Registration Nos. 2-95767 & 811-4229
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[ X ]
Pre-Effective Amendment No. _______ [ ]
Post-Effective Amendment No. 12 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 13 [ X ]
CHURCHILL CASH RESERVES TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady 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 January 31, 1996 pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[_X_] on January 31, 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
and that the Rule 24f-2 Notice for Registrant's fiscal year
ended September 30, 1995 was filed in November 1995.
CHURCHILL CASH RESERVES TRUST
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights
4..............Introduction; Investment of the Trust's As-
sets; Investment Restrictions; General In-
formation
5..............Management Arrangements
5A.............*
6..............General Information; Dividend and Tax Infor-
mation
7..............Net Asset Value per Share; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Investment
Restrictions;Loans of Portfolio Securities
14.............Trustees and Officers
15.............General Information (Prospectus caption)
16.............Additional Information as to Management Ar-
rangements; General Information
17.............Investment of the Trust's Assets (Prospectus
caption)
18.............General Information
19.............Limitation of Redemptions in Kind; Amortized
Cost Valuation; Computation of Daily Divi-
dends; Automatic Withdrawal Plan
20.............*
21.............How to Invest in the Trust (Prospectus cap-
tion); Distribution Plan; General Informa-
tion
22.............Yield Information; Financial Highlights (Pro-
spectus caption)
*Not applicable or negative answer
CHURCHILL CASH RESERVES TRUST
380 Madison Avenue
Suite 2300
New York, New York 10017
212-697-6666
PROSPECTUS
January 31, 1996
The Trust's objective is to provide safety of principal for
the cash reserves of investors while achieving as high a level of
current income and liquidity as possible. It seeks to obtain this
objective through investments in a diversified portfolio of money
market securities meeting specific high quality standards and
having short maturities.
Shares of the Trust may be purchased and redeemed at their
next determined net asset value, which is normally the constant
price of $1.00 per share; See "Net Asset Value Per Share."
Purchases are made without any sales charge through Aquila
Distributors, Inc., which is the exclusive Distributor of the
Trust's shares. See "How to Invest in the Trust" and "How to
Redeem Your Investment."
An investment in the Trust is neither insured nor guaranteed
by the U.S. Government. There can be no assurance that the Trust
will be able to maintain a stable net asset value of $1.00 per
share.
Shares of the Trust are not deposits in, obligations of
or guaranteed or endorsed by BANC ONE CORPORATION or its bank or
non-bank affiliates or by any other bank. Shares of the Trust 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 Trust involves investment risks,
including possible loss of the principal amount invested.
The Prospectus concisely states information about the
Trust that you should know before investing. A Statement of
Additional Information about the Trust dated January 31, 1996,
(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
Trust'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 Trust and its management
not included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus.
Only when you have read both the Prospectus and the Additional
Statement are all the material facts about the Trust available to
you.
FOR PURCHASE, REDEMPTION OR ACCOUNT INQUIRIES CONTACT THE
TRUST'S
SHAREHOLDER SERVICING AGENT:
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
Call 800-952-6666 toll-free or 908-855-5731
FOR GENERAL INQUIRIES AND YIELD INFORMATION, CALL 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>
CHURCHILL CASH RESERVES TRUST
TABLE OF EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases.................... 0%
Maximum Sales Load Imposed on Reinvested Dividends......... 0%
Deferred Sales Load........................................ 0%
Redemption Fees............................................ 0%
Exchange Fee............................................... 0%
Annual Trust Operating Expenses*
(As a percentage of average net assets)
Investment Advisory Fees................................. .30%
12b-1 Fee **............................................. 0%
Other Expenses........................................... 0.28%
Administration Fees................................... 0.16%
Other Expenses ....................................... 0.12%
Total Trust Operating Expenses .......................... 0.58%
Example# 1 year 3 year 5 year 10
year
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period........ $6 $19 $32 $73
* Based upon amounts incurred during the most recent fiscal year
of the Trust, restated to reflect current arrangements (See
"Management Arrangements.")
+ Absent fee waiver, investment advisory fees would have been
incurred at the rate of 0.33% of average net assets. Also,
administration fee waiver, administarion fees would have been
incurred at the rate of 0.17% of average net assets and other
expenses would have included those fees Absent any fee waiver,
total Trust operating expenses for the year would have been
incurred at the annual rate of 0.62%
++ The 12b-1 Plan of the Trust does not involve payments out of
the assets or income of the Trust designed to recognize sales of
shares of the Trust or to pay advertising expenses.
# The expense example is based upon an amount 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
expenses at a 0.60% annual rate; the expense ratio was applied to
an assumed average balance (the year's starting investment plus
one-half the year's results). Each column represents the
cumulative expenses so determined for the period specified.
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% rate for purposes of
preparing the above example.
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in
the Trust will bear directly or indirectly. (See "Management
Arrangements" for a more complete description of the various
investment advisory and administration fees.)
<PAGE>
CHURCHILL CASH RESERVES TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table of Financial Highlights as it relates to
the five years ended September 30, 1995 has been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon is
included in the Trust's financial statements contained in its
Annual Report, which are incorporated by reference into the
Additional Statement. The information provided in the table
should be read in conjunction with the financial statements and
related notes. On September 29, 1989, Aquila Management
Corporation, originally the Trust's Sub-Adviser and
Administrator, became Administrator only. Effective July 19,
1995, Banc One Investment Advisors Corporation became the Trust's
Investment Adviser, replacing PNC Bank, Kentucky, Inc.
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended September 30,
1995 1994 1993 1992 1991
Net Asset Value,
Beginning of
year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from Investment
Operations:
Net investment income 0.0526 0.0319 0.0265 0.0380 0.0636
Net gain (loss) on
securities (both realized
and unrealized) - - - 0.0005 -
Total from Investment
Operations 0.0526 0.0319 0.0265 0.0385 0.0636
Less Distributions:
Dividends from net
investment income (0.0526) (0.0319) (0.0265) (0.0380) (0.0636)
Distributions from
capital gains - - - (0.0005) -
Total Distributions (0.0526) (0.0319) (0.0265) (0.0385) (0.0636)
Net Asset Value, End of
year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Total Return 5.39% 3.24% 2.68% 3.87% 6.54%
Ratios/Supplemental Data
Net Assets, End of Year
(in thousands) $146,130 $187,626 $187,274 $139,633 $222,362
Ratio of Expenses to
Average Net Assets 0.58% 0.60% 0.60% 0.65% 0.60%
Ratio of Net Investment
Income to Average
Net Assets 5.24% 3.17% 2.65% 3.90% 6.36%
</TABLE>
<TABLE>
<C> <C> <C> <C> <C>
1990 1989 1988 1987 1986
$1.0000 $1.0000 $1.0000 $1.0000 $1.0000
0.0790 0.0865 0.0686 0.0504 0.0602
- - - - -
0.0790 0.0865 0.0686 0.0504 0.0602
(0.0790) (0.0865) 0.0686 0.0504 0.0602
- - - - -
(0.0790) (0.0865) 0.0686 0.0504 0.0602
$1.0000 $1.0000 $1.0000 $1.0000 $1.0000
8.17% 9.02% 7.07% 6.06% 6.94%
$238,634 $288,357 $213,938 $199,292 $113,804
0.58% 0.58% 0.59% 0.61% 0.65%
7.90% 8.65% 6.84% 5.97% 6.72%
</TABLE>
* During this period, the Adviser and Administrator waived fees of $48,089
and $21,561, respectively. If these fees had not been waived, net
investment income and dividends to shareholders would have been $0.0522;
the ratio of expenses to average net assets, 0.62% and the ratio of net
investment income to average net assets, 5.20%.
The Trust's "current yield" (unaudited) for the seven days ended
September 30, 1995 was 5.28% and its "compounded effective yield" (unaudited)
for that period was 5.42%; see the additional statement for the methods of
calculating these yields.
<PAGE>
INTRODUCTION
The Trust is an open-end diversified investment company
organized in January 1985, as a Massachusetts business trust,
designed to suit the cash management needs of individuals,
corporations, institutions and fiduciaries.
Cash of investors may be invested in shares of the Trust
as an alternative to idle funds, direct investments in savings
deposits or short-term debt securities. The Trust offers the
opportunity to keep cash reserves fully invested and provides you
with a professionally managed portfolio of money market
instruments which may be more diversified, higher yielding, more
stable and more liquid than you might be able to obtain on an
individual basis. Through the convenience of a single security
consisting of shares of the Trust, you are also relieved of the
inconvenience of making direct investments, including the
selection, purchasing and handling of securities. Shares of the
Trust are not deposits in, obligations of or guaranteed or
endorsed by Banc One Investment Advisors Corporation (the
"Adviser"), Banc One Corporation or its bank or non-bank
affiliates or by any other bank. Shares of the Trust 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.
INVESTMENT OF THE TRUST'S ASSETS
The objective of the Trust is to achieve as high a level of
current income, stability and liquidity for investors' cash
assets as can be obtained from investing in a diversified
portfolio of short-term "money market" securities meeting
specific quality standards. There is no assurance that the Trust
will achieve this objective, which is a fundamental policy of the
Trust.
In addition to the requirements of the Trust's management
policies, all obligations and instruments purchased by the Trust
must meet the requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act"). The provisions of the Rule that
affect portfolio management are summarized under "Effect of the
Rule on Portfolio Management," below. In brief, the Rule's
provisions for quality, diversity and maturity require the Trust
to limit its investments to those instruments which the Adviser
determines (pursuant to procedures approved by the Board of
Trustees) present minimal credit risks, and which at the time of
purchase are Eligible Securities. In general, the Rule defines as
Eligible Securities those that at the time of purchase are rated
in the two highest rating categories for short-term securities by
any two of the nationally recognized statistical rating
organizations ("NRSROs") or unrated securities determined by the
Board of Trustees to be of comparable quality. See Appendix A to
the Additional Statement for a description of the NRSROs and the
factors considered by them in determining ratings. Eligible
Securities so rated in the highest rating category (or unrated
securities of comparable quality) are called "First Tier
Securities"; all other Eligible Securities are called "Second
Tier Securities." The Rule also requires that the dollar-weighted
average maturity of the Trust's portfolio cannot exceed 90 days
and that the Trust cannot purchase any security having a
remaining maturity in excess of 397 days. The Rule also contains
limits on the percentage of the Trust's assets that can be
invested in the securities of any issuer. See "Effect of the Rule
on Portfolio Management," below.
Management Policies:
The Trust seeks to achieve its investment objective through
investments in the types of instruments described in the
management policies listed below. Under the current management
policies, the Trust invests only in the following types of
obligations:
(1) U.S. Government Securities: Obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities; these obligations are referred to in the
Prospectus as "U.S. Government Securities"; see "Information On
U.S. Government Securities" below.
(2) Bank Obligations and Instruments Secured by Them: Bank
obligations that are First Tier Securities including time
deposits, certificates of deposit, bankers' acceptances and other
bank (see below for definition) obligations, and which are (i)
obligations of banks subject to regulation by the U.S. Government
having total assets of at least $1.5 billion, which may be
obligations issued by domestic banks, by foreign branches of such
banks or by U.S. subsidiaries of foreign banks; (ii) obligations
of any foreign bank having total assets equivalent to at least
$1.5 billion; or (iii) obligations ("insured bank obligations")
if such obligations are fully insured as to principal by the
Federal Deposit Insurance Corporation (see "Information on
Insured Bank Obligations" in the Additional Statement); the Trust
may also invest in obligations secured by any obligations set
forth in (i) or (ii) above if such investment meets the
requirements of (6) below. (In the Prospectus and in the
Additional Statement, a bank includes commercial banks, savings
banks and savings and loan associations.)
(3) Commercial Paper Obligations: Commercial paper
obligations that are First Tier Securities; see "Effect of the
Rule on Portfolio Management," below.
(4) Corporate Debt Obligations: Corporate debt obligations
(for example, bonds and debentures) which are First Tier
Securities and which at the time of purchase have a remaining
maturity of not more than 397 days; See "Effect of the Rule on
Portfolio Management." See Appendix A to the Additional Statement
for information about bond ratings.
(5) Variable Amount and Master Demand Notes: Variable amount
master demand notes that are First Tier Securities and which are
redeemable (and thus repayable by the borrower) at principal
amount, plus accrued interest, at any time on not more than
thirty days' notice. Variable amount master demand notes may or
may not be backed by bank letters of credit. (Because variable
amount master demand notes are direct lending arrangements
between the lender and borrower, it is not generally contemplated
that they will be traded, and there is no secondary market for
them; see the Additional Statement for further information on
these notes.) Variable amount master demand notes repayable in
more that seven days are securities which are not readily
marketable, and fall within the Trust's overall 10% limitation on
securities which are illiquid.
(6) Certain Other Obligations: Obligations other than those
listed in 1 through 5 above only if such other obligations are
guaranteed as to principal and interest by either a bank in whose
obligations the Trust may invest (see 2 above) or a corporation
in whose commercial paper the Trust may invest (see 3 above). See
"Effect of the Rule on Portfolio Management." If the Trust
invests more than 5% of its net assets in such other obligations,
the Prospectus will be supplemented to describe them. See the
Additional Statement.
(7) Repurchase Agreements: The Trust may purchase securities
subject to repurchase agreements provided that such securities
consist entirely of U.S. Government securities or securities
that, at the time the repurchase agreement is entered into, are
rated in the highest rating category by the requisite NRSROs.
Repurchase agreements may be entered into only with commercial
banks or broker-dealers. Subject to the control of the Board of
Trustees, the Adviser will regularly review the financial
strength of all parties to repurchase agreements with the Trust.
See "Information about Repurchase Agreements," below.
(8) When-Issued or Delayed Delivery Securities: The Trust
may buy securities on a when-issued or delayed delivery basis;
the securities so purchased are subject to market fluctuation and
no interest accrues to the Trust until delivery and payment take
place; their value at the delivery date may be less than the
purchase price. The Trust may not enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
the Trust's total assets, less liabilities other than the
obligations created by when-issued commitments. See the
Additional Statement for further information.
Shareholder approval is not required to change any of the
foregoing management policies.
Information On U.S. Government Securities
U.S. Government Securities (i.e., obligations issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S.
Government, which in turn include Treasury Bills (which mature
within one year of the date they are issued) and Treasury Notes
and Bonds (which are issued with longer maturities). All Treasury
securities are backed by the full faith and credit of the United
States.
U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the
Export-Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal National Mortgage Association, Financing
Corporation, Government National Mortgage Association, Resolution
Funding Corporation, Small Business Administration, Student Loan
Marketing Association and the Tennessee Valley Authority.
Securities issued or guaranteed by U.S. Government agencies
and instrumentalities are not always supported by the full faith
and credit of the United States. Some, such as securities issued
by the Federal Home Loan Banks, are backed by the right of the
agency or instrumentality to borrow from the U.S. Treasury.
Others, such as securities issued by the Federal National
Mortgage Association, are supported only by the credit of the
instrumentality and not by the U.S. Treasury. If the securities
are not backed by the full faith and credit of the United States,
the owner of the securities must look principally to the agency
issuing the obligation for repayment and may not be able to
assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Trust
will invest in government securities, including securities of
agencies and instrumentalities only if the Adviser (pursuant to
procedures approved by the Board of Trustees) is satisfied that
these obligations present minimal credit risks. See "Effect of
the Rule on Portfolio Management," below, for a discussion of the
determination of minimal credit risks in connection with the
purchase of portfolio securities.
Information On Foreign Bank Obligations
Investments, which must be denominated in U.S. dollars, in
foreign banks and foreign branches of United States banks involve
certain risks in addition to those involved with investment in
domestic banks. While domestic banks are required to maintain
certain reserves and are subject to other regulations, such
requirements and regulations may not apply to foreign branches of
domestic banks. Investments in foreign banks and foreign branches
of domestic banks may also be subject to other risks, including
future political and economic developments, the possible
imposition of withholding taxes on interest income, the seizure
or nationalization of foreign deposits and the establishment of
exchange controls or other restrictions.
Information about Repurchase Agreements
Under a repurchase agreement, at the time the Trust
purchases a security, the Trust 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 Trust's money is invested
in the Resold Securities. The majority of these transactions run
from day to day, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the 1940 Act. The return on such
"collateral" may be more or less than that from the repurchase
agreement. The Resold Securities under any repurchase agreement
will be marked to market every business day so that the value of
the "collateral" is at least equal to the resale price provided
in the agreement, including the accrued interest earned thereon,
plus sufficient additional market value as is considered
necessary to provide a margin of safety. During the term of the
repurchase agreement, the Trust 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 Trust or its custodian.
The Trust retains an unqualified right to possess and sell the
Resold Securities in the event of a default by the other party.
In the event of bankruptcy or other default by the other
party, there may be possible delays and expenses in liquidating
the Resold Securities, decline in their value and loss of
interest. If the maturity of the Resold Securities is such that
they cannot be owned by the Trust under the applicable provisions
of the Rule, they will have to be sold which could result in a
loss. See "Effect of the Rule on Portfolio Management."
Limitation to 10% As To Certain Investments
Due to their possible limited liquidity, the Trust may not
make certain investments if thereafter more than 10% of its net
assets would consist of such investments. The investments
included in this 10% limit are (i) repurchase agreements maturing
in more than seven days; (ii) fixed time deposits subject to
withdrawal penalties other than overnight deposits; (iii)
restricted securities, i.e., securities which cannot freely be
sold for legal reasons (which the Trust does not expect to own);
(iv) securities which are not readily marketable and (v) insured
bank obligations unless the Board of Trustees determines that a
readily available market exists for such obligations. However,
this 10% limit does not include any obligations payable at
principal amount plus accrued interest on demand or within seven
days after demand.
Factors Which May Affect the Value
of the Trust's Investments and Their Yields
The value of the obligations and instruments in which the
Trust invests will fluctuate depending in large part on changes
in prevailing interest rates. If the prevailing interest rates go
up after the Trust buys a security, the value of the security may
go down; if these rates go down, the value of the security may go
up. Changes in value and yield based on changes in prevailing
interest rates may have different effects on short-term
obligations than on long-term obligations. Long-term obligations
(which often have higher yields) may fluctuate in value more than
short-term ones.
Portfolio Transactions
The Trust will seek to obtain the best net price and the
most favorable execution of orders. Purchases will be made
directly from issuers or from underwriters, dealers or banks
which specialize in the types of securities invested in by the
Trust. As most purchases made by the Trust are principal
transactions at net prices, the Trust incurs little or no
brokerage costs. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter
and purchases from dealers may include the spread between the bid
and the asked price. If the execution and price offered by more
than one dealer are comparable, the order may be allocated to a
dealer which has provided research advice, such as information on
particular companies and industries and market, economic and
institutional activity. By allocating transactions to obtain
research services, the Trust enables the Adviser to supplement
its own research and analyses with the views and information of
other securities firms. Such research services, whether or not
useful to the Trust, may be useful to other accounts managed by
the Adviser or its affiliates.
Effect of the Rule on Portfolio Management
As a money market fund, the Trust operates under the Rule,
which allows the Trust to use the "amortized cost" method of
valuing its securities and which contains certain risk limiting
provisions, including requirements as to maturity, quality and
diversification of the Trust's portfolio. Some of the most
important aspects of the Rule are described below.
Under the Rule, the Trust must limit its investments to
those instruments which are denominated in U.S. dollars, which
are determined by the Board of Trustees to present minimal credit
risks, and which, at the time of purchase, are Eligible
Securities. In accordance with the Rule, the Board of Trustees
has adopted investment procedures and has approved investment
policies pursuant to which all investment determinations have
been delegated to the Adviser, under the direction and control of
the Board of Trustees, except for those matters for which the
Rule requires Board determination.
