Capital Cash Management Trust
380 Madison Avenue
Suite 2300
New York, NY 10017
212-697-6666
Statement of Additional Information
October 31, 1996
Supplemented November 12, 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 October 31, 1996, of Capital Cash Management Trust (the
"Trust"), which may be obtained from the Trust's Shareholder
Servicing Agent, Administrative Data Management Corp., by writing
to 581 Main Street, Woodbridge, NJ 07095-1198, or by calling the
following numbers:
800-952-6666 toll free or 908-855-5731
or from Aquila Distributors, Inc., the Trust's Distributor, by
writing to 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
June 30, 1996, 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. . . . . . . . . . . . . . . .9
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . 10
Additional Information as to Management Arrangements . . . . . 15
Amortized Cost Valuation . . . . . . . . . . . . . . . . . . . 18
Computation of Daily Dividends . . . . . . . . . . . . . . . . 19
Automatic Withdrawal Plan. . . . . . . . . . . . . . . . . . . 20
General Information. . . . . . . . . . . . . . . . . . . . . . 20
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 22
<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, although they are redeemable (and thus repayable by the
borrower) at principal amount, plus accrued interest, at any
time. The Trust has no limitations on the amount of its assets
invested in such notes. There is no limitation on the type of
issuer from which these notes will be purchased; however, all
such notes must be First Tier Securities and in connection with
such purchases and on an ongoing basis, STCM Management Company,
Inc. (the "Adviser") must determine that they 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, 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, under its minimum rating standards, invest in them only if
at the time of an investment they are determined to be comparable
in quality to rated issues in which the 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 a First Tier 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 a First Tier Security and meets all
other applicable requirements of the 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.
Since the Trust cannot buy any securities other than those
listed under "Investment of the Trust's Assets" in the
Prospectus, 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 own in the aggregate
more than 5% of such securities.
The Trust cannot buy or sell real estate; however it may
purchase marketable securities issued by companies, including
real estate investment trusts, which invest in real estate or
interests therein.
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 doesn't 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 invest in securities for which there are
legal or contractual restrictions on resale or underwrite
securities of other issuers except insofar as it may technically
be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities.
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 a Distribution Plan under Rule 12b-1 (the
"Rule") under the 1940 Act. The Rule provides in substance that
an investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in
the sale of its shares except pursuant to a plan adopted under
the Rule.
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 Aquila Management
Corporation (the "Administrator") and (ii) broker-dealers,
membership organizations, associations of common interest or
others selected by the Trust's administrator or sub-adviser with
which it has entered into written agreements ("Related
Agreements") contemplated by the Rule and which have rendered
assistance (whether direct, administrative or both) in the
distribution and/or retention of Trust shares, in the servicing
of shareholder accounts or in consulting or otherwise cooperating
as to its members or others in its area of interest. "Qualified
Holdings" means, as to any Qualified Recipient, all Trust shares
beneficially owned by such Qualified Recipient or by one or more
of its customers (brokerage or other), other contacts, investment
advisory clients, other clients, or its members, associates or
other persons within its area of interest, if the Qualified
Recipient was, in the sole judgment of the administrator or
sub-adviser, instrumental in the purchase and/or retention of
such Trust shares and/or in providing administrative, consulting
or other 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; (c) the
consulting or other assistance provided by the Qualified
Recipient; and (d) 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 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 also states that if and to the extent that any of
the payments listed below are considered by anyone to be
"primarily intended to result in the sale of" shares issued by
the Trust within the meaning of the Rule, 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 qualification of the Trust
and/or its shares under the securities or "Blue-Sky" law 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 Independent Trustees are those Trustees who are not
"interested persons" of the Trust as defined in the 1940 Act and
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan. 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 at least quarterly report to the Trust's
Trustees in writing for their 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 went into effect upon approval by the shareholders
of the Trust on February 28, 1992, and unless terminated as
hereinafter provided, and continues from November 30 of each year
and year to year thereafter, but only so long as such continuance
is specifically approved at least annually by the vote of the
Trust's Board of Trustees and its Independent Trustees 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 a 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
by a vote of the Trustees of the Trust and of the Independent
Trustees, with votes cast in person at a meeting called for the
purpose of voting on 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, the
Rule. 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, the Rule.
