CHURCHILL CASH RESERVES TRUST
Supplement to the Prospectus and Statement of Additional
Information dated January 31, 1996
A paragraph on page 7 of the Prospectus as to a 10% limitation
of the Trust is changed to read as follows:
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) securities which are
not readily marketable and (iv) insured bank obligations unless the
Board of Trustees determines that a readily available market exists
for such obligations. Also included in this 10% limit are
restricted securities, i.e., securities which cannot freely be sold
for legal reasons, that have not been determined by the Trust to be
liquid. Restricted securities that may be determined to be liquid
include securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933, as amended and privately placed
commercial paper that has a readily available market. The Board of
Trustees has delegated to the Adviser the responsibility for
determining and monitoring the liquidity of the Trust's investment
in restricted securities, subject to supervision, including
periodic review, by the Board. The Trust does not expect to make an
investment in restricted securities that will result in more than
25% of the net assets of the Trust being invested in restricted
securities. This 10% limit does not include any obligations payable
at principal amount plus accrued interest on demand or within seven
days after demand.
In addition, the Statement of Additional Information is
changed by removing the investment restriction on page 6 which
provides that the Trust cannot invest in restricted securities.
The date of this supplement is May 17, 1996
<PAGE>
CAPITAL 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.
This 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 & 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>
<TABLE>
<CAPTION>
CHURCHILL CASH RESERVES TRUST
TABLE OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
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%
<CAPTION>
ANNUAL TRUST OPERATING EXPENSES*
(as a percentage of average net assets)
<S> <C>
Investment Advisory Fee After Waiver # 0.30%
12b-1 Fee ## 0%
Total Other Expenses After Fee Waiver # 0.28%
Administration Fee After Waiver # 0.16%
Other Expenses 0.12%
Total Trust Operating Expenses After Fee Waivers # 0.58%
Example** 1 year 3 years 5 years 10 years
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
<FN>
* Based upon amounts incurred during the most recent fiscal year of
the Trust, restated to reflect current arrangements (See "Management
Arrangements.")
</FN>
<FN>
#Absent fee waiver, investment advisory fees would have been incurred
at the rate of 0.33% of average net assets. Also absent administration
fee waiver, administration 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%.
</FN>
<FN>
##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.
</FN>
<FN>
**The expense example is based upon an amount at the beginning of each
year which includes the prior year's assumed results. A years 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
years starting investment plus one-half the years results). Each column
represents the cumulative expenses so determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL MUTUAL
FUNDS USE THE 5% 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>
<TABLE>
<CAPTION>
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. Effective July 19, 1995, Banc One
Investment Advisors Corporation became the Trust's Investment Adviser,
replacing PNC Bank, Kentucky, Inc.
Year ended September 30,
<S> <C> <C> <C> <C>
1995* 1994 1993 1992
Net Asset Value, Beginning of Year $1.0000 $1.0000 $1.0000 $1.0000
Income from Investment Operations:
Net investment income 0.0526 0.0319 0.0265 0.0380
Net gain on securities (both
realized and unrealized) -- -- -- 0.0005
Total from Investment Operations 0.0526 0.0319 0.0265 0.0385
Less Distributions:
Dividends from net investment
income (0.0526) (0.0319) (0.0265) (0.0380)
Distributions from capital gains -- -- -- (0.0005)
Total Distributions (0.0526) (0.0319) (0.0265) (0.0385)
Net Asset Value, End of Year $1.0000 $1.0000 $1.0000 $1.0000
Total Return 5.39% 3.24% 2.68% 3.87%
Ratios/Supplemental Data
Net Assets, End of Year (in
thousands) $146,130 $187,626 $187,274 $139,633
Ratio of Expenses to Average Net
Assets 0.58% 0.60% 0.60% 0.65%
Ratio of Net Investment Income to
Average Net Assets 5.24% 3.17% 2.65% 3.90%
<C> <C> <C> <C> <C> <C>
1991 1990 1989 1988 1987 1986
$1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
0.0636 0.0790 0.0865 0.0686 0.0504 0.0602
-- -- -- -- -- --
0.0636 0.0790 0.0865 0.0686 0.0504 0.0602
(0.0636) (0.0790) (0.0865) 0.0686 0.0504 0.0602
-- -- -- -- -- --
(0.0636) (0.0790) (0.0865) 0.0686 0.0504 0.0602
$1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
6.54% 8.17% 9.02% 7.07% 6.06% 6.94%
$222,362 $238,634 $288,357 $213,938 $199,292 $113,804
0.60% 0.58% 0.58% 0.59% 0.61% 0.65%
6.36% 7.90% 8.65% 6.84% 5.97% 6.72%
<FN>
* 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%.
</FN>
</TABLE>
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 2:00 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
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 this Trust, 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.
Of the shares of the Trust outstanding on January 2, 1996, a
nominee of Bank One Trust Co., 235 West Schrock Road, Westerville,
OH held of record 37,993,511 shares (21.0%); First Fidelity Bank,
N.A., New Jersey, Broad & Walnut Street, Philadelphia, PA held of
record 15,301,348 shares (8.4%) and Liberty National Bank & Trust
Co., P.O. Box 32590, Louisville, KY held of record 110,328,134
shares (60.9%). 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>
[LOGO] 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 Step 4,
Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received
in good order at least 2 weeks
prior to 1st actual liquidation
date.