In general, the Rule defines as Eligible Securities those
that at the time of purchase are rated in the two highest rating
categories for short-term securities by any two of the NRSROs, or
if unrated are determined by the Board of Trustees to be of
comparable quality. Eligible Securities so rated in the highest
rating category (and unrated securities determined by the Board
of Trustees to be of comparable quality) are called "First Tier
Securities"; all other Eligible Securities are called "Second
Tier Securities." Eligible Securities can in some cases include
securities rated by only one NRSRO and unrated obligations that
are determined by the Board of Trustees to be of comparable
quality to rated securities. A security that was long-term when
issued must at the time of purchase by the Trust have either a
short-term rating such that it is an Eligible Security, be
comparable in priority and security with a rated short-term
obligation of the same issuer that is an Eligible Security or if
it has no short-term rating (and does not have a long-term rating
from any NRSRO below the highest rating) if it is determined by
the Board of Trustees to be of comparable quality to rated
securities the Trust could purchase. Purchase of any security
rated by only one NRSRO and purchase of any unrated security
(except U.S. Government Securities) must be ratified by the Board
of Trustees.
The Rule requires (with limited exceptions) that immediately
after purchase of any security the Trust have invested not more
than 5% of its assets in the securities of any one issuer.
Moreover, the Rule provides that the Trust cannot have more than
5% of its assets in the aggregate invested in Second Tier
Securities, nor more than the greater of 1% of its assets or
$1,000,000 invested in Second Tier Securities of any single
issuer. In general, the Trust does not intend to own Second Tier
Securities. The Rule has specific provisions relating to
determinations of the eligibility of certain types of instruments
such as repurchase agreements and instruments subject to a demand
feature. It also has specific provisions for determining the
issuer of a security for purposes of compliance with the
diversification requirements.
Generally, under the Rule, the maturity of an instrument is
considered to be its stated maturity (or in the case of an
instrument called for redemption, the date on which the
redemption payment must be made). There are special rules for
determining the maturity of certain kinds of instruments. The
Rule contains provisions as to the maturity of variable rate and
floating rate instruments. Repurchase agreements and securities
loan agreements are, in general, treated as having a maturity
equal to the period remaining until they can be executed.
The Rule has provisions requiring specific actions whenever
the rating of a portfolio security is downgraded. Generally,
these actions include a prompt reassessment by the Board of
Trustees of the credit risks associated with such a security. In
general, the Rule mandates prompt sale or other disposition,
e.g., by exercising a demand for payment, in certain cases, such
as when a security ceases to be an Eligible Security, no longer
presents minimal credit risks or suffers a financial default.
INVESTMENT RESTRICTIONS
The Trust 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 Trust's outstanding shares vote to change
them. (See the Additional Statement for a definition of such a
majority.) All other policies can be changed from time to time
without shareholder approval. Some of the more important of the
Trust's fundamental policies, not otherwise identified in the
Prospectus are set forth below; others are listed in the
Additional Statement.
1. The Trust has diversification and certain
anti-concentration requirements.
The Trust cannot buy the securities of any issuer if it
would then own more than 10% of the total value of all of the
issuer's outstanding securities.
The Trust cannot buy the securities (not including U.S.
Government Securities) of any issuer if more than 5% of its total
assets (valued at market value) would then be invested in
securities of that issuer. In addition, the Rule limits
investment in Second Tier Securities to 5% of the Trust's assets
in the aggregate, and to no more than the greater of 1% of the
Trust's assets or $1,000,000 in the securities of any one issuer.
The Trust cannot buy the securities of issuers in any one
industry if more than 25% of its total assets would then be
invested in securities of issuers in that industry (see the
Additional Statement); U.S. Government Securities and those
domestic bank obligations and instruments of domestic banks which
the Trust may purchase (see "Investment of the Trust's Assets")
are considered as not included in this limit; however,
obligations of foreign banks and of foreign branches of domestic
banks are considered as included in this limit.
2. The Trust can make loans only by lending securities or
entering into repurchase agreements.
The Trust can buy those debt securities which it is
permitted to buy (see "Investment of the Trust's Assets"); this
is investing, not making a loan. The Trust can lend its portfolio
securities on a collateralized basis up to 10% of the value of
its total assets to specified borrowers (broker-dealers, banks
and certain other financial institutions) to increase its income
(see the Additional Statement) and enter into repurchase
agreements (see "Repurchase Agreements" above). The Trust may be
considered as the beneficial owner of the loaned securities in
that any gain or loss in their market price during the loan
inures to the Trust and its shareholders; thus, when the loan is
terminated, the value of the securities may be more or less than
their value at the beginning of the loan.
3. The Trust can borrow in limited amounts for special
purposes.
The Trust 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
Trust's income. The Trust will not borrow to purchase securities
or to increase its income but only to meet redemptions so that it
will not have to sell securities to pay for redemptions. The
Trust will not purchase any securities while it has any
outstanding borrowings which exceed 5% of the value of its
assets. Except in connection with borrowings, the Trust will not
issue senior securities.
NET ASSET VALUE PER SHARE
The Trust's net asset value per share is determined as of
4:00 p.m. New York time on each day that the New York Stock
Exchange is open by dividing the value of the net assets of the
Trust (i.e., the value of the assets less liabilities, exclusive
of surplus) by the total number of shares outstanding.
The net asset value per share will normally remain constant
at $1.00 per share except under extraordinary circumstances; see
the Additional Statement for a discussion of the extraordinary
circumstances which could result in a change in this fixed share
value. The net asset value per share is based on a valuation of
the Trust's investments at amortized cost; see the Additional
Statement.
HOW TO INVEST IN THE TRUST
The Trust's shares are sold on a continuous basis at the net
asset value next determined after an order is entered and deemed
effective. There is no sales charge. The minimum initial
investment is $1,000. Subsequent investments may be in any
amount. Aquila Distributors, Inc. (the "Distributor") is the
exclusive Distributor of the Trust's shares. The Distributor
sells shares only for purchase orders received.
Opening an Account
To open a new account, you must send a properly completed
Application to Administrative Data Management Corp. (the
"Agent"). Redemption of shares purchased by wire payment will not
be honored until a properly completed Application has been
received by the Agent.
Initial investments may be made in any of these three ways:
1. By Mail. Payment may be made by check, money order,
Federal Reserve Draft or other negotiable bank draft drawn
in United States dollars on a United States commercial or
savings bank or credit union (each of which is a "Financial
Institution") payable to the order of Churchill Cash
Reserves Trust and mailed to:
Administrative Data Management Corp.
Attn: Aquilasm Group of Funds
581 Main Street Woodbridge, NJ 07095-1198
2. By Wire. Payment may be wired in Federal funds
(monies credited to a bank's account with a Federal Reserve
Bank) to Bank One Trust Company, N.A. (the "Custodian"),
which serves as custodian of the Trust's assets.
To insure prompt and proper crediting to your account, if
you choose this method of payment, you should first telephone the
Agent (800-952-6666 toll free or 908-855-5731) and then instruct
your bank to wire funds to:
Bank One, Columbus
ABA No. 044000037
CR A/C 04-01787
For further credit to
Churchill Cash Reserves Trust
A/C 6801373500
Account Name and Number (if an existing account)
The name in which the investment is to be registered (if a
new account).
Your bank may impose a charge for wiring funds.
3. Through Brokers. If you wish, you may invest in the
Trust by purchasing shares through registered
broker-dealers.
There is no sales or service charge imposed by the Trust,
although broker-dealers may make reasonable charges to their
customers for their services. The services to be provided and the
fees therefor are established by each broker-dealer acting
independently; broker-dealers may also determine to establish, as
to accounts serviced by them, higher initial or subsequent
investment requirements than those required by the Trust.
Broker-dealers are responsible for prompt transmission of orders
placed through them.
Additional Investments
You may make additional investments in shares of the
Trust in any amount after an account has been established by
mailing directly to the Agent a check, money order or other
negotiable bank draft made payable to Churchill Cash Reserves
Trust, or by wiring funds as described above. In each case you
should indicate your name and account number to insure prompt and
proper crediting of your account. The pre-printed stub attached
to confirmations is provided as a convenient identification
method to accompany additional investments made by mail. You may
also make subsequent investments of $50 or more using electronic
funds transfers from your demand account at a Financial
Institution if it is a member of the Automated Clearing House and
if the Agent has received a 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 Trust may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
When Shares Are Issued and
Dividends Are Declared On Them
There are three methods as to when shares are issued. Under
each method, shares are issued at the net asset value per share
next determined after the purchase order is effective, as
discussed below. Under each method, the Application must be
properly completed and have been received and accepted by the
Agent; the Trust or the Distributor may also reject any purchase
order. Under each method, Federal funds (see above) must either
be available to the Trust or the payment thereof must be
guaranteed to the Trust so that the Trust can be as fully
invested as practicable.
The first method under which shares are issued involves
ordinary investments. Under this method, payments transmitted by
wire in Federal funds and payments made by Federal Reserve Draft
received by the Custodian prior to 4:00 p.m. New York time on any
day on which the New York Stock Exchange is open will be invested
(i.e., the purchase order will be effective) at the net asset
value per share determined as of 4:00 p.m. on that day; if either
such type of payment is received after that time, the purchase
order will be effective as of 4:00 p.m. on the next day that the
exchange is open. Wire payments not in Federal funds will
normally be converted into Federal funds on the next day such
exchange is open and the purchase order will be effective as of
4:00 p.m. on such next day. Payments transmitted by check will
normally be converted to Federal funds by the Agent, as your
agent, within two business days for checks drawn on a member bank
of the Federal Reserve System, and longer for most other checks,
and the purchase orders will be effective as of 4:00 p.m. on that
day if the exchange is open and otherwise at 4:00 p.m. on the
next day the exchange is open after such conversion. All checks
are accepted subject to collection at full face value in United
States funds and must be drawn in United States dollars on a
United States bank; if not, shares will not be issued. Purchases
by Automatic Investment and Telephone Investment will be executed
on the first day on which that exchange is open occurring on or
after the date an order is considered received by the Agent at
the net asset value determined on that day. In the case of
Automatic Investment the order will be executed on the date you
specified for investment at the price determined on that day,
unless it is not a day on which that exchange is open, in which
case the order will be executed at the net asset value determined
on the next day on which that exchange is open. In the case of
Telephone Investment the order will be filled at the next
determined net asset value, which for orders placed after the
time for determining the net asset value of the Trust's shares
for any day will be the price determined on the following day on
which the exchange is open. Dividends on shares issued under this
first investment method are declared starting on the day (whether
or not a business day) after the purchase order is effective and
are declared on the day on which the shares are redeemed.
The second method under which shares are issued involves a
bank or broker-dealer making special arrangements with the Trust
under which (i) either (a) payment is made in Federal funds or by
check in New York Clearing House funds delivered to the Agent
prior to 5:00 p.m. New York time or (b) the Agent is advised
prior to that time of a dollar amount to be invested; (ii) the
Agent is advised prior to that time of the form of registration
of the shares to be issued; (iii) the bank or broker-dealer will
prior to noon New York time on the next business day wire Federal
funds to the Custodian (but in the case of prior payment by check
under (i)(a) above only if the check is not converted into
Federal funds in the normal course on the next business day); and
(iv) arrangements satisfactory to the Trust are made between it
and the bank or broker-dealer under which if Federal funds are
not so received by the Custodian, the Trust is reimbursed for any
costs or loss of income arising out of such non-receipt. New York
Clearing House funds are funds represented by a check drawn on a
bank which is a member of the New York Clearing House. Under this
second method, the purchase order is effective on the day the
check or the advice is received under (i) above. Dividends on
shares issued under this second method are declared starting on
the day (whether or not a business day) after the purchase order
is effective and are declared on the day on which such shares are
redeemed.
The third method under which shares are issued involves
broker-dealers or banks which have requested that this method be
used to which request the Trust has consented. Under this third
method (i) the Agent must be advised prior to 1:00 p.m. New York
time on any business day of a dollar amount to be invested; and
(ii) Federal funds must be wired to the Custodian on that day;
under this method, the purchase order is effective on that day.
Dividends on shares issued under this third investment method are
declared beginning on that day but not on the day such shares are
redeemed.
This third investment method is available to prospective
investors in Trust shares who wish to use it so that the
dividends on their shares will commence to be declared on the day
the purchase order is effective. Upon written or phone request to
the Trust by such a prospective investor, the Trust will advise
as to the broker-dealers or banks through which such purchases
may be made.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to
you in an account maintained for you by the Agent in full and
fractional shares of the Trust (rounded to the nearest 1/1000th
of a share). Share certificates will not be issued unless you so
request from the Agent in writing and declare a need for such
certificates, such as a pledge of shares or an estate situation.
Expedited Redemption Methods described below will not be
available and delay and expense may be incurred if you lose the
certificates. No certificates will be issued for fractional
shares or to shareholders who have elected the checking account
or predesignated bank account methods of withdrawing cash from
their accounts. (See "How to Redeem Your Investment" below.)
The Trust 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 Trust has adopted a Distribution Plan under Rule 12b-1
("Rule 12b-1") under the 1940 Act. No payments are made by the
Trust under the Plan. Rule 12b-1 provides in substance that an
investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in
the sale of its shares except pursuant to a plan adopted under
that rule. One part of the Distribution Plan is designed to
protect against any claim against or involving the Trust that
some of the expenses which the Trust pays or may pay come within
the purview of Rule 12b-1. Another part of the Distribution Plan
authorizes Aquila Management Corporation (the "Administrator"),
not the Trust, to make payments in connection with the sale of
the Trust's shares provided such payments do not exceed in total
in any of the Trust's fiscal years 0.10 of 1% of its average
annual net assets; see the Additional Statement for further
information.
The Trust's Distribution Plan is solely a defensive plan
designed to protect the Trust and its affiliates against any
claim described above. The Distribution Plan does not involve
payments out of assets or income of the Trust designed to
recognize sales of shares of the Trust or to pay advertising
expenses.
HOW TO REDEEM YOUR INVESTMENT
The Trust provides day-to-day liquidity. You may redeem all
or any part of your shares at any time at the net asset value
next determined after acceptance of your redemption request at
the Agent. Redemptions can be made by the various methods
described below. Except for shares recently purchased by check as
discussed below, there is no minimum time period for any
investment in the Trust. There are no redemption fees or
withdrawal penalties. If you purchase shares of the Trust through
broker-dealers, banks and other financial institutions which
serve as shareholders of record you must redeem through those
institutions, which are responsible for prompt transmission of
redemption requests. In all other cases, you may redeem directly,
but a completed purchase Application must have been received by
the Agent before redemption requests can be honored. A redemption
may result in a taxable transaction to you, but only if there has
been a change in the net asset value per share, which will occur
only under extraordinary circumstances.
For your convenience the Trust offers expedited redemption
to provide you with a high level of liquidity for your
investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of three expedited methods of
initiating redemptions. These are available as to shares not
represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments to
a Financial Institution account you have predesignated. See
"Redemption Payments," below for payment methods. Your name
and your account number must be supplied.
To redeem an investment by this method, telephone:
800-952-6666 toll free or 908-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting for 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. 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 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
Ready Access Features form and provide the required information
concerning the Financial Institution account number. The
Financial Institution account must be in the exclusive name(s) of
the shareholder(s) as registered with the Trust. 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.
3. By Check. The Agent will, upon request, provide you
with forms of drafts ("checks") drawn on the Custodian.
This feature is not available if your shares are represented
by certificates. These checks represent a further
alternative redemption means and you may make them payable
to the order of anyone in any amount of not less than $500.
If you wish to use this check writing redemption procedure
you should notify the Agent or so indicate on your
Application. You will be issued special checks to be drawn
against the Custodian for this purpose. You will be subject
to the Custodian's rules and regulations governing its
checking accounts. If the account is registered in more than
one name, each check must be signed by each account holder
exactly as the names appear on the account registration,
unless expressly stated otherwise on your Application.
There is no charge for the maintenance of this special check
writing privilege or for the clearance of any checks.
When such a check is presented to the Custodian for
payment, a sufficient number of full and fractional shares in
your account will be redeemed to cover the amount of the check.
This check writing redemption procedure enables you to continue
receiving dividends on those shares equaling the amount being
redeemed by check until such time as the check is actually
presented to the Custodian for payment.
As these checks are redemption drafts relating to shares
of the Trust, you should be certain that adequate shares for
which certificates have not been issued and which were not
recently purchased by check are in the account to cover the
amount of the check. See "Redemption Payments" below for more
details as to special problems as to shares recently purchased
by check. If insufficient redeemable shares are in the account,
the redemption check will be returned marked "insufficient
funds." The fact that redemption checks are drafts may also
permit a bank in which they are deposited to delay crediting the
account in question until that bank has received payment funds
for the redemption check.
Checks may not be directly presented to any branch of the
Custodian. This does not affect checks used for the payment of
bills or cashed at other banks. You may not use checks to close
your account, since the number of shares in your account
changes daily through dividend payments which are automatically
reinvested in full and fractional shares. Consequently, you may
not present a check directly to the Custodian and request
redemption for all or substantially all shares held in your
account. Only expedited redemption to a predesignated bank
account or the regular redemption method (see below) may be used
when closing your account.
Multiple Redemption Services. You are not limited in
choice of redemption methods but may utilize all available forms.
However, when both redemption to a predesignated Financial
Institution account and check writing are desired, you must so
elect on your Application, or by proper completion of a Ready
Access Features form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates in blank (unsigned)
representing shares to be redeemed should be sent to: the
Trust'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 Agent.
For your protection, certificates and signed redemption
documentation should be sent separately.
For the redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Additional documentation may be
required where shares are held by a corporation, a partnership,
trustee or executor, or if redemption is requested by other than
the shareholder of record. If redemption proceeds of less than
$50,000 are payable to the record holder and are to be sent to
the record address, no signature guarantee is required. In all
other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent
bank, a participant in the Securities Transfer Association
Medallion Program (STAMP), The Stock Exchanges Medallion Program
(SEMP) or The New York Stock Exchange, Inc. Medallion Signature
Program (MSP). A notary public is not an acceptable signature
guarantor.
2. Non-Certificate Shares. If you own non-certificate
shares registered on the books of the Trust, 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 Number;
Dollar amount or number of shares to be redeemed or
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
Trust);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
above.
Redemption Payments
For redemptions other than by checks you have written,
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 Trust may
impose a charge, not exceeding $5.00 per wire redemption, after
written notice to shareholders who have elected this redemption
procedure. The Trust has no present intention of making this
charge. Upon 30 days' written notice to shareholders, the Trust
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 currently contemplated. If you use a
dealer to arrange for a redemption, you may be required to pay
the dealer for this service.
Redemption proceeds on shares issued under the third method
under which shares are issued (see "When Shares Are Issued and
Dividends Are Declared on Them" under "How to Invest in the
Trust") will be wired in Federal funds on the date of redemption,
if practicable, and, if not practicable, as soon thereafter as
practicable, irrespective of amount. Redemption requests as to
such shares may be made by telephone.