Under the Rule, 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.
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 such factor 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 time, persons and effort to
activities which, although not sales activities themselves, may
be useful to the Distributor in its responsibilities as 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.
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 the Adviser and the Distributor, and their principal
occupations during at least the past five years are set forth
below. Messrs. Herrmann and Mason are "interested persons" of the
Trust as that term is defined in the 1940 Act as officers of the
Trust; in addition Mr. Herrmann is an officer, director and
shareholder of the Adviser and of the Distributor. They are so
designated by an asterisk. (See "General Information" for
information about shareholdings of Trustees and Officers).
Lacy B. Herrmann*, President and Chairman of the Board of
Trustees, 380 Madison Avenue, New York, New York 10017
Founder, President and Chairman of the Board of Aquila Management
Corporation since 1984, the sponsoring organization and
Administrator and/or Adviser or Sub-Adviser to the following
open-end investment companies, and Founder, Chairman of the Board
of Trustees, and President of each: Pacific Capital Cash Assets
Trust since 1984; Churchill Cash Reserves Trust since 1985;
Pacific Capital U.S. Treasuries Cash Assets Trust since 1988;
Pacific Capital Tax-Free Cash Assets Trust since 1988; each of
which is a Money-Market Fund, and together with this Trust are
called the Aquila Money-Market Funds; Hawaiian Tax-Free Trust
since 1984; Tax-Free Trust of Arizona since 1986; Tax-Free Trust
of Oregon since 1986; Tax-Free Fund of Colorado since 1987;
Churchill Tax-Free Fund of Kentucky since 1987; Tax-Free Fund For
Utah since 1992; and Narragansett Insured Tax-Free Income Fund
since 1992; each of which is a tax-free municipal bond fund, and
two equity funds, Aquila Rocky Mountain Equity Fund since 1993
and Aquila Cascadia Equity Fund, since 1996, which, are called
the Aquila Bond and Equity Funds; Vice President, Director,
Secretary and formerly Treasurer of Aquila Distributors, Inc.
since 1981, distributor of the above funds; Chairman of the Board
of Trustees and President of Prime Cash Fund (which is inactive),
since 1982 and of Short Term Asset Reserves 1984-1996; President
and a Director of STCM Management Company, Inc., sponsor and
sub-adviser to CCMT; Chairman, President, and a Director since
1984, of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves,
and Founder and Chairman of several other Money-Market Funds;
Director or Trustee of OCC Cash Reserves, Inc., Oppenheimer Quest
Global Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and
Trustee of Quest For Value Accumulation Trust, The Saratoga
Advantage Trust, and of the Rochester Group of Funds, each of
which is an open-end investment company; Trustee of Brown
University, 1990-1996 and currently Trustee Emeritus; actively
involved for many years in leadership roles with university,
school and charitable organizations.
Theodore T. Mason, Vice Chairman of the Board of Trustees, 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;Director of STCM Management Company, Inc.; Vice
Chairman of the Board of Trustees and Trustee of Prime Cash Fund
(which is inactive) since 1982; Trustee of Short Term Asset
Reserves, 1984-1986 and 1989-1996, of Hawaiian Tax-Free Trust and
Pacific Capital Cash Assets Trust since 1984, of Churchill Cash
Reserves Trust since 1985, of Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Treasuries Cash Assets
Trust since 1988 and of Churchill Tax-Free Fund of Kentucky since
1992; Vice President and Trustee of Oxford Cash Management Fund,
1983-1989; Vice President of Trinity Liquid Assets Trust,
1983-1985; President and Director of Ted Mason Venture
Associates, Inc., a venture capital consulting firm, 1972-1980;
Advisor to the Commander, U.S. Maritime Defense Zone Atlantic,
1984-1988; National Vice President, Surface/Subsurface, Naval
Reserve Association, 1985-1987; National Vice President, Budget
and Finance, for the same Association, 1983-1985; Commanding
Officer of four Naval Reserve Units, 1974-1985; Captain, USNR,
1978-1988.
