium paid by the Fund when
purchasing a put option will be recorded as an asset of the Fund.
This asset will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which the
net asset value per share of the Fund is computed (close of New
York Stock Exchange), or, in the absence of such sale, the latest
bid price. The option will be terminated upon expiration of the
option, the selling (writing) of an identical option in a closing
transaction, or the delivery of the underlying security upon the
exercise of the option.
Writing Put Options
The Fund will not write put options except to close out
transactions as described above.
Purchasing Call Options
The Fund may purchase call options. As the holder of a call
option, the Fund has the right to purchase the underlying security
at the exercise price at any time during the option period. The
Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may
purchase call options for the purpose of increasing its current
return or avoiding tax consequences which could reduce its current
return. The Fund may also purchase call options in order to acquire
the underlying securities. Examples of such uses of call options
are provided below. The Fund will not purchase options for leverage
purposes.
Call options may be purchased by the Fund for the purpose of
acquiring the underlying securities for its portfolio. Utilized in
this fashion, the purchase of call options enables the Fund to fix
its cost of acquiring the securities directly. This technique may
also be useful to the Fund in purchasing a large block of stock
that would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying
security itself, the Fund is partially protected from any
unexpected decline in the market price of the underlying security
and in such event could allow the call option to expire, incurring
a loss only to the extent of the premium paid for the option.
The Fund will commit no more than 5% of its assets to
premiums when purchasing call options. The Fund may also purchase
call options on underlying securities it owns in order to protect
unrealized gains on call options previously written by it. A call
option would be purchased for this purpose where tax considerations
make it inadvisable to realize such gains through a closing
purchase transaction. Call options may also be purchased at times
to avoid realizing losses that would result in a reduction of the
Fund's current return. For example, where the Fund has written a
call option on an underlying security having a current market value
below the price at which such security was purchased by the Fund,
an increase in the market price could result in the exercise of the
call option written by the Fund and the realization of a loss on
the underlying security with the same exercise price and expiration
date as the option previously written.
Risks Associated with Options Transactions
Option transactions involve risks and transaction costs which
the Fund would not incur if it did not engage in option
transactions. If the Adviser's predictions of movements in the
direction of the securities markets are inaccurate, the adverse
consequences to the Fund may leave the Fund in a worse position
than if such strategies were not used. Risks inherent in the use of
options include (i) dependence upon the Adviser's ability to
predict correctly movements in the direction of securities prices;
(ii) imperfect correlation between the price of options and the
movements in the prices of securities being hedged; (iii) the fact
that the skills needed to use these strategies are different from
those needed to select portfolio securities; (iv) the possible
absence of a liquid secondary market for any particular instrument
at any time; (v) the possible need to defer closing out certain
hedged position to avoid adverse consequences and (vi) the possible
inability of the Fund to purchase or sell portfolio securities at
a time when it would otherwise be favorable to do so, or the
possible need for the Fund to sell a portfolio security at a
disadvantageous time, because of the requirement for the Fund to
maintain "cover" or to segregate securities in connection with a
hedging transaction.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage
computed by taking the lesser of purchases or sales of portfolio
securities for a year and dividing it by the monthly average value
of such securities during the year, excluding certain short term
securities. Since the turnover rate of the Fund will be affected by
a number of factors, the Fund is unable to predict what rate the
Fund will have in any particular period or periods, although such
rate is not expected to exceed 60% except with respect to 95% of
the Funds assets. With respect to 5% of the Fund's assets called
the Aggressively Traded Assets ("ATA") the portfolio turnover rate
may be as much as 360%, but trading in the ATA will be managed so
that the Fund's overall portfolio turnover rate does not exceed
75%. The factors which may affect the rate with respect to the
balance of the Fund's assets include (ii) the possible necessary
sales of portfolio securities to meet redemptions; and (iii) the
possibility of purchasing or selling portfolio securities without
regard to the length of time they have been held to attempt to take
advantage of market opportunities and to avoid market declines.
Short-term trading increases portfolio turnover and transaction
costs.
PERFORMANCE
As noted in the Prospectus, the Fund may from time to time
quote various performance figures to illustrate its past
performance.
Performance quotations by investment companies are subject to
rules of the Securities and Exchange Commission ("SEC"). These
rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized
performance information computed as required by the SEC. Average
annual compounded total return quotations used by the Fund are
based on these standardized methods. Each of these and other
methods that may be used by the Fund are described in the following
material.
Total Return
Average annual total return is determined by finding the
average annual compounded rates of return over a 1- year period and
a period since the inception of the operations of the Fund (on
*******) that would equate an initial hypothetical $1,000
investment to the value such an investment would have if it were
completely redeemed at the end of each such period. The calculation
assumes the maximum sales charge is deducted from the hypothetical
initial $1,000 purchase, that on each reinvestment date during each
such period any capital gains are reinvested at net asset value,
and all income dividends are reinvested at net asset value, without
sales charge (because the Fund does not impose any sales charge on
reinvestment of dividends). The computation further assumes that
the entire hypothetical account was completely redeemed at the end
of each such period.
Investors should note that the maximum sales charge (4.25%)
reflected in the following quotations is a one time charge, paid at
the time of initial investment. The greatest impact of this charge
is during the early stages of an investment in the Fund. Actual
performance will be affected less by this one time charge the
longer an investment remains in the Fund.
These figures will be calculated according to the following
SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1- and 5-year
periods or the period since inception, at the end of each
such period.
As discussed in the Prospectus, the Fund may quote total rates
of return in addition to its average annual total return. Such
quotations are computed in the same manner as the Fund's average
annual compounded rate, except that such quotations will be based
on the Fund's actual return for a specified period as opposed to
its average return over the periods described above. In general,
actual total rate of return will be lower than average annual rate
of return because the average annual rate of return reflects the
effect of compounding. See discussion of the impact of the sales
charge on quotations of rates of return, above.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used.
INVESTMENT RESTRICTIONS
The Fund has a number of policies concerning what it can and
cannot do. Those that are called 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. Under
that Act, the vote of the holders of a "majority" of the Fund's
outstanding shares 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 the Fund's
outstanding shares. Those fundamental policies not set forth in the
Prospectus are set forth below.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than those discussed
under "Investment of the Fund's Assets" in the Prospectus;
therefore the Fund cannot buy any commodities or commodity
contracts, any mineral related programs or leases, any shares of
other investment companies, 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 can otherwise buy even though the issuer invests in real
estate or has interests in real estate.
2. The Fund does not buy for control.
The Fund cannot invest for the purpose of exercising control
or management of other companies.
3. 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; however, the Fund
can make margin deposits in connection with the purchase or sale of
options and can pay premiums on these options.
4. 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.
DISTRIBUTION PLAN
The Fund's Distribution Plan has three parts, relating
respectively to distribution payments with respect to Class A
Shares (Part I), to distribution payments relating to Class C
Shares (Part II) and to certain defensive provisions (Part
III).
Provisions Relating to Class A Shares (Part I)
At the date of the Additional Statement, most of the
outstanding shares of the Fund would be considered Qualified
Holdings of various broker-dealers unaffiliated with the Adviser or
the Distributor. The Distributor will consider shares which are not
Qualified Holdings of such unrelated broker-dealers to be Qualified
Holdings of the Distributor and will authorize Permitted Payments
to the Distributor with respect to such shares whenever Permitted
Payments are being made under the Plan.
Part I of the Plan applies only to the Front Payment Shares
Class ("Class A Shares") of the Fund (regardless of whether such
class is so designated or is redesignated by some other name).
As used in Part I of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to any principal
underwriter of the Fund, with which the Fund or the Distributor has
entered into written agreements in connection with Part I ("Class
A Plan Agreements") and which have rendered assistance (whether
direct, administrative, or both) in the distribution and/or
retention of the Fund's Front Payment Shares or servicing of
shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all Front
Payment Class 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 sole judgment of
the Distributor, instrumental in the purchase and/or retention of
such shares and/or in providing administrative assistance or other
services in relation thereto.
Subject to the direction and control of the Board of Trustees
of the Fund, the Fund may make payments ("Class A Permitted
Payments") to Qualified Recipients, which Class A Permitted
Payments may be made directly, or through the Distributor or
shareholder servicing agent as disbursing agent, which may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under the Plan are
not accruable or for any fiscal year which is not a full fiscal
year), 0.15 of 1% of the average annual net assets of the Fund
represented by the Front Payment Class Shares. Such payments shall
be made only out of the Fund's assets allocable to the Front
Payment Shares. The Distributor shall have sole authority (i) as to
the selection of any Qualified Recipient or Recipients; (ii) not to
select any Qualified Recipient; and (iii) the amount of Class A
Permitted Payments, if any, to each Qualified Recipient provided
that the total Class A Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Distributor is authorized, but not directed, to take into account,
in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Front Payment Class
Shares, including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations and
addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting
in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection
with customer orders to purchase or redeem shares; verifying and
guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder designated
accounts; furnishing (either alone or together with other reports
sent to a shareholder by such person) monthly and year-end
statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the
Fund to its shareholders; receiving, tabulating and transmitting to
the Fund proxies executed by shareholders with respect to meetings
of shareholders of the Fund; and providing such other related
services as the Distributor or a shareholder may request from time
to time; 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.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years.
While Part I is in effect, the Fund's Distributor shall report
at least quarterly to the Fund's Trustees in writing for their
review on the following matters: (i) all Class A Permitted
Payments made under Section 9 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which the
amounts were expended; and (ii) all fees of the Fund to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the Fund,
the Adviser, the Administrator or the Distributor, such person
shall agree to furnish to the Distributor for transmission to the
Board of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part I originally went into effect when it was approved (i) by
a vote of the Trustees, including the Independent Trustees, with
votes cast in person at a meeting called for the purpose of voting
on Part I of the Plan; and (ii) by a vote of holders of at least a
"majority" (as so defined) of the outstanding voting securities of
the Front Payment Class Shares (or of any predecessor class or
category of shares, whether or not designated as a class) and a
vote of holders of at least a "majority" (as so defined) of the
outstanding voting securities of the Level Payment Class and/or of
any other class whose shares are convertible into Front Payment
Shares. Part I has continued, and will, unless terminated as
hereinafter provided, continue in effect, until the June 30 next
succeeding such effectiveness, and from year to year thereafter
only so long as such continuance is specifically approved at least
annually by the Fund's Trustees and its Independent Trustees with
votes cast in person at a meeting called for the purpose of voting
on such continuance. Part I 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 to which Part I applies.
Part I may not be amended to increase materially the amount of
payments to be made without shareholder approval of the class or
classes of shares affected by Part I as set forth in (ii) above,
and all amendments must be approved in the manner set forth in (i)
above.
In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class A Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each
such agreement must be approved in accordance with, and contain the
provisions required by, the Rule. In the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Class A Plan Agreements with them shall be (i) their agreements
with the Distributor with respect to payments under the Fund's
Distribution Plan in effect prior to April 1, 1996 or (ii) Class A
Plan Agreements entered into thereafter.
Provisions relating to Class C Shares (Part II)
Part II of the Plan applies only to the Level Payment Class
Shares ("Class C Shares") of the Fund (regardless of whether such
class is so designated or is redesignated by some other name).
As used in Part II of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to any principal
underwriter of the Fund, with which the Fund or the Distributor has
entered into written agreements in connection with Part II ("Class
C Plan Agreements") and which have rendered assistance (whether
direct, administrative, or both) in the distribution and/or
retention of the Fund's Level Payment Class Shares or servicing of
shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all Level
Payment Class 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 sole judgment of
the Distributor, instrumental in the purchase and/or retention of
such shares and/or in providing administrative assistance or other
services in relation thereto.
Subject to the direction and control of the Board of Trustees
of the Fund, the Fund may make payments ("Class C Permitted
Payments") to Qualified Recipients, which Class C Permitted
Payments may be made directly, or through the Distributor or
shareholder servicing agent as disbursing agent, which may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under the Plan are
not accruable or for any fiscal year which is not a full fiscal
year), 0.75 of 1% of the average annual net assets of the Fund
represented by the Level Payment Class Shares. Such payments shall
be made only out of the Fund's assets allocable to the Level
Payment Shares. The Distributor shall have sole authority (i) as
to the selection of any Qualified Recipient or Recipients; (ii) not
to select any Qualified Recipient; and (iii) the amount of Class C
Permitted Payments, if any, to each Qualified Recipient provided
that the total Class C Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Distributor is authorized, but not directed, to take into account,
in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Level Payment Shares,
including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations and
addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting
in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection
with customer orders to purchase or redeem shares; verifying and
guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder designated
accounts; furnishing (either alone or together with other reports
sent to a shareholder by such person) monthly and year-end
statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the
Fund to its shareholders; receiving, tabulating and transmitting to
the Fund proxies executed by shareholders with respect to meetings
of shareholders of the Fund; and providing such other related
services as the Distributor or a shareholder may request from time
to time; 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.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years.
While Part II is in effect, the Fund's Distributor shall
report at least quarterly to the Fund's Trustees in writing for
their review on the following matters: (i) all Class C Permitted
Payments made under Section 15 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which the
amounts were expended; and (ii) all fees of the Fund to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the Fund,
the Adviser, the Administrator or the Distributor, such person
shall agree to furnish to the Distributor for transmission to the
Board of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part II originally went into effect when it was approved (i)
by a vote of the Trustees, including the Independent Trustees, with
votes cast in person at a meeting called for the purpose of voting
on Part II of the Plan; and (ii) by a vote of holders of at least
a "majority" (as so defined) of the outstanding voting securities
of the Level Payment Class Shares. Part II has continued, and
will, unless terminated as hereinafter provided, continue in
effect, until the April 30 next succeeding such effectiveness, and
from year to year thereafter only so long as such continuance is
specifically approved at least annually by the Fund's Trustees and
its Independent Trustees with votes cast in person at a meeting
called for the purpose of voting on such continuance. Part II 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 to which Part II applies. Part II may not be amended
to increase materially the amount of payments to be made without
shareholder approval of the class or classes of shares affected by
Part II as set forth in (ii) above, and all amendments must be
approved in the manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class C Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each
such agreement must be approved in accordance with, and contain the
provisions required by, the Rule. In the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Class C Plan Agreements with them shall be their agreements with
the Distributor with respect to payments under Part II.
Defensive Provisions (Part III)
Another part of the Plan (Part III) 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 of all prospectuses and statements of
additional information and the costs of printing and mailing all
prospectuses and statements of additional information to existing
shareholders; (iii) the costs of preparation, printing and mailing
of any proxy statements and proxies, irrespective of whether any
such proxy statement includes any item relating to, or directed
toward, the sale of the Fund's shares; (iv) all legal and
accounting fees relating to the preparation of any such reports,
prospectuses, statements of additional information, proxies and
proxy statements; (v) all fees and expenses relating to the
registration or qualification of the Fund and/or its shares under
the securities or "Blue-Sky" laws of any jurisdiction; (vi) all
fees under the Securities Act of 1933 and the 1940 Act, including
fees in connection with any application for exemption relating to
or directed toward the sale of the Fund's shares; (vii) all fees
and assessments of the Investment Company Institute or any
successor organization, irrespective of whether some of its
activities are designed to provide sales assistance; (viii) all
costs of the preparation and mailing of confirmations of shares
sold or redeemed or share certificates, and reports of share
balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of such
disinterested Trustees but that nothing in the Plan shall prevent
the involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved by
a majority of such disinterested Trustees.
The Plan states that while it is in effect, the Fund's
Administrator and Distributor shall report at least quarterly to
the Fund's Board of Trustees in writing for their review on the
following matters: (i) all Permitted Payments made under this 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 of cost specified in the Plan (making estimates of such
costs where necessary or desirable) during the preceding calendar
or fiscal quarter; and (iii) all fees of the Fund to the
distributor, sub-adviser or administrator paid or accrued during
such quarter. In addition if any such Qualified Recipient is an
affiliate, as that term is defined in the Act, of the Fund, the
Adviser, the Administrator or the Distributor, such person shall
agree to furnish to the Distributor for transmission to the Board
of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
The Plan defines as the Fund's Independent Trustees those
Trustees who are not "interested persons" of the Fund as defined in
the 1940 Act and who have no direct or indirect financial interest
in the operation of the Plan or in any agreements related to the
Plan. 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 Board of Trustees and its Independent Trustees with votes
cast in person at a meeting called for the purpose of voting on
such continuance. In voting on the implementation or continuance of
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 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 shareholder approval and all
amendments must be approved in the manner set forth above as to
continuance of the Plan.
The Plan and each Part of it shall also be subject to all
applicable terms and conditions of Rule 18f-3 under the 1940 Act as
now in force or hereafter amended. Specifically, but without
limitation, the provisions of Part III shall be deemed to be
severable, within the meaning of and to the extent required by Rule
18f-3, with respect to each outstanding class of shares of the
Fund.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the
"Services Plan") to provide for the payment with respect to Class
C Shares of the Fund of "Service Fees" within the meaning of
Article III, Section 26(b)(9) of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. The Services Plan
applies only to the Class C Shares of shares of the Fund
(regardless of whether such class is so designated or is
redesignated by some other name).
As used in the Services Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to the Distributor
and any other principal underwriter of the Fund, who have, pursuant
to written agreements with the Fund or the Distributor, agreed to
provide personal services to shareholders of Level-Payment Class
Shares and/or maintenance of Level-Payment Class Shares shareholder
accounts. "Qualified Holdings" shall mean, as to any Qualified
Recipient, all Level-Payment Class Shares beneficially owned by
such Qualified Recipient's customers, clients or other contacts.
"Administrator" shall mean Aquila Management Corporation or any
successor serving as sub-adviser or administrator of the Fund.
Subject to the direction and control of the Board of Trustees
of the Fund, the Fund may make payments ("Service Fees") to
Qualified Recipients, which Service Fees (i) may be paid directly
or through the Distributor or shareholder servicing agent as
disbursing agent and (ii) may not exceed, for any fiscal year of
the Fund (as adjusted for any part or parts of a fiscal year during
which payments under the Services Plan are not accruable or for any
fiscal year which is not a full fiscal year) 0.25, of 1% of the
average annual net assets of the Fund represented by the Level-
Payment Class of shares. Such payments shall be made only out of
the Fund's assets allocable to the Level-Payment Shares. The
Distributor shall have sole authority with respect to the selection
of any Qualified Recipient or Recipients and the amount of Service
Fees, if any, paid to each Qualified Recipient, provided that the
total Service Fees paid to all Qualified Recipients may not exceed
the amount set forth above and provided, further, that no Qualified
Recipient may receive more than 0.25 of 1% of the average annual
net asset value of shares sold by such Recipient. The Distributor
is authorized, but not directed, to take into account, in addition
to any other factors deemed relevant by it, the following: (a) the
amount of the Qualified Holdings of the Qualified Recipient and (b)
the extent to which the Qualified Recipient has, at its expense,
taken steps in the shareholder servicing area with respect to
holders of Level Payment Class Shares, including without
limitation, any or all of the following activities: answering
customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Fund may
be effected; assisting shareholders in designating and changing
dividend options, account designations and addresses; providing
necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting in processing purchase
and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; and
providing such other related services as the Distributor or a
shareholder may request from time to time. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees (as
defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years.
While the Services Plan is in effect, the Fund's Distributor
shall report at least quarterly to the Fund's Trustees in writing
for their review on the following matters: (i) all Service Fees
paid under the Services Plan, the identity of the Qualified
Recipient of each payment, and the purposes for which the amounts
were expended; and (ii) all fees of the Fund to the Distributor
paid or accrued during such quarter. In addition, if any Qualified
Recipient is an "affiliated person," as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the
Fund, the Adviser, the Administrator or the Distributor, such
person shall agree to furnish to the Distributor for transmission
to the Board of Trustees of the Fund an accounting, in form and
detail satisfactory to the Board of Trustees, to enable the Board
of Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
The Services Plan has been approved by a vote of the Trustees,
including those Trustees who, at the time of such vote, were not
"interested persons" (as defined in the 1940 Act) of the Fund and
had no direct or indirect financial interest in the operation of
the Service Plan or in any agreements related to the Service Plan
(the "Independent Trustees"), with votes cast in person at a
meeting called for the purpose of voting on the Service Plan. It
is effective as of the date first above written and will continue
in effect for a period of more than one year from such date only so
long as such continuance is specifically approved at least annually
as set forth in the preceding sentence. It may be amended in like
manner and may be terminated at any time by vote of the Independent
Trustees.
The Services Plan shall also be subject to all applicable
terms and conditions of Rule 18f-3 under the Act as now in force or
hereafter amended.
While the Service Plan is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested
persons" of the Fund, as that term is defined in the 1940 Act,
shall be committed to the discretion of such disinterested
Trustees. Nothing herein shall prevent the involvement of others in
such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
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
the Prospectus, 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 Trust, their affiliations, if
any, with the Administrator or the Distributor, and their principal
occupations during at least the past five years are set forth
below. None of the Trustees or officers of the Trust is affiliated
with the Adviser, except as indicated.
Mr. Herrmann is an "interested person" of the Trust as that
term is defined in the Investment Company Act of 1940 (the "1940
Act") as an officer of the Trust and a Director, officer and
shareholder of the Distributor. Ms. Herrmann is an interested
person as a member of his immediate family.
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 Sub-Adviser to the following open-end
investment companies, and Founder, Chairman of the Board of
Trustees, and President of each: Prime Cash Fund, 1982-1996;
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 an equity fund, Aquila Rocky
Mountain Equity Fund since 1993, together with this Fund 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;
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 since
1990; actively involved for many years in leadership roles with
university, school and charitable organizations.
Vernon R. Alden, Trustee, 420 Boylston Street, Suite 403,
Boston, Massachusetts 02116
Director of Augat Inc., a manufacturing corporation, since 1979,
Colgate Palmolive Company since 1974, Digital Equipment
Corporation, a computer manufacturing corporation, since 1959,
Intermet Corporation, an independent foundry, since 1986, and
Sonesta International Hotels Corporation since 1978; Chairman of
the Board and Executive Committee of The Boston Company, Inc., a
financial services company, 1969-1978; Trustee of Tax-Free Trust of
Oregon since 1988, of Hawaiian Tax-Free Trust, Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and
Pacific Capital U.S. Treasuries Cash Assets Trust since 1989, of
Cascades Cash Fund, 1989-1994 and of Narragansett Insured Tax-Free
Income Fund since 1992; Associate Dean and member of the faculty of
Harvard University Graduate School of Business Administration,
1951-1962; member of the faculty and Program Director of Harvard
Business School - University of Hawaii Advanced Management Program,
summer of 1959 and 1960; President of Ohio University, 1962-1969;
Chairman of The Japan Society of Boston, Inc., and member of
several Japan-related advisory councils; Chairman of the
Massachusetts Business Development Council and the Massachusetts
Foreign Business Council, 1978-1983; Trustee of the Boston Symphony
Orchestra since 1975; Chairman of the Massachusetts Council on the
Arts and Humanities, 1972-1984; Member of the Board of Fellows of
Brown University, 1969-1986; Trustee and member of the Executive
Committee, Plimoth Plantation; trustee of various other cultural
and educational organizations; Honorary Consul General of the Royal
Kingdom of Thailand.
Warren C. Coloney, Trustee, 7304 Millwood Road, Bethesda,
Maryland 20817
Consultant to top management and governing boards on issues of
corporate governance, strategy, organization and human resource
management; Director of the Washington, D.C. office of Management
Practice, Inc., since 1992; President of Coloney & Company, Inc.,
since 1984; Managing Director-Europe of Towers, Perrin, Forster &
Crosby, Inc., 1974-1984; President of Coloney, Cannon, Main &
Pursell, Inc., 1968-1974; Registered Professional Engineer;
Founding Member of the Institute of Management Consultants; Trustee
of Tax-Free Trust of Oregon since 1986 and of Cascades Cash Fund,
1989-1994; active in a number of professional, social, church, and
community service organizations in England and the United
States.
James A. Gardner, Trustee, Vandervert Ranch, Vandervert Road,
Bend, Oregon 97707
President of Gardner Associates, an investment and real estate
firm, since 1970; President Emeritus of Lewis and Clark College and
Law School since 1989 and President, 1981-1989; affiliated with the
Ford Foundation, 1969-1981; Lecturer and Assistant Director of
Admissions of Harvard College, 1968-1969; Member of the Oregon
Young Presidents Organization since 1983; Director of Stanley
Investment & Management Inc., an international business brokerage,
since 1987; Member of the Council on Foreign Relations since 1988;
Trustee of Tax-Free Trust of Oregon since 1986 and of Cascades Cash
Fund, 1989-1994; Director of the Oregon High Desert Museum since
1989; active in civic, business, educational and church
organizations in Oregon.
Diana P. Herrmann*, Trustee, 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
and of Churchill Tax-Free Fund of Kentucky and Churchill Cash
Reserves Trust since 1995; Vice President of InCap Management
Corporation since 1986 and Director since 1983; Vice President and
formerly Assistant Vice President of the Money Funds since 1986;
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.
Ann R. Leven, Trustee, 785 Park Avenue, Apartment 20A, New York,
NY 10021
Treasurer of the National Gallery of Art, Washington, D.C.,
since 1994, Deputy Treasurer, 1990-1994; Treasurer of the
Smithsonian Institution, Washington, D.C., 1984-1990; President of
ARL Associates, strategic consultants, since 1983; Vice
President/Senior Corporate Planning Officer of The Chase Manhattan
Bank, N.A., 1979-1983; Treasurer of The Metropolitan Museum of Art,
1972-1979; Trustee of Short Term Asset Reserves, 1984-1993, of Tax-
Free Trust of Oregon since 1986, of Churchill Tax-Free Fund of
Kentucky since 1987, of Cascades Cash Fund, 1989-1994, and of
Churchill Cash Reserves Trust since 1995; Trustee of Oxford Cash
Management Fund, 1987-1988; Director of the Delaware Group of
mutual funds since 1989; Adjunct Professor at Columbia University
Graduate School of Business Administration since 1975; Trustee of
the American Red Cross Endowment Fund, 1985-1990; Member of the
Visiting Committee of Harvard Business School, 1979-1985; Member of
the Board of Overseers of The Amos Tuck School, Dartmouth College,
1978-1984; Staff Director of the Presidential Task Force on the
Arts and Humanities, 1981; Director of Alliance Capital Reserves
Fund, a money market fund, 1978-1979.
Raymond H. Lung, Trustee, 2828 Southwest Hamilton Street,
Portland, Oregon 97201
Retired; Trustee of Qualivest Group of Funds since 1994;
Executive Vice President and Executive Trust Officer of U.S.
National Bank of Oregon, 1989-1991; Senior Vice President and
Executive Trust Officer, 1980-1989; various other management
positions, 1954-1980; Member of Executive Committee, Trust
Division, American Bankers Association, 1986-1988; Director of
Pacific Securities Depository Trust Company and Pacific Clearing
Corporation (subsidiaries of the Pacific Stock Exchange), 1980-
1987; Director of Collins Pine Company and Ostrander Companies
(lumber and oil), 1980-1990; Trustee of Tax-Free Trust of Oregon
since 1992 and of Cascades Cash Fund, 1992-1994.