Except as indicated above, the Trust will normally make
payment for all shares redeemed on the next business day
following receipt of request. Except as set forth below, in no
event will payment be made more than seven days after receipt of
a redemption request made in compliance with one of the
redemption methods specified above. However, the right of
redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for
other than weekends and holidays or when trading on such exchange
is restricted as determined by the Securities and Exchange
Commission by rule or regulation; (ii) during periods in which an
emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption by any method (including redemption by check) of
shares recently purchased by check (irrespective of whether the
check is a regular check or a certified, cashier's or official
bank check) 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 bank 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 Trust, that the
purchase check or Automatic Investment or Telephone Investment
will be honored. Shares so purchased within the prior 15 days
will not be redeemed under the check writing redemption procedure
and a shareholder must not write a check if (i) it will be
presented to the Custodian for payment within 15 days of a share
purchase by check and (ii) the redemption check would cause the
redemption of some or all of those shares. Possible delays in
payment of redemption proceeds can be eliminated by using wire
payments or Federal Reserve drafts to pay for purchases.
If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders
of the Trust to make payment wholly or partly in cash, the Trust
may pay the redemption price in whole or in part by the
distribution in kind of securities from the portfolio of the
Trust, in lieu of cash, in conformity with applicable rules of
the Securities and Exchange Commission. See the Additional
Statement for details.
The Trust has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 due to shareholder redemptions. If the
Board of Trustees elects to do this, shareholders who are
affected will receive prior written notice and will be permitted
60 days to bring their accounts up to the minimum before this
redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase shares of the Trust having a net
asset value of at least $5,000 you may establish an Automatic
Withdrawal Plan under which you will receive a monthly or
quarterly check in a stated amount, not less than $50. If such a
plan is established, all dividends and distributions must be
reinvested in your shareholder's account. 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 Trust are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Trust's Trustees and officers and provides
further information about them.
The Advisory Agreement
Banc One Investment Advisors Corporation (the "Adviser")
supervises the investment program of the Trust and the
composition of its portfolio.
The services of the Adviser are rendered under an
Investment Advisory Agreement (the "Advisory Agreement") which
became effective on July 19, 1995 upon the termination of the
Trust's former advisory agreement with PNC Bank, Kentucky. The
Advisory Agreement provides, subject to the control of the Board
of Trustees, for investment supervision , arranging for the
purchase and the sale of securities held in the portfolio of the
Trust and furnishing information as to such securities to any
provider of fund accounting services to the Trust, monitoring
records of the Trust as to the portfolio, including prices,
maintained by such provider of such services; and supplying
monthly or more frequently as may be necessary, pricing of the
Trust's portfolio based on available market quotations using a
pricing service or other source of pricing information
satisfactory to the Trust. The Advisory Agreement states that the
Adviser shall, at its expense, provide to the Trust all office
space and facilities, equipment and clerical personnel necessary
for the carrying out of the Adviser's duties under the Advisory
Agreement.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Trust and of
those Trustees, if any, who are affiliated with the Adviser.
Under the Advisory Agreement, the Trust bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to its shareholders and the
costs of printing or otherwise producing and distributing those
copies of such prospectuses, statements of additional information
and reports as are sent to its shareholders. Under the Advisory
Agreement, all costs and expenses not expressly assumed by the
Adviser or by the Administrator under the Administration
Agreement or by the Trust's principal underwriter are paid by the
Trust. The Advisory Agreement lists examples of such expenses
borne by the Trust, 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 Trust and its shares under Federal and State securities laws,
interest, taxes and non-recurring expenses, including litigation.
Under the Advisory Agreement, the Trust pays a fee
payable monthly and computed on the net asset value of the Trust
as of the close of business each business day at the annual rate
of 0.33 of 1% of such net assets. (However, the total fees
which the Trust pays are at the annual rate of 0.50 of 1% of such
net assets, since the Administrator also receives a fee from the
Trust under the Administration Agreement; see below.)
The Adviser agrees that the above fee shall be reduced,
but not below zero, by an amount equal to its pro-rata portion
(hereafter described) of the amount, if any, by which the total
expenses of the Trust in any fiscal year, exclusive of taxes,
interest and brokerage fees, shall exceed the lesser of (i)
2.5% of the first $30 million of average annual net assets of
the Trust plus 2% of the next $70 million of such net assets of
the Trust plus 1.5% of its average annual net assets in excess of
$100 million, or (ii) 25% of the Trust's total annual investment
income.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Trust; see the
Additional Statement. Under these provisions, the Adviser is
authorized to consider sales of the Trust's shares in making this
allocation.
The Administration Agreement
Under an Administration Agreement (the "Administration
Agreement"), Aquila Management Corporation as Administrator, at
its own expense, provides office space, personnel, facilities and
equipment for the performance of its functions thereunder and as
is necessary in connection with the maintenance of the
headquarters of the Trust and pays all compensation of the
Trust's Trustees, officers and employees who are affiliated
persons of the Administrator.
Under the Administration Agreement, subject to the
control of the Trust's Board of Trustees, the Administrator
provides all administrative services to the Trust other than
those relating to its investment portfolio . Such administrative
services include but are not limited to either keeping the
accounting records of the Trust, including the computation of net
asset value per share and the dividends (provided that pricing of
the Trust's portfolio shall be the responsibility of the Adviser
under the Advisory Agreement) or, at its expense and
responsibility, delegating such duties in whole or in part to a
company satisfactory to the Trust, maintaining the Trust's other
books and records and overseeing the relationships between the
Trust and its transfer agent, custodian, legal counsel, auditors
and principal underwriter, including the negotiation of
agreements in relation thereto, the supervision and coordination
of the performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Trust and for the sale, servicing or
redemption of the Trust's shares. See the Additional Statement
for a further description of functions listed in the
Administration Agreement as part of such duties.
Under the Administration Agreement, the Trust pays a fee
payable monthly and computed on the net asset value of the Trust
at the end of each business day at the annual rate of 0.17 of 1%
of such net asset value. The Administrator has agreed that this
fee shall be reduced, but not below zero, by an amount equal to
its pro-rata portion (hereafter described) of the amount, if any,
by which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual
net assets of the Trust plus 2% of the next $70 million of such
net assets of the Trust plus 1.5% of its average annual net
assets in excess of $100 million, or (ii) 25% of the Trust's
total annual investment income. The pro-rata portion, as between
the Administrator and Adviser, is based on the aggregate of the
fee of the Adviser and the fee of the Administrator (exclusive of
amounts paid or to be paid out for the applicable period pursuant
to the Trust's Distribution Plan).
Information as to the Adviser,
the Administrator and the Distributor
The Adviser is a wholly-owned subsidiary of BANC ONE
CORPORATION, Columbus, Ohio. BANC ONE CORPORATION is one of the
largest U.S. banking organization based on assets. The Adviser
also advises the One Group Family of Mutual Funds with $9.4
billion in assets. The Adviser is currently responsible for
management of over $30 billion in assets, of which over $5.8
billion are short-term assets and $4.8 billion are money market
assets. The Trust has been advised that initially certain Bank
One affiliates of the Adviser intend to use the Trust as an
alternative money market fund for temporary cash investments of
clients. It is expected that substantial funds will be invested
in the Trust from such sources. Since September 11, 1995, an
affiliate of the Adviser, Bank One Trust Company, N.A., has acted
as custodian for the Trust. See the Additional Statement as to
the legality, under the Glass-Steagall Act, of the Adviser's
acting as the Trust's investment adviser.
The Trust's Administrator is administrator to the
Aquilasm Group of Funds which consists of tax-free municipal bond
funds, money market funds and an equity fund. As of September
30, 1995, these funds had aggregate assets of approximately $2.6
billion, of which approximately $700 million consisted of assets
of the money-market funds. The Administrator is controlled by Mr.
Lacy B. Herrmann, through share ownership directly, through a
trust and by his wife. See the Additional Statement for
information on Mr. Herrmann.
For the fiscal year ended September 30, 1995, the fees
payable to the Trust's former adviser under an advisory agreement
in effect until July 19, 1995 were $366,654 and fees payable to
the Adviser under the Advisory Agreement thereafter were $99,642
of which $49,089 was voluntarily waived. During the same period,
fees payable to the Administrator under a former administration
agreement in effect until July 19, 1995 were $366,654 and under
the Administration Agreement in effect thereafter were $58,931
of which $21,561 was waived.
The Distributor currently handles the distribution of the
shares of fourteen funds (six money-market funds, seven tax-free
municipal bond funds and an equity fund) including the Trust.
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. All of the shares of the Distributor are owned by Mr.
Herrmann.
At the date of the 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
officers and directors of the Distributor and Administrator,
including Mr. Herrmann; in anticipation of this transaction, the
Board of Trustees, including a majority of the Independent
Trustees, has approved a new Distribution Agreement for the Trust
with no material change from the currently effective Distribution
Agreement.
DIVIDEND AND TAX INFORMATION
All of the Trust's net income for dividend purposes (see
below) will be declared daily as dividends; see "When Shares Are
Issued and Dividends Are Declared on Them" under "How to Invest
in the Trust" for information as to when dividends are declared.
Dividends are paid within a week before or after the end of each
month and invested in additional shares at net asset value on the
payable date, or, at your election, paid in cash by check. This
election may be made in the Application or by subsequent written
notice to the Agent. You may also elect to have dividends
deposited without charge by electronic funds transfers into an
account at a Financial Institution which is a member of the
Automated Clearing House by completing a Ready Access Features
form. If you redeem all of your shares, you will be credited on
the redemption payment date with the amount of all dividends
declared for the month through the date of redemption, or through
the day preceding the date of redemption in the case of shares
on which income dividends were declared on the same day on which
the shares were issued.
You will receive monthly a summary of your account,
including information as to dividends paid during the month and
the shares credited to your account through reinvestment of
dividends.
Daily dividends will be calculated as follows: the net
income for dividend purposes will be calculated immediately prior
to the calculation of net asset value and will include accrued
interest and original issue and market discount earned since the
last valuation, less the estimated expenses of the Trust and
amortized original issue and market premium for the period.
However, the calculation of the dividend could change under
certain circumstances under the procedures adopted by the Board
of Trustees relating to "amortized cost" valuation; see the
Additional Statement.
Dividends so paid will be taxable to you as ordinary income,
even though reinvested, unless the net income, computed as above,
exceeds "earnings and profits," as determined for tax purposes;
this could occur because net income as so determined will include
certain unrealized appreciation and discount which is not
included for tax purposes. If dividends exceed your ratable share
of "earnings and profits," the excess will reduce the cost or
other tax basis for your shares; any reduction which would
otherwise result in a negative basis will cause the basis to be
reduced to zero, with any remaining amount being taxed as capital
gain. The dividends paid by the Trust will not be eligible for
the 70% dividends received deduction for corporations. Statements
as to the tax status of your dividends will be mailed annually.
It is possible but unlikely that the Trust may have realized
long-term capital gains or losses in a year. If it has any net
long-term gains realized through October 31st of a year, it will
pay a capital gains distribution after that date. It may also pay
a supplemental distribution after the end of its fiscal year. Any
capital gains distribution will be taxed at the same rate as
ordinary income, except that for individuals, trusts and estates
the maximum tax rate on capital gains distributions is 28% even
if the applicable rate on ordinary income for such taxpayers is
higher than 28%.
The Trust will be required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid or credited to you
and on redemption proceeds, if you have not filed with the Trust
a correct Taxpayer Identification Number, certified when
required.
The Trust, during its last fiscal year, qualified and
intends to continue to qualify under subchapter M of the Internal
Revenue Code; if so qualified it will not be liable for Federal
income taxes on amounts distributed by it.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Trust 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 in the
Aquilasm Group of Funds and have the same Administrator and
Distributor as the Trust. All exchanges are subject to certain
conditions described below. As of the date of the Prospectus,
the Aquila Bond or Equity Funds are this Trust, 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 Prime
Cash Fund.
Under the exchange privilege, once any applicable sales
charge has been paid on 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.
The "Eligible Shares" of any Bond or Equity Fund are those
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); or (d) acquired as a result of reinvestment of
dividends and/or distributions on otherwise Eligible Shares.
If you own Eligible Shares of any Bond or Equity Fund, you
may exchange them for shares of any Money-Market Fund or the
shares of any other 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 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 shares of any Bond or Equity Fund without payment of
any sales charge.
Shares of a Money-Market Fund may be exchanged for shares
of another Money-Market Fund or 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 shares of a Bond or Equity Fund only upon
payment of the applicable sales charge. The shares of the Bond or
Equity Fund so acquired are then Eligible Shares.
This Trust, as well as the other Money-Market Funds and
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 Trust 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; and (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.
To effect an exchange, you must complete a form which is
available from the Distributor unless you have elected the
Telephone Exchange feature on the Application. The exchange will
be effected at the relative exchange prices of the shares being
exchanged next determined after receipt by the Distributor of a
properly completed form or Telephone Exchange request. The
exchange prices will be the respective net asset values of the
shares, unless a sales charge is to be deducted in connection
with an exchange of shares of a Money-Market Fund for shares of a
Bond or Equity Fund as described above, in which case the
exchange price of shares of the Bond or Equity Fund will be its
public offering price. Prices for exchanges are determined in the
same manner as for purchases of the Trust's shares. (See "How to
Invest in the Trust.")
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 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
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 Bond or
Equity 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 or Equity 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
Description of Shares
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares and to divide or
combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests
in the Trust. Each share represents an equal proportionate
interest in the Trust with each other share. Upon liquidation of
the Trust, shareholders are entitled to share pro-rata in the net
assets of the Trust 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 Trust may create additional classes of shares
which may differ from each other only as to dividends (subject to
rules and regulations of the Securities and Exchange Commission
or by exemptive order) or the Board of Trustees may, at its own
discretion, create additional series of shares, each of which
will have separate assets and liabilities (in which case any such
series would 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.
[To be updated with information within 30 days of the
effective date] Of the shares of the Trust outstanding on January
***, 1996, ************* held of record ***** shares (***%);
First Fidelity Bank, N.A., 765 Broad Street, Newark, NJ held of
record ***** shares (***%); Mercantile Bank of St. Louis, P.O.
Box 387, St. Louis, MO held of record ******* shares (***%) and
American Trust Company of Hawaii, P.O. Box 3170, Honolulu, HI
held of record ****** shares (***%). The Trust's management is
not aware of any person, other than those named above, who
beneficially owned 5% or more of its outstanding shares on such
date. On the basis of information received from the record owners
listed above, the Trust's management believes (i) that all of the
shares indicated are held for the benefit of custodial or trust
clients; and (ii) that all of such shares could be considered as
"beneficially" owned by the named shareholders in that they
possessed shared voting and/or investment powers as to such
shares.
Voting Rights
Shareholders are entitled to one vote for each full share
held (and fractional votes for fractional shares held) and will
vote on the election of Trustees and on other matters submitted
to the vote of shareholders. No amendment may be made to the
Declaration of Trust without the affirmative vote of the holders
of a majority of the outstanding shares of the Trust. The Trust
may be terminated (i) upon the sale of its assets to another
issuer, or (ii) upon liquidation and distribution of the assets
of the Trust, in either case if such action is approved by the
vote of the holders of a majority of the outstanding shares of
the Trust. If not so terminated, the Trust will continue
indefinitely.
<PAGE>
Application for Churchill Cash Reserves Trust
Please complete steps 1 through 4 and mail to:
ADM, Attn: AquilaSM Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
1-800-952-6666
STEP 1 ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation,
Other Organization or
any Fiduciary capacity
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._____________________________________________________________________
Custodians First Name Middle Initial Last Name
Custodian for_________________________________________________________
Minors First Name Middle Initial Last Name
Under the________________ UGTMA**_____________________________________
Name of State Minors Social Security Number
4._____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or Organization. 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:_______________________
Employers 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
1) ___ By Check
2) ___ By Wire
1) By Check: Make check payable to: CHURCHILL CASH RESERVES TRUST
Amount of investment $ ________________ Minimum initial investment $1,000
2) By Wire: OR
$_________________________________ From_______________________________
Name of Financial Institution
_________________________________ ___________________________________
Financial Institution Account No. Branch, Street or Box#
On_______________________________ ___________________________________
(Date) City State Zip
*NOTE: If investing by wiring of funds, instruct your Financial
Institution to wire funds to:
Bank One, Columbus Account of: (Account name and number,
ABA No. 044000037 or name in which investment is to be
CR A/C 04-01787 registered if new account)
For further credit to Churchill Cash Reserves Trust A/C 6801373500
(A FINANCIAL INSTITUTION IS A COMMERCIAL BANK, SAVINGS
BANK OR CREDIT UNION.)
B. DIVIDENDS
ALL INCOME DIVIDENDS ARE AUTOMATICALLY REINVESTED IN ADDITIONAL SHARES
AT NET ASSET VALUE UNLESS OTHERWISE INDICATED BELOW.
Dividends are to be:___ Reinvested or ___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.
___ 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 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
ADMINISTRATIVE DATA MANAGEMENT CORP. (THE AGENT) toll-free at
1-800-952-6666. To establish this program, please complete Step4,
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, 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
______________________________________ _____________________________
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.
TO MAKE A TELEPHONE EXCHANGE, CALL
THE AGENT AT 1-800-952-6666
The Agent is authorized to accept and act upon my/our or any other
persons telephone instructions to execute the exchange of shares 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.
TO MAKE AN EXPEDITED REDEMPTION,
CALL THE AGENT AT 1-800-952-6666
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 Trust account is
registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
________________________________ ___________________________________
Account Registration Financial Institution AccountNumber
________________________________ ___________________________________
Financial Institution Name Financial Institution Transit/Routing Number
________________________________ ___________________________________
Street City State Zip
F. CHECKING ACCOUNT SERVICE
(Check appropriate box)
___ Yes ___ No
Please open a redemption checking account at Bank One Trust Company,
N.A., in my (our) name(s) as registered and send me (us) a supply of
checks. I (we) understand that this checking account will be subject to the
rules and regulations of Bank One Trust Company, N.A., pertaining thereto
and as amended from time to time. For joint account: Check here whether
either owner ___ is authorized, or all owners ___ are required to sign
checks. IF NO BOX IS CHECKED, TWO SIGNATURES WILL BE REQUIRED ON JOINT
ACCOUNTS.
<PAGE>
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 Name of FinancialInstitution____________________
is maintained StreetAddress___________________________________
City______________________State_____ Zip_________
Name(s) and
Signature(s)of ________________________________
Depositor(s) as they (Please Print)
appear where account X_______________________________ __________
is registered (Signature) (Date)
________________________________
(Please Print)
X_______________________________ __________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositors 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.
<PAGE>
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 Trust and has received and read a current
Prospectus of the Trust and agrees to its terms.
. I/We authorize the Trust and its agents to act upon these instructions
for the features that have been checked.
. I/We acknowledge that in connection with an Autoamatic Investment or
Telephone Investment, if my/our account at the Financial Institution has
insufficient funds, the Trust and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Trust 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 Trust and its agents to
correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Trust account and to charge the account for any
related charges.
. The Trust, 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 more than 183 days during each calendar year
and does not conduct a business in the U.S. which would receive any gain
from the Trust, 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, Trustee, etc. Title Date
* 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 Trusts Agent.
. You may cancel any feature at any time, effective 3 days after the Agent
receives written notice from you.
. Either the Trust 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 Trust 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
1-800-228-7496 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 Trusts Agent.