Paul Y. Clinton, Trustee, 946 Morris Avenue, Bryn Mawr,
Pennsylvania 19010
Principal of Clinton Management Associates, a financial and
venture capital consulting firm; formerly Director of External
Affairs of Kravco Corporation, a national real estate owner and
developer, 1984-1995; formerly President of Essex Management
Corporation, a management and financial consulting company,
1979-1983; Trustee of Narragansett Insured Tax-Free Income Fund
since 1996 and of Prime Cash Fund (which is inactive), since
1993; Trustee of Short Term Asset Reserves 1984-1996; general
partner of Capital Growth Fund, a venture capital partnership,
1979-1982; President of Geneve Corp., a venture capital fund,
1970-1978; formerly Chairman of Woodland Capital Corp., a small
business investment company; formerly Vice President, W.R. Grace
& Co;Director or Trustee of OCC Cash Reserves, Inc., Oppenheimer
Quest Global Value Fund, Inc., Oppenheimer Quest Value Fund,
Inc., and Trustee of Quest For Value Accumulation Trust, and of
the Rochester Group of Funds, each of which is an open-end
investment company.
Robert L. Krakoff, Trustee, 257 Commonwealth Avenue, Boston,
Massachusetts 02116
Chairman and Chief Executive Officer of Advanstar Holdings, Inc.,
since 1996. Chairman and Chief Executive Officer of Cahners
Publishing Company 1991-1996; President of Cahners Publishing
Company 1989-1991; Executive Vice President of that company,
1985-1989; President of Cahners Exposition Group, a division of
that company, 1979-1985; Vice President of that company,
1973-1985; Trustee of Narragansett Insured Tax-Free Income Fund
since 1992; Director of Centennial Capital Special Fund, Inc.
until 1979; Trustee of Trinity Liquid Assets Trust, 1982-1991;
Director of Reed Elsevier International PLC (an international
publishing firm) since 1990-1996; Director of Freedom
Communications, Inc. since 1996.
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 Churchill Cash Reserves Trust since 1985,
of Tax-Free Trust of Arizona since 1986, of Churchill Tax-Free
Fund of Kentucky and Tax-Free Fund of Colorado since 1987 and of
Tax-Free Fund For Utah since 1994.
Cornelius T. Ryan, Trustee, c/o Oxford Partners, 315 Post Road
West, Westport, Connecticut, 06880
General Partner of Oxford Partners, a group of investment venture
capital partnerships; General Partner of Oxford Bioscience
Partners, and President of Oxford Venture Corporation, an
affiliated administrative company, since 1980; Trustee of Prime
Cash Fund (which is inactive) since 1983 and of Aquila Rocky
Mountain Equity Fund since 1996; President of AMR International,
Inc., a management training and publishing company, 1978-1980;
Director of Schuster Fund, Inc., 1972-1980;President of GTE New
Ventures Corporation, 1974-1978; Vice President, Corporation
Development, of GTE Corporation, 1974-1978; President and a
founder of Randolph Computer Corporation, 1965-1974; Director of
Neuberger & Berman Equity Funds, since 1988.
Charles E. Childs, III, Senior 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.
Diana P. Herrmann, Vice President, 380 Madison Avenue, New York, New York
10017
Senior Vice President and Secretary and formerly Vice President of the
Administrator since 1986 and Director since 1984; Trustee of Tax-Free
Trust of Arizona and Tax-Free Trust of Oregon since 1994 and of
Churchill Cash Reserves Trust since 1995; Vice President of InCap
Management Corporation since 1986 and Director since 1983; Senior
Vice President or Vice President and formerly Assistant Vice President of
the Money Funds since 1986; Vice President of Prime Cash Fund (which
is inactive), since 1986, of Cascades Cash Fund 1989-1994, and of Short
Term Asset Reserves, 1986-1988; Assistant Vice President of Oxford Cash
Management Fund, 1986-1988; 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.