Richard C. Ross, Trustee, 510 SW Country Club Road, Lake Oswego,
Oregon 97034
President of Richard Ross Communications, a consulting firm,
since 1986; Senior communications consultant to Pihas, Schmidt,
Westerdahl, advertising and public relations, 1986-1988; Executive
News Director of KATU Television, 1975-1986; News Director of KGW-
TV, 1956-1975; Trustee of Tax-Free Trust of Oregon since 1988 and
of Cascades Cash Fund, 1989-1994; Director of the Portland Rose
Festival since 1972; Director of the Greater Portland Convention &
Visitors Association, 1982-1985; Director of the Portland Chamber
of Commerce, 1971-1980; President of the Oregon chapter of the
National Multiple Sclerosis Society, 1984-1986; Director of the
Meridian Park Hospital Foundation, 1984-1987; Chairman of the
Broadcasters Group of the Bar-Press-Broadcasters professional
relations committee, 1964-1984; Former President of the Rotary Club
of East Portland and currently a Director of Goodwill Industries,
Metropolitan Youth Symphony and the Lake Oswego Community
Theatre.
William C. Wallace, Senior Vice President, 380 Madison Avenue,
New York, New York 10017
Vice President of Capital Cash Management Trust and Pacific
Capital Cash Assets Trust since 1984; Senior Vice President of
Hawaiian Tax-Free Trust since 1985 and Vice President, 1984-1985;
Senior Vice President of Tax-Free Trust of Arizona since 1989 and
Vice President, 1986-1988; Vice President of Tax-Free Trust of
Oregon since 1986, of Churchill Tax-Free Fund of Kentucky and Tax-
Free Fund of Colorado since 1987, of Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Treasuries Cash Assets Trust
since 1988 and of Narragansett Insured Tax-Free Income Fund since
1992; Secretary and Director of STCM Management Company, Inc. since
1974; President of the Distributor since 1995 and formerly Vice
President of the Distributor, 1986-1992; Member of the Panel of
Arbitrators, American Arbitration Association, since 1978;
Assistant Vice President, American Stock Exchange, Market
Development Division, and Director of Marketing, American Gold Coin
Exchange, a subsidiary of the American Stock Exchange, 1976-
1984.
Sally Wilson Church, Vice President, 4800 MaCadam Avenue, Suite
300, Portland, Oregon 97201
Vice President of Tax-Free Trust of Oregon since 1988 and of
Cascades Cash Fund, 1989-1994; Corporate Vice President of Shearson
Lehman Hutton and Senior Marketing Coordinator of its Northwest
Region, 1985-1989 and an employee in various capacities at that
firm, 1978-1985.
Nancy L. Kayani, Vice President, 4800 MaCadam Avenue, Suite 300,
Portland, Oregon 97201
Vice President of Tax-Free Trust of Oregon since 1992 and
Assistant Vice President of Cascades Cash Fund, 1992-1994; Customer
Service Representative of U.S. National Bank of Oregon, 1990-1991;
Securities Trader of Bidwell & Co., 1988-1989; Securities Trader
and Mutual Fund Regional Representative of Fidelity Investments
Southwest, 1985-1987; Stockbroker of Dean Witter Reynolds, 1983-
1984; Mutual Regional Representative of Columbia Management
Company, 1980-1983.
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.
John M. Herndon, 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.
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.
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Sub-Advisory Agreement
The Investment Sub-Advisory Agreement (the "Sub-Advisory
Agreement") between the Fund and Ferguson, Wellman, Rudd, Purdy &
Van Winkle, Inc. (the "Sub-Adviser") contains the provisions
described below, in addition to those described in the
Prospectus.
The Sub-Advisory Agreement may be terminated by the Sub-
Adviser at any time without penalty upon giving the Fund sixty
days' written notice, and may be terminated by the Fund at any time
without penalty upon giving the Sub-Adviser sixty days' written
notice, provided that such termination by the Fund shall be
directed or approved by the vote of a majority of all its Trustees
in office at the time or by the vote of the holders of a majority
(as defined in the 1940 Act) of its voting securities at the time
outstanding and entitled to vote; it automatically terminates in
the event of its assignment (as so defined). However, in the Sub-
Advisory Agreement, the Sub-Adviser agrees that it will not
exercise its termination rights for at least two years from the
effective date of the Sub-Advisory Agreement, except for regulatory
reasons.
The expense limitation referred to in the Prospectus, 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 Sub-Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, the Sub-Adviser is not
liable for any loss sustained by the adoption of any investment
policy or the purchase, sale or retention of any security and
permits the Sub-Adviser to act as investment adviser for any other
person, firm or corporation. The Fund agrees to indemnify the Sub-
Adviser to the full extent permitted under the Fund's Declaration
of Trust.
The Sub-Advisory Agreement contains the following provisions
as to the Fund's portfolio transactions. In connection with its
duties to arrange for the purchase and sale of the Fund's portfolio
securities, the Sub-Adviser shall select such broker-dealers
("dealers") as shall, in the Sub-Adviser's judgment, implement the
policy of the Fund to achieve "best execution," i.e., the most
favorable price and efficient execution, and accordingly shall seek
to execute each transaction at a price and commission, if any,
which provide the most favorable total cost or proceeds reasonably
attainable in the circumstances. The Fund understands that
purchases from underwriters include a commission or concession paid
by the issuer to the underwriter and that principal transactions
placed through dealers include a spread between the bid and asked
prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer
will provide best execution, the dealer's reliability, integrity,
financial condition and risk in positioning the securities
involved, as well as the difficulty of the transaction in question,
and thus need not pay the lowest spread or commission available if
the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the brokerage
and research services provided by the dealer, viewed either in
terms of the particular transaction or the Sub-Adviser's overall
responsibilities. If, on the foregoing basis, the transaction in
question could be allocated to two or more dealers, the Sub-Adviser
is authorized, in making such allocation, to consider (i) whether
a dealer has provided research services, as further discussed
below; and (ii) whether a dealer has sold shares of the Fund. Such
research may be in written form or through direct contact with
individuals and may include quotations on portfolio securities and
information on particular issuers and industries, as well as on
market, economic or institutional activities. The Fund recognizes
that no dollar value can be placed on such research services or on
execution services and that such research services may or may not
be useful to the Fund and may be used for the benefit of the Sub-
Adviser or its other clients.
The Sub-Advisory Agreement states that it is agreed that the
Sub-Adviser shall have no responsibility or liability for the
accuracy or completeness of the Fund's Registration Statement under
the Securities Act of 1933 and the 1940 Act, except for the
information supplied by the Sub-Adviser for inclusion therein.
Additional Information as to the Advisory and Administration
Agreement
The Advisory and Administration Agreement (the "Advisory
Agreement") between Aquila Management Corporation, as Adviser and
Administrator, and the Fund contains the provisions described below
in addition to those described in the Prospectus.
Subject to the control of the Fund's Board of Trustees, the
Adviser provides all administrative services to the Fund other than
those relating to its investment portfolio handled by the Sub-
Adviser under the Sub-Advisory Agreement; as part of such duties,
the Adviser (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, subject to the approval of the Fund's Board of
Trustees, 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 and for the sale, servicing, or
redemption of the Fund's shares; (iii) either keeps the accounting
records of the Fund, including the computation of net asset value
per share and the dividends (provided that daily pricing of the
Fund's portfolio is the responsibility of the Sub-Adviser under the
Sub-Advisory Agreement) or, at its expense and responsibility,
delegates such duties in whole or in part to a company satisfactory
to the Fund; (iv) maintains the Fund's 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 the Fund's 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 Advisory and Administration Agreement further provides
with respect to advisory services that subject to the direction and
control of the Board of Trustees of the Fund, the Adviser shall
review with the Sub-Adviser the investment activities of the Fund
and in conjunction with the Sub-Adviser shall make such periodic
reports to the Board of Trustees of the Fund as may be appropriate,
and in addition, the Adviser shall provide such advisory services
to the Fund, in addition to those services provided by the Sub-
Adviser, as the Adviser deems appropriate; as part of any such
services, the Adviser shall at its discretion: (i) provide the Sub-
Adviser and the Fund with overall market analysis; (ii) provide the
Sub-Adviser and the Fund with material relevant to the investment
of the assets of the Fund in securities of issuers in various
states; (iii) provide the Sub-Adviser and the Fund such other
investment advice as it considers necessary or appropriate; (iv)
consult with the Sub-Adviser in connection with the Sub-Adviser's
duties under the Sub-Advisory Agreement; and (v) otherwise assist
the Sub-Adviser, and itself directly act (in coordination with the
Sub-Adviser and as may be agreed among them with respect to a
portion of, or all of, the Fund's portfolio), to (A) supervise
continuously the investment program of the Fund and the composition
of its portfolio; (B) determine what securities shall be purchased
or sold by the Fund; and (C) arrange for the purchase and the sale
of securities held in the portfolio of the Fund.
The Advisory and Administration Agreement further provides
with respect to possible advisory services that subject to the
direction and control of the Board of Trustees of the Fund, in the
event of the termination of the Sub-Advisory Agreement, the Adviser
shall act as managerial investment adviser to the Fund with respect
to the investment of the Fund's assets, and supervise and arrange
the purchase of securities for and the sale of securities held in
the portfolio of the Fund, and the fee payable to the Adviser shall
be increased to the amount provided in sub-section 4(b) thereof,
provided, however, that (i) within two weeks of notice of
termination of the Sub-Advisory Agreement being delivered by the
Fund or by the Sub-Adviser, or termination of the Sub-Advisory
Agreement for any other reason, or within such longer period as
shall have been specified by the Board of Trustees, the Adviser
shall have provided the Board of Trustees information of the kind
required in connection with annual renewal of agreements under
Section 15(c) of the Act, and (ii) within thirty days of the
termination of the Sub-Advisory Agreement, the assumption of such
duties by the Adviser shall have been approved by a vote of the
Trust's Board of Trustees, including a vote of a majority of the
Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, with votes cast
in person at a meeting called for the purpose of voting on such
approval.
In the event that the Adviser assumes such duties, it shall
(i) supervise continuously the investment program of the Fund and
the composition of its portfolio; (ii) determine what securities
shall be purchased or sold by the Fund; (iii) arrange for the
purchase and the sale of securities held in the portfolio of the
Fund; and (iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of pricing
information satisfactory to the Fund and, unless otherwise directed
by the Board of Trustees, provide for pricing of the Fund's
portfolio at least quarterly using another such source satisfactory
to the Fund.
In the event that the Adviser has assumes the duties of
managerial investment adviser to the Fund with respect to
investment of the Fund's assets hereof following approval by the
Fund's Board of Trustees, the Fund shall pay the Adviser, and the
Adviser shall accept as full compensation for all services rendered
thereunder, 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 1.50% of such net asset value on net assets of the Fund up
to $15,000,000, 1.20% on net assets of the Fund above $15,000,000
to $50,000,000 and 0.90 of 1% of the Fund's net assets above
$50,000,000.
In the event of termination of the Sub-Advisory Agreement, if
the Adviser does not elect to assume the duties of managerial
investment adviser or if its election as managerial investment
adviser is not approved by the Board of Trustees, the Adviser shall
act as acting investment adviser until a new investment adviser has
been appointed. In such event, the Fund shall pay the Adviser an
amount in addition to the amounts it is being paid for advisory and
administrative services as described in the Prospectus, which does
not exceed its costs for its services as acting managerial
investment adviser, but in no event more that the amounts set forth
in the preceding paragraph.
The Advisory and Administration Agreement contains provisions
as to the Adviser's allocation of the portfolio transactions of the
Fund similar to those in the Sub-Advisory Agreement.
The Advisory and Administration Agreement may be terminated at
any time without penalty by the Adviser upon sixty days' written
notice to the Fund and the Sub-Adviser; it may be terminated by the
Fund at any time without penalty upon giving the Adviser sixty
days' written notice, provided that such termination by the Fund
shall be directed or approved by 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. The Advisory
and Administration Agreement will otherwise continue indefinitely.
In either case the notice provision may be waived. The Advisory and
Administration Agreement contains a provision under which the
Adviser agrees that it will not exercise its termination rights for
at least two years from the effective date of the Agreement except
for regulatory reasons.
The expense limitation referred to in the Prospectus, 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 Advisory and Administration Agreement provides that the
Adviser 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 Advisory and Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence
of the Adviser in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the Advisory
and Administration Agreement. The Fund agrees to indemnify the
Adviser to the full extent permitted by the Declaration of
Trust.
COMPUTATION OF NET ASSET VALUE
The net asset value of the Fund's shares 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 Fund's net assets by
the total number of its shares then outstanding. The close of the
principal exchanges or other markets on which some of the Fund's
portfolio securities are traded may be later than 4:00 p.m. New
York time. Options are valued at the last prior sales price on the
principal commodities exchange on which the option is traded or, if
there are no sales, at the bid price. Debt securities having a
remaining maturity of less than sixty days when purchased and
securities originally purchased with maturities in excess of sixty
days but which currently have maturities of sixty days or less are
valued at cost adjusted for amortization of premiums and accretion
of discounts.
As indicated above, 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 be 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.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a number
of instances in which the Fund's shares are sold or issued on a
basis other than the maximum public offering price, that is, the
net asset value plus the highest sales charge. Some of these relate
to lower or eliminated sales charges for larger purchases, whether
made at one time or over a period of time as under a Letter of
Intent or right of accumulation. (See the table of sales charges in
the Prospectus.) The reasons for these quantity discounts are, in
general, that (i) they are traditional and have long been permitted
in the industry and are therefore necessary to meet competition as
to sales of shares of other funds having such discounts; and (ii)
they are designed to avoid an unduly large dollar amount of sales
charge on substantial purchases in view of reduced selling
expenses. Quantity discounts are made available to certain related
persons ("single purchasers") for reasons of family unity and to
provide a benefit to tax-exempt plans and organizations.
The reasons for the other instances in which there are reduced
or eliminated sales charges are as follows. Exchanges at net asset
value are permitted because a sales charge has already been paid on
the shares exchanged. Sales without sales charge are permitted to
Trustees, officers and certain others due to reduced or eliminated
selling expenses and/or since such sales may encourage incentive,
responsibility and interest and an identification with the aims and
policies of the Fund. Reinvestments of redemptions at no sales
charge are permitted during a limited time to permit flexibility to
shareholders in their financial planning and to allow them an
opportunity to correct mistaken or incompletely informed redemption
decisions. Shares may be issued at no sales charge in plans of
reorganization due to reduced or eliminated sales expenses and
since, in some cases, such issuance is exempted in the 1940 Act
from the otherwise applicable restrictions as to what sales charge
must be imposed. In no case in which there is a reduced or
eliminated sales charge are the interests of existing shareholders
adversely affected since, in each case, the Fund receives the net
asset value per share of all shares sold or issued.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Class A Shares or Class Y 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. Stock
certificates will not be issued for shares held under an Automatic
Withdrawal Plan. All dividends and distributions must be
reinvested. Shares will be redeemed on the last business day of the
month or quarter as may be necessary to meet withdrawal
payments.
Redemption of shares for withdrawal purposes may reduce or
even liquidate the account. Monthly or quarterly payments paid to
shareholders should not be considered as a yield or income on
investment.
ADDITIONAL TAX INFORMATION
If you incur a sales commission when you buy shares of one
mutual fund (the original fund) and then sell such shares or
exchange them for shares of a different mutual fund without having
held them at least 91 days you must reduce your tax basis for the
shares sold or exchanged to the extent that the standard sales
commission charged for acquiring shares in the exchange or later
acquiring shares of the original fund or another fund is reduced
because of your having owned the original fund shares. The effect
of the rule is to increase your gain or reduce your loss on the
original fund shares. The amount of the basis reduction on the
original fund shares, however, is added on your basis for the fund
shares acquired in the exchange or later acquired. The provision
applies to commissions charged after October 3, 1989.
CONVERSION OF CLASS C SHARES
Level Payment Class Shares ("Class C Shares) of the Fund,
which you hold will automatically convert to Front Payment Class
Shares ("Class A Shares") of the Fund based on the relative net
asset values per share of the two classes as of the close of
business on the first business day of the month in which the sixth
anniversary of the your initial purchase of such Class C Shares
occurs. For these purposes, the date of your initial purchase shall
mean (1) the first business day of the month in which such Class C
Shares were issued to you, or (2) for Class C Shares of the Fund
you have obtained through an exchange or series of exchanges under
the Exchange Privilege (see "Exchange Privilege" in the
Prospectus), the first business day of the month in which you made
the original purchase of Class C Shares so exchanged. For
conversion purposes, Class C Shares purchased through reinvestment
of dividends or other distributions paid in respect of Class C
Shares will be held in a separate sub-account. Each time any Class
C Shares in your regular account (other than those in the sub-
account) convert to Class A Shares, a pro-rata portion of the Class
C Shares in the sub-account will also convert to Class A Shares.
The portion will be determined by the ratio that your Class C
Shares then converting to Class A Shares bears to the total of your
Class C Shares not acquired through reinvestment of dividends and
distributions.
The availability of the conversion feature is subject to the
continuing applicability of a ruling of the Internal Revenue
Service ("IRS"), or an opinion of counsel, that: (1) the dividends
and other distributions paid on Class A Shares and Class C Shares
will not result in "preferential dividends" under the Code; and (2)
the conversion of shares does not constitute a taxable event. If
the conversion feature ceased to be available, the Class C Shares
of the Fund would not be converted and would continue to be subject
to the higher ongoing expenses of the Class C Shares beyond six
years from the date of purchase. The Fund has no reason to believe
that these conditions for the availability of the conversion
feature will not continue to be met.
If the Fund implements any amendments to its Distribution Plan
that would increase materially the costs that may be borne under
such Distribution Plan by Class A Shares shareholders, Class C
Shares will stop converting into Class A Shares unless a majority
of Class C Shares shareholders, voting separately as a class,
approve the proposal.
GENERAL INFORMATION
Voting at Meetings of Shareholders
At any meeting of shareholders, each shareholder of each share
of the Fund and of each share of each series of the Fund, if more
than one series is established, is entitled to one (1) vote for
each dollar of net asset value (determined as of the record date
for such meeting) per share of each such series, and will so vote
on the election of Trustees and on other matters submitted to the
vote of all shareholders of the Business Trust, except where a vote
of the holders of the shares of any series voting by series, is
required by the 1940 Act and/or Massachusetts law as to any
proposal.
Possible Additional Series
If additional Series 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 shareholder 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.
Indemnification of Shareholders and Trustees
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. For shareholder
protection, however, an express disclaimer of shareholder liability
for acts or obligations of the Fund is contained in the Declaration
of Trust which 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 the Fund had two or more Series, and if
any such Series were to be unable to meet the obligations
attributable to it (which, as is the case with the Fund, is
relatively remote), the other Series would be subject to such
obligations, with a corresponding increase in the risk of the
shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees of
the Fund out of the property of the Fund and provides that they
will not be liable for errors of judgment or mistakes of fact or
law; but nothing in the Declaration of Trust protects a Trustee
against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office.
Custodian and Auditors
The Fund's Custodian, Bank One Trust Company 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.
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL BOND RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal
obligation rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors,
insurers or lessees.
The debt rating is not a recommendation to purchase, sell
or hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Standard & Poor's ratings for municipal note issues are
designated SP in order to help investors distinguish more clearly
the credit quality of notes as compared to bonds. Notes bearing the
designation SP-1 are deemed very strong or to have strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Notes bearing the designation SP-2 are deemed to have
a satisfactory capacity to pay principal and interest.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some
time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated
by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's Investment
Grade as MIG 1 through MIG 4. In the case of variable rate demand
obligations (VRDOs), two ratings are assigned; one representing an
evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When no rating is applied to the long
or short-term aspect of a VRDO, it will be designated NR. Issues or
the features associated with MIG or VMIG ratings are identified by
date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any
other similar issue of the same obligor. MIG ratings terminate at
the retirement of the obligation while VMIG rating expiration will
be a function of each issuer's specific structural or credit
features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality. Margins
of protection are ample although not so large
as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access for
refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although
not distinctly or predominantly speculative,
there is specific risk.
<PAGE>
INVESTMENT ADVISER
Ferguson, Wellman, Rudd, Purdy & Van Winkle Inc.
888 SW Fifth Avenue, Suite 1200
Portland, OR 97204-2026
ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
James A. Gardner
Diana P. Herrmann
Ann R. Leven
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
William C. Wallace, Senior Vice President
Sally Wilson Church, Vice President
Nancy L. Kayani, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
Aquila
Cascadia Pacific
Equity Fund
Statement of
Additional Information
One Of The
AquilaSM Group Of Funds
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part B:
Report of Independent Auditors
Statement of Net Assets as of March 31, 1996
Statement of Operations for the year
ended March 31, 1996
Statement of Changes in Net Assets for the
years ended March 31, 1996 and 1995
Notes to Financial Statements
Included in Part C:
Consent of Independent Certified Public
Accountants
(b) Exhibits:
(1) Amended and Restated Declaration of Trust (vi)
(2) By-laws (vi)
(3) Not applicable
(4) Specimen share certificate (i)
(5) (a) Investment Advisory and
Administration Agreement (vi)
(5) (b) Sub-Advisory Agreement (vi)
(6) (a) Distribution Agreement (vi)
(b) Sales Agreement (for brokerage firms) (vi)
(c) Sales Agreement (for financial
institutions (vi)
(d) Related Agreement (vi)
(e) Shareholder Services Agreement (vi)
(7) Not applicable
(8) Custody Agreement (v)
(9) (a) Transfer Agency Agreement (vi)
(10) Opinion and consent
of counsel to the Fund (vi)
(11) Not applicable
(12) Not applicable
(13) Agreement with initial shareholder (ii)
(14) Not applicable
(15) Distribution Plan (vi)
(15) (a) Services Plan (vi)
(16) Not Applicable
(17) Financial Data Schedule (vi)
(18) Plan pursuant to Rule 18f-3
under the 1940 Act (vi)
(i) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 dated November 7, 1984 and incor-
porated herein by reference.
(ii) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 2 dated December 17, 1984 and incor-
porated herein by reference.
(iii) Filed as an exhibit to Registrant's Form N-SAR for
the period ended September 30, 1989 and incorporated
herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 7 dated July 30, 1990 and incorporated
herein by reference.
(v) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 14 under the 1940 Act dated July 25,
1995 and incorporated herein by reference.
(vi) Filed herewith
ITEM 25. Persons Controlled by or under Common Control with
Registrant
Registrant's shares are 100% owned by Aquila Ma-
nagement Corporation. Aquila Management Corpora-
tion (the Trust's Administrator) and Aquila Distri-
butors, Inc. (the Trust's Distributor) are under
the common control of Mr. Lacy B. Herrmann (the
Trust's President and Chairman).
ITEM 26. Numbers of Holders of Securities
As of April 15, 1996, Registrant had one holder of
record of its shares.
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Amended and Restated Declaration of
Trust, 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, unenforce-
able. In the event that a claim for indemnifica-
tion against such liabilities (other than the pay-
ment by Registrant of expenses incurred or paid by
a Trustee, officer, or controlling person of Regis-
trant 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 pub-
lic policy as expressed in the Act and will be go-
verned by the final adjudication of such issue.
ITEM 28. Business & Other Connections of Investment Adviser
Ferguson, Wellman, Rudd, Purdy & Van Winkle Inc.
("Ferguson, Wellman", Registrant's investment adviser, is
an investment adviser for other non-investment company
clients. For information as to the business, profession,
vocation, or employment of a substantial nature of the
investment adviser, its directors, and its officers,
reference is made to the Form ADV filed by it under the
Investment Adviser's Act of 1940.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal un-
derwriter 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, Tax-Free Fund for Utah,
Tax-Free Fund of Colorado, Tax-Free Trust of Arizona, and
Tax-Free Trust of Oregon, in addition to serving as the
Registrant's principal underwriter.
(b) For information about the Directors and officers of
Aquila Distributors, Inc., reference is made to the
Form BD filed by it under the Securities Exchange
Act of 1934.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the administrator and the custodian,
whose addresses appear on the back cover pages of
the Prospectus and Statement of Additional Infor-
mation, and by the fund accounting service of the
Registrant, which is Bank of Boston, 150 Royall
Street, Canton, Massachusetts 02021.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) If the information called for by Item 5A is contained in
the latest annual report to shareholders, the Registrant
undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual
Report to Shareholders, upon request and without charge.
(d) If requested to do so by the holders of 10% of the Fund's
outstanding shares, the Fund will call a meeting of
shareholders for the purpose of voting upon the question
of removal of a Trustee or Trustees and to assist in
communication with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
<PAGE>
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Consent
To the Trustees and Shareholders of
Aquila Cascadia Pacific Equity Fund:
We consent to the use of our report dated April 16, 1996
incorporated herein by reference and to the reference to our firm
under the heading "Financial Highlights" in the Prospectus.
/s/KPMG Peat Marwick LLP
New York, New York KPMG Peat Marwick LLP
April 22, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement or Amendment 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 22nd day of April, 1996.
AQUILA CASCADIA PACIFIC EQUITY 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 4/22/96
______________________ President, Chairman of __________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Vernon A. Alden 4/22/96
______________________ Trustee __________
Vernon A. Alden
/s/Warren C. Coloney 4/22/96
______________________ Trustee __________
Warren C. Coloney
/s/James A. Gardner 4/22/96
______________________ Trustee __________
James A. Gardner
/s/Diana P. Herrmann 4/22/96
______________________ Trustee __________
Diana P. Herrmann
/s/Ann R. Leven 4/22/96
_____________________ Trustee __________
Ann R. Leven
/s/Raymond H. Lung 4/22/96
_____________________ Trustee __________
Raymond H. Lung
/s/Richard C. Ross 4/22/96
_____________________ Trustee __________
Richard C. Ross
/s/Rose F. Marotta 4/22/96
_____________________ Chief Financial Officer __________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
AQUILA CASCADIA PACIFIC EQUITY FUND
EXHIBIT INDEX
Exhibit Exhibit Page
Number Name Number
1 Supplemental Declaration of Trust Amending and
Restating the Declaration of Trust
2 Bylaws
5 (a)Investment Advisory and
Administration Agreement
(b) Sub-Advisory Agreement
6 (a) Distribution Agreement
(b) Sales Agreement (for brokerage firms)
(c) Sales Agreement (for financial
institutions
(d) Related Agreement
(e) Shareholder Services Agreement
9 Transfer Agency Agreement
10 Opinion and Consent of Trust Counsel
15 Distribution Plan
15(a) Services Plan
17 Financial Data Schedule
18 Plan pursuant to Rule 18f-3
Correspondence
AQUILA CASCADIA PACIFIC EQUITY FUND
(formerly SHORT TERM ASSET RESERVES)
SUPPLEMENTAL DECLARATION OF TRUST
AMENDING AND RESTATING THE DECLARATION OF TRUST
SUPPLEMENTAL DECLARATION OF TRUST made [ ], 1996
to the DECLARATION OF TRUST (the "Present Declaration of Trust")
of SHORT TERM ASSET RESERVES, the name of which upon execution of
this instrument has become AQUILA CASCADIA PACIFIC EQUITY FUND
(the "Trust").
WHEREAS, paragraph 12 of Article EIGHTH of the Present
Declaration of Trust permits the Trustees of the Trust to amend
or otherwise supplement the Present Declaration of Trust by
making a Supplemental Declaration of Trust, if authorized by vote
of the Trustees and the Shareholders; and
WHEREAS, the making of this Supplemental Declaration of
Trust was duly authorized by the Trustees on April 1, 1996 and by
the sole shareholder on April [ ], 1996; and
WHEREAS, the officer of the Trust executing this
Supplemental Declaration of Trust has been authorized and
directed to do so by the Trustees of the Trust and the
shareholders of the Trust on behalf of the Trustees and the
Trust;
NOW, THEREFORE, the Present Declaration of Trust is amended
and restated so that the Declaration of Trust of the Trust
(hereinafter referred to as the "Declaration of Trust") shall
read in its entirety as follows:
<PAGE>
WHEREAS, the Trustees desire to establish a trust fund under
the laws of the Commonwealth of Massachusetts, for the investment
and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and
property contributed to the trust fund hereunder shall be held
and managed under this Declaration of Trust IN TRUST as herein
set forth below.