<PAGE>
[CCRT Prospectus back cover]
Investment Adviser
BANC ONE INVESTMENT ADVISORS CORPORATION
774 Park Meadow Road
Columbus, Ohio 43271-0211
Administrator
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
Distributor
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
Trustees
Lacy B. Herrmann, Chairman
Thomas A. Christopher
Douglas Dean
Ann R. Leven
Theodore T. Mason
Anne J. Mills
William J. Nightingale
James R. Ramsey
Officers
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, Vice President
John M. Herndon, Vice President
Jerry G. McGrew, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
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
Table of Contents....................2
Financial Highlights.................3
Introduction.........................4
Investment of the Trust's Assets.....4
Investment Restrictions..............9
Net Asset Value Per Share...........10
How to Invest In The Trust..........10
How to Redeem Your Investment.......13
Automatic Withdrawal Plan...........17
Management Arrangements.............17
Dividend And Tax Information........19
Exchange Privilege..................20
General Information.................22
Application
CHURCHILL CASH
RESERVES TRUST
A cash
management
investment
[LOGO OF HORSE]
PROSPECTUS
[LOGO OF EAGLE]
One of the
Aquila sm Group of Funds
<PAGE>
CHURCHILL CASH RESERVES TRUST
380 Madison Avenue
Suite 2300
New York, New York 10017
212-697-6666
STATEMENT OF ADDITIONAL INFORMATION
January 31, 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 January 31, 1996, of Churchill Cash Reserves Trust (the
"Trust") which may be obtained from the Trust's Shareholder
Servicing Agent, Administrative Data Management Corp., by writing
to it at: 581 Main Street, Woodbridge, NJ 07095- 1104 or by
calling it at the following numbers:
800-952-6666 toll free or 908-855-5731
or from Aquila Distributors, Inc., the Trust's Distributor, by
writing to it at 380 Madison Avenue, Suite 2300, New York, New
York 10017; or by calling:
212-697-6666
The Annual Report of the Trust for the fiscal year ended
September 30, 1995 will be delivered with the Additional
Statement.
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . . .2
Yield Information . . . . . . . . . . . . . . . . . . . . . . .4
Investment Restrictions . . . . . . . . . . . . . . . . . . . .5
Loans of Portfolio Securities . . . . . . . . . . . . . . . . .6
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . .7
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 10
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 10
Additional Information as to Management Arrangements . . . . . 15
Amortized Cost Valuation . . . . . . . . . . . . . . . . . . . 10
Computation of Daily Dividends . . . . . . . . . . . . . . . . 20
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 20
General Information . . . . . . . . . . . . . . . . . . . . . 20
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INVESTMENT OF THE TRUST'S ASSETS
The Prospectus contains information as to the purchase and
redemption of the Trust's shares. The investment objective and
policies of the Trust are also described in the Prospectus, which
refers to the investments and investment methods described below.
Information on Variable Amount Master Demand Notes
The Trust may buy variable amount master demand notes.
The nature and terms of these obligations are as follows. They
permit the investment of fluctuating amounts by the Trust at
varying rates of interest pursuant to direct arrangements between
the Trust, as lender, and the borrower. They permit daily changes
in the amounts borrowed. The Trust has the right to increase the
amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount, and the
borrower may prepay up to the full amount of the note without
penalty. Because these notes are direct lending arrangements
between the lender and borrower, it is not generally contemplated
that they will be traded, and there is no secondary market for
them. They are redeemable (and thus repayable by the borrower) at
principal amount, plus accrued interest, at any time on not more
than thirty days' notice. The Trust has no limitations on the
amount of its assets invested in such notes. However, except for
those which are payable at principal amount plus accrued interest
within seven days after demand, such notes are securities which
are not readily marketable, and fall within the Trust's overall
10% limitation on securities with limited liquidity. There is no
limitation on the type of issuer from which these notes will be
purchased; however, all such notes must be Eligible Securities
and in connection with such purchases and on an ongoing basis,
Banc One Investment Advisors Corporation (the "Adviser") must
determine, pursuant to procedures approved by the Board of
Trustees, that such obligations present minimal credit risks. In
addition, the Adviser will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay
principal and interest on demand or on the specified notice, as
the case may be, including a situation in which all holders of
such notes make demand simultaneously. Master demand notes, as
such, are not typically rated by credit rating agencies, and if
not so rated the Trust may invest in them only if at the time of
an investment they are determined to be comparable in quality to
rated issues in which the Trust can invest.
Information On Insured Bank Obligations
The Federal Deposit Insurance Corporation ("FDIC") insures
the deposits of Federally insured banks and, effective August 9,
1989, savings institutions (collectively, herein, "banks") up to
$100,000. On that date the FDIC assumed the insurance functions
of the Federal Savings and Loan Insurance Corporation, which was
abolished. The Trust may purchase bank obligations which are
fully insured as to principal by the FDIC. To remain fully
insured as to principal, these investments must currently be
limited to $100,000 per bank; if the principal amount and accrued
interest together exceed $100,000 then the excess accrued
interest will not be insured. Insured bank obligations may have
limited marketability; unless the Board of Trustees determines
that a readily available market exists for such obligations, the
Trust will invest in them only within the 10% limit mentioned in
the Prospectus unless such obligations are payable at principal
amount plus accrued interest on demand or within seven days after
demand.
Information about Certain Other Obligations:
The Trust may purchase obligations other than those listed
in categories 1 through 5 under "Investment of the Trust's
Assets," in the Prospectus, but only if such other obligations
are guaranteed as to principal and interest by either a bank in
whose obligations the Trust may invest or a corporation in whose
commercial paper the Trust may invest. If any such guarantee is
unconditional and is itself an Eligible Security, the obligation
may be purchased based on the guarantee; if any such guarantee is
not unconditional, purchase of the obligation can only be made if
the underlying obligation is an Eligible Security and meets all
other applicable requirements of Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission. See "Effect of the Rule on
Portfolio Management" in the Prospectus. As of the date of this
Additional Statement the Trust does not own any such obligations
and has no present intention of purchasing any. Such obligations
can be any obligation of any kind so guaranteed, including, for
example, obligations created by "securitizing" various kinds of
assets such as credit card receivables or mortgages. If the Trust
invests in these assets, they will be identified in the Trust's
Prospectus; and described in the Additional Statement.
Turnover
In general, the Trust will purchase securities with the
expectation of holding them to maturity. However, the Trust may
to some degree engage in short-term trading to attempt to take
advantage of short-term market variations. The Trust may also
sell securities prior to maturity to meet redemptions or as a
result of a revised management evaluation of the issuer. The
Trust will have a high portfolio turnover due to the short
maturities of the securities held, but this should not affect net
asset value or income, as brokerage commissions are not usually
paid on the securities in which the Trust invests. (In the usual
calculation of portfolio turnover, securities of the type in
which the Trust invests are excluded; consequently, the high
turnover which the Trust will have is not comparable to the
turnover of non-money-market investment companies.)
When-Issued and Delayed Delivery Securities
The Trust may purchase securities on a when-issued or
delayed delivery basis. For example, delivery and payment may
take place a month or more after the date of the transaction. The
purchase price and the interest rate payable on the securities
are fixed on the transaction date. At the time the Trust makes
the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction and
thereafter reflect the value of such securities each day in
determining its net asset value. The Trust will make commitments
for such when-issued transactions only when it has the intention
of actually acquiring the securities. The Trust will maintain
with the Custodian and mark to market every business day a
separate account with portfolio securities in an amount at least
equal to such commitments. On delivery dates for such
transactions, the Trust will meet its obligations from maturities
or sales of the securities held in the separate account and/or
from cash flow. If the Trust chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation,
incur a gain or loss due to market fluctuation.
Diversification and Certain Industry Requirements
The Trust has a rule, set forth in the Prospectus, under
which it cannot buy the securities of issuers in any one industry
if more than 25% of its total assets would then be invested in
securities of issuers of that industry. In applying this rule to
commercial paper issued by finance subsidiaries or affiliates of
operating companies, if the business of the issuer consists
primarily of financing the activities of the related operating
company, the Trust considers the industry of the issuer to be
that of the related operating company.
YIELD INFORMATION
There are two methods by which the Trust's yield for a
specified period of time is calculated.
The first method, which results in an amount referred to as
the "current yield," assumes an account containing exactly one
share at the beginning of the period. (The net asset value of
this share will be $1.00 except under extraordinary
circumstances.) The net change in the value of the account during
the period is then determined by subtracting this beginning value
from the value of the account at the end of the period; however,
excluded from the calculation are capital changes, i.e., realized
gains and losses from the sale of securities and unrealized
appreciation and depreciation.
This net change in the account value is then divided by the
value of the account at the beginning of the period (i.e.,
normally $1.00 as discussed above) and the resulting figure
(referred to as the "base period return") is then annualized by
multiplying it by 365 and dividing it by the number of days in
the period; the result is the "current yield." Normally a seven
day period will be used in determining yields (both the current
and the effective yield discussed below) in published or mailed
advertisements.
The second method results in an amount referred to as the
"compounded effective yield." This represents an annualization of
the current yield with dividends reinvested daily. This
compounded effective yield for a seven-day period would be
computed by compounding the unannualized base period return by
adding one to the base period return, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result.
Since calculations of both kinds of yields do not take into
consideration any realized or unrealized gains or losses on the
Trust's portfolio securities which may have an effect on
dividends, the dividends declared during a period may not be the
same on an annualized basis as either kind of yield for that
period.
Yield information may be useful to investors in reviewing
the Trust's performance. However, a number of factors should be
taken into account before using yield information as a basis for
comparison with alternative investments. An investment in the
Trust is not insured and its yields are not guaranteed. They
normally will fluctuate on a daily basis. The yields for any
given past period are not an indication or representation by the
Trust of future yields or rates of return on its shares and,
therefore, they cannot be compared to yields on savings accounts
or other investment alternatives which often provide a guaranteed
fixed yield for a stated period of time, and may be insured by a
government agency. In comparing the yields of one money market
fund to another, consideration should be given to each fund's
investment policy, portfolio quality, portfolio maturity, type of
instruments held and operating expenses.
INVESTMENT RESTRICTIONS
The Trust has a number of policies concerning what it can
and cannot do. Those policies, which are called "fundamental
policies" may not be changed unless the holders of a majority, as
defined in the Investment Company Act of 1940 (the "1940 Act"),
of the Trust's outstanding shares vote to change them. Under the
1940 Act, the vote of the holders of a majority of the
outstanding shares of the Trust means the vote of the holders of
the lesser of (a) 67% or more of the Trust's shares present at a
meeting or represented by proxy if the holders of more than 50%
of its shares are so present or represented, or (b) more than 50%
of its outstanding shares. Those fundamental policies not set
forth in the Prospectus are set forth below.
1. The Trust invests only in certain limited securities.
The Trust cannot buy any voting securities, any commodities
or commodity contracts, any mineral related programs or leases,
any shares of other investment companies or any warrants, puts,
calls or combinations thereof.
The Trust cannot purchase or hold the securities of any
issuer if, to its knowledge, Trustees, Directors or officers of
the Trust 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 Trust cannot buy real estate or any non-liquid interests
in real estate investment trusts; however, it can buy any
securities which it could otherwise buy even though the issuer
invests in real estate or interests in real estate.
2. Almost all of the Trust's assets must be in established
companies.
Only 5% of the Trust's total assets may be in issuers less
than three years old, that is, which have not been in continuous
operation for at least three years. This includes the operations
of predecessor companies.
3. The Trust does not buy for control.
The Trust cannot invest for the purpose of exercising
control or management of other companies.
4. The Trust does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin.
5. The Trust is not an underwriter.
The Trust cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, it cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
LOANS OF PORTFOLIO SECURITIES
The Trust may, to increase its income, lend its securities
on a short- or long-term basis to broker-dealers, banks or
certain other financial institutions (see below) if (i) the loan
is collateralized in accordance with applicable regulatory
requirements (the "Guidelines") and if (ii) after any loan, the
value of the securities loaned does not exceed 10% of the value
of its total assets. As of the date of this Additional Statement,
the Trust does not foresee lending securities if after any loan
the value of loaned securities exceeds 5% of the value of its
total assets. The financial institutions other than
broker-dealers or banks to which the Trust can lend its
securities are limited to "accredited investors," as that term is
defined in Section 2(15) of the Securities Act of 1933. (In
general, such institutions are insurance companies, investment
companies and certain employee benefit plans.) Under the present
Guidelines (which are subject to change) the loan collateral
must, on each business day, at least equal the value of the
loaned securities and must consist of cash, bank letters of
credit or U.S. Government securities. To be acceptable as
collateral, a letter of credit must obligate a bank to pay
amounts demanded by the Trust if the demand meets the terms of
the letter. Such terms and the issuing banks would have to be
satisfactory to the Trust. Any loan might be secured by any one
or more of the three types of collateral. In addition, any such
investment must meet the applicable requirements of the Rule. See
"Effect of the Rule on Portfolio Management" in the Prospectus.
The Trust receives amounts equal to the interest or other
distributions on loaned securities and also receives one or more
of the negotiated loan fees, interest on securities used as
collateral or interest on the securities purchased with such
collateral, either of which types of interest may be shared with
the borrower. The Trust may also pay reasonable finder's,
custodian and administrative fees but only to persons not
affiliated with the Trust. The terms of the Trust's loans will
meet certain tests under the Internal Revenue Code and permit the
Trust to terminate the loan and thus reacquire loaned securities
on five days' notice.
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 ("Rule 12b-1") under the 1940 Act (the "1940 Act").
Rule 12b-1 provides in substance that an investment company may
not engage directly or indirectly in financing any activity which
is primarily intended to result in the sale of its shares except
pursuant to a plan adopted under Rule 12b-1. The Plan is designed
to protect against any claim involving the Trust that the
administration fee and some of the expenses which the Trust pays
or may pay come within the purview of Rule 12b-1. The Trust
believes it is not financing any such activity and does not
consider such fee or any payment enumerated in the Plan as so
financing any such activity. However, it might be claimed that
such fee and some of the expenses the Trust pays come within the
purview of Rule 12b-1. If and to the extent that any payments
(including fees) specifically listed in the Plan are considered
to be primarily intended to result in or are indirect financing
of any activity which is primarily intended to result in the sale
of Trust shares, these payments are authorized under the Plan.
As used in the Plan, "Qualified Recipients" means (i) any
principal underwriter or underwriters of the Trust (other than a
principal underwriter which is an affiliated person, or an
affiliated person of an affiliated person, of the Administrator)
and (ii) broker-dealers or others selected by Aquila Management
Corporation (the "Administrator") with which it has entered into
written agreements ("Related Agreements") contemplated by Rule
12b-1 and which have rendered assistance (whether direct,
administrative or both) in the distribution and/or retention of
the Trust's shares or servicing shareholder accounts. "Qualified
Holdings" means, as to any Qualified Recipient, all Trust shares
beneficially owned by such Qualified Recipient or by one or more
of customers (brokerage or other) or other contacts and/or its
investment advisory or other clients, if the Qualified Recipient
was, in the sole judgment of the Administrator, instrumental in
the purchase and/or retention of such Trust shares and/or in
providing administrative assistance in relation thereto.
The Plan permits the Administrator to make payments
("Permitted Payments") to Qualified Recipients. These Permitted
Payments are made by the Administrator and are not reimbursed by
the Trust to the Administrator. Permitted Payments may not
exceed, for any fiscal year of the Trust (pro-rated for any
fiscal year which is not a full fiscal year), 0.10 of 1% of the
average annual net assets of the Trust. The Administrator shall
have sole authority (i) as to the selection of any Qualified
Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) to determine the amount of Permitted
Payments, if any, to each Qualified Recipient, provided that the
total Permitted Payments to all Qualified Recipients do not
exceed the amount set forth above. The Administrator is
authorized, but not directed, to take into account, in addition
to any other factors deemed relevant by it, the following: (a)
the amount of the Qualified Holdings of the Qualified Recipient;
(b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area; and (c)
the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient.
The Plan recognizes that, in view of the Permitted Payments
and bearing by the Administrator of certain distribution
expenses, the profits, if any, of the Administrator are dependent
primarily on the administration fees paid by the Trust to the
Administrator and that its profits, if any, would be less, or
losses, if any, would be increased due to such Permitted Payments
and the bearing by it of such expenses. If and to the extent that
any such administration fees paid by the Trust 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 Trust, the payment of such fees is authorized by
the Plan.
The Plan does not contain any limit as to the source of the
assets which the Administrator may use to make Permitted Payments
under the Plan and therefore it may use any of its assets for
such purpose, whether or not such assets are derived from the
Administration fee.
The Plan also 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 Trust
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 Trust 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 Trust'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 Trust 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 Trust'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 whenever the
Administrator bears the costs, not borne by the Trust's
Distributor, 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, or the costs of supplemental sales literature and
advertising, such payments are authorized.
The Plan states that while it is in effect, the selection
and nomination of those Trustees of the Trust who are not
"interested persons" of the Trust 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 Trust's
Administrator shall report at least quarterly to the Trust's
Trustees in writing for its review on the following matters: (i)
all Permitted Payments made to Qualified Recipients, the identity
of the Qualified Recipient of each Payment and the purpose for
which the amounts were expended; (ii) all costs of each item
specified in the second preceding paragraph (making estimates of
such costs where necessary or desirable) during the preceding
calendar or fiscal quarter; and (iii) all fees of the Trust to
the Administrator paid or accrued during such quarter.
The Plan defines as the Trust's Independent Trustees those
Trustees who are not "interested persons" of the Trust 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 Trust's Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. In voting on the implementation or continuance of
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 Trust 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 Trust. 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 states that in the case of a Qualified Recipient
which is a principal underwriter of the Trust the Related
Agreement shall be the agreement contemplated by Section 15(b) of
the 1940 Act since each such agreement must be approved in
accordance with, and contain the provisions required by, Rule
12b-1. The Plan also states that in the case of Qualified
Recipients which are not principal underwriters of the Trust, the
Related Agreements with them shall be approved in accordance
with, and contain the provisions required by, Rule 12b-1.
Under Rule 12b-1, all Related Agreements must be in writing
and must contain specified adoption and continuance requirements,
including a requirement that they terminate automatically on
their "assignment," as that term is defined in the 1940 Act. The
other adoption and continuance requirements as to Related
Agreements are the same as those described above as to the Plan
itself except that: (i) no shareholder action is required for the
approval of Related Agreements, and (ii) termination by Trustee
or shareholder action as there described may be on not more than
60 days' written notice.
During the Trust's fiscal year ended September 30, 1995,
no Qualified Payments were made by the Administrator to Qualified
Recipients.
The formula under which the payments described above may be
made under the Plan by the Administrator was arrived at by
considering a number of factors. One of such factors is that such
payments are designed to provide incentives for Qualified
Recipients (i) in the case of Qualified Recipients which are
principal underwriters, to act as such and (ii) in the case of
all Qualified Recipients, to devote substantial time, persons and
effort to the sale of the shares of the Trust. Another factor is
that such payments by the Administrator to Qualified Recipients
provide the only incentive for Qualified Recipients to do so
since there is no sales charge on the sale of the Trust's shares.
Another factor is that the Trust is one of a group of funds
having certain common characteristics. Each such fund (i) is a
money market fund; and (ii) has as its investment adviser a
banking institution or an affiliate which invests assets over
which it has investment authority in money market funds advised
by other banking institutions or affiliates. The marketing of the
Trust's shares may be facilitated since each such institution
can, due to these common characteristics, be fully and currently
informed as to the quality of the investments of and other
aspects of the operations of each of the other funds and if such
an investment is otherwise appropriate, can, although not
required to do so, invest assets over which it has investment
authority in one or more of the other funds.