(Check appropriate box)
___ Yes ___No
Please establish an Automatic Withdrawal Plan for this account, subject
to the terms of the Automatic Withdrawal Plan Provisions set forth below.
To realize the amount stated below, 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 Account Number
________________________________ ___________________________________
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.
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 Financial Institution____________________
is maintained Street Address___________________________________
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.
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 Automatic 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 Trust's 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 Trust's Agent.
<PAGE>
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
Diana P. Herrmann
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 and Assistant Secretary
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 Expenses 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]
PROSPECTUS
[LOGO]
One of the
AQUILASM 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
Performance Information . . . . . . . . . . . . . . . . . . . .4
Investment Restrictions . . . . . . . . . . . . . . . . . . . .5
Loans of Portfolio Securities . . . . . . . . . . . . . . . . .6
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . .6
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 10
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 10
Additional Information as to Management Arrangements . . . . . 16
Amortized Cost Valuation . . . . . . . . . . . . . . . . . . . 20
Computation of Daily Dividends . . . . . . . . . . . . . . . . 21
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 21
General Information . . . . . . . . . . . . . . . . . . . . . 22
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
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.
PERFORMANCE INFORMATION
From time to time, the Trust may advertise its "current yield"
and its "effective yield" (also referred to as "effective compound
yield"). Both yield figures are based on historical earnings and
are not intended to indicate future performance. The current yield
of a Trust refers to the net income generated by an investment in
that Trust over a stated seven-day period. This income is then
"annualized". That is, the amount of income generated by the
investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The Trust may also advertise or quote its effective
yield, which is calculated similarly, but, when annualized, the
income earned by an investment in the Trust is assumed to be
reinvested. The effective yield will be slightly higher than the
current yield because of the compounding effect of this assumed
reinvestment.
In addition, the Trust may also compare its performance to
other income-producing securities such as (i) money market funds;
(ii) various bank products, including both those that are insured
(e.g., deposit obligations) and those that are not (e.g.,
investment instruments offered by affiliates of banks); and (iii)
U.S. Treasury Bills or Notes. There are differences between these
income-producing alternatives and the Trust other than their
yields, some of which are summarized below.
The yield of the Trust is not fixed and will fluctuate. In
addition, your investment is not insured and its yield is not
guaranteed. There can be no assurance that the Trust will be able
to maintain a stable net asset value of $1.00 per share. Although
the yields of bank money market deposit accounts and NOW accounts
will fluctuate, principal will not fluctuate and is insured by the
Federal Deposit Insurance Corporation up to $100,000. Bank passbook
savings accounts normally offer a fixed rate of interest, and their
principal and interest are also guaranteed and insured. Bank
certificates of deposit offer fixed or variable rates for a set
term. Principal and fixed rates are guaranteed and insured. There
is no fluctuation in principal value. Withdrawal of these deposits
prior to maturity will normally be subject to a penalty. Investment
instruments, such as Repurchase Agreements and Commercial Paper,
offered by affiliates of banks are not insured by the Federal
Deposit Insurance Corporation. In comparing the yields of one money
market fund to another, consideration should be given to each
fund's investment policy, portfolio quality, portfolio maturity,
type of instruments held and operating expenses.
INVESTMENT RESTRICTIONS
The 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 6, 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. Ms.
Herrmann was elected Trustee by the Board of Trustees on December
3, 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. Herrmann is an interested
person as a member of his immediate family. 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 of 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.
Diana P. Herrmann*, Vice President and Trustee, 380 Madison Avenue,
New York, New York 10017
Senior Vice President and Secretary and formerly Vice President of
the Administrator since 1986 and Director since 1984; Trustee of
Tax-Free Trust of Arizona and Tax-Free Trust of Oregon since 1994
and of Churchill Tax-Free Fund of Kentucky 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.
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
Vice 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, 1266 East Main Street, Stamford
Connecticut 06902
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
Vice 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.
Charles E. Childs, III, Vice President, 380 Madison Avenue, New
York, New York 10017
Vice President - Administration and formerly Assistant Vice
President and Associate of the Administrator since 1987; Vice
President or Assistant Vice President of the Money Funds since
1988; Northeastern University, 1986-1987 (M.B.A., 1987); Financial
Analyst, Unisys Corporation, 1986; Associate Analyst at National
Economic Research Associates, Inc. (NERA), a micro-economic
consulting firm, 1979-1985.
John M. Herndon, Vice President and Assistant Secretary, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the 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.
<TABLE>
<CAPTION>
Compensation Number of
from all boards
Compensation funds in the which the
Name from the Trust Aquila Group Trustee now
serves
<S> <C> <C> <C>
Thomas A. $,5022 $10,776 2
Christopher
Douglas Dean $ $7,054 2
Ann R. $ $19,100 3
Leven
Theodore T. $4,718 $30,690 8
Mason
Anne J. $4,587 $19,818 6
Mills
William J. $4,250 $9,750 3
Nightingale
James R. $ $6,624 2
Ramsey
</TABLE>
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
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 Bank 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.
<PAGE>
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>
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
Diana P. Herrmann
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]
STATEMENT OF
ADDITIONAL
INFORMATION
[LOGO]
One of the
Aquilasm Group of Funds