FIRST: This Trust shall be known as Aquila Cascadia Pacific
Equity Fund.
SECOND: Whenever used herein, unless otherwise required by
the context or specifically provided:
1. All terms used in this Declaration of Trust which are
defined in the 1940 Act shall have the meanings given to them in
the 1940 Act.
2. The "Trust" refers to Aquila Cascadia Pacific Equity
Fund.
3. "Shareholder" means a record owner of Shares of the
Trust.
4. The "Trustees" refer to the individual trustees in
their capacity as trustees hereunder of the Trust and their
successor or successors for the time being in office as such
trustees.
5. "Shares" means the units of interest into which the
beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
6. The "1940 Act" refers to the Investment Company Act of
1940, as amended from time to time.
7. "Commission" means the Securities and Exchange
Commission.
8. "Board" or "Board of Trustees" means the Board of
Trustees of the Trust.
THIRD: The purpose or purposes for which the Trust is
formed and the business or objects to be transacted, carried on
and promoted by it are as follows:
1. To hold, invest and reinvest its funds, and in
connection therewith to hold part or all of its funds in cash,
and to purchase or otherwise acquire, hold for investment or
otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize
upon, securities (which term "securities" shall for the purposes
of this Declaration of Trust, without limitation of the
generality thereof, be deemed to include any stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests
therein, or in any property or assets) created or issued by any
issuer (which term "issuer" shall for the purposes of this
Declaration of Trust, without limitation of the generality
thereof be deemed to include any persons, firms, associations,
corporations, syndicates, combinations, organizations,
governments, or subdivisions thereof); and to exercise, as owner
or holder of any securities, all rights, powers and privileges in
respect thereof; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of
any or all such securities.
2. To borrow money and pledge assets in connection with
any of the objects or purposes of the Trust, and to issue notes
or other obligations evidencing such borrowings, to the extent
permitted by the 1940 Act and by the Trust's fundamental
investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on
such terms and conditions, for such purposes and for such amount
or kind of consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of the
Commonwealth of Massachusetts and by this Declaration of Trust,
as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or
consent of the Shareholders of the Trust) its Shares, in any
manner and to the extent now or hereafter permitted by the laws
of Commonwealth of Massachusetts and by this Declaration of
Trust.
5. To conduct its business in all its branches at one or
more offices in the Commonwealth of Massachusetts and elsewhere
in any part of the world, without restriction or limit as to
extent.
6. To carry out all or any of the foregoing objects and
purposes as principal or agent, and alone or with associates or,
to the extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts, as a member of, or as the owner or
holder of any stock of, or share of interest in, any issuer, and
in connection therewith to make or enter into such deeds or
contracts with any issuers and to do such acts and things and to
exercise such powers, as a natural person could lawfully make,
enter into, do or exercise.
7. To do any and all such further acts and things and to
exercise any and all such further powers as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of all or any of the
foregoing purposes or objects.
The foregoing objects and purposes shall, except as
otherwise expressly provided, be in no way limited or restricted
by reference to, or inference from, the terms of any other clause
of this or any other Articles of this Declaration of Trust, and
shall each be regarded as independent and construed as powers as
well as objects and purposes, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the
general powers of the Trust now or hereafter conferred by the
laws of the Commonwealth of Massachusetts, nor shall the
expression of one thing be deemed to exclude another, though it
be of like nature, not expressed; provided, however, that the
Trust shall not carry on any business, or exercise any powers, in
any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the
laws thereof.
FOURTH: The beneficial interest in the Trust shall at all
times be divided into an unlimited number of transferable Shares,
each such Share having a par value of one cent per Share, each of
which shall represent an equal proportionate interest in the
Trust with each other Share outstanding, none having priority or
preference over another, subject to the further provisions of
this Article FOURTH. The Trustees may from time to time divide
or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the
Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000ths of a
Share or multiple thereof.
Subject to the further provisions of Article FOURTH, the
Board of Trustees may, without obtaining any authorization or
vote of the Shareholders of any series or class of Shares,
classify unissued Shares into one or more additional series and
classes which shall, together with the issued Shares of
beneficial interest of the Trust, have such designations as the
Board may determine (but which shall in the case of a series
include the word "Series" and in the case of a class include the
word "Class"). Subject to the distinctions permitted among
classes of the same series established by the Board of Trustees
consistent with the requirements of the 1940 Act and any rule,
regulation or order of the Commission, each Share of a series of
the Trust shall represent an equal interest in the net assets of
the series, and each holder of Shares of a series shall be
entitled to receive such holder's pro-rata share of distributions
of income and capital gains, if any, made with respect to such
series. Upon redemption of the Shares of any series, the
applicable Shareholder shall be paid solely out of funds and
property of such series of the Trust.
All references to Shares in this Declaration of Trust shall
be deemed to be to Shares of any or all series or classes
thereof, as the context may require.
Series and classes shall, subject to any applicable rule,
regulation or order of the Commission or other applicable law or
regulation, have the characteristics set forth in (a) through and
including (h) below.
(a) All consideration received by the Trust for the
issue or sale of Shares of each such series, together with all
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably
belong to the series of Shares with respect to which such assets,
payments, or funds were received by the Trust for all purposes,
subject only to the rights of creditors, and shall be so handled
upon the books of account of the Trust. Such assets, income,
earnings, profits and proceeds thereof, and any asset derived
from any reinvestment of such proceeds, in whatever form the same
may be, are herein referred to as "assets belonging to" such
series.
(b) Dividends or distributions on Shares of any such
series, whether payable in Shares or cash, shall be paid only out
of earnings, surplus or other assets belonging to such series.
(c) In the event of the liquidation or dissolution of
the Trust, Shareholders of each such series shall be entitled to
receive, as a series, out of the assets of the Trust available
for distribution to Shareholders, but other than general assets
not belonging to any particular series, the assets belonging to
such series; and the assets so distributable to the Shareholders
of any such series shall be distributed among such Shareholders
in proportion to the number of Shares of such series held by them
and recorded on the books of the Trust. In the event that there
are any general assets not belonging to any particular series of
Shares and available for distribution, such distribution shall be
made to the holders of Shares of all series in proportion to the
asset value of the Shares.
(d) The assets belonging to any such series of Shares
shall be charged with the liabilities in respect to such series
and shall be charged with their share of the general liabilities
of the Trust, in proportion to the asset value of the respective
series. The determination of the Board of Trustees shall be
conclusive as to the amount of liabilities, including accrued
expenses and reserves, and as to the allocation of the same as to
a given series, and as to whether the same, or general assets of
the Trust, are allocable to one or more series. The liabilities
so allocated to a series are herein referred to as "liabilities
belonging to" such series.
(e) The Board of Trustees may without the requirement
of Shareholder approval, classify Shares of any series or divide
the Shares of any series into classes, each class having such
different dividend, liquidation, voting and other rights as the
Trustees may determine, and may establish and designate the
specific classes of Shares of each series. The fact that a
series shall have initially been established and designated
without any specific establishment or designation of classes
(i.e., that all Shares of such series are initially of a single
class), or that a series shall have more than one established and
designated class, shall not limit the authority of the Trustees
to establish and designate separate classes, or one or more
further classes, of said series without approval of the holders
of the initial class thereof, or previously established and
designated class or classes thereof, provided that the
establishment and designation of such further separate classes
would not adversely affect the rights of the holders of the
initial or previously established and designated class or
classes.
(f) At all meetings of Shareholders, each Shareholder
of each Share of each such series or class of the Trust shall be
entitled to one vote for each dollar of net asset value
represented by such Share, determined as provided in the then
current Prospectus of such series or class, as of the record date
for such meeting, irrespective of series or class, standing in
his name on the books of the Trust, except that where a vote of
the holders of the Shares of any series or class, or of more than
one series or class, voting by series or class, is required by
the 1940 Act, any rule, regulation or order of the Commission or
other applicable law or regulation as to any proposal, only the
holders of such series or series, or class or classes, voting by
series or class, shall be entitled to vote upon such proposal and
the holders of any other series or class or classes shall not be
entitled to vote thereon. Any fractional Share, if any such
fractional Shares are outstanding, shall carry proportionately
all the rights of a whole Share, including the right to vote and
the right to receive dividends. There shall be no cumulative
voting rights with respect to any Shares or series or class of
Shares of the Trust.
(g) The provisions of Article FIFTH relating to voting
shall apply when the Trust has only one series or class of Shares
outstanding or when the Trust has more than one series or class
of Shares outstanding but which differ only as to their dividend
rights. Otherwise, the provisions of Article FIFTH shall be
subject to the provisions of this Article FOURTH.
(h) When the Trust has more than one series or class
of Shares outstanding: (i) the redemption rights provided to the
holders of the Trust's Shares shall be deemed to apply only to
the assets belonging to the series or class of Shares in
question; and (ii) the net asset value per Share computation as
provided for in Article SEVENTH shall be applied as if each such
series or class of Shares were the Trust as referred to in such
computation, but with its assets limited to the assets belonging
to such series or class and its liabilities limited to the
liabilities belonging to such series or class.
(i) The ownership of Shares shall be recorded in the
books of the Trust or a transfer agent. The Trustees may make
such rules as they consider appropriate for the transfer of
Shares and similar matters. The record books of the Trust or any
transfer agent, as the case may be, shall be conclusive as to who
are the holders of Shares and as to the number of Shares held
from time to time by each.
(j) The Trustees shall accept investments in the Trust
from such persons and on such terms as they may from time to time
authorize.
(k) Shareholders shall have no pre-emptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees.
(l) The dividends payable to Shareholders shall,
subject to any applicable rule, regulation or order of the
Commission or other applicable law or regulation, be determined
by the Board and need not be individually declared but may be
declared and paid in accordance with a formula adopted by the
Board.
FIFTH: The following provisions are hereby adopted with
respect to voting Shares of the Trust and certain other rights:
1. The Shareholders shall have power to vote (i) for
the election of Trustees when that issue is submitted to
them, (ii) with respect to the amendment of this Declaration
of Trust, except as stated in Article EIGHTH as to the name
of the trust, (iii) to the same extent as the shareholders
of a Massachusetts business corporation, as to whether or
not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of
the Trust or the Shareholders, and (iv) with respect to such
additional matters relating to the Trust as may be required
by the 1940 Act or authorized by law, by this Declaration of
Trust, or the By-Laws of the Trust or any registration
statement of the Trust with the Commission or any State, or
as the Trustees may consider desirable.
2. At all meetings of Shareholders each Shareholder
shall be entitled to one vote for each dollar of net asset
value for each Share (determined in the manner described in
the current Prospectus or Prospectuses, if more than one
class or series is outstanding) standing in his name on the
books of the Trust on the date, fixed in accordance with the
By-Laws, for determination of Shareholders entitled to vote
at such meeting except (if so determined by the Board of
Trustees) for Shares redeemed prior to the meeting. Any
fractional Share shall carry proportionately all the rights
of a whole Share, including the right to vote and the right
to receive dividends. The presence in person or by proxy of
the holders of Shares outstanding and entitled to vote
thereat representing one-third of the net asset value of the
Trust as so determined shall constitute a quorum at any
meeting of the Shareholders. If at any meeting of the
Shareholders there shall be less than a quorum present, the
Shareholders present at such meeting may, without further
notice, adjourn the same from time to time until a quorum
shall attend, but no business shall be transacted at any
such adjourned meeting except such as might have been
lawfully transacted had the meeting not been adjourned.
3. Each Shareholder, upon request to the Trust in
proper form determined by the Trust, shall be entitled to
require the Trust to redeem all or any part of the Shares
standing in the name of such Shareholder. The method of
computing such net asset value, the time at which such net
asset value shall be computed and the time within which the
Trust shall make payment therefor, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration
of Trust. Notwithstanding the foregoing, the Trustees, when
permitted or required to do so by the 1940 Act, may suspend
the right of the Shareholders to require the Trust to redeem
Shares.
4. No Shareholder shall, as such holder, have any
right to purchase or subscribe for any security of the Trust
which it may issue or sell, other than such right, if any,
as the Trustees, in their discretion, may determine.
5. All persons who shall acquire Shares shall acquire
the same subject to the provisions of this Declaration of
Trust.
6. Notwithstanding anything elsewhere contained in
this Declaration of Trust or in the By-Laws of the Trust,
whenever the By-Laws of the Trust do not provide for regular
annual meetings of Shareholders of the Trust, the
Shareholders of the Trust shall have such rights, and the
Trust, the Board of Trustees and the Trustees shall have
such obligations as would exist if the Trust were a common
law trust covered by Section 16(c) of the 1940 Act. In the
event that the Trust has outstanding two or more Series,
each such Series shall be considered as if it were a
separate common law trust covered by said Section 16(c).
However, the Trust may at any time or from time to time
apply to the Commission for one or more exemptions from all
or part of said Section 16(c) and, if an exemptive order or
orders are issued by the Commission, such order or orders
shall be deemed part of said Section 16(c) for the purposes
of this paragraph 6.
SIXTH: The persons who shall act as initial Trustees are
the Trustees initially executing this Declaration of Trust or any
counterpart thereof. However, the By-Laws of the Trust may fix
the number of Trustees at a number greater than that of the
number of initial Trustees and may authorize the Trustees, by the
vote of a majority of the entire number of Trustees, to increase
or decrease the number of Trustees fixed by this Declaration of
Trust or by the By-Laws within limits specified in the By-Laws,
provided that in no case shall the number of Trustees be less
than two, and to fill the vacancies created by any such increase
in the number of Trustees. Unless otherwise provided by the By-
Laws of the Trust, the Trustees need not be Shareholders.
SEVENTH: The following provisions are hereby adopted for
the purpose of defining, limiting and regulating the powers of
the Trust and of the Trustees and Shareholders.
1. As soon as any Trustee is duly elected by the
Shareholders or the Trustees and shall have accepted this
trust, the Trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee
hereunder.
2. The death, declination, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them
shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this
Declaration of Trust.
3. The assets of the Trust shall be held separate and
apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any
successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. Except
as provided in this Declaration of Trust, no Shareholder
shall have, as such holder of beneficial interest in the
Trust, any authority, power or right whatsoever to transact
business for or on behalf of the Trust, or on behalf of the
Trustees, in connection with the property or assets of the
Trust, or in any part thereof, except the rights to receive
the income and distributable amounts arising therefrom as
set forth herein.
4. The Trustees in all instances shall act as
principals, and are and shall be free from the control of
the Shareholders. The Trustees shall have full power and
authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider
necessary or appropriate in connection with the management
of the Trust. The Trustees shall not in any way be bound or
limited by present or future laws or customs in regard to
Trust investments, but shall have full authority and power
to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the
purposes of this Trust. Subject to any applicable
limitation in this Declaration of Trust or in the By-Laws of
the Trust, the Trustees shall have power and authority:
(a) to adopt By-laws not inconsistent with this
Declaration of Trust providing for the conduct of the
business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint
and terminate such officers as they consider appropriate
with or without cause;
(c) to employ a bank or trust company as
custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and Shareholder
servicing agent, or both;
(e) to provide for the distribution of Shares
either through a principal underwriter or the Trust itself
or both;
(f) to set record dates in the manner provided
for in the By-Laws of the Trust;
(g) to delegate such authority as they consider
desirable to any officers of the Trust and to any agent,
custodian or underwriter;
(h) to vote or give assent, or exercise any
rights of ownership, with respect to stock or other
securities or property held in trust hereunder; and to
execute and deliver powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription
or otherwise which in any manner arise out of ownership of
securities held in trust hereunder;
(j) to hold any security or property in a form
not indicating any trust, whether in bearer, unregistered or
other negotiable form; or either in its own name or in the
name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual
practice of Massachusetts business trusts or investment
companies;
(k) to consent to or participate in any plan for
the reorganization, consolidation or merger of any
corporation or concern, any security of which is held in the
Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to
any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy including, but not limited to, claims for taxes;
(m) to make, in the manner provided in the By-
Laws, distributions of income and of capital gains to
Shareholders;
(n) to borrow money to the extent and in the
manner permitted by the 1940 Act and the Trust's fundamental
policy thereunder as to borrowing; and
(o) to enter into investment advisory, sub-
advisory, management, administrative or similar contracts,
subject to the 1940 Act, with any one or more corporations,
partnerships, trusts, associations or other persons; if the
other party or parties to any such contract are authorized
to enter into securities transactions on behalf of the
Trust, such transactions shall be deemed to have been
authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under
any obligation to make any inquiry concerning the authority
of the Trustees, or to see to the application of any
payments made or property transferred by the Trustees or
upon their order.
6. (a) The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares
or otherwise. Every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust shall include a recitation
limiting the obligation represented thereby to the Trust and
its assets (but the omission of such a recitation shall not
operate to bind any Shareholder).
(b) Except as otherwise provided in this
Declaration of Trust or the By-Laws, whenever this
Declaration of Trust calls for or permits any action to be
taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a
quorum of Trustees as set forth from time to time in the By-
Laws of the Trust or as required pursuant to the provisions
of the 1940 Act and the rules and regulations promulgated
thereunder.
(c) The Trustees shall possess and exercise any
and all such additional powers as are reasonably implied
from the powers herein contained such as may be necessary or
convenient in the conduct of any business or enterprise of
the Trust, to do and perform anything necessary, suitable,
or proper for the accomplishment of any of the purposes, or
the attainment of any one or more of the objects, herein
enumerated, or which shall at any time appear conducive to
or expedient for the protection or benefit of the Trust, and
to do and perform all other acts or things necessary or
incidental to the purposes herein before set forth, or that
may be deemed necessary by the Trustees.
(d) The Trustees shall have the power to
determine conclusively whether any moneys, securities, or
other properties of the Trust property are, for the purposes
of this Trust, to be considered as capital or income and in
what manner any expenses or disbursements are to be borne as
between capital and income whether or not in the absence of
this provision such moneys, securities, or other properties
would be regarded as capital or income and whether or not in
the absence of this provision such expenses or disbursements
would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees
into classes and prescribe the tenure of office of the
several classes, but no class shall be elected for a period
shorter than that from the time of the election following
the division into classes until the next annual meeting and
thereafter for a period shorter than the interval between
annual meetings or for a period longer than five years, and
the term of office of at least one class shall expire each
year.
8. The Shareholders shall have the right to inspect
the records, documents, accounts and books of the Trust,
subject to reasonable regulations of the Trustees, not
contrary to Massachusetts law, as to whether and to what
extent, and at what times and places, and under what
conditions and regulations, such right shall be exercised.
9. Any Trustee, or any officer elected or appointed
by the Trustees or by any committee of the Trustees or by
the Shareholders or otherwise, may be removed at any time,
with or without cause, in such lawful manner as may be
provided in the By-Laws of the Trust.
10. If the By-Laws so provide, the Trustees shall have
power to hold their meetings, to have an office or offices
and, subject to the provisions of the laws of the
Commonwealth of Massachusetts, to keep the books of the
Trust outside of said Commonwealth at such places as may
from time to time be designated by them.
11. Securities held by the Trust shall be voted in
person or by proxy by the President or a Vice-President, or
such officer or officers of the Trust as the Trustees shall
designate for the purpose, or by a proxy or proxies
thereunto duly authorized by the Trustees, except as
otherwise ordered by vote of the holders of a majority of
the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act,
any Trustee, officer or employee, individually, or any
partnership of which any Trustee, officer or employee may be
a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, director,
trustee, employee or stockholder, may be a party to, or may
be pecuniarily or otherwise interested in, any contract or
transaction of the Trust, and in the absence of fraud no
contract or other transaction shall be thereby affected or
invalidated; provided that in case a Trustee, or a
partnership, corporation or association of which a Trustee
is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed
or shall have been known to the Trustees or a majority
thereof; and any Trustee who is so interested, or who is
also a director, officer, trustee, employee or stockholder
of such other corporation or association or a member of such
partnership which is so interested, may be counted in
determining the existence of a quorum at any meeting of the
Trustees which shall authorize any such contract or
transaction, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he
were not such director, officer, trustee, employee or
stockholder of such other trust or corporation or
association or a member of a partnership so interested.
(b) Specifically, but without limitation of the
foregoing, the Trust may enter into a management, investment
advisory, sub-advisory, administration or underwriting
contract and other contracts with, and may otherwise do
business with any manager, investment adviser, sub-adviser,
or administrator for the Trust, or principal underwriter of
the Shares of the Trust, or any subsidiary or affiliate of
any such manager, investment adviser, sub-adviser or
administrator and/or principal underwriter and may permit
any such firm or corporation to enter into any contracts or
other arrangements with any other firm or corporation
relating to the Trust notwithstanding that the Board of
Trustees of the Trust may be composed in part of partners,
directors, officers or employees of any such firm or
corporation, and officers of the Trust may have been or may
be or become partners, directors, officers or employees of
any such firm or corporation, and in the absence of fraud
the Trust and any such firm or corporation may deal freely
with each other, and no such contract or transaction between
the Trust and any such firm or corporation shall be
invalidated or in any wise affected thereby, nor shall any
Trustee or officer of the Trust be liable to the Trust or to
any Shareholder or creditor thereof or to any other person
for any loss incurred by it or him solely because of the
existence of any such contract or transaction; provided that
nothing herein shall protect any Trustee or officer of the
Trust against any liability to the Trust or to its security
holders 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.
(c) (1) As used in this paragraph the following
terms shall have the meanings set forth below:
(i) the term "indemnitee" shall mean any
present or former Trustee, officer or
employee of the Trust, any present or former
Trustee or officer of another trust or
corporation whose securities are or were
owned by the Trust or of which the Trust is
or was a creditor and who served or serves in
such capacity at the request of the Trust,
any present or former investment adviser,
sub-adviser, administrator or principal
underwriter of the Trust and the heirs,
executors, administrators, successors and
assigns of any of the foregoing; however,
whenever conduct by an indemnitee is referred
to, the conduct shall be that of the original
indemnitee rather than that of the heir,
executor, administrator, successor or
assignee;
(ii) the term "covered proceeding" shall
mean any threatened, pending or completed
action, suit or proceeding, whether civil,
criminal, administrative or investigative, to
which an indemnitee is or was a party or is
threatened to be made a party by reason of
the fact or facts under which he or it is an
indemnitee as defined above;
(iii) the term "disabling conduct" shall
mean willful misfeasance, bad faith, gross
negligence or reckless disregard of the
duties involved in the conduct of the office
in question;
(iv) the term "covered expenses" shall mean
expenses (including attorney's fees),
judgments, fines and amounts paid in
settlement actually and reasonably incurred
by an indemnitee in connection with a covered
proceeding; and
(v) the term "adjudication of liability"
shall mean, as to any covered proceeding and
as to any indemnitee, an adverse
determination as to the indemnitee whether by
judgment, order, settlement, conviction or
upon a plea of nolo contendere or its
equivalent.
(d) The Trust shall not indemnify any indemnitee
for any covered expenses in any covered proceeding if there
has been an adjudication of liability against such
indemnitee expressly based on a finding of disabling
conduct.
(e) Except as set forth in (d) above, the Trust
shall indemnify any indemnitee for covered expenses in any
covered proceeding, whether or not there is an adjudication
of liability as to such indemnitee, if a determination has
been made that the indemnitee was not liable by reason of
disabling conduct by (i) a final decision of the court or
other body before which the covered proceeding was brought;
or (ii) in the absence of such decision, a reasonable
determination, based on a review of the facts, by either (a)
the vote of a majority of a quorum of Trustees who are
neither "interested persons," as defined in the 1940 Act nor
parties to the covered proceeding or (b) an independent
legal counsel in a written opinion; provided that such
Trustees or counsel, in reaching such determination, may but
need not presume the absence of disabling conduct on the
part of the indemnitee by reason of the manner in which the
covered proceeding was terminated.
(f) Covered expenses incurred by an indemnitee in
connection with a covered proceeding shall be advanced by
the Trust to an indemnitee prior to the final disposition of
a covered proceeding upon the request of the indemnitee for
such advance and the undertaking by or on behalf of the
indemnitee to repay the advance unless it is ultimately
determined that the indemnitee is entitled to
indemnification thereunder, but only if one or more of the
following is the case: (i) the indemnitee shall provide a
security for such undertaking; (ii) the Trust shall be
insured against losses arising out of any lawful advances;
or (iii) there shall have been a determination, based on a
review of the readily available facts (as opposed to a full
trial-type inquiry) that there is a reason to believe that
the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a
written opinion or by the vote of a majority of a quorum of
trustees who are neither "interested persons" as defined in
the 1940 Act nor parties to the covered proceeding.
(g) Nothing herein shall be deemed to affect the
right of the Trust and/or any indemnitee to acquire and pay
for any insurance covering any or all indemnitees to the
extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be
entitled to the extent permitted by the 1940 Act.
13. For purposes of the computation of net asset
value, as in this Declaration of Trust referred to, the
following rules shall apply:
(a) The net asset value of each Share of the
Trust tendered to the Trust for redemption shall be
determined as of the close of business on the New York Stock
Exchange next succeeding the tender of such Share;
(b) The net asset value of each Share of the
Trust for the purpose of the issue of such Shares shall be
determined as of the close of business on the New York Stock
Exchange next succeeding the receipt of an order to purchase
such Shares;
(c) The net asset value of each Share of the
Trust, as of time of valuation on any day, shall be the
quotient obtained by dividing the value, as at such time, of
the net assets of the Trust (i.e., the value of the assets
of the Trust less its liabilities exclusive of its surplus)
by the total number of Shares outstanding at such time. The
assets and liabilities of the Trust shall be determined in
accordance with generally accepted accounting principles;
provided, however, that in determining the liabilities of
the Trust there shall be included such reserves for taxes or
contingent liabilities as may be authorized or approved by
the Trustees, and provided further that in determining the
value of the assets of the Trust for the purpose of
obtaining the net asset value, each security listed on the
New York Stock Exchange shall be valued on the basis of the
closing sale at the time of valuation on the business day as
of which such value is being determined; if there be no sale
on such day, then the security shall be valued on the basis
of the mean between closing bid and asked prices on such
day; if no bid and asked prices are quoted for such day,
then the security shall be valued by such method as the
Trustees shall deem in good faith to reflect its fair market
value; securities not listed on the New York Stock Exchange
shall be valued in like manner on the basis of quotations on
any other stock exchange which the Trustees may from time to
time approve for that purpose; readily marketable securities
traded in the over-the-counter market shall be valued at the
mean between their bid and asked prices, or, if the Trustees
shall so determine, at their bid prices; and all other
assets of the Trust and all securities as to which the Trust
might be considered an "underwriter" (as that term is used
in the Securities Act of 1933), whether or not such
securities are listed or traded in the over-the-counter
market, shall be valued by such method as they shall deem in
good faith to reflect their fair market value. In
connection with the accrual of any fee or refund payable to
or by an investment adviser of the Trust, the amount of
which accrual is not definitely determinable as of any time
at which the net asset value of each Share of the Trust is
being determined due to the contingent nature of such fee or
refund, the Trustees are authorized to establish from time
to time formulae for such accrual, on the basis of the
contingencies in question to the date of such determination,
or on such other basis as the Trustees may establish.