LIMITATION OF REDEMPTIONS IN KIND
The Trust has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Trust 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 Trust during any 90-day period for
any one shareholder. Should redemptions by any shareholder exceed
such limitation, the Trust 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 Aquila Management Corporation, the
Administrator of the Trust, and Aquila Distributors, Inc., the
Distributor of the Trust, and their principal occupations during
at least the past five years are set forth below. The Trust is
one of the Aquilasm Group of Funds, which consists of fourteen
funds, six money market funds, seven tax-free municipal bond
funds and an equity fund . None of the Trustees or officers of
the Trust is affiliated with the Adviser. As of January ***,
1996, the Trustees and officers of the Trust owned less than 1%
of its outstanding shares. Mr. G. Philip Williams resigned in
May, 1995 because of the need to devote more time to other
business. Mr. Robert Sanchez resigned in May, 1995 because he is
no longer associated with the Administrator. Mr. Dean, Ms. Leven
and Mr. Ramsey were elected Trustees by the shareholders of the
Trust at the Trust's annual meeting on August 18, 1995. 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. Leven is an interested person as a
beneficiary of a trust that owns shares of the parent company of
the Adviser. They are so designated by an asterisk.
Lacy B. Herrmann*, President and Chairman of the Board of
Trustees, 380 Madison Avenue, New York, New York 10017
Founder of the Trust and President and a Director of the
Administrator since 1984; Chairman and President, Chief Executive
Officer (Chairman of the Board of Trustees and/or President) and
Trustee of Capital Cash Management Trust ("CCMT"), since 1981 and
Founder and executive officer (since 1974) of CCMT and its
predecessor; Founder, President and Chairman of the Board of
Trustees of Prime Cash Fund since 1982, of Short Term Asset
Reserves and Pacific Capital Cash Assets Trust since 1984, of
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988 and of Cascades Cash
Fund, 1989-1994, all of which are money market funds to which the
Administrator is administrator and which are referred to as the
"Money Funds"; Founder, President and Chairman of the Board of
Trustees of Hawaiian Tax-Free Trust since 1984, of Tax-Free Trust
of Arizona and Tax-Free Trust of Oregon since 1986, of Churchill
Tax-Free Fund of Kentucky and Tax-Free Fund of Colorado since
1987 and of Tax-Free Fund For Utah and Narragansett Insured
Tax-Free Income Fund since 1992, all of which are tax-free
municipal bond funds, and an equity fund, Aquila Rocky Mountain
Equity Fund since 1993, to all of which the Administrator is
administrator and which are referred to as the "Bond and Equity
Funds"; Vice President, a Director and Secretary since 1981
(formerly Treasurer) of the Distributor, which is distributor
(i.e., principal underwriter) for the Money Funds and the Bond
and Equity Funds; President and a Director of STCM Management
Company, Inc., 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; Director or Trustee of the various Quest for
Value Funds, a group of stock, bond and money market mutual
funds, since 1983; Director of Saratoga Advantage Trust, a group
of mutual funds, since 1994; Trustee of Brown University since
1990; actively involved for many years in leadership roles with
university, school and charitable organizations.
Thomas A. Christopher, Trustee, 459 West Green Street, Danville,
Kentucky 40422
Shareholder of Robinson, Hughes & Christopher, C.P.A.s,
P.S.C., since 1977; President of A Good Place for Fun, Inc., a
sports facility, since 1987; active member of the American
Institute of Certified Public Accountants; Board of Directors of
the Kentucky Society of CPAs; Trustee of Churchill Tax-Free Fund
of Kentucky since 1992; presently active in leadership roles
with various civic, community and church organizations.
Douglas Dean, Trustee, 106 West Vine Street, Suite 600,
Lexington, Kentucky 40507
Founder and President of Dean, Dorton & Ford P.S.C., a public
accounting firm, since 1979; previously Staff Accountant, Tax
Supervisor and Tax Manager with Coopers & Lybrand, a public
accounting firm; Trustee of Trent Equity Fund, an equity mutual
fund, 1992-1994; Trustee of Churchill Tax-Free Fund of Kentucky
since 1987; Active as an officer and board member of various
charitable and community 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 and of Cascades Cash Fund,
1989-1994; 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.
Theodore T. Mason, Trustee, 26 Circle Drive, Hastings-on-Hudson,
New York 10706
Managing Director of EastWind Power Partners, Ltd. since
1994; Director of Cogeneration Development of Willamette
Industries, Inc., a forest products company, 1991-1993; Vice
President of Corporate Development of Penntech Papers, Inc.,
1978-1991; Vice President of Capital Projects for the same
company, 1977-1978; Vice Chairman of the Board of Trustees of
CCMT since 1981; Trustee and Vice President, 1976-1981, and
formerly Director of its predecessor; Director of STCM Management
Company, Inc.; Vice Chairman of the Board of Trustees and Trustee
of Prime Cash Fund since 1982; Trustee of Short Term Asset
Reserves, 1984-1986 and since 1989, of Hawaiian Tax-Free Trust
and Pacific Capital Cash Assets Trust since 1984, of Pacific
Capital Tax-Free Cash Assets Trust and Pacific Capital U.S.
Treasuries Cash Assets Trust since 1988 and of Churchill Tax-Free
Fund of Kentucky since 1992; Vice President and Trustee of Oxford
Cash Management Fund, 1983-1989; Vice President of Trinity Liquid
Assets Trust, 1983-1985; President and Director of Ted Mason
Venture Associates, Inc., a venture capital consulting firm,
1972-1980; Advisor to the Commander, U.S. Maritime Defense Zone
Atlantic, 1984-1988; National Vice President, Surface/Subsurface,
Naval Reserve Association, 1985-1987; National Vice President,
Budget and Finance, for the same Association, 1983-1985;
Commanding Officer of four Naval Reserve Units, 1974-1985;
Captain, USNR, 1978-1988.
Anne J. Mills, Trustee, 167 Glengarry Place, Castle Pines
Village, Castle Rock, Colorado 80104 {OR FOR TFTA ONLY - 7030
East Shooting Star Way, Scottsdale, Arizona 85262}
V ice President for Business Affairs of Ottawa University since
1992; Director of Customer Fulfillment, U.S. Marketing and
Services Group, IBM Corporation, 1990- 1991; Director of Business
Requirements of that Group, 1988- 1990; Director of Phase
Management of that Group, 1985- 1988; Budget Review Officer of
the American Baptist Churches/USA since 1994; Director of the
American Baptist Foundation since 1985; Trustee of Brown
University; Trustee of Tax-Free Trust of Arizona since 1986, of
Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado
and Capital Cash Management Trust since 1987 and of Tax-Free Fund
For Utah since 1994.
William J. Nightingale, Trustee, 3 Forest Street, New Canaan,
Connecticut 06840
Chairman and founder (1975) and Senior Advisor since 1995 of
Nightingale & Associates, Inc., a general management consulting
firm focusing on interim management, divestitures, turnaround of
troubled companies, corporate restructuring and financial
advisory services; President, Chief Executive Officer and
Director of Bali Company, Inc., a manufacturer of women's
apparel, which became a subsidiary of Hanes Corporation,
1970-1975; prior to that, Vice President and Chief Financial
Officer of Hanes Corporation after being Vice President-Corporate
Development and Planning of that company, 1968-1970; formerly
Senior Associate of Booz, Allen & Hamilton, management
consultants, after having been Marketing Manager with General
Mills, Inc.; Trustee of Narragansett Insured Tax-Free Income Fund
since 1992 and of Churchill Tax-Free Fund of Kentucky since 1993;
Director of Spreckels Industries, Inc. (beet sugar processing
and various industrial manufacturing companies); Glasstech Inc.
(glass bending equipment and engineering) and Ring's End, Inc.
(retail lumber and building supply chain).
James R. Ramsey, Trustee, 109 Wetherby Building, Western
Kentucky University, Bowling Green, Kentucky 42101
V ice President for Finance and Administration, and Professor
of Economics, Western Kentucky University; Trustee of Churchill
Tax-Free Fund of Kentucky since 1987; Chief State Economist and
Executive Director of the Office for Financial Management and
Economic Analysis of the Commonwealth of Kentucky, 1981-1992;
Adjunct Professor of the University of Kentucky; Assistant Dean
and Director of Public Administration of Loyola University in New
Orleans, Louisiana, 1978-1981; Assistant Professor of Public
Finance and Administration of Loyola University, 1977-1981;
Assistant Professor of Economics, Middle Tennessee State
University, 1975-1977; published numerous articles, monographs
and working papers on economics and fiscal management .
Diana P. Herrmann, Vice President, 380 Madison Avenue, New York,
New York 10017
Senior Vice President and Secretary and formerly Vice
President of the Administrator since 1986 and Director since
1984; Trustee of Tax-Free Trust of Arizona and Tax-Free Trust of
Oregon since 1994 and of Churchill Tax-Free Fund of Kentucky
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 Trust's President;
Trustee of the Leopold Schepp Foundation (academic scholarships)
since 1995; actively involved in mutual fund and trade
associations and in college and other volunteer
organizations.
Charles E. Childs, III, Vice President, 380 Madison Avenue, New
York, New York 10017
Vice President - Administration and formerly Assistant Vice
President and Associate of the Administrator since 1987; Vice
President or Assistant Vice President of the Money Funds since
1988; Northeastern University, 1986-1987 (M.B.A., 1987);
Financial Analyst, Unisys Corporation, 1986; Associate Analyst at
National Economic Research Associates, Inc. (NERA), a
micro-economic consulting firm, 1979-1985.
John M. Herndon, Vice President, 380 Madison Avenue, New York,
New York 10017
Assistant Secretary of the Money Funds and the Bond and Equity
Funds since 1995; Vice President of the Money 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.
Jerry G. McGrew, Vice President, P.O. Box 662, Radcliff,
Kentucky 40159
Senior Vice President of Churchill Tax-Free Fund of Kentucky
since 1994, Vice President since 1987; Vice President of Tax-Free
Fund For Utah since 1992; Registered Principal since 1993; Vice
President of Aquila Distributors, Inc. since 1993; Registered
Representative of J.J.B. Hilliard, W.L. Lyons Inc., 1983-1987;
Account Manager with IBM Corporation, 1967-1981; Gubernatorial
appointee, Kentucky Financial Institutions Board, since 1993;
Chairman, Total Quality Management for Small Business, 1990-1994;
President of Elizabethtown/Hardin County, Kentucky, Chamber of
Commerce, 1989-1991; President of Elizabethtown Country Club,
1983-1985.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Money Funds and the Bond and
Equity Funds since 1991; Treasurer of the Money Funds and the
Bond and Equity Funds, 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 Money Funds and the 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 Money Funds and the Bond and Equity Funds since
1982; Secretary of Trinity Liquid Assets Trust, 1982-1985 and
Trustee of that Trust, 1985-1986; Secretary of Oxford Cash
Management Fund, 1982-1988.
Patricia A. Craven, Assistant Secretary & Compliance Officer,
380 Madison Avenue, New York, New York 10017
Assistant Secretary of the Money Funds and the Bond and Equity
Funds since 1995; Counsel to the Administrator and the
Distributor since 1995; formerly a Legal Associate for
Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
The Trust does not pay fees to Trustees affiliated with the
Administrator or to any of the Trust's officers. During the
fiscal year ended September 30, 1995, the Trust paid $43,749 in
fees and reimbursement of expenses to its other Trustees. The
Trust is one of the 14 funds in the Aquilasm Group of Funds,
which consist of tax-free municipal bond funds, money market
funds and an equity fund. The following table lists the
compensation of all Trustees who received compensation from the
Trust and the compensation they received during the Trust's
fiscal year from other funds in the Aquilasm Group of Funds. None
of such Trustees has any pension or retirement benefits from the
Trust or any of the other funds in the Aquila group.
Compensation Number of
from all boards
Compensation funds in the which the
Name from the Trust Aquila Group Trustee now
serves
Thomas A. $6,498 $15,268 2
Christopher
Douglas Dean $400 $8,200 2
Ann R. Levin $350 $14,300 3
Theodore T. $5,867 $41,692 8
Mason
Anne J. $6,292 $32,236 6
Mills
William J. $6,026 $16,819 3
Nightingale
James R. $250 $9,475 2
Ramsey
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Advisory Agreement
The Investment Advisory Agreement (the "Advisory
Agreement") between the Trust and the Adviser contains the
provisions described below, in addition to those described in the
Prospectus. The Advisory Agreement became effective on July 19,
1995. Prior to that date, PNC Bank, Kentucky, Inc. acted as the
Trust's investment adviser under a former advisory agreement that
terminated on that date.
The Advisory Agreement may be terminated by the Adviser at
any time without penalty upon giving the Trust sixty days'
written notice, and may be terminated by the Trust at any time
without penalty upon giving the Adviser sixty days' written
notice, provided that such termination by the Trust 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).
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 Agreement provides that in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, the Adviser is not
liable for any loss sustained by the adoption of any investment
policy or the purchase, sale or retention of any security and
permits the Adviser to act as investment adviser for any other
person, firm or corporation. The Trust agrees to indemnify the
Adviser to the full extent permitted under the Trust's
Declaration of Trust.
The Advisory Agreement states that it is agreed that the
Adviser shall have no responsibility or liability for the
accuracy or completeness of the Trust's Registration Statement
under the Securities Act of 1933 and the 1940 Act except for the
information supplied by the Adviser for inclusion therein.
The Advisory Agreement contains the following provisions as
to the Trust's portfolio transactions. In connection with its
duties to arrange for the purchase and sale of the Trust's
portfolio securities, the Adviser shall select such
broker-dealers ("dealers") as shall, in the Adviser's judgment,
implement the policy of the Trust to achieve "best execution,"
i.e., prompt, efficient and reliable execution of orders at the
most favorable net price. The Adviser shall cause the Trust to
deal directly with the selling or purchasing principal or market
maker without incurring brokerage commissions unless the Adviser
determines that better price or execution may be obtained by
paying such commissions; the Trust expects that most transactions
will be principal transactions at net prices and that the Trust
will incur little or no brokerage costs. The Trust understands
that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread
between the bid and asked prices. In allocating transactions to
dealers, the Adviser is authorized to consider, in determining
whether a particular dealer will provide best execution, the
dealer's reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the difficulty of
the transaction in question, and thus need not pay the lowest
spread or commission available if the Adviser determines in good
faith that the amount of commission is reasonable in relation to
the value of the brokerage and research services provided by the
dealer, viewed either in terms of the particular transaction or
the Adviser's overall responsibilities as to the accounts as to
which it exercises investment discretion. If, on the foregoing
basis, the transaction in question could be allocated to two or
more dealers, the Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of the Trust or any other investment
company or companies having the Adviser as its investment adviser
or having the same sub-adviser, Administrator or principal
underwriter as the Trust. 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 Trust recognizes that no dollar
value can be placed on such research services or on execution
services, that such research services may or may not be useful to
the Trust and/or other accounts of the Adviser and that research
received by such other accounts may or may not be useful to the
Trust.
Glass-Steagall Act
In 1971 the United States Supreme Court held in
Investment Company Institute v. Camp that the federal statute
commonly referred to as the Glass-Steagall Act prohibits a
national bank from operating a fund for the collective investment
of managing agency accounts. Subsequently, the Board of Governors
of the rr
Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such
decision: (a) forbid a bank holding company registered under the
Federal Bank Holding Company Act of 1956 (the "Holding Company
Act") or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment
company continuously engaged in the issuance of its Shares, but
(b) do not prohibit such a holding company or affiliate from
acting as investment adviser, transfer agent, and custodian to
such an investment company. In 1981, the United States Supreme
Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its
authority under the Holding Company Act when it adopted its
regulation and interpretation authorizing bank holding companies
and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. In the Board of
Governors case, the Supreme Court also stated that if a national
bank complied with the restrictions imposed by the Board in its
regulation and interpretation authorizing bank holding companies
and their non-bank affiliates to act as investment advisers to
investment companies, a national bank performing investment
advisory services for an investment company would not violate the
Glass-Steagall Act. In addition, state securities laws on this
issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.
In the Investment Advisory Agreement with the Trust, the
Adviser has represented to the Trust that it possesses the legal
authority to perform the investment advisory services
contemplated by the agreement and described in the Prospectus and
the Additional Statement without violation of applicable statutes
and regulations. Future changes in either federal or state
statutes and regulations relating to the permissible activities
of banks or bank holding companies and the subsidiaries or
affiliates of those entities, as well as further judicial or
administrative decisions or interpretations of present and future
statutes and regulations, could prevent or restrict the Adviser
from continuing to perform such services for the Trust. Depending
upon the nature of any changes in the services which could be
provided by the Adviser, the Board of Trustees of the Trust would
review the Trust's relationship with the Adviser and consider
taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative
action prohibit or restrict the proposed activities of BANC ONE
CORPORATION subsidiary banks or their correspondent banks in
connection with customer purchases of shares of the Trust, these
banks might be required to alter materially or discontinue the
services offered by them to customers. It is not anticipated,
however, that any change in the Trust's method of operations
would affect its net asset value per share or result in financial
losses to any customer .
Additional Information as to the Administration Agreement
The Administration Agreement between Aquila Management
Corporation, as Administrator, and the Trust (the "Administration
Agreement") contains the provisions described below in addition
to those described in the Prospectus.
Subject to the control of the Trust's Board of Trustees,
the Administrator provides all administrative services to the
Trust other than those relating to its investment portfolio ; as
part of such duties, the Administrator (i) provides office space,
personnel, facilities and equipment for the performance of the
following functions and for the maintenance of the Trust's
headquarters; (ii) oversees all relationships between the Trust
and its transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of agreements in
relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Trust and for the sale, servicing or
redemption of the Trust's shares; (iii) provides to the Adviser
and to the Trust statistical and other factual information and
advice regarding economic factors and trends, but does not
generally furnish advice or make recommendations regarding the
purchase or sale of securities; (iv) either keeps the accounting
records of the Trust, including the computation of net asset
value per share and the dividends (provided that pricing of the
Trust's portfolio is the responsibility of the Adviser under the
Advisory Agreement) or, at its expense and responsibility,
delegates such duties in whole or in part to a company
satisfactory to the Trust, maintains the Trust's other 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 Trust's insurance
relationships; (v) prepares, on the Trust's behalf and at its
expense, such applications and reports as may be necessary to
register or maintain its registration or that of its shares under
the securities or "Blue-Sky" laws of all such jurisdictions as
may be required from time to time; and (vi) responds to any
inquiries or other communications from shareholders and
broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Trust's shareholder servicing
and transfer agent or distributor, oversees such shareholder
servicing and transfer agent's or distributor's response thereto.
Since the Trust pays its own legal and audit expenses, to the
extent that the Trust'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 Trust.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Trust and the Adviser; it may be terminated by the
Trust at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Trust 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 Trust. In either
case the notice provision may be waived.
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 Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Trust in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Trust agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
For the fiscal year ended September 30, 1995, the fees
payable to the Trust's former adviser under an advisory agreement
in effect until July 19, 1995 were $366,654 and fees payable to
the Adviser under the Advisory Agreement thereafter were $99,642
of which $49,089 was voluntarily waived. During the same period,
fees payable to the Administrator under a former administration
agreement in effect until July 19, 1995 were $366,654 and under
the Administration Agreement in effect thereafter were $58,931 of
which $21,561 was waived. For the fiscal years ended September
30, 1994 and 1993, respectively, the fees payable to the former
adviser under the former advisory agreement then in effect and to
the Administrator under the former administration agreement then
in effect, were, each, $543,130 and $387,719 .