John M. Herndon, Vice President and Assistant Secretary, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995 and Vice President of the
Aquila Money-Market Funds since 1990; Vice President of the
Administrator since 1990; Investment Services Consultant and Bank
Services Executive of Wright Investors' Service, a registered
investment adviser, 1983-1989; Member of the American Finance
Association, the Western Finance Association and the Society of
Quantitative Analysts.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
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 Sub-Adviser since 1984
and of the Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New
York 10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond
and Equity Funds and of Aquila Distributors, Inc. since 1992;
Associate Director of Furman Selz Incorporated, 1991-1992; Vice
President of Scudder, Stevens & Clark, Inc. and Treasurer of
Scudder Institutional Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer of Lazard Freres
Group of Investment Companies and HT Insight Funds, Inc.,
1986-1988; Vice President of Lehman Management Co., Inc. and
Assistant Treasurer of Lehman Money-Market Funds, 1981-1985;
Controller of Seligman Group of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New
York 10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-1986; Secretary of
Oxford Cash Management Fund, 1982-1988.
Patricia A. Craven, Assistant Secretary & Compliance Officer, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1995; Counsel to the
Administrator and the Distributor since 1995; formerly a Legal
Associate for Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
The Trust does not pay fees to Trustees affiliated with the
Administrator or to any of the Trust's officers. During the
fiscal year ended June 30, 1996, the Trust paid $25,452 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 two
equity funds. 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.
[CAPTION]
<TABLE>
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Trust Group now serves
<S> <C> <C> <C>
Paul Y.
Clinton $2,840 $7,996 3
Robert L.
Krakoff $1,450 $2,100 2
Theodore T.
Mason $938 $42,341 7
Anne J.
Mills $2,075 $30,364 6
Cornelius T.
Ryan $1,375 $5,650 2
</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 STCM Management Company, Inc. (the
"Adviser") contains the provisions described below, in addition
to those described in the Prospectus.
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.
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 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 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 as presently in effect, and by the 1940 Act.
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.
During the fiscal year ended June 30, 1996, the Trust
accrued $3,673 in favor of the Adviser under the Advisory
Agreement and $2,775 in favor of the Administrator under the
Administration Agreement. All such fees were waived. The expense
limitation provisions in the Advisory and Administration
Agreements in effect, would in any event have precluded any of
such fees during the last fiscal year. The Administrator also
reimbursed the Trust $73,338 to comply with the expense
limitation, $14,519 pursuant to the agreement regarding total
expenses of the Trust and $3,635 voluntarily, totaling $91,492.
During the fiscal year ended June 30, 1995, the Trust accrued
$3,924 in favor of the Adviser under the Advisory Agreement and
$2,943 in favor of the Administrator under the Administration
Agreement. All such fees were waived. The expense limitation
provisions in the Advisory and Administration Agreements in
effect would in any event have precluded any of such fees during
that fiscal year. In addition, the Administrator reimbursed the
Trust $64,713 to comply with the expense limitation described in
the Prospectus, $14,732 pursuant to the agreement regarding total
expenses of the Trust, described in the Prospectus and $3,960
voluntarily, totaling $83,405. During the fiscal year ended June
30, 1994, the Trust accrued $3,583 in favor of the Adviser under
the Advisory Agreement and $2,687 in favor of the Administrator
under the Administration Agreement. All such fees were waived.
The expense limitation provisions in the Advisory and
Administration Agreements would in any event have precluded any
of such fees during the last fiscal year. For the fiscal year
ended June 30, 1994, the Administrator reimbursed the Trust for
expenses in the amount of $73,123.
Additional Information as to the Administration Agreement
The Administration Agreement (the "Administration
Agreement") between Aquila Management Corporation, as
Administrator, and the Trust 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 the Trust's investment portfolio and
the maintenance of the Trust's accounting books and records (see
below for discussion); as part of such duties, the Administrator
(i) provides office space, personnel, facilities, and equipment
for the performance of the following functions and for the
maintenance of the Trust's headquarters; (ii) oversees all
relationships between the Trust and the Trust's transfer agent,
custodian, legal counsel, auditors and principal underwriter,
including the negotiation of agreements in relation thereto, the
supervision and coordination of the performance of such
agreements, and the overseeing of all administrative matters
which are necessary or desirable for the effective operation 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) maintains the Trust's books and records (other than
accounting books and records), and prepares (or assists counsel
and auditors in the preparation of) all required proxy
statements, reports to the Trust's shareholders and Trustees,
reports to and other filings with the Securities and Exchange
Commission and any other governmental agencies, and tax returns,
and oversees the Trust's insurance relationships; (v) prepares,
on the Trust's behalf, such applications and reports as may be
necessary to register or maintain the Trust's registration or
that of its shares under the securities or Blue-Sky laws of all
such jurisdictions as may be required from time to time; and (vi)
responds to any inquiries or other communications from the
Trust's 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 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 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 Trust's Trustees in office at the time, including a majority
of Independent Trustees. In either case the notice provision may
be waived.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgment or for any loss
suffered by the Trust in connection with the matters to which 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 Trust's
Declaration of Trust and the 1940 Act.