(1) Shares to be issued shall be deemed to
be outstanding as of the time of the determination
of the net asset value per share applicable to
such issuance and the net price thereof shall be
deemed to be an asset of the Trust;
(2) Shares to be redeemed by the Trust shall
be deemed to be outstanding until the time of the
determination of the net asset value applicable to
such redemption and thereupon and until paid the
redemption price thereof shall be deemed to be a
liability of the Trust; and
(3) Shares voluntarily purchased or
contracted to be purchased by the Trust pursuant
to the provisions of paragraph 13(d) of this
Article SEVENTH shall be deemed to be outstanding
until whichever is the later of (i) the time of
the making of such purchase or contract of
purchase, and (ii) the time as of which the
purchase price is determined, and thereupon and
until paid, the purchase price thereof shall be
deemed to be a liability of the Trust.
(d) The net asset value of each Share of the
Trust, as of any time other than the close of business on
the New York Stock Exchange of any day, may be determined by
applying to the net asset value as of the close of business
on that Exchange on the preceding business day, computed as
provided in this Article SEVENTH, such adjustments as are
authorized by or pursuant to the direction of the Trustees
and designed reasonably to reflect any material changes in
the market value of securities and other assets held and any
other material changes in the assets or liabilities of the
Trust and in the number of its outstanding Shares which
shall have taken place since the close of business on such
preceding business day.
(e) In addition to the foregoing, the Trustees
are empowered, in their absolute discretion, to establish
other bases or times, or both, for determining the net asset
value of each Share of the Trust in accordance with the 1940
Act and to authorize the voluntary purchase by the Trust,
either directly or through an agent, of Shares of the Trust
upon such terms and conditions and for such consideration as
the Trustees shall deem advisable in accordance with any
such provision, rule or regulation.
(f) Payment of the net asset value of Shares of
the Trust properly surrendered to it for redemption shall be
made by the Trust within seven days after tender of such
Shares to the Trust for such purpose plus any period of time
during which the right of the holders of the Shares of the
Trust to require the Trust to redeem such Shares has been
suspended. Any such payment may be made in portfolio
securities of the Trust and/or in cash, as the Trustees
shall deem advisable, and no Shareholder shall have a right,
other than as determined by the Trustees, to have his Shares
redeemed in kind.
EIGHTH:
1. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of
his being or having been a Shareholder and not because of
his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other
general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss
and expense arising from such liability. This Trust shall,
upon request by the Shareholder, assume the defense of any
claim made against any Shareholder for any act or obligation
of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and
not a partnership is created hereby. No Trustee hereunder
shall have any power to bind personally either the Trust's
officers or any Shareholder. All persons extending credit
to, contracting with or having any claim against the Trust
or the Trustees shall look only to the assets of the Trust
for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their
agents, whether past, present or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall
protect a Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office of Trustee hereunder.
3. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care
under the circumstances then prevailing, shall be binding
upon everyone interested. Subject to the provisions of
paragraph 2 of this Article EIGHTH, the Trustees shall not
be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts
with respect to the meaning and operations of this
Declaration of Trust, and subject to the provisions of
paragraph 2 of this Article EIGHTH, shall be under no
liability for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any
surety if a bond is required.
4. This Trust shall continue without limitation of
time but subject to the provisions of sub-sections (a), (b)
and (c) of this paragraph 4.
(a) The Trustees, with the favorable vote of the
holders of more than 50% of the outstanding Shares entitled
to vote, and if the Trust has outstanding Shares of more
than one series or class, such vote shall be in accordance
with the provisions of Article FIFTH section (2), may sell
and convey the assets of the Trust (which sale may be
subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a
consideration which may be or include securities of such
issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the
Trustees shall distribute the remaining proceeds ratably
among the holders of the Shares of the Trust then
outstanding.
(b) The Trustees, with the favorable vote of the
holders of more than 50% of the outstanding Shares entitled
to vote, and if the Trust has outstanding Shares of more
than one series or class, such vote shall be in accordance
with the provisions of Article FIFTH section (2), may at any
time sell and convert into money all the assets of the
Trust. Upon making provision for the payment of all
outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust, the Trustees shall
distribute the remaining assets of the Trust ratably among
the holders of the outstanding Shares.
(c) Upon completion of the distribution of the
remaining proceeds or the remaining assets as provided in
sub-sections (a) and (b), the Trust shall terminate and the
Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and
interest of all parties shall be cancelled and discharged.
5. The original or a copy of this instrument and of
each declaration of trust supplemental hereto shall be kept
at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each
supplemental declaration of trust shall be filed with the
Massachusetts Secretary of State, as well as any other
governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not
any such supplemental declarations of trust have been made
and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer of the
Trust to be a copy of this instrument or of any such
supplemental declaration of trust. In this instrument or in
any such supplemental declaration of trust, references to
this instrument, and all expressions like "herein," "hereof"
and "hereunder" shall be deemed to refer to this instrument
as amended or affected by any such supplemental declaration
of trust. This instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
6. The trust set forth in this instrument is created
under and is to be governed by and construed and
administered according to the laws of the Commonwealth of
Massachusetts. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting
the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the
redemption of the Shares held in any account if the
aggregate net asset value of such Shares (taken at cost or
value, as determined by the Board) has been reduced by a
Shareholder to $500 or less upon such notice to the
Shareholders in question, with such permission to increase
the investment in question and upon such other terms and
conditions as may be fixed by the Board of Trustees in
accordance with the 1940 Act.
8. In the event that any person advances the
organizational expenses of the Trust, such advances shall
become an obligation of the Trust subject to such terms and
conditions as may be fixed by, and on a date fixed by, or
determined in accordance with criteria fixed by the Board of
Trustees, to be amortized over a period or periods to be
fixed by the Board.
9. Whenever any action is taken under this
Declaration of Trust under any authorization to take action
which is permitted by the 1940 Act, such action shall be
deemed to have been properly taken if such action is in
accordance with the construction of the 1940 Act then in
effect as expressed in "no action" letters of the staff of
the Commission or any release, rule, regulation or order
under the 1940 Act or any decision of a court of competent
jurisdiction, notwithstanding that any of the foregoing
shall later be found to be invalid or otherwise reversed or
modified by any of the foregoing.
10. Any action which may be taken by the Board of
Trustees under this Declaration of Trust or its By-Laws may
be taken by the description thereof in the then effective
prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or
in any proxy statement of the Trust rather than by formal
resolution of the Board.
11. Whenever under this Declaration of Trust, the
Board of Trustees is permitted or required to place a value
on assets of the Trust, such action may be delegated by the
Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940
Act.
12. If authorized by vote of the Trustees and the
favorable vote of the holders of more than 50% of the
outstanding Shares entitled to vote, or by any larger vote
which may be required by applicable law in any particular
case, and if the Trust has outstanding Shares of more than
one series or class, such vote shall be in accordance with
the provisions of Article FIFTH section (2), the Trustees
shall amend or otherwise supplement this instrument, by
making a declaration of trust supplemental hereto, which
thereafter shall form a part hereof; however, any such
supplemental declaration of trust may be authorized by the
vote of a majority of the Trustees then in office without
any shareholder vote if the sole purpose of such
supplemental declaration of trust is to change the name of
the Trust; any such supplemental declaration of trust may be
executed by and on behalf of the Trust and the Trustees by
any officer or officers of the Trust.
13. The address of the Trust is 380 Madison Avenue,
Suite 2300, New York, NY 10017. The agent of the Trust in the
Commonwealth of Massachusetts is United Corporate Services, Inc.,
18 Tremont Street, Suite 146, Boston, Massachusetts 02108.
IN WITNESS WHEREOF, the undersigned have executed this
Supplemental Declaration of Trust on behalf of the Trust and the
Trustees as of the date first above written.
AQUILA CASCADIA PACIFIC EQUITY FUND
______________________________
William C. Wallace
Senior Vice President
Attest:
______________________________
Patricia A. Craven
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of AQUILA CASCADIA
PACIFIC EQUITY FUND (formerly Short Term Asset Reserves) who
executed on behalf of said Trust and its Trustees the foregoing
Supplemental Declaration of Trust, hereby acknowledges, in the
name and on behalf of said Trust and its Trustees, the foregoing
Supplemental Declaration of Trust to be the act of said Trust and
its Trustees and further certifies that to the best of his
information, knowledge and belief, the matters and facts set
forth therein with respect to the approval thereof are true in
all material respects, under penalties of perjury.
________________________________
William C. Wallace
Senior Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On April , 1996 before me personally came William C.
Wallace, to me known and known to me to be the person described
in and who executed the foregoing instrument and acknowledged
that he executed the same
____________________________________
Notary Public
Dated: ***********
AQUILA CASCADIA PACIFIC EQUITY FUND
BY-LAWS
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the
Shareholders (which term as used herein shall, together with all
other terms defined in the Declaration of Trust, have the same
meaning as in the Declaration of Trust) shall be held at the
principal office of the Fund or at such other place as may from
time to time be designated by the Board of Trustees and stated in
the notice of meeting.
Section 2. Shareholder Voting. At any meeting of
Shareholders, Shareholders are entitled to one (1) vote for each
dollar of net asset value (determined as of the record date for
the meeting) per Share held (and fractional votes for fractional
dollar amounts.)
Section 3. Annual Meeting. In any year in which the
Trustees determine that a meeting of the Shareholders of the Fund
shall be held for the purpose of electing Trustees, that meeting
shall be held on such date and at such time as may be determined
by the Board of Trustees and as shall be designated in the notice
of meeting for the purpose of electing Trustees until the next
meeting for such purpose and for the transaction of such other
business as may properly be brought before the meeting.
Section 4. Special or Extraordinary Meetings. Special or
extraordinary meetings of Shareholders for any purpose or
purposes may be called by the Chairman of the Board of Trustees,
if any, or by the President or by the Board of Trustees and shall
be called by the Secretary upon receipt of the request in writing
signed by holders of Shares representing not less than ten
percent (10%) of the votes eligible to be cast thereat. Such
request shall state the purpose or purposes of the proposed
meeting.
Section 5. Notice of Meetings of Shareholders. Not less
than ten days' and not more than ninety days' written or printed
notice of every meeting of Shareholders, stating the time and
place thereof (and the general nature of the business proposed to
be transacted at any special or extraordinary meeting), shall be
given to each Shareholder entitled to vote thereat by leaving the
same with him or at his residence or usual place of business or
by mailing it, postage prepaid and addressed to him at his
address as it appears upon the books of the Fund.
No notice of the time, place or purpose of any meeting of
Shareholders need be given to any Shareholder who attends in
person or by proxy or to any Shareholder who, in writing executed
and filed with the records of the meeting, either before or after
the holding thereof, waives such notice.
Section 6. Record Dates. The Board of Trustees may fix, in
advance, a date, not exceeding ninety days and not less than ten
days preceding the date of any meeting of Shareholders, and not
exceeding ninety days preceding any dividend payment date or any
date for the allotment of rights, as a record date for the
determination of the Shareholders entitled to receive such
dividends or rights, as the case may be; and only Shareholders of
record on such date shall be entitled to notice of and to vote at
such meeting or to receive such dividends or rights, as the case
may be.
Section 7. Quorum, Adjournment of Meetings. The presence
in person or by proxy of the holders of record of outstanding
Shares of the Fund representing at least one-third of the votes
eligible to be cast thereat shall constitute a quorum at all
meetings of Shareholders. If at any meeting of the Shareholders
there shall be less than a quorum present, the Shareholders
present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except
such as might have been lawfully transacted had the meeting not
been adjourned.
Section 8. Voting and Inspectors. At all meetings of
Shareholders every Shareholder of record entitled to vote thereat
shall be entitled to vote at such meeting either in person or by
proxy appointed by instrument in writing subscribed by such
Shareholder or his duly authorized attorney-in-fact.
All elections of Trustees shall be had by a plurality of the
votes cast and all questions shall be decided by a majority of
the votes cast, in each case at a duly constituted meeting,
except as otherwise provided in the Declaration of Trust or in
these By-Laws or by specific statutory provision superseding the
restrictions and limitations contained in the Declaration of
Trust or in these By-Laws.
At any election of Trustees, the Board of Trustees prior
thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon the request of the holders of the
outstanding Shares of the Fund representing 10% of its net asset
value entitled to vote at such election shall, appoint two
inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at
such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of
Trustee shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken
upon the request of the holders of the outstanding Shares of the
Fund representing 10% of its net asset value entitled to vote on
such election or matter.
Section 9. Conduct of Shareholders' Meetings. The meetings
of the Shareholders shall be presided over by the Chairman of
the Board of Trustees, if any, or if he shall not be present, by
the President, or if he shall not be present, by a
Vice-President, or if neither the Chairman of the Board of
Trustees, the President nor any Vice-President is present, by a
chairman to be elected at the meeting. The Secretary of the
Fund, if present, shall act as Secretary of such meetings, or if
he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor an Assistant Secretary is present, then
the meeting shall elect its secretary.
Section 10. Concerning Validity of Proxies, Ballots, Etc.
At every meeting of the Shareholders, all proxies shall be
received and taken in charge of and all ballots shall be received
and canvassed by the secretary of the meeting, who shall decide
all questions touching the qualification of voters, the validity
of the proxies, and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed as provided in
Section 8, in which event such inspectors of election shall
decide all such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and
property of the Fund shall be conducted and managed by a Board of
Trustees consisting of the number of initial Trustees, which
number may be increased or decreased as provided in Section 2 of
this Article. Each Trustee shall, except as otherwise provided
herein, hold office until the annual meeting of Shareholders of
the Fund next succeeding his election or until his successor is
duly elected and qualifies. Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees;
Removal. The Board of Trustees, by the vote of a majority of the
entire Board, may increase the number of Trustees to a number not
exceeding fifteen, and may elect Trustees to fill the vacancies
created by any such increase in the number of Trustees until the
next annual meeting or until their successors are duly elected
and qualify; the Board of Trustees, by the vote of a majority of
the entire Board, may likewise decrease the number of Trustees to
a number not less than two but the tenure of office of any
Trustee shall not be affected by any such decrease. Vacancies
occurring other than by reason of any such increase shall be
filled as provided for a Massachusetts business corporation. In
the event that after proxy material has been printed for a
meeting of Shareholders at which Trustees are to be elected any
one or more management nominees dies or becomes incapacitated,
the authorized number of Trustees shall be automatically reduced
by the number of such nominees, unless the Board of Trustees
prior to the meeting shall otherwise determine. Any Trustee at
any time may be removed either with or without cause by
resolution duly adopted by the affirmative votes of the holders
of the majority of the Shares of the Fund present in person or by
proxy at any meeting of Shareholders at which such vote may be
taken, provided that a quorum is present, or by such larger vote
as may be required by Massachusetts law. Any Trustee at any
time may be removed for cause by resolution duly adopted at any
meeting of the Board of Trustees provided that notice thereof is
contained in the notice of such meeting and that such resolution
is adopted by the vote of at least two thirds of the Trustees
whose removal is not proposed. As used herein, "for cause" shall
mean any cause which under Massachusetts law would permit the
removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their
meetings, have one or more offices, and keep the books of the
Fund outside Massachusetts, at any office or offices of the Fund
or at any other place as they may from time to time by resolution
determine, or, in the case of meetings, as they may from time to
time by resolution determine or as shall be specified or fixed
in the respective notices or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board
of Trustees shall be held at such time and on such notice, if
any, as the Trustees may from time to time determine.
The annual meeting of the Board of Trustees shall be held as
soon as practicable after the annual meeting of the Shareholders
for the election of Trustees.
Section 5. Special Meetings. Special meetings of the Board
of Trustees may be held from time to time upon call of the
Chairman of the Board of Trustees, if any, the President or two
or more of the Trustees, by oral or telegraphic or written notice
duly served on or sent or mailed to each Trustee not less than
one day before such meeting. No notice need be given to any
Trustee who attends in person or to any Trustee who, in writing
executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such
meeting.
Section 6. Quorum. One-third of the Trustees then in
office shall constitute a quorum for the transaction of business,
provided that a quorum shall in no case be less than two
Trustees. If at any meeting of the Board there shall be less
than a quorum present (in person or by open telephone line, to
the extent permitted by the 1940 Act), a majority of those
present may adjourn the meeting from time to time until a quorum
shall have been obtained. The act of the majority of the
Trustees present at any meeting at which there is a quorum shall
be the act of the Board, except as may be otherwise specifically
provided by statute, by the Declaration of Trust or by these
By-Laws.
Section 7. Executive Committee. The Board of Trustees may,
by the affirmative vote of a majority of the entire Board, elect
from the Trustees an Executive Committee to consist of such
number of Trustees as the Board may from time to time determine.
The Board of Trustees by such affirmative vote shall have power
at any time to change the members of such Committee and may fill
vacancies in the Committee by election from the Trustees. When
the Board of Trustees is not in session, the Executive Committee
shall have and may exercise any or all of the powers of the
Board of Trustees in the management of the business and affairs
of the Fund (including the power to authorize the seal of the
Fund to be affixed to all papers which may require it) except as
provided by law and except the power to increase or decrease the
size of, or fill vacancies on the Board. The Executive Committee
may fix its own rules of procedure, and may meet, when and as
provided by such rules or by resolution of the Board of Trustees,
but in every case the presence of a majority shall be necessary
to constitute a quorum. In the absence of any member of the
Executive Committee the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a member of
the Board of Trustees to act in the place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the
affirmative vote of a majority of the entire Board, may appoint
other committees which shall in each case consist of such number
of members (not less than two) and shall have and may exercise
such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee
may determine its action, and fix the time and place of its
meetings, unless the Board of Trustees shall otherwise provide.
The Board of Trustees shall have power at any time to change the
members and powers of any such committee, to fill vacancies, and
to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of
Trustees and Committees. Any action required or permitted to be
taken at any meeting of the Board of Trustees or any committee
thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board, or of such
committee, as the case may be. Trustees or members of a
committee of the Board of Trustees may participate in a meeting
by means of a conference telephone or similar communications
equipment; such participation shall, except as otherwise required
by the 1940 Act, have the same effect as presence in person.
Section 10. Compensation of Trustees. Trustees shall be
entitled to receive such compensation from the Fund for their
services as may from time to time be voted by the Board of
Trustees.
Section 11. Dividends. Dividends or distributions payable
on the Shares may, but need not be, declared by specific
resolution of the Board as to each dividend or distribution; in
lieu of such specific resolutions, the Board may, by general
resolution, determine the method of computation thereof, the
method of determining the Shareholders to which they are payable
and the methods of determining whether and to which Shareholders
they are to be paid in cash or in additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of
the Fund shall be chosen by the Board of Trustees as soon as may
be practicable after the annual meeting of the Shareholders.
These may include a Chairman of the Board of Trustees, and shall
include a President, one or more Vice-Presidents (the number
thereof to be determined by the Board of Trustees), a Secretary
and a Treasurer. The Chairman of the Board of Trustees, if any,
and the President may, but need not be, selected from among the
Trustees. The Board of Trustees may also in its discretion
appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and
perform such duties as the Board or the Executive Committee may
determine. The Board of Trustees may fill any vacancy which may
occur in any office. Any two offices, except those of President
and Vice-President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law or
these By-Laws to be executed, acknowledged or verified by two or
more officers.
Section 2. Term of Office. The term of office of all
officers shall be one year and until their respective successors
are chosen and qualify; however, any officer may be removed from
office at any time with or without cause by the vote of a
majority of the entire Board of Trustees.
Section 3. Powers and Duties. The officers of the Fund
shall have such powers and duties as generally pertain to their
respective offices, as well as such powers and duties as may from
time to time be conferred by the Board of Trustees or the
Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificates of Shares. Each Shareholder of the
Fund may be issued a certificate or certificates for his Shares
in such form as the Board of Trustees may from time to time
prescribe, but only if and to the extent and on the conditions
prescribed by the Board.
Section 2. Transfer of Shares. Shares shall be
transferable on the books of the Fund by the holder thereof in
person or by his duly authorized attorney or legal
representative, upon surrender and cancellation of certificates,
if any, for the same number of Shares, duly endorsed or
accompanied by proper instruments of assignment and transfer,
with such proof of the authenticity of the signature as the Fund
or its agent may reasonably require; in the case of Shares not
represented by certificates, the same or similar requirements may
be imposed by the Board of Trustees.
Section 3. Stock Ledgers. The stock ledgers of the Fund,
containing the name and address of the Shareholders and the
number of Shares held by them respectively, shall be kept at the
principal offices of the Fund or, if the Fund employs a transfer
agent, at the offices of the transfer agent of the Fund.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Trustees may determine the conditions upon which a new
certificate may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in their
discretion, require the owner of such certificate or his legal
representative to give bond, with sufficient surety to the Fund
and the transfer agent, if any, to indemnify it and such transfer
agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one
so lost, stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the
Fund, in such form and bearing such inscriptions as it may
determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Fund shall be fixed by the Board of
Trustees.
ARTICLE VII
AMENDMENT OF BY-LAWS
The By-Laws of the Fund may be altered, amended, added to or
repealed by the Shareholders or by majority vote of the entire
Board of Trustees, but any such alteration, amendment, addition
or repeal of the By-Laws by action of the Board of Trustees may
be altered or repealed by the Shareholders.
DRAFT 3/19/96
AQUILA CASCADIA PACIFIC EQUITY FUND
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of , 1996, by and
between AQUILA CASCADIA PACIFIC EQUITY FUND (the "Fund"), a
Massachusetts business Trust, 380 Madison Avenue, Suite
2300, New York, New York 10017 and AQUILA MANAGEMENT
CORPORATION (the "Adviser"), a New York corporation, 380
Madison Avenue, Suite 2300, New York, New York 10017
W I T N E S S E T H:
WHEREAS, the Fund and the Adviser wish to enter into
an Advisory and Administration Agreement as herein set
forth (referred to hereafter as "this Agreement");
NOW THEREFORE, in consideration of the mutual promises
and agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. In General
The Adviser shall perform (at its own expense) the
functions set forth more fully herein for the Fund.
2. Duties and Obligations of the Adviser
(a) Administration. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Adviser
shall provide all administrative services to the Fund other
than those relating to its investment portfolio handled by
the Sub-Adviser of the Fund (the "Sub-Adviser") under the
Sub-Advisory Agreement of the Fund (the "Sub-Advisory
Agreement"); as part of such duties, the Adviser shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following
functions and for the maintenance of the headquarters
of the Fund;
(ii) oversee all relationships between the Fund and
its [sub-adviser,] 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 the effective operation of the Fund and
for the sale, servicing or redemption of the Fund's
shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share
and the dividends (provided that daily pricing of the
Fund's portfolio shall be the responsibility of the
Sub-Adviser under the Sub-Advisory Agreement) or, at
its expense and responsibility, delegate such duties
in whole or in part to a company satisfactory to the
Fund;
(iv) maintain the Fund's books and records, and
prepare (or assist counsel and auditors in the
preparation of) all required proxy statements, reports
to the Fund's shareholders and Trustees, reports to
and other filings with the Securities and Exchange
Commission and any other governmental agencies, and
tax returns, and oversee the insurance relationships
of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be
necessary to register or maintain the registration of
the Fund and/or its shares under the securities or
"Blue-Sky" laws of all such jurisdictions as may be
required from time to time;
(vi) respond to any inquiries or other communications
of shareholders of the Fund 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, oversee such
shareholder servicing and transfer agent's or
distributor's response thereto.
(b) Sub-Advisory Services. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Adviser
shall review with the Sub-Adviser the investment activities
of the Fund and in conjunction with the Sub-Adviser shall
make such periodic reports to the Board of Trustees of the
Fund as may be appropriate, and in addition, the Adviser
shall provide such advisory services to the Fund, in
addition to those services provided by the Sub-Adviser, as
the Adviser deems appropriate; as part of any such
services, the Adviser shall at its discretion:
(i) provide the Sub-Adviser and the Fund with overall
market analysis;
(ii) provide the Sub-Adviser and the Fund with
material relevant to the investment of the assets of
the Fund in securities of issuers in various states;
(iii) provide the Sub-Adviser and the Fund such other
investment advice as it considers necessary or
appropriate;
(iv) consult with the Sub-Adviser in connection with
the Sub-Adviser's duties under the Sub-Advisory
Agreement; and
(v) otherwise assist the Sub-Adviser, and itself
directly act (in coordination with the Sub-Adviser and
as may be agreed among them with respect to a portion
of, or all of, the Fund's portfolio), to
(A) supervise continuously the investment program
of the Fund and the composition of its portfolio;
(B) determine what securities shall be purchased
or sold by the Fund; and
(C) arrange for the purchase and the sale of
securities held in the portfolio of the Fund.
(c) Advisory Services. Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, in the event
of the termination of the Sub-Advisory Agreement, the
Adviser shall act as managerial investment adviser to the
Fund with respect to the investment of the Fund's assets,
and supervise and arrange the purchase of securities for
and the sale of securities held in the portfolio of the
Fund, and the fee payable to the Adviser shall be increased
to the amount provided in sub-section 4(b) hereof,
provided, however, that (i) within two weeks of notice of
termination of the Sub-Advisory Agreement being delivered
by the Fund or by the Sub-Adviser, or termination of the
Sub-Advisory Agreement for any other reason, or within such
longer period as shall have been specified by the Board of
Trustees, the Adviser shall have provided the Board of
Trustees information of the kind required in connection
with annual renewal of agreements under Section 15(c) of
the Act, and (ii) within thirty days of the termination of
the Sub-Advisory Agreement, the assumption of such duties
by the Adviser shall have been approved by a vote of the
Trust's Board of Trustees, including a vote of a majority
of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such
party, with votes cast in person at a meeting called for
the purpose of voting on such approval. In the event that
the Adviser assumes such duties, it shall
(i) supervise continuously the investment program
of the Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased
or sold by the Fund;
(iii) arrange for the purchase and the sale of
securities held in the portfolio of the Fund; and
(iv) at its expense provide for pricing of the
Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory
to the Fund and, unless otherwise directed by the
Board of Trustees, provide for pricing of the
Fund's portfolio at least quarterly using another
such source satisfactory to the Fund.
(d) Compliance with Requirements. Any investment
program furnished, and any activities performed, by the
Adviser under this section shall at all times conform to,
and be in accordance with, any requirements imposed by: (1)
the Investment Company Act of l940 (the "Act") and any
rules or regulations in force thereunder; (2) any other
applicable laws, rules and regulations; (3) the Declaration
of Trust and By-Laws of the Fund as amended from time to
time; (4) any policies and determinations of the Board of
Trustees of the Fund; and (5) the fundamental policies of
the Fund, as reflected in its registration statement under
the Act or as amended by the shareholders of the Fund.
(e) Best Efforts; Responsibility. The Adviser shall
give the Fund the benefit of its best judgment and effort
in rendering services hereunder, but the Adviser shall not
be liable for any loss sustained by reason of the adoption
of any investment policy or the purchase, sale or retention
of any security, whether or not such purchase, sale or
retention shall have been based upon (i) its own
investigation and research or (ii) investigation and
research made by any other individual, firm or corporation,
if such purchase, sale or retention shall have been made
and such other individual, firm or corporation shall have
been selected in good faith by the Adviser or the Sub-
Adviser.