AMORTIZED COST VALUATION
The Trust operates under Rule 2a-7 (the "Rule") of the
Securities and Exchange Commission which permits it to value its
portfolio on the basis of amortized cost. The amortized cost
method of valuation is accomplished by valuing a security at its
cost and thereafter assuming a constant amortization rate to
maturity of any discount or premium, and does not reflect the
impact of fluctuating interest rates on the market value of the
security. This method does not take into account unrealized gains
or losses.
While the amortized cost method provides certainty in
valuation, there may be periods during which value, as determined
by amortized cost, is higher or lower than the price the Trust
would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on the Trust's shares
may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its
portfolio instruments and changing its dividends based on these
changing prices. The converse would apply in a period of rising
interest rates.
Under the Rule, the Trust's Board of Trustees must
establish, and has established, procedures (the "Procedures")
designed to stabilize at $1.00, to the extent reasonably
possible, the Trust's price per share as computed for the purpose
of sales and redemptions. Such procedures must include review of
the Trust's portfolio holdings by the Board of Trustees at such
intervals as it may deem appropriate and at such intervals as are
reasonable in light of current market conditions to determine
whether the Trust's net asset value calculated by using available
market quotations deviates from the per share value based on
amortized cost. "Available market quotations" may include actual
market quotations (valued at the mean between bid and asked
prices), estimates of market value reflecting current market
conditions based on quotations or estimates of market value for
individual portfolio instruments or values obtained from yield
data relating to a directly comparable class of securities
published by reputable sources.
Under the Rule, if the extent of any deviation between the
net asset value per share based upon "available market
quotations" (see above) and the net asset value per share based
on amortized cost exceeds $0.005, the Board of Trustees must
promptly consider what action, if any, will be initiated. When
the Board of Trustees believes that the extent of any deviation
may result in material dilution or other unfair results to
investors or existing shareholders, it is required to take such
action as it deems appropriate to eliminate or reduce to the
extent reasonably practicable such dilution or unfair results.
Such actions could include the sale of portfolio securities prior
to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or payment of
distributions from capital or capital gains, redemptions of
shares in kind, or establishing a net asset value per share using
available market quotations. The Procedures include changes in
the dividends payable by the Trust under specified conditions, as
described below under "Computation of Daily Dividends." This
portion of the Procedures provides that actions that the Trustees
would consider under certain circumstances can be taken
automatically.
COMPUTATION OF DAILY DIVIDENDS
Under the Procedures which the Trust's Board of Trustees has
adopted relating to amortized cost valuation, the calculation of
the Trust's daily dividends will change under certain
circumstances from that indicated in the Prospectus. If on any
day the deviation between net asset value determined on an
amortized cost basis and that determined using market quotations
is $0.003 or more, the amount of such deviation will be added to
or subtracted from the daily dividend to the extent necessary to
reduce such deviation to within $0.003.
If on any day there is insufficient net income to absorb any
such reduction, the Board of Trustees would be required under the
Rule to consider taking other action if the deviation, after
eliminating the dividend for that day, exceeds $0.005. One of the
actions which the Board of Trustees might take could be the
elimination or reduction of dividends for more than one day.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase shares of the Trust having a net
asset value of at least $5,000 you may establish an Automatic
Withdrawal Plan under which you will receive a monthly or
quarterly check in a stated amount, not less than $50. Stock
certificates will not be issued for shares held under an
Automatic Withdrawal Plan. All dividends must be reinvested.
Shares will be redeemed on the last business day of the
month as may be necessary to meet withdrawal payments. Shares
acquired with reinvested dividends will be redeemed first to
provide such withdrawal payments and thereafter other shares will
be redeemed to the extent necessary, and, depending upon the
amount withdrawn, your principal may be depleted.
Redemption of shares for withdrawal purposes may reduce or
even liquidate the account. Monthly or quarterly payments paid to
shareholders may not be considered as a yield or income on
investment.
GENERAL INFORMATION
Net Asset Value Per Share
As indicated in the Prospectus, the net asset value per
share of the Trust'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.
Possible Additional Series
If additional Series (as discussed in the Prospectus) 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 fairly among two or more series in a manner acceptable
to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, as to any investment
company which has two or more Series outstanding as to any matter
required to be submitted to shareholder vote, such matter 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
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders of a trust such as the Trust, may, under certain
circumstances, be held personally liable as partners for the
obligations of the trust. For shareholder protection, however, an
express disclaimer of shareholder liability for acts or
obligations of the Trust 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 Trust or the Trustees. The Declaration of Trust
does, however, contain an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration
of Trust provides for indemnification out of the Trust's property
of any shareholder held personally liable for the obligations of
the Trust. The Declaration of Trust also provides that the Trust
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to the relatively remote circumstances in which the Trust
itself would be unable to meet its obligations. In the event the
Trust 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 Trust, 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 Trust 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 Trust's Custodian is Banc One Trust Company N.A.; it
receives, holds and delivers the Trust's portfolio securities
(including physical securities, book-entry securities, and
securities in depositories) and money, performs related
accounting functions and issues reports to the Trust. The Trust
pays the Custodian (1) an asset-based annual fee, with a minimum
asset-based annual fee, and (2) a fee for each portfolio purchase
transaction of the Trust. The rates of these fees have been
reviewed by the Board of Trustees of the Trust and are believed
to be comparable to those available from other organizations
providing such services. The Custodian is an affiliate of the
Adviser.
The Trust's auditors, KPMG Peat Marwick LLP, perform an
annual audit of the Trust's financial statements.
Financial Statements
The financial statements for the Trust for the fiscal
year ended September 30, 1995, which are contained in the Annual
Report for that fiscal year, are hereby incorporated by reference
into the Additional Statement. Those financial statements have
been audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon is incorporated herein by reference.
APPENDIX A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS
At the date of this Additional Statement there are six
organizations considered as Nationally Recognized Statistical
Rating Organizations ("NRSROs") for purposes of Rule 15c3-1 under
the Securities Exchange Act of 1934. Their names, a brief summary
of their respective rating systems, some of the factors considered
by each of them in issuing ratings and their individual
procedures are described below.
STANDARD AND POOR'S CORPORATION
Commercial paper consists of unsecured promissory notes
issued to raise short-term funds. An S&P commercial paper rating
is a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. S&P's
commercial paper ratings are graded into several categories from
"A-1" for the highest-quality obligations (which can also have a
plus (+) sign designation) to "D" for the lowest. The two highest
categories are:
A-1: This highest category indicates the degree of
safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign.
A-2: Capacity for timely payment on issues with this
designation is satisfactory. However, the relative
degree of safety is not as high for issues designated
A-1.
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific
obligation. The ratings are based, in varying degrees, on the
following considerations:
1) Likelihood of default -- capacity and willingness of
the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligations;
2) Nature of and provisions of the obligation; and
3) Protection afforded by, and relative position of,
the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of
bankruptcy and other
laws affecting creditors' rights.
The two highest categories are:
AAA: Capacity to pay interest and repay principal is
extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in a degree.
MOODY'S INVESTORS SERVICE
Moody's short-term debt ratings are opinions of the ability
of issuers to repay punctually senior debt obligations which have
an original maturity not exceeding one year. Obligations relying
upon support mechanisms such as letters of credit and bonds of
indemnity are excluded unless explicitly rated. The two highest
categories are:
Prime-1: Issuers rated P-1 have a superior ability for
repayment of senior short-term debt obligations,
evidenced by the following characteristics:
* Leading market positions in
well-established industries.
* High rates of return on funds employed.
* Conservative capital structure with
moderate reliance on debt and ample asset
protection.
* Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
* Well-established access to a range of
markets and assured sources of alternative
liquidity.
Prime-2: Issuers rated P-2 have a strong ability for
repayment of senior short-term debt obligations,
evidenced by the above-mentioned characteristics, but
to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still
appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
Corporate bonds rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by large or exceptionally stable margin and principal
is secure. Corporate bonds rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. Aa bonds
are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risk appear
somewhat greater than the Aaa securities.
DUFF & PHELPS, INC.
The ratings apply to all obligations with maturities of under one
year, including commercial paper, the unsecured portion of
certificates of deposit, unsecured bank loans, master notes,
bankers' acceptances, irrevocable letters of credit and current
maturities of long-term debt. The two highest categories are:
D-1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
access to alternative sources of funds is outstanding
and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1: Very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
D-1 -: High certainty of timely payment. Liquidity
factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are very small.
Long-term debt rated AAA represents the highest credit quality.
The risk factors are negligible, being only slightly more than
for risk-free U.S. Treasury debt. Debt rated AA represents high
credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic
conditions.
IBCA
In determining the creditworthiness of financial
institutions, IBCA assigns ratings within the following
categories: Legal, Individual, Short and Long Term. A legal
rating deals solely with the question of whether an institution
would receive support if it ran into difficulties and not whether
it is "good" or "bad". An individual rating looks purely at the
strength of a financial institution without receiving any
support. Short and long-term ratings assess the borrowing
capabilities and the capacity for timely repayment of debt
obligations. A short-term rating relates to debt which has a
maturity of less than one year, while a long-term rating applies
to a instrument of longer duration. The legal ratings are:
1: A bank for which there is a clear legal guarantee on
the part of its home state to provide any necessary
support or a bank of such importance both
internationally and domestically that support from the
state would be forthcoming, if necessary.
2: A bank for which there is no legal obligation on the
part of its sovereign entity to provide support but for
which state support would be forthcoming, for example,
because of its importance to the total economy or its
historic relationship with the government.
The individual ratings are:
A: A bank with a strong balance sheet, favorable
credit profile and a consistent record of above average
profitability.
B: A bank with a sound credit profile and without
significant problems. The bank's performance has
generally been in line with or better than that of its
peers.
The short-term ratings are:
A-1+: Obligations supported by the highest capacity for
timely repayment.
A-1: Obligations supported by a very strong capacity
for timely repayment.
A-2: Obligations supported by a very strong capacity
for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or
financial conditions.
The long-term ratings are:
AAA: Obligations for which there is the lowest
expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial,
such that adverse changes in business, economic or
financial conditions are unlikely to increase
investment risk.
AA: Obligations for which there is a very low
expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial.
Adverse changes in business, economic or financial
conditions may increase investment risk albeit not
significantly.
Thomson BankWatch, Inc. (TBW)
The TBW short-term ratings apply to commercial paper, other
senior short-term obligations and deposit obligations of the
entities to which the rating has been assigned. TBW's two highest
short-term ratings are:
TBW-1: Indicates a very high degree of likelihood that
principal and interest will paid on a timely basis.
TBW-2: While the degree of safety regarding timely
repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues
rated "TBW-1".
The TBW long-term rating specifically assess the likelihood
of an untimely repayment of principal or interest over the term
to maturity of the rated instrument. TBW's two highest long-term
ratings are:
AAA: Indicates ability to repay principal and interest
on a timely basis is very strong.
AA: Indicates a superior ability to repay principal
and interest on a timely basis with limited incremental
risk versus issues rated in the highest category.
Fitch Investors Service, Inc.
The Fitch short-term ratings apply to debt obligations that
are payable on demand which include commercial paper,
certificates of deposit, medium-term notes and municipal and
investment notes. Short-term ratings places greater emphasis than
long-term ratings on the existence of liquidity necessary to meet
the issuer's obligations in a timely manner. Fitch short-term
ratings are:
F-1+: Issues assigned this rating are regarded as
having the strongest degree of assurance for timely
payment.
F-1: Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than
issues rated "F-1+".
The Fitch long-term rating represents their assessment of
the issuer's ability to meet the obligations of a specific debt
issue or class of debt in a timely manner. The rating takes into
consideration special features of the issue, its relationship to
other obligations of the issuer, the current and prospective
financial and operating performance of the issuer and any
guarantor, as well as the economic and political environment that
might affect the issuer's future financial strength and credit
quality. The Fitch long-term rating are:
AAA: Bonds considered to be investment grade and of the
highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Bonds considered to be investment grade and of
very high credit quality. The obligor's ability to pay
interest and repay principal is very strong.
<PAGE>
[CCRT SAI back cover]
Investment Adviser
BANC ONE INVESTMENT ADVISORS CORPORATION
774 Park Meadow Road
Columbus, Ohio 43271-0211
Administrator
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
Distributor
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
Trustees
Lacy B. Herrmann, Chairman
Thomas A. Christopher
Douglas Dean
Ann R. Leven
Theodore T. Mason
Anne J. Mills
William J. Nightingale
James R. Ramsey
Officers
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, Vice President
John M. Herndon, Vice President
Jerry G. McGrew, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
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
CHURCHILL CASH
RESERVES TRUST
A cash
management
investment
[LOGO OF HORSE]
STATEMENT OF
ADDITIONAL
INFORMATION
[LOGO OF EAGLE]
One of the
Aquila sm Group of Funds
<PAGE>
CHURCHILL CASH RESERVES TRUST
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Per Share Income and Capital Changes
Incorporated by reference into Part B:
Report of Independent Certified Public
Accountants
Statement of Assets and Liabilities as of
September 30, 1995
Statement of Operations for the year ended
September 30, 1995
Statement of Changes in Net Assets for the
years ended September 30, 1995 and 1994
Statement of Investments as of September
30, 1995
Notes to Financial Statements
Included in Part C:
Consent of Independent Certified Public
Accountants
(b) Exhibits:
(1) Amended and Restated Declaration of Trust (v)
(2) By-laws (i)
(3) Not applicable
(4) Specimen share certificate (iv)
(5) Investment Advisory Agreement (ix)
(6) Distribution Agreement (iii)
(7) Not applicable
(8) Custody Agreement (ix)
(9) (a) Transfer Agency Agreement (vi)
(b) Administration Agreement (ix)
(10) Opinion and consent of Trust's counsel (ii)
(11) Not Applicable
(12) Not applicable
(13) Agreement with initial shareholder (ii)
(14) Not applicable
(15) Distribution Plan (viii)
(i) Filed as an exhibit to Registrant's Initial Regis-
tration Statement dated February 8, 1985 and incor-
porated herein by reference.
(ii) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 dated May 10, 1985 and incorporated
herein by reference.
(iii) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 2 dated June 7, 1985 and incorporated
herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 2 dated November 28, 1986 and incor-
porated herein by reference.
(v) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 5 dated November 30, 1989 and incorpo-
rated herein by reference.
(vi) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 6 dated November 27, 1991 and incorpo-
rated herein by reference.
(vii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 8 dated January 29, 1993 and incorpo-
rated herein by reference.
(viii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 10 dated January 29, 1993 and incorpo-
rated herein by reference.
(ix) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control with
Registrant
None
ITEM 26. Number of Holders of Securities
As of December 31, 1993, Registrant had 7 holders
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, filed as Exhibit 1 to Registrant's Post-
Effective Amendment No. 5 dated November 30, 1989,
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
Banc One Investment Advisors Corporation, Regis-
trant's investment adviser, performs investment ad-
visory services for mutual fund and other clients.
For information as to the business, profession, vo-
cation, or employment of a substantial nature of
its Directors and officers, reference is made to
the Form ADV filed by it under the Investment Advi-
sers Act of 1940.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal un-
derwriter to Aquila Rocky Mountain Equity Fund, Ca-
pital Cash Management Trust, Cascades Cash Fund,
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, Prime Cash Fund,
Short Term Asset Reserves, Tax-Free Fund For Utah,
Tax-Free Fund of Colorado, Tax-Free Trust of Arizo-
na, and Tax-Free Trust of Oregon, in addition to
serving as 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 adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectus
and Statement of Additional Information.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
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 President, Chairman of 11/29/95
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/ Thomas A. Christopher Trustee 11/29/95
Thomas A. Christopher
/s/ Theodore T. Mason Trustee 11/29/95
Theodore T. Mason
/s/ Anne J. Mills Trustee 11/29/95
Anne J. Mills
/s/ William J. Nightingale Trustee 11/29/95
William J. Nightingale
/s/ Rose F. Marotta Chief Financial Officer 11/29/95
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
CHURCHILL CASH RESERVES TRUST
EXHIBIT INDEX
Exhibit Number Exhibit Name
23 Independent Auditor's Consent
13 Independent Auditor's Report and Financial Statements
10 Investment Advisory Agreement
10 Amended and Restated Administration Agreement
10 Custody Agreement
27 Summary Financial Information
KPMG Peat Marwick LLP
Financial Services
345 Park Avenue
New York, NY 10154
Consent of Independent Auditors
To the Shareholders and Board of Trustees
Churchill Cash Reserves Trust:
We consent to the use of our report dated October 25, 1995
incorporated herein, and to the reference to our firm under the
heading "Financial Highlights" in the Prospectus and under the
headings "Custodian and Auditors" and "Financial Statements" in
the Statement of Additional Information.
November 22, 1995
KPMG Peat Marwick LLP
/s/KPMG Peat Marwick LLP
INDEPENDENT AUDITORS REPORT
To the Board of Trustees and Shareholders of
Churchill Cash Reserves Trust:
We have audited the accompanying statement of assets and
liabilities of Churchill Cash Reserves Trust, including the
statement of investments, as of September 30, 1995, the related
statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in
the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Trusts
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of September 30, 1995, by correspondence with the
custodian. An audit also includes assessing the accounting
principles used, and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Churchill Cash Reserves Trust
as of September 30, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the
years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then
ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
October 25, 1995
<PAGE>
<TABLE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
<C> <S> <C>
FACE
AMOUNT COMMERCIAL PAPER (84.7%) VALUE
Automotive (4.1%)
6,000,000 General Motors Acceptance Corp., 5.770%, 10/02/95 5,999,038
Banking (12.6%)
6,000,000 Barnett Banks, Inc., 5.790%, 10/04/95 5,997,105
6,500,000 Chemical Banking Corp., 5.710%, 11/06/95 6,462,885
6,000,000 Great Western Bank, FSB, 5.770%, 10/10/95 5,991,345
18,451,335
Communications (4.1%)
6,000,000 NYNEX Corp., 5.780%, 10/19/95 5,982,660
Computers (8.9%)
6,500,000 CSC Enterprises, 5.770%, 10/12/95 6,488,540
6,500,000 IBM Credit Corp., 5.700%, 11/17/95 6,451,629
12,940,169
Construction (4.4%)
6,500,000 Caterpillar Financial Services Corp., 5.720%,10/25/95 6,475,213
Electric And Gas Utility (12.4%)
7,500,000 CSW Credit, Inc., 5.750%, 10/16/95 7,482,031
6,020,000 James River Cogeneration Co., 5.740%, 10/26/95 5,996,004
4,600,000 Public Service Electric & Gas Co., 5.780%, 10/23 4,583,752
18,061,787
Finance (17.8%)
7,000,000 ABS Commercial Paper Inc., 5.820%, 10/11/95 6,988,684
7,000,000 Ciesco L.P., 5.700%, 10/06/95 6,994,458
6,000,000 Madison Funding Corp., 5.800%, 10/04/95 5,997,100
6,000,000 Preferred Receivables Funding Corp., 5.730%, 10/16/95 5,985,675
25,965,917
Leasing (8.5%)
6,500,000 International Lease Finance Corp., 5.720%, 10/2 6,477,279
6,000,000 USL Capital Corp., 5.740%, 10/19/95 5,982,780
12,460,059
Natural Resources (4.4%)
6,500,000 Hanson Finance (U.K.) PLC, 5.680%, 11/02/95 6,467,182
Oil (3.4%)
5,000,000 Pemex Capital, Inc., 5.700%, 11/21/95 4,959,625
</TABLE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF INVESTMENTS
<TABLE>
<C> <S> <C>
Face
Amount COMMERCIAL PAPER (CONTINUE Value
Real Estate (4.1%)
$ 6,000,000 Countrywide Funding Corp., 5.800%, 10/12/95 $ 5,989,367
Total Commercial Paper 123,752,352
REPURCHASE AGREEMENTS (14.4%)
7,002,200 Barclays de Zoete Wedd Securities Inc.,
6.000%, 10/02/95 7,002,200
(Proceeds of $7,005,701 to be received at
maturity)
Collateral: $7,047,000 U.S. Treasury Notes,
6.125%, due 07/31/96 (Collateral
Market Value $7,070,123)
14,000,000 Donaldson, Lufkin & Jenrette Securities
Corp., 6.150%, 10/02/95 14,000,000
(Proceeds of $14,007,175 to be received at
maturity)
Collateral: $14,384,000 U.S. Treasury Bills,
due 11/16/95
(Collateral Market Value $14,321,243)
Total Repurchase Agreements
21,002,200
Floating Rate Demand Note (1.3%)
2,000,000 Bank Of New York, 5.470%, 01/12/96
(RESETS WEEKLY - NEXT RESET 10/04/95) 2,000,000
Total Floating Rate Demand Notes
2,000,000
Total Investments 100.4% (cost
$146,754,552*) 146,754,552
Liabilities in excess of other assets (0.4%)
(624,886)
Net Assets - 100% $146,129,666
(*) Cost for Federal income tax purposes is identical.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments at value (cost-$146,754,552) $146,754,552
Interest receivable 32,495
Other assets 17,963
Total assets 146,805,010
LIABILITIES
Dividends payable 621,501
Adviser and Administrator fees payable 36,425
Accrued expenses 17,418
Total liabilities 675,344
NET ASSETS (equivalent to $1.00 per share on
146,129,666 shares outstanding) $146,129,666
Net Assets consist of:
Capital Stock - Authorized an unlimited
number of shares, par value $.01 per share $ 1,461,297
Additional paid-in capital $146,668,369
$146,129,666
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest income $10,386,955
Expenses:
Investment Adviser fees (note B ) $466,296
Administrator fees (note B) 425,585
Legal fees 49,804
Custodian fees 47,973
Trustees fees and expenses 43,749
Audit and accounting fees 23,300
Registration fees and dues 8,893
Transfer and shareholder
servicing agent fees 8,624
Shareholders reports and
proxy statements 6,833
Insurance 4,766
Miscellaneous 20,608
1,106,431
Investment Advisory fees
waived (note B) (48,089)
Administration fees waived
(note B) (21,561)
Net expenses 1,036,781
Net investment income $9,350,174
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
Year Ended Year Ended
September September
30, 1995 30, 1994
FROM INVESTMENT ACTIVITIES:
Net investment income $9,350,174 $6,891,934
Dividends to shareholders ($0.0526 and
$0.0319 per share, respectively) (9,350,174) (6,891,934)
Change in net assets derived from
investment activities - -
</TABLE>
FROM TRUST SHARE TRANSACTIONS:
<TABLE>
<S> <C> <C> <C> <C>
SHARES
Year Ended Year Ended
September September
30, 1995 30, 1994
Shares sold 564,447,918 759,187,430 564,447,918 759,187,430
Shares redeemed (605,946,746) (758,836,381) (605,946,746) (758,836,381)
Shares reinvested 2,081 1,034 2,081 1,034
Increase (decrease)
in shares and net
assets derived from
Trust share
transactions (41,496,747) 352,083 (41,496,747) 352,083
Net increase (decrease)
in net assets (41,496,747) 352,083
NET ASSETS:
Beginning of year 187,626,413 187,274,330
End of year $146,129,666 $187,626,413
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Churchill Cash Reserves Trust (the Trust), a diversified,
open-end investment company, was organized on January 4, 1985,
as a Massachusetts business trust and is authorized to issue
an unlimited number of shares. The Trust commenced operations
on July 9, 1985.
The following is a summary of significant accounting
policies followed by the Trust in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles for investment
companies.
(1) Portfolio valuation: The Trusts portfolio securities are
valued by the amortized cost method permitted in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the
1940 Act), which, after considering accrued interest thereon,
approximates market. Under this method, a portfolio security
is valued at cost adjusted for amortization of premiums and
accretion of discounts. Amortization of premiums and
accretion of discounts are included in interest income.
(2) Securities transactions and related investment income:
Securities transactions are recorded on the trade date.
Realized gains and losses from securities transactions are
reported on the identified cost basis. Interest income is
recorded daily on the accrual basis and is adjusted for
amortization of premiums and accretion of discounts as
discussed in the preceding paragraph.
(3) Federal income taxes: It is the policy of the Trust to qualify
as a regulated investment company by complying with the
provisions of the Internal Revenue Code applicable to certain
investment companies. The Trust intends to make distributions
of income and securities profits sufficient to relieve it from
all, or substantially all, Federal income and excise taxes.
(4) Repurchase agreements: It is the Trusts policy to monitor
closely the creditworthiness of all firms with which it enters
into repurchase agreements, and to take possession of, or
otherwise perfect its security interest in, securities
purchased under agreements to resell. The securities purchased
under agreements to resell are marked to market every business
day so that the value of the collateral is at least equal to
the value of the loan (repurchase agreements being defined as
loans in the 1940 Act), including the accrued interest earned
thereon, plus sufficient additional market value as is
considered necessary to provide a margin of safety.
NOTE B - MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
Under an Investment Advisory Agreement, Banc One Investment
Advisors Corporation (the Adviser) became Adviser to the Trust,
effective July 19, 1995. In this role, the Adviser supervises the
investments and provides various services to the Trust for which
it is entitled to receive a fee which is payable monthly and
computed as of the close of business each day at the annual rate
of 0.33 of 1% of the average daily net assets of the Trust. This
new Investment Advisory Agreement replaced the former Investment
Advisory Agreement with PNC Bank, Kentucky, Inc. Under the prior
agreement, the Adviser was entitled to receive payment at the
annual rate of 0.25 of 1% of the Trusts average daily net assets
for their investment supervision services which also included
maintenance of the Trusts accounting books and records.
<PAGE>
CHURCHILL CASH RESERVES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
The Trust also has an Administration Agreement with its
founder and sponsor, Aquila Management Corporation (the Administrator).
Under this Agreement, the Administrator provides all
administration services, other than those relating to the
management of the Trusts investments. Since July 19, 1995, the
Administrator also undertook maintenance of the Trusts accounting
books and records, which had previously been the responsibility of
the former Adviser. For its services, the Administrator is
entitled to receive a fee which is payable monthly and computed as
of the close of business each day at the annual rate of 0.17 of 1%
of the average daily net assets of the Trust. Prior to July 19,
1995 the fee to which the Administrator was entitled for its
services was 0.25 of 1% of the average daily net assets of the
Trust.
Specific details as to the nature and extent of the services
provided by the Adviser and the Administrator are more fully
defined in the Trusts Propectus and Statement of Additional
Information.
The Adviser and the Administrator each agree that the above
fees shall be reduced, but not below zero, by an amount equal to
its proportionate share (determined on the basis of the respective
fees computed as described above) of the amount, if any, by which
the total expenses of the Trust in any fiscal year, exclusive of
taxes, interest and brokerage fees, shall exceed the lesser of (i)
2.5% of the first $30 million of average net assets of the Trust
plus 2% of the next $70 million of such assets plus 1.5% of its
average annual net assets in excess of $100 million, or (ii) 25%
of the Trusts total annual investment income. No such reduction in
fees was required during the year ended September 30, 1995.
From October 1, 1994 to July 18, 1995, the fees which the
Trust accrued or paid the former Adviser were $366,654. From July 19,
1995 to September 30, 1995, the fees which the Trust accrued or
paid to the Adviser were $99,642, of which $48,089 was voluntarily
waived. During the year ended September 30, 1995, the fees which
the Trust accrued or paid the Administrator were $425,585, of
which $21,561 was voluntarily waived.Under a Distribution
Agreement, Aquila Distributors, Inc. serves as the exclusive
distributor of the Trusts shares. No compensation or fees are paid
by the Trust to Aquila Distributors, Inc. for such share
distribution.
NOTE C - DISTRIBUTIONS:
The Trust declares dividends daily from net investment
income and makes payments monthly in additional shares at the net asset
value per share or in cash, at the shareholders option.
<PAGE>
CHURCHILL CASH RESERVES TRUST
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended September 30,1995
1995 1994 1993 1992 1991
Net Asset Value,
Beginning of
year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from Investment
Operations:
Net investment income 0.0526 0.0319 0.0265 0.0380 0.0636
Net gain (loss) on
securities (both realized
and unrealized) - - - 0.0005 -
Total from Investment
Operations 0.0526 0.0319 0.0265 0.0385 0.0636
Less Distributions:
Dividends from net
investment income (0.0526) (0.0319) (0.0265) (0.0380) (0.0636)
Distributions from
capital gains - - - (0.0005) -
Total Distributions (0.0526) (0.0319) (0.0265) (0.0385) (0.0636)
Net Asset Value, End of
year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Total Return 5.39% 3.24% 2.68% 3.87% 6.54%
Ratios/Supplemental Data
Net Assets, End of Year
(in thousands) $146,130 $187,626 $187,274 $139,633 $222,362
Ratio of Expenses to
Average Net Assets 0.58% 0.60% 0.60% 0.65% 0.60%
Ratio of Net Investment
Income to Average
Net Assets 5.24% 3.17% 2.65% 3.90% 6.36%
For the year ended September 30, 1995, net investment income per
share and the ratios of income and expenses to average net assets
without the Advisers and Administrators voluntary waiver of fees
would have been:
Net investment income $0.0522
Ratio of Expenses to
Average Net Asset 0.62%
Ratio of Net Investment
Income to Average
Net Assets 5.20%
NOTE: Effective July 19, 1995, Banc One Investment Advisors
Corporation became the Trusts Investment Adviser replacing PNC
Bank, Kentucky, Inc.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of July 17, 1995, by and between
CHURCHILL CASH RESERVES TRUST (the "Trust"), a Massachusetts
business trust, 380 Madison Avenue, Suite 2300, New York, New
York 10017, and BANC ONE INVESTMENT ADVISORS CORPORATION (the
"Adviser")
W I T N E S S E T H :
WHEREAS, the Trust and the Adviser wish to enter into an
investment advisory 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 agrees, all as more fully set forth herein, to
act as managerial investment adviser to the Trust with respect to
the investment of the Trust's assets, and to supervise and
arrange the purchase of securities for and the sale of securities
held in the portfolio of the Trust.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Trust
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Board of
Trustees of the Trust, the Adviser shall:
(i) Supervise continuously the investment program of
the Trust and the composition of its portfolio;
(ii) Determine what securities shall be purchased or
sold by the Trust;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Trust; and
(iv) Furnish information as to such securities to any
provider of fund accounting services to the Trust;
(v) monitor records of the Trust as to the portfolio,
including prices, maintained by such provider of such
services; and supply, monthly or more frequently as may
be necessary, pricing of the Trust's portfolio based on
available market quotations using a pricing service or
other source of pricing information satisfactory to the
Trust.
(b) Any investment program furnished 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
Trust as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Trust; and (5) the
fundamental policies of the Trust, as reflected in its
registration statement under the Act or as amended by the
shareholders of the Trust.
(c) The Adviser shall give the Trust 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. Nothing herein contained shall, however, be construed
to protect the Adviser against any liability to the Trust 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 Adviser
or any affiliated person (as defined in the Act) of the 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 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 Adviser expressly represents
that it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Trust
under this Agreement. It is agreed that the Adviser shall have
no responsibility or liability for the accuracy or completeness
of the Trust's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Trust as to any information concerning the Adviser
appropriate for inclusion in such Registration Statement, or as
to any transaction or proposed transaction which might result in
an assignment of the Agreement. The Trust agrees to indemnify
the Adviser to the full extent permitted by the Trust's
Declaration of Trust.
(e) In connection with its duties to arrange for the
purchase and sale of the Trust's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as shall, in
the Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The
Adviser, acting as agent for the Trust, shall cause the Trust to
deal directly with the selling or purchasing principal or market
maker without incurring brokerage commissions unless the Adviser
determines that better price or execution may be obtained by
paying such commissions; the Trust expects that most transactions
will be principal transactions at net prices and that the Trust
will incur little or no brokerage costs. The Trust understands
that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread
between the bid and asked prices. In allocating transactions to
dealers, the Adviser is authorized to consider, in determining
whether a particular dealer will provide best execution, the
dealer's reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the difficulty of
the transaction in question, and thus need not pay the lowest
spread or commission available if the Adviser determines in good
faith that the amount of commission is reasonable in relation to
the value of the brokerage and research services provided by the
dealer, viewed either in terms of the particular transaction or
the Adviser's overall responsibilities as to the accounts as to
which it exercises investment discretion. If, on the foregoing
basis, the transaction in question could be allocated to two or
more dealers, the Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of the Trust or any other investment
company or companies having the Adviser as its investment adviser
or having the same sub-adviser, administrator or principal
underwriter as the Trust. 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 Trust recognizes that no dollar
value can be placed on such research services or on execution
services, that such research services may or may not be useful to
the Trust and/or other accounts of the Adviser, and that research
received by such other accounts may or may not be useful to the
Trust.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Trust, at the
Adviser's expense, all office space, facilities, equipment and
clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser agrees that it will supply, or cause
to be supplied, to any sub-adviser, administrator or principal
underwriter of the Trust all necessary financial information in
connection with such sub-adviser's, administrator's or principal
underwriter's duties under any agreement between such sub-
adviser, administrator or principal underwriter and the Trust.
The Adviser will also pay all compensation of the Trust's
officers, employees, and Trustees, if any, who are affiliated
persons of the Adviser. The Trust 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 Adviser under this
Agreement or by such sub-adviser, administrator or principal
underwriter shall be paid by the Trust, 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
sub-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 Trust or its shares; (ix) expenses of
preparing, printing and mailing reports and notices and proxy
material to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; and
(xi) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations for
which the Trust may have to indemnify its officers and Trustees.
4. Compensation of the Adviser
(a) The Trust agrees to pay the Adviser, and the
Adviser agrees to accept as full compensation for all services
rendered by the Adviser as such, a management fee payable monthly
and computed on the net asset value of the Trust as of the close
of business each business day at the annual rate of 0.25 of 1% of
such net asset value through and including the day on which this
Agreement is approved by the shareholders of the Trust, and at
the annual rate of 0.33 of 1% of such net assets thereafter.
(b) The Adviser agrees that the fee under (a) above
shall be reduced, but not below zero, by an amount equal to its
pro-rata portion (hereafter described) of the amount, if any, by
which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net
assets of the Trust plus 2% of the next $70 million of such net
assets of the Trust plus 1.5% of its average annual net assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above 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. The pro
rata portion, as between the Administrator and Adviser, is based
on the aggregate of the fee of the Adviser and the fee of the
Administrator (exclusive of amounts paid or to be paid out for
the applicable period pursuant to the Trust's Distribution Plan).
5. Duration and Termination
(a) This Agreement shall become effective upon close of
business on July 17, 1995 and, if approved by the shareholders of
the Trust within 120 days of that date shall, unless terminated
as hereinafter provided, continue in effect until the December 31
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 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, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the Adviser at
any time without penalty upon giving the Trust sixty days'
written notice (which notice may be waived by the Trust) and may
be terminated by the Trust 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
Trust 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 Trust outstanding and entitled to vote. This Agreement shall
automatically terminate in the event of its assignment (as
defined in the Act).
6. Disclaimer of Shareholder Liability
The Adviser 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 Adviser
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.
7. Notices of Meetings
The Trust agrees that notice of each meeting of the
Board of Trustees of the Trust will be sent to the Adviser and
that the Trust will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or
persons as the 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: Churchill Cash Reserves Trust
________________________ By:___________________________________
Lacy B. Herrmann
Assistant Secretary President and Chairman
ATTEST: Banc One Investment Advisors Corporation
________________________ By:___________________________________
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
THIS AGREEMENT, made the 17th day of July, 1995, by and
between CHURCHILL CASH RESERVES TRUST (the "Trust"), a
Massachusetts business Trust, 380 Madison Avenue, Suite 2300, New
York, New York 10017 and AQUILA MANAGEMENT CORPORATION (the
"Administrator"), 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 Trust and the Administrator have previously
entered into an Administration Agreement; and
WHEREAS, the Trust and the Administrator now wish to amend
and restate their 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 Administrator shall perform (at its own expense) the
functions set forth more fully herein for the Trust and for the
investment adviser for the Trust (the "Adviser").
2. Duties and Obligations of the Adviser and Administrator to
the Trust and to Each Other.
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of
the Trust, the Administrator shall provide all administrative
services to the Trust other than those services relating to the
investment portfolio of the Trust; as part of such duties, the
Administrator 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 Trust;
(ii) oversee all relationships between the Trust and its
transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of
agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary
or desirable for the effective operation of the Trust and
for the sale, servicing or redemption of the Trust's shares;
(iii) provide to the Adviser and the Trust statistical and
other factual information and advice regarding economic
factors and trends, but shall not generally furnish advice
or make recommendations regarding the purchase or sale of
securities;
(iv) Either keep the accounting records of the Trust,
including the computation of net asset value per share and
the dividends (provided that pricing of the Trust's
portfolio shall be the responsibility of the Adviser under
the Advisory Agreement) or, at its expense and
responsibility, delegate such duties in whole or in part to
a company satisfactory to the Trust, maintain the Trust's
other books and records and prepare (or assist counsel and
auditors in the preparation of) all required proxy
statements, reports to the Trust'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 Trust;
(v) prepare, on behalf of the Trust and at the Trust's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Trust 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 Trust and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Trust's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(b) Any activities performed by the Administrator 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 Trust as amended
and restated from time to time; (4) any policies and
determinations of the Board of Trustees of the Trust; and (5) the
fundamental policies of the Trust, as reflected in its
registration statement under the Act, or as amended by the
shareholders of the Trust.
(c) The Administrator assumes no responsibility under this
agreement other than to render the services called for hereunder,
and specifically assumes no responsibilities for investment
advice or the investment or reinvestment of the Trust's assets.
(d) The Administrator shall not be liable for any error in
judgment or for any loss suffered by the Trust 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.
(e) Nothing in this Agreement shall prevent the
Administrator 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 Administrator 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
Administrator expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations to the Adviser or the Trust under
this Agreement. The Trust shall indemnify the Administrator to
the full extent permitted by the Trust's Declaration of Trust.
3. Allocation of Expenses.
The Administrator 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 Trust who are affiliated
persons of the Administrator.
4. Compensation of the Administrator.
(a) The Trust shall pay the Administrator, and the
Administrator shall accept as full compensation for all services
rendered hereunder, a fee payable monthly and computed on the net
asset value of the Trust at the end of each business day at the
annual rate of 0.25 of 1% of such net asset value through and
including the day on which the Advisory Agreement is approved by
the shareholders of the Trust, and at the annual rate of 0.17 of
1% of such net assets, thereafter.
(b) The Administrator agrees that the fee under (a) above
shall be reduced, but not below zero, by an amount equal to its
pro-rata portion (hereafter described) of the amount, if any, by
which the total expenses of the Trust in any fiscal year,
exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net
assets of the Trust plus 2% of the next $70 million of such net
assets of the Trust plus 1.5% of its average annual net assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above 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. The pro
rata portion, as between the Administrator and Adviser, is based
on the aggregate of the fee of the Adviser and the fee of the
Administrator (exclusive of amounts paid or to be paid out for
the applicable period pursuant to the Trust's Distribution Plan).