(f) Order Allocation. In connection with any duties
for which it may become responsible to arrange for the
purchase and sale of the Fund's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as
shall, in the Adviser's judgment, implement the policy of
the Fund to achieve "best execution," i.e., the most
favorable price and efficient execution, and accordingly
will seek to execute each transaction at a price and
commission, if any, which provide the most favorable total
cost or proceeds reasonably attainable in the
circumstances. The Fund understands that purchases from
underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions
placed through dealers include a spread between the bid and
asked prices. In allocating transactions to dealers, the
Adviser is authorized to consider, in determining whether a
particular dealer will provide best execution, the dealer's
reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the
difficulty of the transaction in question, and thus need
not pay the lowest spread or commission available if the
Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the
Adviser's overall responsibilities. If, on the foregoing
basis, the transaction in question could be allocated to
two or more dealers, the Adviser is authorized, in making
such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and
(ii) whether a dealer has sold shares of the Fund. Such
research may be in written form or through direct contact
with individuals and may include quotations on portfolio
securities and information on particular issuers and
industries, as well as on market, economic, or
institutional activities. The Fund recognizes that no
dollar value can be placed on such research services or on
execution services and that such research services may or
may not be useful to the Fund and may be used for the
benefit of the Adviser or its other clients.
(g) Other Services. The Adviser assumes no
responsibility under this Agreement other than to render
the services called for hereunder.
(h) Liability for Error. The Adviser shall not be
liable for any error in judgment or for any loss suffered
by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
(i) Other Customers. Nothing in this Agreement shall
prevent the Adviser or any officer thereof from acting as
investment adviser, sub-adviser, administrator or manager
for any other person, firm, or corporation, and shall not
in any way limit or restrict the Adviser or any of its
officers, stockholders or employees from buying, selling or
trading any securities for its own or their own accounts or
for the accounts of others for whom it or they may be
acting, provided, however, that the Adviser expressly
represents that it will undertake no activities which, in
its judgment, will adversely affect the performance of its
obligations to the Fund under this Agreement. The Fund
shall indemnify the Adviser to the full extent permitted by
the Fund's Declaration of Trust.
3. Allocation of Expenses
The Adviser shall, at its own expense, provide office
space, facilities, equipment, and personnel for the
performance of its functions hereunder and shall pay all
compensation of Trustees, officers, and employees of the
Fund who are affiliated persons of the Adviser.
In the event of the termination of the Sub-Advisory
Agreement, the Adviser shall assume the payment of expenses
paid by the investment adviser under the Sub-Advisory
Agreement, and in connection therewith, the Fund agrees as
follows: the Fund shall bear the costs of preparing and
setting in type its prospectuses, statements of additional
information and reports to its shareholders, and the costs
of printing or otherwise producing and distributing those
copies of such prospectuses, statements of additional
information and reports as are sent to its shareholders.
All costs and expenses not expressly assumed by the Adviser
under this sub-section or otherwise by the Adviser,
administrator or principal underwriter or by any other
investment adviser shall be paid by the Fund, including,
but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation
and expenses of its Trustees other than those affiliated
with the Adviser or such adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi)
custodian and transfer agent, or shareholder servicing
agent, fees and expenses; (vii) expenses incident to the
issuance of its shares (including issuance on the payment
of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or
State securities laws of the Fund or its shares; (ix)
expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x)
all other expenses incidental to holding meetings of the
Fund's shareholders; and (xi) such non-recurring expenses
as may arise, including litigation affecting the Fund and
the legal obligations for which the Fund may have to
indemnify its officers and Trustees.
4. Compensation of the Adviser
(a) Initial Compensation. The Fund shall pay the
Adviser, and the Adviser shall accept as full compensation
for all services rendered hereunder, 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 0.80 of 1% of
such net asset value on net assets of the Fund up to
$15,000,000, 0.65 of 1% on net assets of the Fund above
$15,000,000 to $50,000,000 and 0.50 of 1% of the Fund's net
assets above $50,000,000.
(b) Additional Compensation as Approved Adviser. In
the event that the Adviser has assumed the duties of
managerial investment adviser to the Fund with rspect to
investment of the Fund's assets pursuant to sub-section
2(c) hereof following approval by the Fund's Board of
Trustees as there set forth, the Fund shall pay the
Adviser, and the Adviser shall accept as full compensation
for all services rendered hereunder, 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 1.50% of such
net asset value on net assets of the Fund up to
$15,000,000, 1.20% on net assets of the Fund above
$15,000,000 to $50,000,000 and 0.90 of 1% of the Fund's net
assets above $50,000,000.
(c) Additional Compensation as Interim Adviser. In
the event of termination of the Sub-Advisory Agreement, if
the Adviser does not elect to assume the duties of
managerial investment adviser pursuant to sub-section 2(c)
hereof, or if its election as managerial investment adviser
is not approved by the Board of Trustees, the Adviser shall
act as acting investment adviser until a new investment
adviser has been appointed. In such event, in addition to
fees provided under sub-section 4(a) hereof for the
Adviser, the Fund shall pay the Adviser an amount which,
together with the amount paid under sub-section 4(a), does
not exceed the lesser of (i) the amount specified in sub-
section 4(b) above, or (ii) its costs for its services as
administrator and as acting managerial investment adviser.
(d) Fee Limitation. The above fee shall be reduced,
but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and
the Sub-Adviser) of the amount, if any, by which the total
expenses of the Fund in any fiscal year, exclusive of
taxes, interest, and brokerage fees, shall exceed the most
restrictive expense limitation imposed upon the Fund in the
states in which shares are then eligible for sale. The
payment of the above fee at the end of any month will be
reduced or postponed so that at no time will there be any
accrued but unpaid liability under this expense limitation,
subject to readjustment during the year.
5. Duration and Termination
(a) Duration. This Agreement shall become effective
on the effective date of the Registration Statement
containing the initial registration of shares of the Fund
under the name "Aquila Cascadia Pacific Equity Fund" and
shall, unless terminated as hereinafter provided, continue
in effect until [the June 30 next preceding the second
anniversary of the effective date of this Agreement], and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (1)
by a vote of the Fund's Board of Trustees, including a vote
of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act)
of any such party, with votes cast in person at a meeting
called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of
the outstanding voting securities of the Fund and by such a
vote of the Trustees. If the Fund's shareholders fail to
approve this Agreement, the Adviser may continue to serve
and act in that capacity pending further action by the
Fund's Board of Trustees or the Fund's shareholders,
provided that the compensation received by the Adviser
during such period is equal to no more than its actual
costs incurred in furnishing such services to the Fund or
the amount it would have received under this Agreement,
whichever is less.
(b) Termination. This Agreement may be terminated by
the Adviser at any time without penalty upon giving the
Fund sixty days' written notice (which notice may be waived
by the Fund) and may be terminated by the Fund at any time
without penalty upon giving the Adviser sixty days' written
notice (which notice may be waived by the Adviser),
provided that such termination by the Fund shall be
directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders
of a majority (as defined in the Act) of the voting
securities of the Fund outstanding and entitled to vote.
This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act). However, the
Adviser agrees that it will not exercise its termination
rights for at least five years from the effective date of
this Agreement, except for regulatory reasons.
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Adviser
represents that it has notice of the provisions of the
Fund's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Fund.
7. Use of Aquila Name
The Fund may use the name "Aquila" or any name derived
from or similar to the name "Aquila Management Corporation"
or "Aquila Distributors, Inc." only for so long as this
Agreement or any extension, renewal or amendment thereof
remains in effect. At such time as this Agreement shall no
longer be in effect, the Fund shall (to the extent it
lawfully can) cease to use such a name or any other name
indicating that the Fund is administered, distributed or
otherwise connected with the Adviser or with Aquila
Distributors, Inc. (collectively, (the "Aquila
Organization"). The Fund acknowledges that it has adopted
the name "Aquila Cascadia Pacific Equity Fund" through
permission of the Aquila Organization and agrees that the
Aquila Organization reserves to itself and any successor to
any of its business the right to grant the non-exclusive
right to use the names Aquila or any similar name to any
other corporation or entity, including but not limited to
any investment company of which the Aquila Organization or
any subsidiary or affiliate thereof or any successor to the
business of any thereof shall be the adviser, sub-adviser,
administrator or distributor.
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of
the day and year first above written.
ATTEST: AQUILA CASCADIA PACIFIC EQUITY FUND
___________________ By:___________________________________
ATTEST: AQUILA MANAGEMENT CORPORATION
___________________ By:___________________________________
DRAFT 3/19/96
AQUILA ROCKY MOUNTAIN EQUITY FUND
SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of , 1996, by and among
AQUILA CASCADIA PACIFIC EQUITY FUND (the "Fund"), a
Massachusetts business trust, 380 Madison Avenue, Suite
2300, New York, New York 10017, and FERGUSON, WELLMAN,
RUDD, PURDY & VAN WINKLE, INC. (the "Sub-Adviser"), a
______ corporation, 888 Southwest Fifth Avenue (Suite
2000), Portland, Oregon 97204.
W I T N E S S E T H :
WHEREAS, the Fund and the Sub-Adviser wish to enter
into an investment sub-advisory agreement, referred to
hereafter as "this Agreement";
NOW THEREFORE, in consideration of the mutual promises
and agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. In General
The Sub-Adviser shall, all as more fully set forth
herein, act as managerial investment adviser to the Fund
with respect to the investment of the Fund's assets, and
supervise and arrange the purchase of securities for and
the sale of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Sub-Adviser With Respect
To Investment of the Assets of the Fund
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the
Board of Trustees of the Fund, the Sub-Adviser shall:
(i) supervise continuously the investment program
of the Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased
or sold by the Fund;
(iii) arrange for the purchase and the sale of
securities held in the portfolio of the Fund;
(iv) at its expense provide for pricing of the
Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory
to the Fund and, unless otherwise directed by the
Board of Trustees, provide for pricing of the
Fund's portfolio at least quarterly using another
such source satisfactory to the Fund; and
(v) consult with Aquila Management Corporation
(the "Adviser" or the "Administrator") in
connection with its duties hereunder.
(b) Any investment program furnished by the Sub-
Adviser under this section shall at all times conform to,
and be in accordance with, any requirements imposed by: (1)
the Investment Company Act of 1940 (the "Act") and any
rules or regulations in force thereunder; (2) any other
applicable laws, rules and regulations; (3) the Declaration
of Trust and By-Laws of the Fund as amended from time to
time; (4) any policies and determinations of the Board of
Trustees of the Fund; and (5) the fundamental policies of
the Fund, as reflected in its registration statement under
the Act or as amended by the shareholders of the Fund.
(c) The Sub-Adviser shall give the Fund the
benefit of its best judgment and effort in rendering
services hereunder, but the Sub-Adviser shall not be liable
for any loss sustained by reason of the adoption of any
investment policy or the purchase, sale or retention of any
security, whether or not such purchase, sale or retention
shall have been based upon (i) its own investigation and
research or (ii) investigation and research made by any
other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other
individual, firm or corporation shall have been selected in
good faith by the Sub-Adviser. Nothing herein contained
shall, however, be construed to protect the Sub-Adviser
against any liability to the Fund or its security holders
by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason
of its reckless disregard of its obligations and duties
under this Agreement.
(d) Nothing in this Agreement shall prevent the
Sub-Adviser or any affiliated person (as defined in the
Act) of the Sub-Adviser from acting as investment adviser
or manager for any other person, firm or corporation and
shall not in any way limit or restrict the Sub-Adviser or
any such affiliated person from buying, selling or trading
any securities for its own or their own accounts or for the
accounts of others for whom it or they may be acting,
provided, however, that the Sub-Adviser expressly
represents that, while acting as Sub-Adviser, it will
undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the
Fund under this Agreement. It is agreed that the Sub-
Adviser shall have no responsibility or liability for the
accuracy or completeness of the Fund's Registration
Statement under the Act and the Securities Act of 1933,
except for information supplied by the Sub-Adviser for
inclusion therein. The Sub-Adviser shall promptly inform
the Fund as to any information concerning the Sub-Adviser
appropriate for inclusion in such Registration Statement,
or as to any transaction or proposed transaction which
might result in an assignment (as defined in the Act) of
this Agreement. The Fund agrees to indemnify the Sub-
Adviser to the full extent permitted by the Fund's
Declaration of Trust.
(e) In connection with its duties to arrange for
the purchase and sale of the Fund's portfolio securities,
the Sub-Adviser shall select such broker-dealers
("dealers") as shall, in the Sub-Adviser's judgment,
implement the policy of the Fund to achieve "best
execution," i.e., the most favorable price and efficient
execution, and accordingly shall seek to execute each
transaction at a price and commission, if any, which
provide the most favorable total cost or proceeds
reasonably attainable in the circumstances. The Fund
understands that purchases from underwriters include a
commission or concession paid by the issuer to the
underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices.
In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular
dealer will provide best execution, the dealer's
reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the
difficulty of the transaction in question, and thus need
not pay the lowest spread or commission available if the
Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the
Sub-Adviser's overall responsibilities. If, on the
foregoing basis, the transaction in question could be
allocated to two or more dealers, the Sub-Adviser is
authorized, in making such allocation, to consider (i)
whether a dealer has provided research services, as further
discussed below; and (ii) whether a dealer has sold shares
of the Fund. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on
particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes
that no dollar value can be placed on such research
services or on execution services and that such research
services may or may not be useful to the Fund and may be
used for the benefit of the Sub-Adviser or its other
clients.
3. Allocation of Expenses
The Sub-Adviser shall furnish the Fund, at the Sub-
Adviser's expense, all office space, facilities, equipment
and clerical personnel necessary for carrying out its
duties under this Agreement. The Sub-Adviser shall supply,
or cause to be supplied, to any investment adviser,
administrator or principal underwriter of the Fund all
necessary financial information in connection with such
adviser's, administrator's or principal underwriter's
duties under any agreement between such adviser,
administrator or principal underwriter and the Fund. The
Sub-Adviser will also pay all compensation of the Fund's
officers, employees, and Trustees, if any, who are
affiliated persons of the Sub-Adviser. The Fund agrees to
bear the costs of preparing and setting in type its
prospectuses, statements of additional information and
reports to its shareholders, and the costs of printing or
otherwise producing and distributing those copies of such
prospectuses, statements of additional information and
reports as are sent to its shareholders. All costs and
expenses not expressly assumed by the Sub-Adviser under
this Agreement or by such adviser, administrator or
principal underwriter shall be paid by the Fund, including,
but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation
and expenses of its Trustees other than those affiliated
with the Sub-Adviser or such adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi)
custodian and transfer agent, or shareholder servicing
agent, fees and expenses; (vii) expenses incident to the
issuance of its shares (including issuance on the payment
of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or
State securities laws of the Fund or its shares; (ix)
expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x)
all other expenses incidental to holding meetings of the
Fund's shareholders; and (xi) such non-recurring expenses
as may arise, including litigation affecting the Fund and
the legal obligations for which the Fund may have to
indemnify its officers and Trustees.
4. Compensation of the Sub-Adviser
(a) The Fund agrees to pay the Sub-Adviser, and
the Sub-Adviser agrees to accept as full compensation for
all services rendered by the Sub-Adviser as such, a
management fee payable monthly and computed on the net
asset value of the Fund as of the close of business each
business day at the annual rates of 0.70 of 1% of such net
asset value on net assets of the Fund up to $15,000,000,
0.55 of 1% on net assets of the Fund above $15,000,000 to
$50,000,000 and 0.40 of 1% of the Fund's net assets above
$50,000,000.
(b) The above fee shall be reduced, but not below
zero, by an amount equal to the Sub-Adviser's pro-rata
portion (based upon the aggregate fees of the Sub-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, shall exceed the most
restrictive expense limitation imposed upon the Fund in the
states in which shares are then or may be eligible for
sale. The payment of the above fee at the end of any month
will be reduced or postponed so that at no time will there
be any accrued but unpaid liability under this expense
limitation, subject to readjustment during the year.
5. Duration and Termination
(a) This Agreement shall become effective on the
effective date of the Registration Statement containing the
initial registration of shares of the Fund under the name
"Aquila Cascadia Pacific Equity Fund" and shall, unless
terminated as hereinafter provided, continue in effect
until [the June 30 next preceding the second anniversary of
the effective date of this Agreement], and from year to
year thereafter, but only so long as such continuance is
specifically approved at least annually (1) by a vote of
the Fund's Board of Trustees, including a vote of a
majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act)
of any such party, with votes cast in person at a meeting
called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of
the outstanding voting securities of the Fund and by such a
vote of the Trustees. If the Fund's shareholders fail to
approve this Agreement, the Sub-Adviser may continue to
serve and act in that capacity pending further action by
the Fund's Board of Trustees or the Fund's shareholders,
provided that the compensation received by the Sub-Adviser
during such period is equal to no more than its actual
costs incurred in furnishing such services to the Fund or
the amount it would have received under this Agreement,
whichever is less.
(b) This Agreement may be terminated by the Sub-
Adviser at any time without penalty upon giving the Fund
sixty days' written notice (which notice may be waived by
the Fund) and may be terminated by the Fund at any time
without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-
Adviser), provided that such termination by the Fund shall
be directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders
of a majority (as defined in the Act) of the voting
securities of the Fund outstanding and entitled to vote.
This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act). However, the
Sub-Adviser agrees that it will not exercise its
termination rights for at least five years from the
effective date of this Agreement, except for regulatory
reasons.
6. Disclaimer of Shareholder Liability
The Sub-Adviser understands that the obligations
of this Agreement are not binding upon any shareholder of
the Fund personally, but bind only the Fund's property and
represents that it has notice of the provisions of the
Fund's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Fund.
7. Notices of Meetings
The Fund agrees that notice of each meeting of
the Board of Trustees of the Fund will be sent to the Sub-
Adviser and that the Fund will make appropriate
arrangements for the attendance (as persons present by
invitation) of such person or persons as the Sub-Adviser
may designate.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their
duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
ATTEST: AQUILA CASCADIA PACIFIC EQUITY FUND
____________________ By:_________________________________
ATTEST: FERGUSON, WELLMAN, RUDD, PURDY &
VAN WINKLE, INC.
____________________ By:________________________________
DRAFT 3/19/96
DISTRIBUTION AGREEMENT
AGREEMENT, made as of this day of March,
1996, by and between AQUILA CASCADIA PACIFIC EQUITY FUND
(hereinafter called the "Trust"), and AQUILA DISTRIBUTORS,
INC. (hereinafter called the "Distributor").
W I T N E S S E T H :
In consideration of the mutual covenants herein
contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and
between the parties hereto as follows:
1. The Distributor agrees to act as principal
underwriter and exclusive distributor of the shares of the
Trust. The price at which shares of the Trust are issued to
the public by the Distributor shall be as computed and
effective as set forth in the Prospectus and Statement of
Additional Information of the Trust current as of the time
of such sale (collectively, the "Current Prospectus"). The
Distributor is authorized to determine from time to time (i)
the sales charges forming part of the public offering price
and any dealer discount paid to dealers and any agency
commissions paid to brokers; (ii) the terms of any privilege
reducing or eliminating such sales charges; and (iii) the
terms of any sales agreement entered into by the Distributor
relating to the sale of the Trust's shares and the identity
of any broker or dealer with which such agreements are
entered into. The Trust agrees that it will promptly amend
or supplement the Current Prospectus in connection with any
change in any of the foregoing. The Distributor agrees to
bear the costs of printing and distributing all copies of
the Trust's prospectuses, statements of additional
information and reports to shareholders which are not sent
to the Trust's shareholders, as well as the costs of
supplemental sales literature, advertising and other
promotional activities.
2. The Trust agrees to issue shares of the
Trust, subject to the provisions of its Declaration of Trust
and By-Laws, to the Distributor as ordered by the
Distributor, but only to the extent that the Distributor
shall have received purchase orders therefor at the times
and subject to the conditions set forth in the Current
Prospectus. Certificates for shares need not be created or
delivered by the Trust in any case in which the purchase is
made under terms not calling for such certificates. Shares
issued by the Trust shall be registered in such name or
names and amounts as the Distributor may request from time
to time and all shares when so paid for and issued shall be
fully paid and non-assessable to the extent set forth in the
Current Prospectus.
3. The Distributor shall act as principal in all
matters relating to promotion of the growth of the Trust and
shall enter into all of its engagements, agreements and
contracts as principal on its own account. The title to
shares of the Trust issued and sold through the Distributor
shall pass directly from the Trust to the dealer or
investor, or shall, if the Distributor so consents, first
pass to the Distributor, as may from time to time be
determined by the Board of Trustees of the Trust.
4. The Trust hereby consents to any arrangements
whereby the Distributor may act as principal underwriter for
other investment companies or as principal underwriter,
sponsor or depositor for unit investment trusts and periodic
payment plan certificates issued thereby, or as investment
adviser, sub-adviser or administrator to the Trust or other
investment companies or persons. The Trust also consents to
the Distributor carrying on a business as a broker, dealer
and underwriter in securities and to carrying on any other
lawful business.
5. The Trust covenants and agrees that it will
not during the term of this Agreement, without the consent
of the Distributor, offer any shares of the Trust for sale
directly or through any person or corporation other than the
Distributor excepting only (a) the reinvestment of dividends
and/or distributions, or their declaration in shares of the
Trust, in optional form or otherwise; (b) the issuance of
additional shares through stock splits or stock dividends;
(c) sales of shares to another investment or securities
holding company in the process of purchasing all or a
portion of its assets; or (d) in connection with an exchange
of the Trust's shares for shares of another investment
company or securities holding company.
6. The Trust agrees to use its best efforts to
register from time to time under the Securities Act of 1933
adequate amounts of shares of the Trust for sale by the
Distributor to the public and to register or qualify, or to
permit the Distributor to register or qualify, such shares
for offering to the public in such States or other
jurisdictions as may be designated by the Distributor.
7. The Trust agrees to advise the Distributor of
the net asset value of the Trust's shares as often as
computed. The Trust will also furnish to the Distributor,
as soon as practicable, such information as may reasonably
be requested by the Distributor in order that it may know
all of the facts necessary to sell shares of the Trust.
8. The Distributor is familiar with the
Declaration of Trust and By-Laws of the Trust, each as
presently in effect. Insofar as they are applicable to the
Distributor as principal underwriter of the Trust, it will
comply with the provisions of the Declaration of Trust and
By-Laws of the Trust and with the provisions of all acts
administered by the Securities and Exchange Commission (the
"Commission") and rules thereunder.
9. This amended and restated Agreement shall go
into effect on the date first above written, and shall,
unless terminated as hereinafter provided, continue in
effect until [the June 30 which next precedes the second
anniversary of the effective date of this Agreement], and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually as
provided in the Investment Company Act of 1940 (the "Act").
This Agreement shall automatically terminate in the event of
its assignment (as defined in the Act) and may be terminated
by either party on sixty days written notice to the other
party.
10. The Trust agrees with the Distributor, for
the benefit of the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of
the Securities Act of 1933 (the "Securities Act") and each
and all and any of them, to indemnify and hold harmless the
Distributor and any such controlling person from and against
any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject
under the Securities Act, under any other statute, at common
law or otherwise, and to reimburse the Distributor and such
controlling persons, if any, for any legal or other expenses
(including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection
with any litigation whether or not resulting in any
liability, insofar as such losses, claims, damages,
liabilities or litigation arise out of, or are based upon,
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, filed with the Commission, or any amendment
thereof or supplement thereto, or which arise out of, or are
based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided,
however, that this indemnity agreement shall not apply to
amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Trust or
to any such losses, claims, damages, liabilities or
litigation arising out of, or based upon, any untrue
statement or alleged untrue statement of a material fact
contained in any such Registration Statement or Prospectus,
or any amendment thereof or supplement thereto, or arising
out of, or based upon, the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon
information furnished in writing to the Trust by the
Distributor for inclusion in any such Registration Statement
or Prospectus or any amendment thereof or supplement
thereto. The Distributor and each such controlling person
shall, promptly after the complaint shall have been served
upon the Distributor or such controlling person in respect
of which indemnity may be sought from the Trust on account
of its agreement contained in this paragraph, notify the
Trust in writing of the commencement thereof. The omission
of the Distributor or such controlling person so to notify
the Trust of any such litigation shall relieve the Trust
from any liability which it may have to the Distributor or
such controlling person on account of the indemnity
agreement contained in this paragraph, but shall not relieve
the Trust from any liability which it may have to the
Distributor or controlling person otherwise than on account
of the indemnity agreement contained in the paragraph. In
case any such litigation shall be brought against the
Distributor or any such controlling person and notice of the
commencement thereof shall have been given to the Trust, the
Trust shall be entitled to participate in (and, to the
extent that it shall wish, to direct) the defense thereof at
its own expense, but such defense shall be conducted by
counsel of good standing and satisfactory to the Distributor
or such controlling person or persons, defendant or
defendants in the litigation. The indemnity agreement of
the Trust contained in this paragraph shall remain operative
and in full force and effect regardless of any investigation
made by or on behalf of the Distributor or any such
controlling person, and shall survive any delivery of shares
of the Trust. The Trust agrees to notify the Distributor
promptly of the commencement of any litigation or proceeding
against it or any of its officers or directors of which it
may be advised in connection with the issue and sale of
shares of the Trust.
11. Anything herein to the contrary
notwithstanding, the agreement in paragraph 10, insofar as
it constitutes a basis for reimbursement by the Trust for
liabilities (other than payment by the Trust of expenses
incurred or paid in the successful defense of any action,
suit or proceeding) arising under the Securities Act, shall
not extend to the extent of any interest therein of any
person who is an underwriter or a partner or controlling
person of an underwriter within the meaning of Section 15 of
the Securities Act or who, at the date of this Agreement, is
a Trustee of the Trust, except to the extent that an
interest of such character shall have been determined by a
court of appropriate jurisdiction as not against public
policy as expressed in the Securities Act. Unless in the
opinion of counsel for the Trust the matter has been
adjudicated by controlling precedent, the Trust, will, if a
claim for such reimbursement is asserted, submit to a court
of appropriate jurisdiction the question of whether or not
such interest is against the public policy as expressed in
the Securities Act.
12. The Distributor agrees to indemnify and hold
harmless the Trust and its Trustees and such officers as
shall have signed any Registration Statement filed with the
Commission from and against any and all losses, claims,
damages or liabilities, joint or several, to which the Trust
or such Trustees or officers may become subject under the
Securities Act, under any other statute, at common law or
otherwise, and will reimburse the Trust or such Trustees or
officers for any legal or other expenses (including the cost
of any investigation and preparation) reasonably incurred by
it or them or any of them in connection with any litigation,
whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out
of, or are based upon, any untrue statement or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Trust
by the Distributor for inclusion in any Registration
Statement or any Prospectus, or any amendment thereof or
supplement thereto. The Distributor shall not be liable for
amounts paid in settlement of any such litigation if such
settlement was effected without its consent. The Trust and
its Trustees and such officers, defendant or defendants, in
any such litigation shall, promptly after the complaint
shall have been served upon the Trust or any such Trustee or
officer in respect of which indemnity may be sought from the
Distributor on account of its agreement contained in this
paragraph, notify the Distributor in writing of the
commencement thereof. The omission of the Trust or such
Trustee or officer so to notify the Distributor of any such
litigation shall relieve the Distributor from any liability
which it may have to the Trust or such Trustee or officer on
account of the indemnity agreement contained in this
paragraph, but shall not relieve the Distributor from any
liability which it may have to the Trust or such Trustee or
officer otherwise than on account of the indemnity agreement
contained in this paragraph. In case any such litigation
shall be brought against the Trust or any such Trustee or
officer and notice of the commencement thereof shall have
been so given to the Distributor, the Distributor shall be
entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but
such defense shall be conducted by counsel of good standing
and satisfactory to the Trust. The indemnity agreement of
the Distributor contained in this paragraph shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of the Trust and shall
survive any delivery of shares of the Trust. The
Distributor agrees to notify the Trust promptly of the
commencement of any litigation or proceeding against it or
any of its officers or directors or against any such
controlling person of which it may be advised, in connection
with the issue and sale of the Trust's shares.
13. Notwithstanding any provision contained in
this Agreement, no party hereto and no person or persons in
control of any party hereto shall be protected against any
liability to the Trust or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence, in the performance of their
duties, or by reason of their reckless disregard of their
obligations and duties under this Agreement.
14. The Trust shall immediately advise the
Distributor (a) when any post-effective amendment to its
Registration Statement or any further amendment or
supplement thereto or any further Registration Statement or
amendment or supplement thereto becomes effective, (b) of
any request by the Commission for amendments to the
Registration Statement or the then effective Prospectus or
for additional information, (c) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement, or the initiation of any
proceedings for that purpose, and (d) of the happening of
any event which makes untrue any material statement made in
the Registration Statement or the Current Prospectus or
which in the opinion of counsel for the Trust requires the
making of a change in the Registration Statement or the
Current Prospectus in order to make the statements therein
not misleading. In case of the happening at any time of any
event which materially affects the Trust or its securities
and which should be set forth in a supplement to or an
amendment of the then effective Prospectus in order to make
the statements therein not misleading the Trust shall
prepare and furnish to the Distributor such amendment or
amendments to the then effective Prospectus as will correct
the Prospectus so that as corrected it will not contain, or
such supplement or supplements to the then effective
Prospectus which when read in conjunction with the then
effective Prospectus will make the combined information not
contain, any untrue statement of a material fact or any
omission to state any material fact necessary in order to
make the statements in the then effective Prospectus not
misleading. The Trust shall, if at any time the Commission
shall issue any stop order suspending the effectiveness of
the Registration Statement, make every reasonable effort to
obtain the prompt lifting of such order.
15. Except as expressly provided in paragraphs 10
and 12 hereof, the agreements herein set forth have been
made and are made solely for the benefit of the Trust, the
Distributor, and the persons expressly provided for in
paragraphs 10 and 12, their respective heirs, successors,
personal representatives and assigns, and except as so
provided, nothing expressed or mentioned herein is intended
or shall be construed to give any person, firm or
corporation, other than the Trust, the Distributor, and the
persons expressly provided for in paragraphs 10 and 12, any
legal or equitable right, remedy or claim under or in
respect of this Agreement or any representation, warranty or
agreement herein contained. Except as so provided, the term
"heirs, successors, personal representatives and assigns"
shall not include any purchaser of shares merely because of
such purchase.
16. The Trust may use the name "Aquila" or any
name derived from or similar to the name "Aquila Management
Corporation" or "Aquila Distributors, Inc." or any trade or
service mark associated therewith, only for so long as this
Agreement or any extension, renewal or amendment thereof
remains in effect. At such time as this Agreement shall no
longer be in effect, the Trust shall (to the extent it
lawfully can) cease to use such a name or any other name
indicating that the Trust is administered, distributed or
otherwise connected with the Distributor or with Aquila
Management Corporation (collectively, (the "Aquila
Organization") and refrain from using any trade or service
mark containing the word "Aquila." The Trust acknowledges
that it has adopted the name "Aquila Cascadia Pacific Equity
Fund" through permission of the Aquila Organization and
agrees that the Aquila Organization reserves to itself and
any successor to any of its business the right to grant the
non-exclusive right to use the names Aquila or any similar
name to any other corporation or entity, including but not
limited to any investment company of which the Aquila
Organization or any subsidiary or affiliate thereof or any
successor to the business of any thereof shall be the
adviser, sub-adviser, administrator or distributor.
17. The Distributor understands that the
obligations of this Agreement are not binding upon any
shareholder of the Trust personally, but bind only the
Trust's property; the Distributor represents that it has
notice of the provisions of the Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly
authorized officers and their seals to be affixed as of the
day and year first above written.
ATTEST: AQUILA CASCADIA PACIFIC EQUITY FUND
_______________________
By:________________________________
ATTEST: AQUILA DISTRIBUTORS, INC.
_______________________
___________________________________
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with brokerage firms)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
200 Park Avenue, Suite 4515
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you for sale and
distribution of the shares of any of the mutual funds of
which you are, or may become, Distributor (hereinafter
collectively referred to as the "Funds" and individually as
the "Fund"). Upon acceptance of this Agreement by you, we
understand that we may offer and sell shares of the Funds,
subject to all terms and conditions hereof and to your right
without notice to suspend or terminate the sale of shares of
any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold at the current offering price in effect as set
forth in each Fund's then current Prospectus (which term as
used herein includes any related Statement of Additional
Information). All purchase requests and applications
submitted by us are subject to acceptance or rejection as
set forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are a
foreign firm not eligible for membership in the NASD. In
any case, we and you agree to abide by all the rules and
regulations of the NASD concerning distribution of the
securities of open-end investment companies, including
without limitation, Section 26 of Article III of the NASD
Rules of Fair Practice, all of which are incorporated herein
as if set forth in full. We and you further agree to comply
with all applicable State and Federal laws and regulations.
We and you agree that we and you will sell or offer for sale
shares of the Funds only in those states or jurisdictions
whose laws permit the offers or sales in question, whether
or not such permission is dependent on registration or
qualification of the Funds or their shares under such laws.
3. We shall offer and sell shares of the Funds only in
accordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no
representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We agree
to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that such
shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws and
regulations. We agree to hold you and the Funds harmless
and to indemnify you and the Funds in the event that we, or
any of our sales representatives, violate any law or
regulation, or any provisions of this Agreement, which
violation may result in liability to you and/or any Fund;
and in the event you and/or such Fund determine to refund
any amounts paid by any investor by reason of any such
violation on our part, we shall return to you and/or such
Fund any commissions previously paid or discounts allowed by
you to us with respect to the transaction for which the
refund is made. All expenses which we incur in connection
with our activities under this Agreement will be borne by
us.
4. We understand and agree that the sales charge and dealer
commission relative to sales of shares of any Fund made by
us will be in an amount as set forth in the then current
Prospectus of such Fund or in separate written notice to us.
5. Payment for purchases of shares of any Fund made by wire
order from us will be received by you or such Fund within
five business days after the acceptance of our order or such
shorter time as may be required by law. If such payment is
not so received, we understand that you reserve the right,
without notice, forthwith to cancel the sale, or, at your
option, to sell the shares ordered by us back to such Fund,
in which latter case we may be held responsible for any
loss, including loss of profit, suffered by you and/or such
Fund resulting from our failure to make the aforesaid
payment. Where sales of shares of any Fund are contingent
upon such Fund's receipt of Federal funds in payment
therefor, we shall forward promptly to you any purchase
orders and payments received by us from investors.
6. We agree to purchase shares only from you or from our
customers. If we purchase shares from you, we agree that
all such purchases shall be made only to cover orders
received by us from our customers, or for our own bona fide
investment. If we purchase shares from our customers, we
agree to pay such customers not less than the applicable
redemption price as established by the then current
Prospectus.
7. Unless at the time of transmitting an order we advise
you to the contrary, you may consider the order to be the
total holding of the investor and assume that the investor
is not entitled to any reduction in sales price beyond that
accorded to the amount of the purchase as determined by the
schedule set forth in the then current Prospectus.
8. We understand and agree that if shares of any Fund sold
by us under the terms of this Agreement are redeemed by such
Fund (including redemptions resulting from an exchange for
shares of another investment company) or are repurchased by
you as agent for such Fund or are tendered to such Fund for
redemption within seven business days after the confirmation
to us of our original purchase order for such shares, we
shall pay forthwith to you the full amount of the commission
allowed to us on the original sale, provided you notify us
of such repurchase or redemption within ten days of the date
upon which written redemption requests (and, if applicable,
share certificates) are delivered to you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in
performing our services covered by this Agreement we are
acting as principal, and you are in no way responsible for
the manner of our performance or for any of our acts or
omissions in connection therewith. Nothing in this
Agreement shall be construed to constitute us or any of our
agents, employees or representatives as your agent, partner
or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. We agree that
you have and reserve the right, in your sole discretion
without notice, to suspend sales of shares of any one or
more of the Funds, or to withdraw entirely the offering of
shares of any one or more of the Funds, or, in your sole
discretion, to modify, amend, or cancel this Agreement upon
written notice to us of such modification, amendment, or
cancellation, which shall become effective on the date
stated in such notice. Without limiting the foregoing, you
may terminate this Agreement for cause on violation by us of
any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. Without limiting the foregoing, any provision
hereof to the contrary notwithstanding, our expulsion from
the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of
applicable State or Federal laws or regulations will
terminate this Agreement effective upon the date of your
mailing notice to us of such termination. Your failure to
terminate for any cause will not constitute a waiver of your
right to terminate at a later date for any such cause. All
notices hereunder will be to the respective parties at the
addresses listed hereon, unless changed by notice given in
accordance with this Agreement.
11. This Agreement will become effective when it is
executed and dated by you, and will be in substitution of
any prior agreement between you and us covering shares of
the Funds. This Agreement is not assignable or
transferable, except that you may assign or transfer this
Agreement to any successor firm or corporation which becomes
a principal underwriter of the Funds.
_________________________________
(name of brokerage firm)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19___
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with financial institutions)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
200 Park Avenue, Suite 4515
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you to make
available to our customers the shares of any of the funds of
which you are, or may become, Distributor (hereinafter
collectively referred to as the "Funds" or individually as
the "Fund") on a fully disclosed basis wherein you would
confirm transactions of our customers in such shares
directly to them. Upon acceptance of this Agreement by you,
we understand that we may make shares of the Funds available
to our customers, subject to all terms and conditions hereof
and to your right without notice to suspend or terminate the
sale of shares of any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold by you at the current offering price in effect as
set forth in each Fund's then current Prospectus (which term
as used herein includes any related Statement of Additional
Information). All purchase requests and applications
submitted by us are subject to acceptance or rejection as
set forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are either
(i) a foreign firm not eligible for membership in the NASD,
or (ii) a bank, as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934. In any case, we and you
agree to abide by all applicable rules and regulations of
the NASD, including without limitation, Section 26 of
Article III of the NASD Rules of Fair Practice, all of which
are incorporated herein as if set forth in full. We and you
further agree to comply with all applicable State and
Federal laws and regulations. We and you agree that we and
you will make available for sale shares of the Funds only in
those states or jurisdictions whose laws so permit, whether
or not such permission is dependent on registration or
qualification of the Funds or their shares under such laws.
3. We shall make shares of the Funds available only in
accordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no
representations not included in said Prospectus or in any
authorized supplemental material supplied by you. In no
transaction where we make shares of the Funds available to
our customers shall we have any authority to act as agent
for the Funds. The customers in question are for all
purposes our customers and not your customers. However, you
will be responsible for mailing each Fund's then current
Prospectus (not including the related Statement of
Additional Information) with the confirmations. You will
clear transactions for each of our customers only upon our
authorization, it being understood in all cases that (i) we
are acting as agent for the customer, (ii) the transactions
are without recourse against us by the customer except to
the extent that our failure to transmit orders in a timely
fashion results in a loss to our customer, (iii) our
customer will have full beneficial ownership of the shares,
(iv) each transaction is initiated solely upon the order of
the customer, and (v) each transaction is for the account of
the customer and not for our account. We agree to be
responsible for the proper instruction and training of all
personnel employed by us in this area, in order that such
shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws and
regulations. We agree to hold you and the Funds harmless
and to indemnify you and the Funds in the event that we, or
any of such personnel, violate any law or regulation, or any
provisions of this Agreement, which violation may result in
liability to you and/or any Fund; and in the event you
and/or such Fund determine to refund any amounts paid by any
investor by reason of any such violation on our part, we
shall return to you and/or such Fund any agency commissions
previously paid to us with respect to the transaction for
which the refund is made. All expenses which we incur in
connection with our activities under this Agreement will be
borne by us.
4. We understand and agree that the sales charge to the
customer and the agency commission payable to us relative to
sales of shares of any Fund made by us will be in an amount
as set forth in the then current Prospectus of such Fund or
in separate written notice to us.
5. Payment for purchases by our customers of shares of any
Fund made by wire order from us will be received by you or
such Fund within five business days after the acceptance of
our order or such shorter time as may be required by law.
If such payment is not so received, we understand that you
reserve the right, without notice, forthwith to cancel the
sale, or, at your option, to sell the shares ordered by us
back to such Fund, in which latter case we may be held
responsible for any loss, including loss of profit, suffered
by you and/or such Fund resulting from our failure to make
the aforesaid payment. Where sales of shares of any Fund
are contingent upon such Fund's receipt of Federal funds in
payment therefor, we shall forward promptly to you any
purchase orders and payments received by us from our
customers.
6. We agree to make shares available to our customers only
(a) at the public offering price (except as provided in
Paragraph 12 hereunder), (b) from you, and (c) to cover
orders already received from our customers. We shall not
withhold placing with you orders received from our customers
so as to profit ourselves as a result of such withholding;
e.g., by a change in the net asset value from that used in
determining the public offering price to our customers.
7. Unless at the time of transmitting an order we advise you
to the contrary, you may consider the order to be the total
holding of the investor and assume that the investor is not
entitled to any reduction in sales price beyond that
accorded to the amount of the purchase as determined by the
schedule set forth in the then current Prospectus. If we
make shares available to our customers as provided in
Paragraph 12 hereunder, we shall so indicate to you at the
time of transmitting such order.
8. We understand and agree that if any shares sold to our
customers under the terms of this Agreement are redeemed by
any Fund (including redemptions resulting from an exchange
for shares of another investment company) or are repurchased
by you as agent for such Fund or are tendered to such Fund
for redemption within seven business days after the
confirmation to our customers of our original purchase order
for such shares, we shall pay forthwith to you the full
amount of the commission allowed to us on the original sale,
provided you notify us of such repurchase or redemption
within ten days of the date upon which written redemption
requests (and, if applicable, share certificates) are
delivered to you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in
performing our services covered by this Agreement we are
acting as agent for our customers, and you are in no way
responsible for the manner of our performance or for any of
our acts or omissions in connection therewith. Nothing in
this Agreement shall be construed to constitute us or any of
our agents, employees or representatives as your agent,
partner or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. However, our
termination of this Agreement will not terminate our
responsibilities under sections (iv) and (v) of Paragraph 12
hereunder. We agree that you have and reserve the right, in
your sole discretion without notice, to suspend sales of
shares of any one or more of the Funds, or to withdraw
entirely the offering of shares of any one or more of the
Funds, or, in your sole discretion, to modify, amend, or
cancel this Agreement upon written notice to us of such
modification, amendment, or cancellation, which shall become
effective on the date stated in such notice. Without
limiting the foregoing, you may terminate this Agreement for
cause on violation by us of any of the provisions of this
Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Without
limiting the foregoing, any provision hereof to the contrary
notwithstanding, our expulsion from the NASD, if we are a
member of the NASD, will automatically terminate this
Agreement without notice; our suspension from the NASD, if
we are a member of the NASD, or violation of applicable
State or Federal laws or regulations (whether or not we are
a member of the NASD) will terminate this Agreement
effective upon the date of your mailing notice to us of such
termination. Your failure to terminate for any cause will
not constitute a waiver of your right to terminate at a
later date for any such cause. All notices hereunder will
be to the respective parties at the addresses listed hereon,
unless changed by notice given in accordance with this
Agreement.
11. This Agreement will become effective when it is executed
and dated by you, and will be in substitution of any prior
agreement between you and us covering shares of the Funds.
This Agreement is not assignable or transferable, except
that you may assign or transfer this Agreement to any
successor firm or corporation which becomes a principal
underwriter of the Funds.
12. We may make shares of the Funds available to our
customers at the next determined net asset value of such
shares under the following circumstances: (i) each such
purchase order is on behalf of a trust, agency, or custodial
client, (ii) we have, as to each such purchase order,
discretionary investment responsibility over the assets in
question, (iii) the relationship between the us and the
client was not formed solely for the purpose of purchasing
shares of any Fund at net asset value, (iv) the shares
purchased pursuant to such purchase order will not be resold
except by redemption, (v) there is no charge relating to
such purchase other than our normal service charge, and (vi)
we may disclose the name of any Fund to the client without
your consent.
_________________________________
(name of financial institution)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19__
AQUILA DISTRIBUTORS, INC.
RELATED AGREEMENT
From:
_____________________________
_____________________________
_____________________________
To: Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
1. We understand that each of the mutual funds (hereinafter collec-
tively referred to as the "Funds" and individually as the "Fund"),
for which you are or may become Distributor, has adopted a plan
(the "Distribution Plan") pursuant to Rule 12b-1 under the Invest-
ment Company Act of 1940 as amended (the "Act"), for making distri-
bution assistance payments ("Permitted Payments") to selected bro-
kers and other persons ("Qualified Recipients") providing distribu-
tion assistance to certain Fund accounts ("Qualified Holdings").
We have been furnished a copy of the Distribution Plan and under-
stand that this letter is a "Related Agreement" as defined in the
Distribution Plan and that all defined terms in this letter have
the same meanings as in the Distribution Plan.
2. We intend to furnish distribution assistance to Qualified Hol-
dings which will make us a Qualified Recipient for Permitted Pay-
ments. We understand that we may receive Permitted Payments only
in accordance with the Distribution Plan.
3. This Related Agreement is dependent upon the continued effec-
tiveness of a Sales Agreement by which you have agreed with us for
distribution of shares of the Fund. All terms of the Sales Agree-
ment are incorporated by reference into this Related Agreement as
if set forth in full.
4. We understand that, although the Permitted Payments cannot ex-
ceed the limits specified in the Distribution Plan, the amount of
such payments up to such limit, the frequency and timing of such
payments, the terms of any right to sell in a territory, and any
other terms, conditions, or qualifications for us to receive such
payments are subject to change by you from time to time, upon at
least 30 days' written notice. Any orders placed after the effec-
tive date of such change shall be subject to the rates in effect at
the time of receipt of the payment by the Fund. Such 30-day period
may be waived at your sole option in the event such change in-
creases the Permitted Payments due us. We understand that you may
pay the Permitted Payments yourself or pay them through an agent.
2
5. We shall provide you with any documentation which the Federal
and state securities laws and regulations may from time to time re-
quire as a prerequisite to the payment of Permitted Payments. We
shall bear the clerical costs of providing such documentation, and
shall be responsible for the accuracy of such documentation.
6. This Agreement is not assignable or transferable, except that
you may transfer or assign this Agreement to any successor firm or
corporation which becomes Distributor of the Fund.
7. If a quarterly Permitted Payment would be less than $50.00, it
will be aggregated with the following quarterly Permitted Payment,
and you will remit such aggregated Permitted Payments following the
quarter in which such aggregated Permitted Payments exceed $50.00.
8. This Agreement may be terminated by either party on 30 days'
written notice. All notices hereunder shall be in writing ad-
dressed to the respective parties at the addresses listed hereon,
unless changed by notice given in accordance with this Agreement.
9. This Agreement will become effective on the date when it is exe-
cuted and dated by you below. This Agreement and all rights and
obligations of the parties hereunder will be governed by and con-
strued under the laws of the State of New York.
____________________________
(name of firm)
By:_________________________
____________________________
(name and title of officer)
____________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:__________________________
_____________________________
(name and title of officer)
Dated:________________, 19___
3/30/94
AQUILA DISTRIBUTORS, INC.
NOTICE TO FIRMS PROVIDING DISTRIBUTION ASSISTANCE
PURSUANT TO RELATED AGREEMENT
Subject to the limits of the Distribution Plan of each Fund, Per-
mitted Payments to each firm which is a Qualified Recipient will be
made for each calendar quarter, based on each month's average net
asset value of the daily balances in such firm's accounts which are
Qualified Holdings, and will be at the following annual rates:
Hawaiian Tax-Free Trust:
Twenty one-hundredths of one percent (0.20%).
Narragansett Insured Tax-Free Income Fund:
Fifteen one-hundredths of one percent (0.15%).
Tax-Free Fund For Utah:
Twenty one-hundredths of one percent (0.20%).
Each such payment will be mailed by the 15th day of the month fol-
lowing the end of each calendar quarter.
Date of this Notice: March 30, 1994.
draft 3/20/96
SHAREHOLDER SERVICING AGREEMENT
Aquila Distributors, Inc. (the "Distributor")
380 Madison Avenue
Suite 2300
New York, NY 10017
Dear Sirs:
AQUILA CASCADIA PACIFIC EQUITY FUND (the "Fund") confirms
its agreement with Aquila Distributors, Inc. (the "Distributor")
with respect to the servicing of shareholder accounts
representing shares of the Level-Payment Class of the Fund. This
Agreement is entered into pursuant to the Fund's Shareholder
Services Plan dated ________, 199_ (the "Plan").
Section 1. Compensation and Services to be Rendered
(a) The Fund will pay the Distributor an annual fee (the
"Service Fee") in compensation for its services in connection
with the servicing of shareholder accounts. The Service Fee paid
will be calculated daily and paid monthly by the Fund at the
annual rate of .25% of the average annual net assets of the Fund
represented by the Level-Payment ("Class C") Shares.
(b) The Service Fee will be used by the Distributor to
provide compensation for ongoing servicing and/or maintenance of
shareholder accounts and to cover an allocable portion of
overhead and other office expenses of the Distributor and/or
selected dealers related to the servicing and/or maintenance of
shareholder accounts. It is understood that compensation may be
paid by the Distributor to persons, including employees of the
Distributor, who respond to inquiries of Level-Payment
Shareholders of the Fund regarding their ownership of shares or
their accounts with the Fund or who provide other similar
services not otherwise required to be provided by the Fund's
investment manager, transfer agent or other agent of the Fund.
Section 2. Reports
While this Agreeement is in effect, the Distributor shall
provide the reports called for in Section 4 of the Plan.
Section 3. Approval of Trustees
This agreement has been approved by a majority vote of both
(a) the full Board of Trustees of the Fund and (b) those Trustees
who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or
this Agreement (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Agreement.
Section 4. Continuance of Agreement
This Agreement will continue in effect for a period of more
than one year from the date of its effectiveness only so long as
its continuance is specifically approved annually by vote of the
Fund's Board of Trustees in the manner described in Section 3
above.
Section 5. Termination
(a) This agreement may be terminated at any time, without
the payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of a majority of the
outstanding Level-Payment Shares on not more than 60 days'
written notice to the Distributor.
(b) This Agreement will terminate automatically in the
event of its assignment.
Section 6. Selection of Certain Trustees
While this Agreement is in effect, the selection and
nomination of the Fund's Trustees who are not interested persons
of the Fund will be committed to the discretion of the Trustees
then in office who are not interested persons of the Fund.
Section 7. Amendments
No material amendment to this Agreement may be made unless
approved by the Fund's Board of Trustees in the manner described
in Section 3 above.
Section 8. Meaning of Certain Terms
As used in this Agreement, the terms "assignment,"
"interested person" and "majority of this outstanding voting
securities" will be deemed to have the same meaning that those
terms have under the Investment Company Act of 1940, as amended
(the "Act") and the rules and regulations under the Act, subject
to any exemption that may be granted to the Fund under the Act by
the Securities and Exchange Commission.
Section 9. Dates
This Agreement has been executed by the parties as of
________, 1996 and will become effective on _______, 1996.
If the terms and conditions described above are in
accordance with your understanding, kindly indicate your
acceptance of this Agreement by signing and returning to us the
enclosed copy of this Agreement.
Very truly yours,
AQUILA CASCADIA PACIFIC EQUITY FUND
By:________________________
Richard F. West,
Treasurer
Accepted:
AQUILA DISTRIBUTORS, INC.
By:_____________________________
Lacy B. Herrmann
Secretary
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this day of , 1996,
by and between AQUILA CASCADIA PACIFIC EQUITY FUND, an
unincorporated business trust organized under the laws of
Massachusetts (the "Trust"), and ADMINISTRATIVE DATA
MANAGEMENT CORP., a corporation organized and existing under
the laws of the State of New York ("ADM").
R E C I T A L S
WHEREAS, the Trust is registered as an open-end,
diversified, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act")
currently offering one class of shares (the "Shares"); and
WHEREAS, the Trust desires to retain ADM to serve as the
Trust's transfer agent, registrar and dividend disbursing
agent, and ADM is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is agreed between the
parties hereto as follows:
1. Appointment. The Trust hereby appoints ADM to serve
as transfer agent, registrar and dividend disbursing agent
for the Trust, for the period and on the terms set forth in
this Agreement. ADM accepts such appointment and agrees to
furnish the services herein set forth in return for the
compensation as provided for in Paragraph 15 of this
Agreement.
2. Delivery of Documents. (a) The Trust has furnished
ADM with copies properly certified or authenticated of each
of the following:
(i) Resolutions of the Trust's Board of Trustees
authorizing the execution of this Agreement;
(ii) Appendix B identifying and containing the
signatures of the Trust's officers and other persons
authorized to sign Written Instructions and give Oral
Instructions, each as hereinafter defined, on behalf of the
Trust;
(iii) The Trust's Declaration of Trust filed with
the Secretary of State of the Commonwealth of Massachusetts
and all amendments thereto (such Declaration of Trust, as
presently in effect and as it shall from time to time be
amended, is herein called the "Declaration");
(iv) The Trust's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from
time to time be amended, are herein called the "By-Laws");
(v) The Trust's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act")
and under the 1940 Act as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
(vi) The Trust's most recent prospectus and
statement of additional information (such prospectus and
statement of additional information, as from time to time in
effect and all amendments and supplements thereto are herein
called the "Prospectus").
(b) ADM has furnished the Trust with copies properly
certified or authenticated its Registration Statement on Form
TA-1 under the Securities Exchange Act of 1934, as amended
and all annual or other public reports filed with the SEC as
may be requested by the Trust.
(c) Each party from time to time will furnish the
other with copies, properly certified or authenticated, of
all amendments or supplements to the foregoing, if any.
Neither party is obligated hereby to provide the other with
otherwise confidential information.
3. Definitions.
(a) "Authorized Person". As used in this Agreement,
the term "Authorized Person" means the Trust's officers and
other persons duly authorized by the Board of Trustees of the
Trust to give Oral and Written Instructions on behalf of the
Trust and listed on the Certificate annexed hereto as
Appendix B or any amendment thereto as may be received by ADM
from time to time.
(b) "Oral Instructions". As used in this Agreement,
the term "Oral Instructions" means verbal instructions
actually received by ADM from an Authorized Person or from a
person reasonably believed by ADM to be an Authorized Person.
The Trust agrees to deliver to ADM Written Instructions
confirming Oral Instructions.
(c) "Written Instructions". As used in this
Agreement, the term "Written Instructions" means written
instructions delivered by mail, telegram, cable, telex or
facsimile sending device, and received by ADM and signed by
an Authorized Person or reasonably believed by ADM to have
been signed by or authorized by an Authorized Person unless
otherwise required by a resolution of the Board of Trustees
furnished to ADM pursuant to Section 2(a) hereof.
4. Instructions Consistent with Declaration, etc.
(a) Unless otherwise provided in this Agreement, ADM
shall act only upon Oral or Written Instructions. Although
ADM may take cognizance of the provisions of the Declaration
and By-Laws of the Trust, the Trust's Prospectus and the
laws, rules and regulations applicable to the Trust, ADM may
assume that any Oral or Written Instructions received
hereunder are not in any way inconsistent with any provisions
of such Declaration or By-Laws, the Trust's Prospectus or
with any laws, rules or regulations applicable to the Trust
or any vote, resolution or proceeding of the Shareholders, or
of the Board of Trustees, or of any committee thereof.