5. Duration and Termination.
(a) This Agreement shall become effective as of the close of
business on July 17, 1995, after approval by 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 and shall, unless terminated as
hereinafter provided, continue in effect until the December 31
next preceding the first anniversary of the effective date of
this Agreement, and from year to year thereafter.
(b) This Agreement may be terminated by the Administrator at
any time without penalty upon giving the Adviser and the Trust
sixty days' written notice (which notice may be waived by them)
and may be terminated by the Trust at any time without penalty
upon giving the Administrator sixty days' written notice (which
notice may be waived by the Administrator) provided that such
termination by the Trust shall be directed or approved by a vote
of a majority of its Trustees in office at the time, including a
majority of the Trustees who are not interested persons (as
defined in the Act) of the Trust.
6. Disclaimer of Shareholder Liability
The Administrator 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 Administrator
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
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: CHURCHILL CASH RESERVES TRUST
________________________ By:___________________________________
ATTEST: AQUILA MANAGEMENT CORPORATION
_______________________ By:___________________________________
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of September 11, 1995, by and
between CHURCHILL CASH RESERVES TRUST, a business trust organized
under the laws of the Commonwealth of Massachusetts (the "Trust"),
and BANK ONE TRUST COMPANY, N.A., a banking company organized under
the laws of the United States (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that Securities and cash of the
Trust be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to
time serving under the Trust's Declaration of Trust, dated
September 29, 1989, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form of
such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Fund computes the net asset value of the Fund.
1.5 "Fund" shall mean any of the individual investment
portfolios of the Trust, including any additional portfolios
hereafter created, as each are or will be identified in Exhibit A
hereto; provided, however, that in the event that the Trust
consists of only one such portfolio, "Fund" shall refer to the
Trust.
1.6 "NASD" shall mean The National Association of Securities
Dealers, Inc.
1.7 "Officer" shall mean the President, any Senior Vice
President, Vice President or Assistant Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer,
the Treasurer, or any Assistant Treasurer of the Trust.
1.8 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to have
been given by an Authorized Person, (ii) recorded and kept among
the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to
confirm them, the Custodian shall notify the Trust of such variance
but such Oral Instructions will govern unless the Custodian has not
yet acted.
1.9 "Custody Account" shall mean any account in the name of
a Fund, which is provided for in Section 3.2 below, or of the
Trust.
1.10 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.11 "Securities Depository" shall mean The Participants Trust
Company or The Depository Trust Company and (provided that the
Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the
use of such clearing agency as a depository for the Trust) any
other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of
1934 (the "1934 Act"), which acts as a system for the central
handling of Securities where all Securities of any particular class
or series of an issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.12 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options, debentures,
notes, bank certificates of deposit, bankers' acceptances,
mortgage-backed securities, other money market instruments or other
obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that
the Custodian has the facilities to clear and to service.
1.13 "Shares" shall mean the units of beneficial interest
issued by the Trust.
1.14 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by one
or more persons as the Board of Trustees shall have from time to
time authorized, or (ii) communications by telex or any other such
system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to the
Custodian and approved by resolutions of the Board of Trustees, a
copy of which, certified by an Officer, shall have been delivered
to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or
in the possession of the Trust at any time during the period of
this Agreement, provided that such Securities or cash at all times
shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund, except Securities
maintained in a Securities Depository or Book-Entry System, shall
be physically segregated from other Securities and non-cash
property in the possession of the Custodian and shall be identified
as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain
in its trust department a custody account in the name of each Fund,
subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other
assets of the Fund which are delivered to it.
3.3 Appointment of Agents. Subject to the continuing
approval of the Board of Trustees, the Custodian may appoint, and
at any time remove, any domestic bank or trust company, and is
qualified to act as a custodian under the 1940 Act, as sub-
custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such
a bank or trust company (any such accounts to be in the name of the
Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent shall not relieve
the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver,
or cause to be delivered, to the Custodian all of the Fund's
Securities, cash and other assets, including (a) all payments of
income, payments of principal and capital distributions received by
the Fund with respect to such Securities, cash or other assets
owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until
actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit
in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use
of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and
returns of collateral consisting of Securities.
(b) Securities of a Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes only
assets held by the Custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian and the Custodian's account
on the books of the Book-Entry System and Securities
Depository as the case may be, with respect to Securities
of a Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry or otherwise, identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice
from the Book-Entry System or Securities Depository that
such Securities have been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund
are held in a Book-Entry System or Securities Depository,
the Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities
has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Fund.
(e) Upon request, the Custodian shall provide the Fund with
copies of any report (obtained by the Custodian from a
Book-Entry System or Securities Depository in which
Securities of the Fund is kept) on the internal
accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of the
Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-
Entry System or Securities Depository. At its election,
the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry
System or Securities Depository or any other person for
any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and
to the extent that the Custodian has been made whole for
any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from a Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or any
sub-custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9
below in proper form for transfer, or if the purchase of
such Securities is effected through a Book-Entry System
or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and
options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title
thereto in favor of the Trust or any nominee referred to
in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the
Trust and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System
or Securities Depository for the account of the Fund with
such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned
by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Trust, including but not limited to the following
payments for the account of a Fund: interest; taxes;
administration, investment management, investment
advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating
expenses of a Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from a Custody Account but only in the following
cases:
(a) Upon the sale of Securities for the account of a Fund but
only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with
tender or other similar offers for Securities of a Fund;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to
the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by a Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of a Fund, but only against receipt of such collateral as
the Trust shall have specified to the Custodian in Proper
Instructions;
(j) For delivery as security in connection with any
borrowings by the Trust on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt
by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Trust
on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits
in connection with transactions by the Trust on behalf of
a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of
a resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with respect
to all Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Trust is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.9 Registration and Transfer of Securities. All Securities
held for a Fund that are issued or issuable only in bearer form
shall be held by the Custodian in that form, provided that any such
Securities shall be held in a Book-Entry System for the account of
the Trust on behalf of a Fund, if eligible therefor. All other
Securities held for a Fund may be registered in the name of the
Trust on behalf of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided,
however, that such Securities are held specifically for the account
of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name
of any of the nominees hereinabove referred to or in the name of a
Book-Entry System or Securities Depository, any Securities
registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund,
complete and accurate records with respect to Securities, cash or
other property held for the Trust, including (i) journals or other
records of original entry containing an itemized daily record in
detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and
Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of
the Trust as the Trust shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 31
and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be
maintained by Rule 31a-1 under the 1940 Act, be preserved for the
periods prescribed in Rule 31a-2 under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement by Fund and a summary of
all transfers to or from the Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement, by
Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide
the Trust with such reports, as the Trust may reasonably request
from time to time, on the internal accounting controls and
procedures for safeguarding Securities, which are employed by the
Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies, if any, relating to Securities which are not
registered in the name of a Fund, to be promptly executed by the
registered holder of such Securities, without indication of the
manner in which such proxies are to be voted, and shall include all
other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, and all notices to the
holders of such Securities.
3.14 Information on Corporate Actions. The Custodian will
promptly notify the Trust of corporate actions, limited to those
Securities registered in nominee name and to those Securities held
at a Depository or sub-Custodian acting as agent for the Custodian.
The Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Card Service, J.J.
Kenny's Munibase System, Depository Trust Reorganization Notices,
Xcitek Inc., Standard & Poor's Called Bond Listing or The Wall
Street Journal or received by first class mail from the agent. For
market announcements not yet received and distributed by the
Custodian's services, the Trust will inform its custody
representative with appropriate instructions. The Custodian will,
upon receipt of the Trusts's response within the required deadline,
effect such action for receipt or payment for the Trust. For those
responses received after the deadline, the Custodian will effect
such action for receipt or payment, subject to the limitations of
the agent(s) effecting such actions. The Custodian will promptly
notify the Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide or cause
to be provided to the Custodian with all relevant information
contained in the prospectus for any security which has unique
put/option provisions and provide the Custodian with specific
tender instructions at least ten business days prior to the
beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Trust, Written Instructions shall be delivered
to the Custodian, specifying (a) the Fund making the purchase, (b)
the name of the issuer or writer of such Securities, and the title
or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any) or other units purchased, (d)
the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the
name of the person to whom such amount is payable. The Custodian
shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein.
The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Fund, if in the
relevant Custody Account there is insufficient cash available to
the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of
Securities for a Fund is made by the Custodian in advance of
receipt for the account of the Fund of the Securities purchased but
in the absence of specific Written or Oral Instructions to so pay
in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by a Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the Fund making the purchase, (b) the
name of the issuer or writer of such Securities, and the title or
other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the
date of sale and settlement (e) the sale price per unit, (f) the
total amount payable upon such sale, and (g) the person to whom
such Securities are to be delivered. Upon receipt of the total
amount payable to the Trust as specified in such Written
Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall
be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3
above or any other provision of this Agreement, the Custodian, when
instructed to deliver Securities against payment, shall be
entitled, if so directed in Written Instructions and if in
accordance with generally accepted market practice, to deliver such
Securities prior to actual receipt of final payment therefor. In
any such case, the Trust shall bear the risk that final payment for
such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person
to whom they were delivered, and the Custodian shall have no
liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion
and from time to time, the Custodian may credit the relevant
Custody Account, prior to actual receipt of final payment thereof,
with (i) proceeds from the sale of Securities which it has been
instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii)
income from cash, Securities or other assets of the Trust. Any
such credit shall be conditional upon actual receipt by the
Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt
of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual
receipt of all final payments in anticipation of which funds were
credited to the Custody Account.
4.6 Advances by Custodian for Settlement. If the Custodian
should, in its sole discretion, advance funds to the Trust to
facilitate the settlement of transactions on behalf of a Fund in
its Custody Account, then such advance shall be repayable
immediately upon demand made by the Custodian and shall bear
interest from the date incurred at a rate per annum (based on a
360-day year from the actual number of days involved) equal to 1%
over the Federal Funds rate in effect from time to time as
announced by The Wall Street Journal under the section entitled
Money Rates, or any successor title, such rate to be adjusted on
the effective date of any changes in such rate.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the relevant Custody Account, and upon receipt
of Proper Instructions specifying that the funds are required to
redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not
be under any obligation to effect payment or distribution by any
bank designated in Proper Instructions given pursuant to Section
5.1 above of any amount paid by the Custodian to such bank in
accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of and in conformity with Proper Instructions,
the Custodian shall establish and maintain a segregated account or
accounts for and on behalf of each Fund, into and from which
account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Trust,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities made
by a Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees,
certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust for any
loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages, cost,
expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not
be under any obligation at any time to ascertain whether the Trust
is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be custodian of, any cash belonging to
the Trust or any money represented by a check, draft or other
instrument for the payment of money, until the Custodian or its
agents actually receive such cash or collect on such instrument.
7.3 No Responsibility for title, etc. So long as and to the
extent that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received or delivered by
it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. The Custodian shall not
be required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Trust if such Securities are in default or payment is
not made after due demand or presentation. The Custodian shall
inform the Trust promptly of any such default or failure to make
payment.
7.5 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
Oral Instructions and/or any Written Instructions actually received
by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties
or obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
7.7 Cooperation. The Custodian shall cooperate with and
supply necessary information to the entity or entities appointed by
the Trust to keep the books of account of the Trust and/or compute
the value of the assets of the Trust. The Custodian shall take all
such reasonable actions as the Trust may from time to time request
to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to
the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's filings on Form N-1A and Form N-SAR and
any other reports required by the Securities and Exchange
Commission, and (b) the fulfillment by the Trust of any other
requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant to
Section 3.3 above, and any nominee of the Custodian or of such sub-
custodian from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
or foreign securities and/or banking laws) or claim arising
directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any action
or inaction by the Custodian or such sub-custodian (i) at the
request or direction of or in reliance on the advice of the Trust,
or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-
custody agreement with a sub-custodian appointed pursuant to
Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement,
provided that neither the Custodian nor any such sub-custodian
shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the
Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which may,
in the opinion of the Custodian, result in the Custodian or its
nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any
failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its
reasonable control as may cause interruption, loss or malfunction
of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes, acts of
civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay
shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective
as of the close of business on the date first set forth above and
shall continue in full force and effect until terminated as
hereinafter provided.
10.2 Termination. Either party hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of the giving of such notice.
If a successor custodian shall have been appointed by the Board of
Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Trust and held by
the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or
for the benefit of the Trust at the successor custodian, provided
that the Trust shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall
then be entitled. Upon such delivery and transfer, the Custodian
shall be relieved of all obligations under this Agreement. The
Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
Custodian by regulatory authorities in the State of Ohio or upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, and (c) is doing business in New York, New
York, all Securities, cash and other property held by the Custodian
under this Agreement and to transfer to an account of or for the
Trust at such bank or trust company all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall be
relieved of all obligations under this Agreement. If, after
reasonable inquiry, the Custodian cannot find a successor custodian
as contemplated in this Section 10.3, then the Custodian shall have
the right to deliver to the Trust all Securities and cash then
owned by the Trust and to transfer any Securities held in a Book-
Entry System or Securities Depository to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own
custodian with respect to the Trust and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon
from time to time by the Trust and the Custodian. The fees and
other charges in effect on the date hereof and applicable to the
Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts and under a Declaration of Trust, to
which reference is hereby made a copy of which is on file at the
office of the Secretary of State of Massachusetts as required by
law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of the Trust entered into in the name of
the Trust or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons
dealing with any of the Funds of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given to a party
hereunder shall be in writing and shall be sent or delivered to the
party at the address set forth after its name herein below:
To the Trust:
Churchill Cash Reserves Trust
380 Madison Avenue
New York, NY 10017
Attn: Mr. Richard F. West, Treasurer and Mr.
William Killeen, Senior Operations
Officer
Telephone: (212)-697-6666
Facsimile: (212)-687-5373
To the Custodian:
BANK ONE TRUST COMPANY, N.A.,
100 East Broad Street
Columbus, OH 43271-0187
Attention: Mr. Robert F. Schultz, Senior Trust
Officer
Telephone: (614)-248-5445
Facsimile: (614)-248-2554
or at such other address as either party shall have provided to the
other by notice given in accordance with this Article XIII.
Writing shall include transmission by or through teletype,
facsimile, central processing unit connection, on-line terminal and
magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 No Waiver. No failure by either party hereto to exercise
and no delay by such party in exercising, any right hereunder shall
operate as a waiver thereof. The exercise by either party hereto
of any right hereunder shall not preclude the exercise of any other
right, and the remedies provided herein are cumulative and not
exclusive of any remedies provided at law or in equity.
14.3 Amendments. This Agreement cannot be changed orally and
no amendment to this Agreement shall be effective unless evidenced
by an instrument in writing executed by the parties hereto.
14.4 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.5 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.6 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without
the written consent of the other party hereto.
14.7 Headings. The headings of sections in this Agreement are
for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its
behalf by its representatives thereunto duly authorized, all as of
the day and year first above written.
ATTEST: CHURCHILL CASH RESERVES TRUST
By:
Assistant Secretary President
ATTEST: BANK ONE TRUST COMPANY, N.A.
By:
Senior Trust Officer
<PAGE>
EXHIBIT A
Name of Fund (if different from
the Trust Date Added (if
different from
date of original
Custody Agreement
<PAGE>
EXHIBIT B
I, Richard F. West, Treasurer, and I, Patricia Craven, Assistant
Secretary, of Churchill Cash Reserves Trust, a Massachusetts
business trust (the "Trust"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Trust in conformity with the Trust's Declaration of
Trust and By-Laws to give Oral Instructions and Certificate on
behalf of the Trust, and the signatures set forth opposite their
respective names are their true and correct signatures:
NAME SIGNATURE
Lacy B. Herrmann _____________________________
Rose F. Marotta _____________________________
Richard F. West _____________________________
William C. Wallace _____________________________
Diana P. Herrmann _____________________________
Charles E. Childs III _____________________________
John M. Herndon _____________________________
William Killeen _____________________________
Patricia A. Craven _____________________________
________________________ _____________________________
Richard F. West, Patricia A. Craven,
Treasurer Assistant Secretary
<PAGE>
EXHIBIT C
Compensation of Custodian - Equity Fund/Money Market Funds
Whereas Article XI of the Custody Agreement between Churchill Cash Reserves
Trust and Bank One Trust
Company, N.A. stipulates that the compensation of Custodian shall be agreed
upon by the Trust and Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to the
following schedule:
I. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction " includes, but is
not limited to, a purchase sale, maturity, redemption, tender,
exchange, deposit, withdrawal, and collateral movement of a
security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement, overdraft
charges will be at 100 basis points above the Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate applied
to 90% of each day's positive collected balance will reduce custody, FDIC and
other fees as allowed by law. For each month that the charges exceed the
earnings credit, the deficiency shall be paid to Custodian. For each month
that the earnings credit exceeds the charges, the Custodian shall carry such
surplus credits forward to subsequent month(s) and calendar year(s) until
utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to be
exceptional.
The above fee schedule will remain in effect until March 31, 1998 and
thereafter unless changed.
As stated by the Custodian in bidding to provide custody services to the Trust,
if at any time the Trust is not completely satisfied with the Custodian's
service levels, the Custodian will cease to charge custody fees until its
responsiveness and accuracy meet the requirements of the Trust.
<PAGE>
EXHIBIT C
Compensation of Custodian - Bond Funds
Whereas Article XI of the Custody Agreement between Churchill Cash Reserves
Trust and Bank One Trust Company, N.A. stipulates that the compensation of
Custodian shall be agreed upon by the Trust and Custodian, the following is
hereby agreed:
The compensation of the Custodian shall be computed according to the following
schedule:
I. Annual Holding Fee:
.00006 times the market value of assets held
II. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction " includes, but
is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit, withdrawal, and
collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement, overdraft
charges will be at 100 basis points above the Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate applied to
90% of each day's positive collected balance will reduce custody, FDIC and
other fees as allowed by law. For each month that the charges exceed the
earnings credit, the deficiency shall be paid to Custodian. For each month
that the earnings credit exceeds the charges, the Custodian shall carry such
surplus credits forward to subsequent month(s) and calendar year(s) until
utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to be
exceptional.
The above fee schedule will remain in effect until March 31, 1998 and
thereafter unless changed.
As stated by the Custodian in bidding to provide custody services to the
Trust, if at any time the Trust is not completely satisfied with the
Custodian's service levels, the Custodian will cease to charge custody fees
until its responsiveness and accuracy meet the requirements of the Trust.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763534
<NAME> CHURCHILL CASH RESERVES TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 146,754,552
<INVESTMENTS-AT-VALUE> 146,754,552
<RECEIVABLES> 32,495
<ASSETS-OTHER> 17,963
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 146,805,010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 675,344
<TOTAL-LIABILITIES> 675,344
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 146,129,666
<SHARES-COMMON-PRIOR> 196,487,656
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 146,129,666
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,386,955
<OTHER-INCOME> 0
<EXPENSES-NET> (1,036,781)
<NET-INVESTMENT-INCOME> 9,350,174
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,350,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,350,174)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 564,447,918
<NUMBER-OF-SHARES-REDEEMED> (605,946,746)
<SHARES-REINVESTED> 2,081
<NET-CHANGE-IN-ASSETS> (41,496,747)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 466,296
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,106,431
<AVERAGE-NET-ASSETS> 178,361,235
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