(b) ADM shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received
by ADM pursuant to this Agreement and shall have no liability
for any action which it takes or omits in accordance with
such Oral Instructions or Written Instructions, whether
received from personnel of the Trust, its investment adviser,
its administrator, or otherwise. The Trust agrees to forward
to ADM Written Instructions confirming Oral Instructions in
such manner that the Written Instructions are received by
ADM, whether by hand delivery, telex, facsimile sending
device or otherwise, as promptly as practicable after Oral
Instructions are given to ADM. The Trust agrees that the
fact that such confirming Written Instructions are not
received by ADM shall in no way affect the validity of the
actions or transactions or enforceability of the actions or
transactions authorized by the Trust by giving Oral
Instructions.
5. Transactions Not Requiring Instructions.
(a) In the absence of contrary Written Instructions,
ADM is authorized to take and to the extent set forth in the
Activities List shall take the following actions:
(i) issuance, transfer and redemption of Shares;
(ii) opening, maintenance, servicing and closing
of accounts of Shareholders or prospective Shareholders;
(iii) acting as agent of the Trust, in connection
with plan accounts, upon the terms and subject to the
conditions contained in the application relating to the plan
account in question;
(iv) causing the reinvestment in Shareholders'
accounts of dividends and distributions declared upon shares;
(v) transferring the investment of an investor
into, or from, the shares of other open-end investment
companies, if and to the extent permitted by the Prospectus;
(vi) processing redemptions;
(vii) examining and approving legal transfers;
(viii) furnishing to Shareholders confirmations
of transactions relating to their Shares;
(ix) preparing and mailing to the Internal
Revenue Service and all payees all information returns and
payee statements required under the Internal Revenue Code in
respect to the Trust's dividends and distributions and taking
all other necessary actions in connection with the dividend
and other withholding requirements of that Code;
(x) mailing to Shareholders annual and semi-
annual reports prepared by or on behalf of the Trust, and
mailing new Prospectuses upon their issue to shareholders.
(xi) preparation and sending such other
information from the Trust records held by ADM as may be
reasonably requested by the Trust;
(xii) preparation and sending to the Trust such
affidavits of mailing and certifications as are reasonably
requested by an officer of the Trust;
(xiii) transferring stock certificates
representing shares for other stock certificates representing
such shares;
(xiv) replacing allegedly lost, stolen or
destroyed stock certificates with or without surety bonds;
and
(xv) maintaining such books and records relating
to transactions effected by ADM as are required by the 1940
Act, or by any other applicable provisions of law, to be
maintained by the Trust or its transfer agent with respect to
such transactions, and preserving, or causing to be
preserved, any such books and records for such periods as may
be required by any such law, rule or regulation.
(b) ADM agrees to act as Proxy Agent in connection
with the holding of annual or special meetings of
Shareholders, mailing to Shareholders notices, proxies and
proxy statements in connection with the holding of such
meetings, receiving and tabulating votes cast by proxy and
communicating to the Trust the results of such tabulation
accompanied by appropriate certificates, and preparing and
furnishing to the Trust certified lists of Shareholders as of
such date, and in such form and containing such information
as may be required by the Trust to comply with any applicable
provisions of law or its Declaration and/or By-Laws relating
to such meetings. ADM shall be reimbursed for out-of-pocket
expenses in performing such services, such as the costs of
forms, envelopes and postage. ADM at its cost with the
consent of the Trust may employ another firm to perform all
or some of the functions required by this subsection. The
Trust shall pay such additional charges as the parties may
agree upon for the services of the Transfer Agent in
connection with special meetings of shareholders of the Trust
in excess of one such meeting held in any fiscal year of the
Trust.
(c) ADM shall furnish to the Trust such information
and at such intervals as the Trust may reasonably request for
the Trust to comply with the normal registration and/or the
normal reporting requirements of the SEC, Blue Sky
authorities or other regulatory agencies. All such
information shall be materially correct and complete based
upon information supplied to ADM.
(d) ADM shall, in addition to the services herein
itemized, if so requested by the Trust and for such
additional fees as the Trust and ADM may from time to time
agree, perform and do all other acts and services that are
customarily performed and done by transfer agents, dividend
disbursing agents and shareholder servicing agents of open-
end mutual funds such as the Trust, provided that normally
occurring improvements in the services of such agents will be
provided without initial capital cost to the Trust and at
service fees which are competitive with those prevailing in
the industry.
(e) The parties hereto agree that without prejudice
to any other provisions of this Agreement, the functions of
ADM and the Trust under this Agreement will be substantially
performed in accordance with the Activities List set out in
Appendix A to this Agreement. Such activities List as
amended from time to time is an integral part of this
Agreement. In the event that the provisions of this
Agreement are in conflict with or are inconsistent with those
set forth in such Activity List the provisions of the
Activities List shall govern.
(f) ADM agrees to provide to the Trust upon request
such information as may reasonably be required to enable the
Trust to reconcile the number of outstanding shares of the
Trust between ADM's records and the account books of the
Trust.
6. Authorized Shares. The Trust hereby represents that
the Declaration authorizes the Board of Trustees to issue an
unlimited number of shares.
7. Dividends and Distributions. The Trust shall furnish
ADM with the amount of each daily dividend and with
appropriate evidence of action by the Trust's Board of
Trustees authorizing the daily declaration of dividends and
distributions in respect of Shares as described in the then
current Prospectus. Upon declaration of each dividend other
than daily dividends, each capital gain distribution or other
distribution by the Board of Trustees of the Trust, the Trust
shall promptly notify ADM of the date of such declaration,
the amount payable per share, the record date for determining
the shareholders entitled to payment, the payment date, and
the reinvestment date and price which is to be used to
purchase shares for reinvestment, all sufficiently in advance
to permit ADM to process properly such dividend or capital
gain distribution or other distribution in a timely and
orderly manner.
Sufficiently in advance of each payment date to permit ADM
to have federal funds available to it for the payment
thereof, the Trust will transfer, or cause the Custodian to
transfer, to ADM in its capacity as dividend disbursing
agent, at First Financial Savings Bank, S.L.A. or at such
bank or other financial institution as ADM with the consent
of the Trust shall select, which may but need not be an
affiliate of ADM, the total amount of the dividend or
distribution currently payable. After deducting any amount
reasonably believed by ADM to be required to be withheld by
any applicable tax laws, rules and regulations or other
applicable laws, rules and regulations, based upon
information available to it, ADM shall, as agent for each
Shareholder and in accordance with the provisions of the
Trust's Declaration and then current Prospectus, invest
dividends in Shares in the manner described in the Prospectus
or pay them in cash.
ADM shall prepare, file with the Internal Revenue Service,
and address and mail to shareholders such returns and
information relating to dividends and distributions paid by
the Trust as are required to be so prepared, filed and mailed
by applicable laws, rules and regulations, or such substitute
form of notice as may from time to time be permitted or
required by the Internal Revenue Service. The Trust shall
promptly provide ADM with the information necessary to
prepare such returns and information, all sufficiently in
advance to permit ADM to prepare properly and mail such
returns and information in a timely and orderly manner. On
behalf of the Trust, ADM shall pay on a timely basis to the
appropriate Federal authorities any taxes withheld on
dividends and distributions paid by the Trust.
8. Notification of ADM: The Trust shall promptly notify
ADM of the closing net asset value per share and the offering
price per share each day there are any transaction in shares
of the Trust, but in any event not later than sixty (60)
minutes after the closing of the New York Stock Exchange (if
the Trust is not a money market Trust) or before 1:00 p.m.
New York Time (if the Trust is a money market Trust.) In the
event ADM is not so notified, it may assume that the price is
unchanged from the prior price.
9. Communications with Shareholders.
(a) Communications to Shareholders. The Trust shall
prepare, print and provide ADM with sufficient quantities of
all communications by the Trust to its shareholders all
sufficiently in advance to permit ADM to properly address and
mail in a timely and orderly manner all communications by the
Trust to its Shareholders, including reports to Shareholders,
dividend and distribution notices and proxy material for its
meetings of Shareholders. ADM agrees to mail all such
material to shareholders of the Trust in a timely manner. ADM
or a firm employed by ADM will at ADM'S cost and expense
receive and tabulate the proxy cards for the meetings of the
Trust's Shareholders.
(b) Correspondence. ADM will answer such
correspondence from Shareholders, securities brokers and
others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed
upon between ADM and the Trust.
10. Records. ADM shall keep the records described on the
Activities List, including but not limited to the following:
(a) accounts for each Shareholder showing the
following information:
(i) name, address and United States Tax
Identification or Social Security number;
(ii) number of Shares held and number of Shares
for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) historical information regarding the
account of each Shareholder, including dividends and
distributions paid and the date and the price, if applicable,
for all transactions in a Shareholder's account;
(iv) any stop or restraining order placed against
a Shareholder's account;
(v) any correspondence relating to the current
maintenance of a Shareholder's account;
(vi) information with respect to withholdings in
the case of a foreign account; and
(vii) information with respect to withholding in
the case of an account subject to backup withholding;
(ix) any information required in order for ADM to
perform any calculations contemplated or required by this
Agreement.
(b) If agreed between the Trust and ADM, subaccounts
may be maintained for each Shareholder requesting such
services in connection with shares held by such Shareholder
for separate accounts containing the same information for
each subaccount as required by subparagraph (a) above.
The books and records pertaining to the Trust
which are in the possession of ADM shall be the property of
the Trust. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable
securities laws and rules and regulations in effect from time
to time. ADM will, if so requested by the counsel to the
Trust, modify the manner in which such books and records are
prepared and maintained so as to comply with the reasonable
opinion of such counsel as to such laws and rules. The
Trust, or the Trust's authorized representatives, shall have
access to such books and records at all times during ADM's
normal business hours. Upon the reasonable request of the
Trust, copies of any such books and records shall be provided
by ADM to the Trust or the Trust's authorized representative
at the Trust's expense.
11. Reports and Other Information. Upon reasonable
request of the Trust, provided that the cost or effort
required therefor are, singly or in the aggregate, not unduly
burdensome or expensive to it, ADM will promptly transmit to
the Trust, at no additional cost to the Trust, (a) documents
and information in the possession of ADM and not otherwise
available necessary to enable it and its affiliates to comply
with the requirements of the Internal Revenue Service, the
SEC, the National Association of Securities Dealers, Inc.,
state blue sky authorities, and any other regulatory bodies
having jurisdiction; (b) documents and information in the
possession of ADM necessary to enable the Trust to conduct
annual and special meetings of its shareholders; and (c) such
other information, including shareholder lists and
statistical information concerning accounts as may be agreed
upon from time to time between the Trust and ADM.
12. Cooperation with Accountants. ADM shall cooperate
with the Trust's independent public accountants and shall
take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary
information is made available on a timely basis to such
accountants for the expression of their unqualified opinion,
including but not limited to the opinion included in the
Trust's annual report to Shareholders and on Form N-SAR, or
similar form.
13. Confidentiality. ADM agrees on behalf of itself and
its employees to treat confidentially all confidential
records and other confidential information relative to the
Trust and its prior, present or potential shareholders and
relative to the Trust's Distributor and its prior, present or
potential customers. ADM will under normal circumstances not
divulge any such confidential records or information to
anyone other than the shareholder, dealer, Trust or other
person, firm, corporation or other entity which ADM
reasonably believes is entitled to such records or
information except, after prior notification to and approval
in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where ADM may
be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the
Trust.
ADM shall not be considered to have breached this
provision if it, in good faith, has provided information or
documents to an individual, firm, corporation or other entity
(governmental or otherwise) which it reasonably believes is
entitled to such information or documents; provided that it
shall, with respect to any non-routine governmental
investigation or inquiry, first provide notice thereof to the
Trust.
14. Equipment Failures. ADM shall maintain adequate and
reliable computer and other equipment necessary or
appropriate to carry out its obligations under this
Agreement. In the event of computer or other equipment
failures at its own facilities beyond ADM's reasonable
control, ADM shall, at its expense, take reasonable steps to
minimize service interruptions. The foregoing obligation of
ADM shall not extend to computer terminals owned or
maintained by others, located outside of premises maintained
by ADM. ADM represents that it has presently in effect
backup and emergency systems described on Appendix C hereto.
ADM will maintain such arrangements or equivalent while this
Agreement is in force unless ADM notifies the Trust to the
contrary and establishes to the satisfaction of the Trust
that industry standards no longer require such arrangements.
15. Compensation. As compensation for the services
rendered by ADM during the term of this Agreement, ADM shall
be entitled to receive such reimbursement for out-of-pocket
expenses and such compensation is specified on Appendix D
attached hereto or as may from time to time be otherwise
agreed on in writing between the parties.
16. Responsibility of ADM. In the performance of its
duties hereunder, ADM shall be obligated to exercise care and
diligence and to act in good faith and to use its best
efforts within reasonable limits to insure the accuracy and
completeness of all services performed under this Agreement.
ADM and the affiliates and agents of ADM shall not be
responsible for or liable for any taxes, assessments,
penalties, fines or other governmental charges of whatever
description which may be levied or assessed on any basis
whatsoever in connection with withholding of amounts,
verifying or providing taxpayer identification numbers or
otherwise under applicable tax laws and preparing and filing
of tax forms, excepting only for taxes assessed on the basis
of its compensation hereunder, provided that ADM exercises
the care and diligence required by this Agreement, and in the
case of its responsibilities for backup withholding,
verifying or providing taxpayer identification numbers or
otherwise, as to any shareholder from whom such withholding
is required, it withholds the necessary amount and attempts
with reasonable frequency, but no less often than once a
calendar quarter, to obtain the necessary information from
the shareholder until withholding is no longer required.
ADM and the affiliates and agents of ADM shall not be
responsible or liable for the actions, inactions, or any
losses or damages caused by any such actions or inactions of
any agents, brokers or others who are specifically selected
by the Trust in writing.
17. Release. ADM understands that the obligations of
this Agreement are not binding upon any Shareholder of the
Trust personally, but bind only the Trust's property; ADM
represents that it has notice of the provisions of the
Trust's Declaration disclaiming Shareholder liability for
acts or obligations of the Trust.
The Trust understands that the obligations of this
Agreement are not binding upon the parent corporation of ADM
or any affiliates or subsidiaries of ADM and that the Trust,
its Directors, Trustees, Officers, Shareholders and others
shall look only to the separate assets of ADM.
18. Right to Receive Advice. (a) Advice of Trust. If ADM
shall be in doubt as to any action to be taken or omitted by
it, it may request, and shall receive, from the Trust
directions or advice, including Oral or Written Instructions
where appropriate.
(b) Advice of Counsel. If ADM shall be in doubt as
to any question of law involved in any action to be taken or
omitted by ADM, it may request advice without cost to itself
from counsel of its own choosing (who may be counsel for the
Adviser, the Trust or ADM, at the option of ADM).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received
by ADM pursuant to subparagraph (a) of this paragraph and
advice received by ADM pursuant to subparagraph (b) of this
paragraph, ADM shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of ADM. ADM shall be fully protected
in any action or inaction which it takes in reliance on the
provisions of the Trust's Prospectus, procedures established
between ADM and the Trust, or in reliance on any directions,
advice or Oral or Written Instructions received pursuant to
subparagraph (a) or (b) of this paragraph which ADM, after
receipt of any such directions, advice or Oral or Written
Instructions, in good faith believes to be consistent with
such directions, advice or Oral or Written Instructions, as
the case may be. However, nothing in this paragraph shall be
construed as imposing upon ADM any obligation (i) to seek
such directions, advice or Oral or Written Instructions, or
(ii) to act in accordance with such directions, advice or
Oral or Written Instructions when received, unless, under the
terms of another provision of this Agreement, the same is a
condition to ADM's properly taking or omitting to take such
action.
19. Compliance with Governmental Rules and Regulations.
ADM shall have no responsibility for insuring that the
contents of each Prospectus of the Trust complies with all
applicable requirements of the 1933 Act, the 1940 Act, and
any laws, rules and regulations of governmental authorities
having jurisdiction, except that ADM shall cause a senior
officer of ADM, who shall be its General Counsel unless
otherwise agreed upon, or his designee to provide such
information and represents and warrants that all information
so furnished by it for specific use in any such Prospectus
will be correct and complete in all material respects.
20. Records From Others: ADM, its affiliates and agents
shall have no responsibility or liability for the accuracy or
completeness of any documents, records, or information
maintained or provided by or reasonably believed by ADM to
have been maintained or provided by any prior transfer agent,
any shareholder or dealer, or by the Trust or anyone on
behalf of the Trust and the Trust hereby specifically agrees
that ADM, its affiliates and agents may rely on and will be
fully protected in so relying on the completeness and
accuracy of all such documents, records and information;
provided, that ADM will inform the Trust of material errors
coming to its attention in the course of the performance of
its duties hereunder.
ADM, its affiliates and agents may conclusively rely on,
and will be fully protected in relying on, the authenticity
and accuracy of any documents or communications, whether
oral, written or facsimile, it receives from the Trust or
which ADM, its affiliates or agents reasonably believes are
from the Trust, provided these are received from Authorized
Persons in accordance with this Agreement. This provision
will apply to, among other things, the daily public offering
and net asset value prices for Trust shares; instructions
from the Trust concerning dividends and other distributions;
and other matters relating to the Trust and its shareholders.
21. Responsibilities of the Trust: The Trust and the
Agents of the Trust hereby acknowledge and agree that ADM,
its affiliates and its agents are responsible only for those
functions and duties set forth in this Agreement and unless
so set forth are not responsible for any of the following
which are to be handled by the Trust:
(a) creating or maintaining any records on behalf of the
Trust or others required by any federal or state law,
or regulation or rule of any agency thereof or any
self-regulatory authority except (i) those relating
to shareholder account information set forth in Rule
31a-1(b)(2)(iv) promulgated under the 1940 Act or
equivalent regulation applicable from time to time;
and (ii) such additional records as may reasonably be
requested from time to time by the Trust which are
customarily maintained by transfer agents to mutual
funds, and which ADM by use of its best efforts may
provide at minimal cost and inconvenience to it; with
respect to these records ADM agrees that they: (i)
are the property of the Trust; (ii) will be
maintained by ADM for the period prescribed in Rule
31a-2 or equivalent regulation; (iii) will be made
available, upon request to the Trust and the SEC; and
(iv) will be surrendered promptly upon the request of
the Trust;
(b) determining the legality of any sale, exchange,
issuance or redemption of any shares of the Trust;
(c) determining the legality of any communications, oral
or written, which is sent or provided by ADM, its
affiliates or its agents on behalf of the Trust;
(d) complying with any federal or state laws or the
regulations or rules of any agency thereof or of any
self-regulatory authority except those specifically
applicable to ADM as a transfer agent;
(e) filing any documents on behalf of the Trust or any
one else with any federal or state government or with
any agency thereof or of any self-regulatory
authority except ADM will file with the Internal
Revenue Service copies of 1099 Div, 1099R and 1099B
Forms sent to shareholders of the Trust and forms
relating to withholding and non-resident alien
withholding;
(f) monitoring the activities of the Trust or any one
else or their compliance with applicable law, rules
and regulations or with the provisions of the Trust's
Prospectus, of Trust, By-Laws or other governing
instruments; or
(g) compliance of the Trust or others with applicable
federal and state laws, regulations and rules of any
agency thereof, or of any self-regulatory authority
pertaining to the registration of the Trust or of
shares of the Trust or the legality of their sale
although ADM will, in order to provide the Trust with
assistance in complying with normal Blue Sky
requirements, upon the reasonable request of the
Trust provide the Trust with a report generated from
the information readily available to ADM detailing
the amount of shares of the Trust purchased and
redeemed and the states of residence of the
shareholders purchasing or redeeming such shares.
22. Information and Documents: (a) The Trust shall
promptly provide ADM with the current Prospectus for the
Trust, the Annual and Semi-Annual Reports to shareholders of
the Trust, Proxy Statement and other Trust material, all in
sufficient quantities and sufficiently in advance to permit
ADM to provide them to shareholders of the Trust in a timely
and orderly fashion.
(b) To the extent necessary or appropriate to enable ADM
to carry out its responsibilities under this Agreement, the
Trust shall
(i) promptly notify ADM of all material events which
affect the Trust or any affiliate of the Trust;
(ii) promptly notify ADM of any suits or other
proceedings threatened or actually instituted
against the Trust or any affiliate of the Trust
by the federal government, any state government,
or any agency thereof (including but not limited
to the SEC, the Securities Commission of any
state) or by the National Association of
Securities Dealers, Inc., or any other self-
regulatory authority;
(iii) promptly notify ADM of any consent order, stop
orders or similar orders affecting the Trust or
any affiliate of the Trust issued by the federal
government, any state government, or any agency
thereof (including but not limited to the SEC,
the Securities Commission of any state) or by
the National Association of Securities Dealers,
Inc. or any other self-regulatory authority;
(iv) promptly provide ADM, with copies of the audited
Annual Financial Statements for each affiliate
of the Trust which is an Investment Advisor,
Investment Sub-Advisor, Distributor or
Administrator of the Trust;
(v) promptly provide ADM, upon request, with copies
of any filings made by the Trust or any
affiliate of the Trust which is an Investment
Advisor, Investment Sub-Advisor, Distributor or
Administrator of the Trust with the federal
government or any state government or any agency
thereof or with any self-regulatory authority;
and
(vi) promptly provide ADM, upon request, with copies
of any documents relating to items (ii) and
(iii) above.
(vii) discuss with ADM changes in the description of
ADM and the services which ADM provides to
shareholders contained in the Prospectus of the
Trust at the time of filing any amendments to
the registration statement of the Trust
involving any such change. ADM shall use its
best efforts to assure the accuracy and
completeness of all material information
furnished by it for inclusion in any such
document.
23. Indemnification. Neither party nor any of its
nominees shall be indemnified against any liability to the
other party (or any expenses incident to such liability)
arising solely out of (a) such party's or such nominee's own
willful misfeasance, bad faith or gross negligence or
reckless disregard of its duties in connection with the
performance of any duties, obligations or responsibilities
provided for in this Agreement or (b) such party's or such
nominee's own negligent failure to perform its duties
expressly provided for in this Agreement or otherwise agreed
to in writing.
24. Liability. (a) ADM shall be responsible for the
performance of its obligations under this Agreement
notwithstanding the delegation of some or all of such
obligations to others in accordance with the terms of this
Agreement.
(b) ADM shall not be responsible for loss, liability
cost or expense arising out of occurrences beyond its control
caused by fire, flood, power failure, unanticipated equipment
failure, acts of God, or war or civil insurrection; provided,
however, that it shall have contingency planning for
equipment or electrical failure and such other contingencies
as provided in this Agreement.
25. Insurance. ADM shall maintain fidelity, errors and
omissions and other insurance coverage in amounts and on
terms and conditions as set forth in information provided to
the Trust from time to time.
26. Advancement of Monies: Nothing in this Agreement
shall require ADM or any affiliate or agent of ADM to pay any
monies prior to its receipt of federal funds for such payment
or for ADM or any of its affiliates or agents to incur or
assume any liability for the payment of any such monies prior
to its receipt of federal funds for such payment.
27. Exclusivity. It is expressly understood and agreed
that the services to be rendered by ADM to the Trust under
the provisions of this Transfer Agency Agreement are not
deemed to be exclusive and ADM shall be free to render
similar or different services to others.
28. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are
reasonably necessary to effectuate the purposes hereof.
29. Amendments. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by
the party against which enforcement of such change or waiver
is sought.
30. Assignment. This Agreement and the performance
hereunder may not be assigned by ADM without the Trust's
written consent. Not withstanding the previous sentence, ADM
may, without the Trust's consent, assign the performance of
all or a portion of its responsibilities and duties hereunder
to an affiliate of ADM, provided that the Trust shall incur
no additional cost or expense in connection therewith.
31. Declaration and Termination. This Agreement shall
continue until termination by the Trust on sixty (60) days'
written notice or by ADM on sixty (60) days' written notice.
32. Notices. All notices and other communications,
including Written Instructions (collectively referred to as
"Notice" or "Notices" in this paragraph), hereunder shall be
in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed;
(a) if to ADM at:
Administrative Data Management Corp.
10 Woodbridge Center Drive
Woodbridge, New Jersey 07095-1198
Attn: Ms. Anne Condon, Vice President
or to such other address as ADM shall instruct the Trust, in
writing, from time to time;
(b) if to the Trust at:
Aquila Cascadia Pacific Equity Fund
380 Madison Avenue, Suite 2300
New York, New York 10017
Attention: President
or to such other address as the Trust shall instruct ADM, in
writing, from time to time; or
(c) if to neither of the foregoing, at such other address
as shall have been notified to the sender of any such Notice
or other communication.
33. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and
supersedes all prior agreements and understandings relating
to the subject matter hereof, provided that the parties
hereto may embody in one or more separate documents their
agreement, if any, with respect to Oral Instructions. The
captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made
in New York and governed by New York law. If any provision
of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. None of the
provisions contained in this Agreement shall be deemed waived
or modified because of a previous failure of a party to
insist upon strict performance thereof. This Agreement shall
be binding and shall inure to the benefit of the parties
hereto and their respective successors.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below
on the day and year first above written.
AQUILA CASCADIA PACIFIC
EQUITY FUND
Attest: ______________________ By:______________________
ADMINISTRATIVE DATA
MANAGEMENT CORP.
Attest: ______________________ By:_____________________
<PAGE>
APPENDIX B
AQUILA CASCADIA PACIFIC EQUITY FUND
Signatures
On the date of the Agreement and thereafter until
further notice, the following persons shall be Authorized
Persons as defined therein:
Lacy B. Herrmann ______________________
Chairman of the Board of Trustees Lacy B. Herrmann
Diana P. Herrmann ______________________
Vice President Diana P. Herrmann
Charles E. Childs, III ______________________
Vice President Charles E. Childs, III
John M. Herndon ______________________
Vice President John M. Herndon
Rose F. Marotta ______________________
Treasurer Rose F. Marotta
[Thomas M. Reynolds ______________________
Assistant Treasurer] Thomas M. Reynolds
[Patricia A. Craven ______________________
Assistant Secretary] Patricia A. Craven
<PAGE>
APPENDIX C
Backup Arrangement
ADM currently has in effect a redundancy arrangement with
Comdisco Disaster Recovery Services, Inc. The agreement with
Comdisco provides that in the event of a data processing
systems disaster at ADM's facilities in Woodbridge, New
Jersey, ADM may use equipment available at Comdisco's
facilities for routine and other processing. The agreement
with Comdisco also provides for dedicated time on Comdisco's
data processing equipment each year to allow ADM to test the
redundancy system.
<PAGE>
APPENDIX D
Compensation
In accordance with the provisions of Section 15 of the
attached Agreement, the Trust shall pay ADM the monthly
amount of $1.25 for each account in the Trust open at any
time during the month. The minimum amount of compensation
for each month shall be $500.00
In addition to the above charges, the Trust shall pay or
reimburse ADM for out-of pocket expenses, including but not
limited to: postage; forms relating to the Trust or
shareholders of the Trust; envelopes; paper; bank charges;
costs relating to the production of special reports for the
Trust, its distributor, or otherwise; and similar expenses.
The Trust will also reimburse ADM for counsel fees in
accordance with the Agreement.
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
551 Fifth Avenue
New York, NY 10176
Tel: (212) 818-1110
FAX: (212) 818-0494
e-mail: [email protected]
April 19, 1996
Aquila Cascadia Pacific Equity Fund
380 Madison Avenue, Suite 2300
New York, New York 10017
Ladies and Gentlemen:
You have requested that we render an opinion to Aquila
Cascadia Pacific Equity Fund (the "Fund"), which was formerly
named Short Term Asset Reserves, with respect post-effective
amendment No. 10 (the "Amendment") to the Registration Statement
of the Fund under the Securities Act of 1933 (the "1933 Act") and
No. 15 under the Investment Company Act of 1940 (the "1940 Act")
which you propose to file with the Securities and Exchange
Commission (the "Commission"). The purpose of the Amendment is to
redesignate existing shares of the Fund as Front-Payment Class
Shares ("Class A Shares") and to designate two new classes of
shares to be offered by the Fund as Level-Payment Class Shares
("Class C Shares") and Institutional Class Shares ("Class Y
Shares").
We have examined originals or copies, identified to our
satisfaction as being true copies, of those corporate records of
the Fund, certificates of public officials, and other documents
and matters as we have deemed necessary for the purpose of this
opinion. We have assumed without independent verification the
authenticity of the documents submitted to us as originals and
the conformity to the original documents of all documents
submitted to us as copies.
Upon the basis of the foregoing and in reliance upon such
other matters as we deem relevant under the circumstances, it is
our opinion that the Class A Shares, Class C Shares and Class Y
Shares of the Fund as described in the Amendment, when issued and
paid for in accordance with the terms set forth in the prospectus
and statement of additional information of the Fund forming a
part of its then effective Registration Statement as heretofore,
herewith and hereafter amended, will be duly issued, fully-paid
and non-assessable to the extent set forth therein.
This letter is furnished to you pursuant to your request and
to the requirements imposed upon you under the 1933 Act and 1940
Act and is intended solely for your use for the purpose of
completing the filing of the Amendment with the Commission. This
letter may not be used for any other purpose or furnished to or
relied upon by any other persons, or included in any filing made
with any other regulatory authority, without our prior written
consent.
We hereby consent to the filing of this opinion with the
Amendment.
Very truly yours,
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
/s/ W. L. D. Barrett
By:_________________________________
W. L. D. Barrett
Dated: , 1996
AQUILA CASCADIA PACIFIC EQUITY FUND
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is the written plan,
contemplated by Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act"), of Aquila Cascadia Pacific
Equity Fund (the "Fund"). Part I of the Plan applies solely to
the Front-Payment Class ("Class A") of shares of the Fund, Part
II solely to the Level-Payment Class ("Class C") and Part III to
all classes.
2. Disinterested Trustees. While any Part of this Plan is in
effect, the selection and nomination of those Trustees of the
Fund who are not "interested persons" of the Fund shall be
committed to the discretion of such disinterested Trustees.
Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
Part I
Payments Involving Fund Assets Allocated to Front-Payment Shares
3. Applicability. This Part I of the Plan applies only to the
Front-Payment Class ("Class A") of shares of the Fund (regardless
of whether such class is so designated or is redesignated by some
other name).
4. Definitions for Part I. As used in this Part I of the Plan,
"Qualified Recipients" shall mean broker-dealers or others
selected by Aquila Distributors, Inc. (the "Distributor"),
including but not limited to any principal underwriter of the
Fund, with which the Fund or the Distributor has entered into
written agreements in connection with this Part I ("Class A Plan
Agreements") and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Fund's Front-Payment Shares or servicing of shareholder
accounts with respect to such shares. "Qualified Holdings" shall
mean, as to any Qualified Recipient, all Front-Payment 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 sole judgment of the Distributor,
instrumental in the purchase and/or retention of such shares
and/or in providing administrative assistance or other services
in relation thereto. "Administrator" shall mean Aquila
Management Corporation or any successor serving as sub-adviser or
administrator of the Fund.
5. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Class A Permitted Payments") to Qualified Recipients,
which Class A Permitted Payments may be made directly, or through
the Distributor or shareholder servicing agent as disbursing
agent, which may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under the Plan are not accruable or for any fiscal year
which is not a full fiscal year) 0.25 of 1% of the average annual
net assets of the Fund represented by the Front-Payment Class of
shares. Such payments shall be made only out of the Fund assets
allocable to the Front-Payment Shares. The Distributor shall
have sole authority (i) as to the selection of any Qualified
Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) the amount of Class A Permitted Payments, if
any, to each Qualified Recipient provided that the total Class A
Permitted Payments to all Qualified Recipients do not exceed the
amount set forth above. The Distributor is authorized, but not
directed, to take into account, in addition to any other factors
deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient; (b) the extent to
which the Qualified Recipient has, at its expense, taken steps in
the shareholder servicing area with respect to holders of Front-
Payment Shares, including without limitation, any or all of the
following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Fund may be effected; assisting
shareholders in designating and changing dividend options,
account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; 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. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
6. Reports. While this Part I is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Class A Permitted Payments made under Section 5 of the
Plan, the identity of the Qualified Recipient of each payment,
and the purposes for which the amounts were expended; and (ii)
all fees of the Fund to the Distributor paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Fund, the Adviser, the Administrator or the Distributor, such
person shall agree to furnish to the Distributor for transmission
to the Board of Trustees of the Fund an accounting, in form and
detail satisfactory to the Board of Trustees, to enable the Board
of Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
7. Effectiveness, Continuation, Termination and Amendment. To
the extent required by the 1940 Act, this Part I of the Plan has
been approved (i) by a vote of the Trustees, including those
Trustees (the "Independent Trustees") who, at the time of such
vote, were not "interested persons" (as defined in the 1940 Act)
of the Fund and had no direct or indirect financial interest in
the operation of this Plan or in any agreements related to this
Plan, with votes cast in person at a meeting called for the
purpose of voting on Part I of the Plan; and (ii) by a vote of
holders of at least a "majority" (as defined in the 1940 Act) of
the outstanding voting securities of the Front-Payment Class (or
of any predecessor class or category of shares, whether or not
designated as a class) and a vote of holders of at least a
"majority" (as so defined) of the outstanding voting securities
of the Level-Payment Class and/or of any other class whose shares
are convertible into Front-Payment Shares. This Part I is
effective as of the date first above written and will, unless
terminated as hereinafter provided, continue in effect until June
30 of each year only so long as such continuance is specifically
approved at least annually by the Fund's Trustees and its
Independent Trustees with votes cast in person at a meeting
called for the purpose of voting on such continuance. This Part
I may be terminated at any time by the vote of a majority of the
Independent Trustees or by shareholder approval of the class or
classes of shares affected by this Part I as set forth in (ii)
above. This Part I may not be amended to increase materially the
amount of payments to be made without shareholder approval of the
class or classes of shares affected by this Part I as set forth
in (ii) above, and all amendments must be approved in the manner
set forth in (i) above.
8. Class A Plan Agreements. In the case of a Qualified
Recipient which is a principal underwriter of the Fund, the Class
A Plan Agreement shall be the agreement contemplated by Section
15(b) of the 1940 Act since each such agreement must be approved
in accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Class A Plan Agreements
with them shall be their agreements with the Distributor with
respect to payments under this Part I, provided, however, that
"Related Agreements" entered into under the distribution plan of
the Fund in effect prior to the effective date of this Part I and
not terminated at or prior to such effective date are deemed to
be "Class A Plan Agreements" for purposes of this Part I and
that, as and to the extent necessary to give effect to this
proviso, defined terms used in such agreements shall be deemed to
have the meanings assigned to their appropriate counterparts in
this Part I and the provisions of such agreements, which shall
otherwise remain in full force and effect, are deemed to be
appropriately modified.
Part II
Payments Involving Fund Assets Allocated to Level-Payment Shares
9. Applicability. This Part II of the Plan applies only to the
Level-Payment Class ("Class C") of shares of the Fund (regardless
of whether such class is so designated or is redesignated by some
other name).
10. Definitions for Part II. As used in this Part II of the
Plan, "Qualified Recipients" shall mean broker-dealers or others
selected by Aquila Distributors, Inc. (the "Distributor"),
including but not limited to any principal underwriter of the
Fund, with which the Fund or the Distributor has entered into
written agreements in connection with this Part II ("Class C Plan
Agreements") and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Fund's Level-Payment Shares or servicing of shareholder
accounts with respect to such shares. "Qualified Holdings" shall
mean, as to any Qualified Recipient, all Level-Payment 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 sole judgment of the Distributor,
instrumental in the purchase and/or retention of such shares
and/or in providing administrative assistance or other services
in relation thereto. "Administrator" shall mean Aquila Management
Corporation or any successor serving as sub-adviser or
administrator of the Fund.
11. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Class C Permitted Payments") to Qualified Recipients,
which Class C Permitted Payments may be made directly, or through
the Distributor or shareholder servicing agent as disbursing
agent, which may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under the Plan are not accruable or for any fiscal year
which is not a full fiscal year) 0.75 of 1% of the average annual
net assets of the Fund represented by the Level-Payment Class of
shares. Such payments shall be made only out of the Fund assets
allocable to the Level-Payment Shares. The Distributor shall
have sole authority (i) as to the selection of any Qualified
Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) the amount of Class C Permitted Payments, if
any, to each Qualified Recipient provided that the total Class C
Permitted Payments to all Qualified Recipients do not exceed the
amount set forth above. The Distributor is authorized, but not
directed, to take into account, in addition to any other factors
deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient; (b) the extent to
which the Qualified Recipient has, at its expense, taken steps in
the shareholder servicing area with respect to holders of Level-
Payment Shares, including without limitation, any or all of the
following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Fund may be effected; assisting
shareholders in designating and changing dividend options,
account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; 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. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
12. Reports. While this Part II is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Class C Permitted Payments made under Section 11 of the
Plan, the identity of the Qualified Recipient of each payment,
and the purposes for which the amounts were expended; and (ii)
all fees of the Fund to the Distributor paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Fund, the Adviser, the Administrator or the Distributor, such
person shall agree to furnish to the Distributor for transmission
to the Board of Trustees of the Fund an accounting, in form and
detail satisfactory to the Board of Trustees, to enable the Board
of Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
13. Effectiveness, Continuation, Termination and Amendment.
This Part II has been approved (i) by a vote of the Trustees,
including the Independent Trustees, with votes cast in person at
a meeting called for the purpose of voting on Part II of the
Plan; and (ii) by a vote of holders of at least a "majority" (as
defined in the 1940 Act) of the outstanding voting securities of
the Level-Payment Class. This Part II is effective as of the
date first above written and will, unless terminated as
hereinafter provided, continue in effect until June 30 of each
year only so long as such continuance is specifically approved at
least annually by the Fund's Trustees and its Independent
Trustees with votes cast in person at a meeting called for the
purpose of voting on such continuance. This Part II 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 Level-Payment Class. This Part II may not be
amended to increase materially the amount of payments to be made
without shareholder approval of the class or classes of shares
affected by this Part II as set forth in (ii) above, and all
amendments must be approved in the manner set forth in (i) above.
14. Class C Plan Agreements. In the case of a Qualified
Recipient which is a principal underwriter of the Fund, the Class
C Plan Agreement shall be the agreement contemplated by Section
15(b) of the 1940 Act since each such agreement must be approved
in accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Class C Plan Agreements
with them shall be their agreements with the Distributor with
respect to payments under this Part II, provided, however, that
"Related Agreements" entered into under the distribution plan of
the Fund in effect prior to the effective date of this Part II
and not terminated at or prior to such effective date are deemed
to be "Class C Plan Agreements" for purposes of this Part II and
that, as and to the extent necessary to give effect to this
proviso, defined terms used in such agreements shall be deemed to
have the meanings assigned to their appropriate counterparts in
this Part II and the provisions of such agreements, which shall
otherwise remain in full force and effect, are deemed to be
appropriately modified.
Part III
Defensive Provisions
15. Certain Payments Permitted. Whenever the Administrator of
the Fund (i) makes any payment directly or through the Fund's
Distributor for additional compensation to dealers in connection
with sales of shares of the Fund, which additional compensation
may include payment or partial payment for advertising of the
Fund's shares, payment of travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to locations within
or outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences, or other items described in the Fund's
prospectus, in amounts that will not exceed the amount of the
sales charges in respect of sales of shares of the Fund effected
through such participating dealers whether retained by the
Distributor or reallowed to participating dealers, or (ii) bears
the costs, not borne by the Distributor, of printing and
distributing all copies of the Fund's prospectuses, statements of
additional information and reports to shareholders which are not
sent to the Fund's shareholders, or the costs of supplemental
sales literature and advertising, such payments are authorized.
It is recognized that, in view of the bearing by the
Administrator of certain distribution expenses, the profits, if
any, of the Administrator are dependent primarily on the
administration fees paid by the Fund to the Administrator and
that its profits, if any, would be less, or losses, if any, would
be increased due to the bearing by it of such expenses. If and to
the extent that any such administration fees paid by the Fund
might, in view of the foregoing, be considered as indirectly
financing any activity which is primarily intended to result in
the sale of shares issued by the Fund, the payment of such fees
is authorized by the Plan.
16. Certain Fund Payments Authorized. 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 the Rule, such payments are authorized
under this Plan: (i) the costs of the preparation of all reports
and notices to shareholders and the costs of printing and mailing
such reports and notices to existing shareholders, irrespective
of whether such reports or notices contain or are accompanied by
material intended to result in the sale of shares of the Fund or
other funds or other investments; (ii) the costs of the
preparation and setting in type of all prospectuses and
statements of additional information, and the costs of printing
and mailing of all prospectuses and statements of additional
information to existing shareholders; (iii) the costs of the
preparation, printing and mailing of all proxy statements and
proxies, irrespective of whether any such proxy statement
includes any item relating to, or directed toward, the sale of
the Fund's shares; (iv) all legal and accounting fees relating to
the preparation of any such reports, prospectuses, statements of
additional information, proxies and proxy statements; (v) all
fees and expenses relating to the registration or qualification
of the Fund and/or its shares under the securities or "Blue-Sky"
laws of any jurisdiction; (vi) all fees under the Securities Act
of 1933 and the 1940 Act, including fees in connection with any
application for exemption relating to or directed toward the sale
of the Fund's shares; (vii) all fees and assessments of the
Investment Company Institute or any successor organization,
irrespective of whether some of its activities are designed to
provide sales assistance; (viii) all costs of the preparation and
mailing of confirmations of shares sold or redeemed or share
certificates, and reports of share balances; and (ix) all costs
of responding to telephone or mail inquiries of investors.
17. Reports. While Part III of this Plan is in effect, the
Fund's adviser, Administrator or Distributor shall report at
least quarterly to the Fund's Trustees in writing for their
review on the following matters: (i) all payments made under
Section 15 of this Plan; (ii) all costs of each item specified in
Section 16 of this Plan (making estimates of such costs where
necessary or desirable) during the preceding calendar or fiscal
quarter; and (iii) all fees of the Fund to the Distributor,
adviser or Administrator paid or accrued during such quarter.
18. Effectiveness, Continuation, Termination and Amendment. To
the extent required by the 1940 Act, this Part III of the Plan
has, with respect to each class of shares outstanding, been
approved (i) 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 this Plan; and (ii) by a vote
of holders of at least a "majority" (as defined in the 1940 Act)
of the outstanding voting securities of such class and a vote of
holders of at least a "majority" (as so defined) of the
outstanding voting securities of any class whose shares are
convertible into shares of such class. This Part III is
effective as of the date first above written and will, unless
terminated as hereinafter provided, continue in effect with
respect to each class of shares to which it applies until June 30
of each year only so long as such continuance is specifically
approved with respect to that class at least annually by the
Fund's Trustees and its Independent Trustees with votes cast in
person at a meeting called for the purpose of voting on such
continuance. This Part III of the Plan may be terminated at any
time with respect to a given class 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 that class. This Part III may not be amended to
increase materially the amount of payments to be made without
shareholder approval as set forth in (ii) above, and all
amendments must be approved in the manner set forth in (i) above.
--------------------------
19. Additional Terms and Conditions. This Plan and each Part of
it shall also be subject to all applicable terms and conditions
of Rule 18f-3 under the Act as now in force or hereafter amended.
Specifically, but without limitation, the provisions of Part III
shall be deemed to be severable, within the meaning of and to the
extent required by Rule 18f-3, with respect to each outstanding
class of shares of the Fund.
Dated: _____________ , 1996
AQUILA CASCADIA PACIFIC EQUITY FUND
SHAREHOLDER SERVICES PLAN
1. The Plan. This Shareholder Services Plan (the "Plan") is the
written plan of AQUILA CASCADIA PACIFIC EQUITY FUND (the "Fund")
adopted to provide for the payment by the Level-Payment Class of
shares of the Fund of ""service fees" within the meaning of
Article III, Section 26(b)(9) of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. This Plan
applies only to the Level-Payment Class ("Class C") of shares of
the Fund (regardless of whether such class is so designated or is
redesignated by some other name).
2. Definitions. As used in this Plan, "Qualified Recipients"
shall mean broker-dealers or others selected by Aquila
Distributors, Inc. (the "Distributor"), including but not limited
to the Distributor and any other principal underwriter of the
Fund, who have, pursuant to written agreements with the Fund or
the Distributor, agreed to provide personal services to Level-
Payment shareholders and/or maintenance of Level-Payment
shareholder accounts. "Qualified Holdings" shall mean, as to any
Qualified Recipient, all Level-Payment Shares beneficially owned
by such Qualified Recipient's customers, clients or other
contacts. "Administrator" shall mean Aquila Management
Corporation or any successor serving as sub-adviser or
administrator of the Fund.
3. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Service Fees") to Qualified Recipients, which Service
Fees (i) may be paid directly or through the Distributor or
shareholder servicing agent as disbursing agent and (ii) may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under the Plan
are not accruable or for any fiscal year which is not a full
fiscal year) 0.25 of 1% of the average annual net assets of the
Fund represented by the Level-Payment Class of shares. Such
payments shall be made only out of the Fund assets allocable to
the Level-Payment Shares. The Distributor shall have sole
authority with respect to the selection of any Qualified
Recipient or Recipients and the amount of Service Fees, if any,
paid to each Qualified Recipient, provided that the total Service
Fees paid to all Qualified Recipients may not exceed the amount
set forth above and provided, further, that no Qualified
Recipient may receive more than 0.25 of 1% of the average annual
net asset value of shares sold by such Recipient. The
Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient and (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Level-Payment Shares,
including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving
funds in connection with customer orders to purchase or redeem
shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; and providing such other related
services as the Distributor or a shareholder may request from
time to time. Notwithstanding the foregoing two sentences, a
majority of the Independent Trustees (as defined below) may
remove any person as a Qualified Recipient. Amounts within the
above limits accrued to a Qualified Recipient but not paid during
a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference
will not be carried over to subsequent years.
4. Reports. While this Plan is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Service Fees paid under the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which
the amounts were expended; and (ii) all fees of the Fund to the
Distributor paid or accrued during such quarter. In addition, if
any Qualified Recipient is an "affiliated person," as that term
is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), of the Fund, the Adviser, the Administrator or the
Distributor, such person shall agree to furnish to the
Distributor for transmission to the Board of Trustees of the Fund
an accounting, in form and detail satisfactory to the Board of
Trustees, to enable the Board of Trustees to make the
determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
5. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved by a vote of the Trustees, including those
Trustees who, at the time of such vote, were not "interested
persons" (as defined in the 1940 Act) of the Fund and had no
direct or indirect financial interest in the operation of this
Plan or in any agreements related to this Plan (the "Independent
Trustees"), with votes cast in person at a meeting called for the
purpose of voting on this Plan. It is effective as of the date
first above written and will continue in effect for a period of
more than one year from such date only so long as such
continuance is specifically approved at least annually as set
forth in the preceding sentence. It may be amended in like
manner and may be terminated at any time by vote of the
Independent Trustees.
6. Additional Terms and Conditions. (a) This Plan shall also be
subject to all applicable terms and conditions of Rule 18f-3
under the Act as now in force or hereafter amended.
(b) While this Plan is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of
the Fund, as that term is defined in the 1940 Act, shall be
committed to the discretion of such disinterested Trustees.
Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000750913
<NAME> SHORT TERM ASSET RESERVES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 1001
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1001
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1001
<SHARES-COMMON-STOCK> 1001
<SHARES-COMMON-PRIOR> 1001
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1001
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 1001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[DRAFT 3/20/96]
AQUILA CASCADIA PACIFIC EQUITY FUND
Rule 18f-3
Multiple Class Plan
AQUILA CASCADIA PACIFIC EQUITY FUND (the "Fund"), has
elected to rely on Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), in offering multiple classes
of shares with differing distribution arrangements, voting rights
and expense allocations.
Pursuant to Rule 18f-3, the Board of Trustees of the
Fund has approved and adopted this written plan (the "Plan")
specifying all of the differences among the classes of shares to
be offered by the Fund. Prior to such offering, the Plan will be
filed as an exhibit to the Fund's registration statement. The
Plan sets forth the differences among the classes, including
shareholder services, distribution arrangements, expense
allocations, and conversion or exchange options.
I. Attributes of Share Classes
This section discusses the attributes of the various classes
of shares. Each share of the Fund represents an equal pro rata
interest in the Fund and has identical voting rights, powers,
qualifications, terms and conditions, and in proportion to each
share's net asset value, liquidation rights and preferences.
Each class differs in that: (a) each class has a different class
designation; (b) only the Front-Payment Shares are subject to a
front-end sales charge ("FESC"); (c) only the Level-Payment
Shares are subject to a contingent deferred sales charge
("CDSC"); (d) only the Front-Payment Shares and Level-Payment
Shares (as described below) are subject to distribution fees
under a plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), the distribution fee for the Level-Payment
Class being higher than that for the Front-Payment Class; (e)
only the Level-Payment Shares are subject to a shareholder
servicing fee under a non-Rule 12b-1 shareholder services plan (a
"Shareholder Services Plan"); (f) to the extent that one class
alone is affected by a matter submitted to a vote of the
shareholders, then only that class has voting power on the
matter, provided, however, that any class whose shares convert
automatically to shares of another class also votes separately
with respect to class-specific Rule 12b-1 matters applying to the
latter class; (g) the expenses attributable to a specific class
("Class Expenses")* are borne only by shares of that class on a
pro-rata basis; and (h) exchange privileges may vary among the
classes.
* Class Expenses are limited to (i) transfer agency fees;
(ii) preparation and mailing expenses for shareholder
communications required by law, sent to current shareholders
of a class; (iii) state Blue Sky registration fees; (iv)
Securities and Exchange Commission ("SEC") registration
fees; (v) trustees' fees; (vi) expenses incurred for
periodic meetings of trustees or shareholders; and (vii)
legal and accounting fees, other than fees for income tax
return preparation or income tax advice.
A. Front-Payment Shares
Front-Payment Shares are sold to (1) retail customers
and (2) persons entitled to exchange into Front-Payment
Shares under the exchange privileges of the Fund. Shares of
the Fund outstanding on the date that the three classes of
shares are first made available will be redesignated Front-
Payment Shares. Front-Payment Shares will also be issued
upon automatic conversion of Level-Payment Shares, as
described below.
1. Sales Loads. Front-Payment Shares are sold
subject to the current maximum FESC (with scheduled
variations or eliminations of the sales charge, as
permitted by the 1940 Act).
2. Distribution and Service Fees. Front-Payment
Shares are subject to a distribution fee pursuant to
Part I of the Fund's Rule 12b-1 Plan. They are not
subject to charges applicable to a Shareholder Services
Plan.
3. Class Expenses. Class Expenses that are
attributable to the Front-Payment Class are allocated
to that particular class.
4. Exchange Privileges and Conversion Features.
Front-Payment Shares are exchangeable for Front-Payment
Shares issued by other funds sponsored by Aquila
Management Corporation and as may additionally be set
forth in the then current prospectus of the Fund.
Front-Payment Shares have no conversion features.
B. Level-Payment Shares
Level-Payment Shares are sold to (1) retail customers
and (2) persons entitled to exchange into Level-Payment
Shares under the exchange privileges of the Fund.
1. Sales Loads. Level-Payment Shares are sold
without the imposition of any FESC, but are subject to
a CDSC (with scheduled variations or eliminations of
the sales charge, as permitted by the 1940 Act).
2. Distribution and Service Fees. Level-Payment
Shares are subject to a distribution fee pursuant to
Part II of the Fund's Rule 12b-1 Plan and to a
shareholder servicing fee under a Shareholder Services
Plan not to exceed .25% of the average daily net assets
of the Level-Payment Class.
3. Class Expenses. Class Expenses that are
attributable to the Level-Payment Class are allocated
to that particular class.
4. Exchange Privileges and Conversion Features.
Level-Payment Shares are exchangeable for Level-Payment
Shares issued by other funds sponsored by Aquila
Management Corporation and as may additionally be set
forth in the then current prospectus of the Fund. After
a period of no greater than six years, Level-Payment
Shares automatically convert to Front-Payment Shares on
the basis of the relative net asset values of the two
classes without the imposition of any sales charge,
fee, or other charge, provided, however, that the
expenses, including distribution fees, for Front-
Payment Shares are not higher than the expenses,
including distribution fees, for Level-Payment Shares.
If the amount of expenses, including distribution fees,
for the Front-Payment Class is increased materially
without approval of the shareholders of the Level-
Payment Class, a new class will be established -- on
the same terms as apply to the Front-Payment Class
prior to such increase -- as the class into which
Level-Payment Shares automatically convert.
C. Institutional Shares
Institutional Shares are not offered to retail
customers but are sold only to (1) institutional investors
investing funds held in a fiduciary, advisory, agency,
custodial or other similar capacity and (2) persons entitled
to exchange into Institutional Shares under the exchange
privileges of the Fund.
1. Sales Loads. Institutional Shares are sold
without the imposition of any FESC, CDSC or any other
sales charge.
2. Distribution and Service Fees. Institutional
Shares are not subject to any distribution fee or
shareholder servicing fee.
3. Class Expenses. Class Expenses that are
attributable to the Institutional Class are allocated
to that particular class.
4. Exchange Privileges and Conversion Features.
Institutional Shares are exchangeable for Institutional
Shares issued by other funds sponsored by Aquila
Management Corporation and as may additionally be set
forth in the then current prospectus of the Fund.
Institutional Shares have no conversion features.
D. Additional Classes
In the future, the Fund may offer additional classes of
shares which differ from the classes discussed above.
However, any additional classes of shares must be approved
by the Board, and the Plan must be amended to describe those
classes.
II. Approval of Multiple Class Plan
The Board of the Fund, including a majority of the
independent Trustees, must approve the Plan initially. In
addition, the Board must approve any material changes to the
classes and the Plan prior to their implementation. The Board
must find that the Plan is in the best interests of each class
individually and the Fund as a whole. In making its findings,
the Board should focus on, among other things, the relationships
among the classes and examine potential conflicts of interest
among classes regarding the allocation of fees, services, waivers
and reimbursements of expenses, and voting rights. Most
significantly, the Board should evaluate the level of services
provided to each class and the cost of those services to ensure
that the services are appropriate and that the allocation of
expenses is reasonable. In accordance with the foregoing
provisions of this Section II, the Board of the Fund has approved
and adopted this Plan as of the date written below.
III. Dividends and Distributions
Because of the differences in fees paid under a Rule
12b-1 Plan and Shareholder Services Plan and the special
allocation of Class Expenses among the classes of shares of the
Fund, the dividends payable to shareholders of a class will
differ from the dividends payable to shareholders of the other
classes. Dividends paid to each class of shares in the Fund
will, however, be declared and paid at the same time and, except
for the differences in expenses listed above, will be determined
in the same manner and paid in the same amounts per outstanding
shares.
IV. Expense Allocations
The methodology and procedures for calculating the net
asset value and dividends and distributions of the various
classes of shares and the proper allocation of income and
expenses among the various classes of shares are set forth in the
Memorandum (together with exhibits) of Richard F. West,
Treasurer, dated November 24, 1995 and entitled "Methodologies
Used In Accounting For Multiple Class Shares."
Dated: _____________, 1996