AMORTIZED COST VALUATION
The Trust operates under Rule 2a-7 under the 1940 Act, 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 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
they 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 Rule 2a-7, 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 of $0.005. One of
the actions which the Board of Trustees might take could be the
elimination or reduction of dividends for more than one day.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan under which
you will receive a monthly or quarterly check in a stated amount,
not less than $50, if you own or purchases shares of the Trust
having a net asset value of at least $5,000. Stock certificates
will not be issued for shares held under an Automatic Withdrawal
Plan. All dividends must be reinvested.
Shares will be redeemed on the last business day of the
month as may be necessary to meet withdrawal payments. Shares
acquired with reinvested dividends will be redeemed first to
provide such withdrawal payments and thereafter other shares will
be redeemed to the extent necessary, and, depending upon the
amount withdrawn, your principal may be depleted.
Redemption of shares for withdrawal purposes may reduce or
even liquidate your account. Monthly or quarterly payments paid
to shareholders may not be considered as a yield or income on
investment.
GENERAL INFORMATION
Background of the Trust
Capital Cash Management Trust is one of the oldest
Money-Market mutual funds in the United States. It has served a
wide range of investors for over 20 years, producing competitive
results for individuals, churches, endowments, schools, bank
trust departments and corporations.
Information about 5% shareholders
As of October 3, 1996 the following persons owned more than
5% of the Trust's outstanding shares:
William J. Boyle and Margaret M. Boyle, JTWROS, 99,923
shares (5.6%); In addition, the Trustees and officers of the
Trust owned 527,608 shares (29.6%), of which 378,069 shares
(21.2%) are held as follows: by Aquila Management Corp., 395
shares, by Aquila Distributors, Inc., 81,357 shares, by Lacy B.
Herrmann and Elizabeth B. Herrmann, 196,461 shares and by
Elizabeth B. Herrmann 99,856 shares. See "Trustees and Officers"
above for information about Mr. Herrmann, and "Information as to
the Adviser, the Administrator and the Distributor" in the
Prospectus for information about Aquila Management Corporation.
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.
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 such a trust may, under certain circumstances, be
held personally liable as partners for the obligations of the
Trust. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of the Trust's property of any
shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to the relatively remote circumstances in which the Trust
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees
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, Bank One Trust Company, N.A., is
responsible for holding the Trust's assets.
The Trust's auditors, KPMG Peat Marwick LLP, perform an
annual audit of the Trust's financial statements.
Financial Statements
The financial statements of the Trust for the fiscal year
ended June 30, 1996, which are contained in the Annual Report for
that fiscal year, are hereby incorporated by reference into the
Additional Statement. Those financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors, whose
report thereon is incorporated herein by reference.
APPENDIX A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS
Bond Ratings
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
STCM MANAGEMENT COMPANY, INC.
380 Madison Avenue, Suite 2300
New York, NY 10017
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
Theodore T. Mason, Vice President
Paul Y. Clinton
Robert L. Krakoff
Anne J. Mills
Cornelius T. Ryan
Officers
Lacy B. Herrmann, President
Charles E. Childs, III, Senior Vice President
Diana P. Herrmann, Vice President
John M. Herndon, Vice President & Assistant Secretary
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
Patricia A. Craven, Assistant 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
Legal Counsel
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
551 Fifth Avenue
New York, New York 10176
CAPITAL CASH
MANAGEMENT TRUST
A cash
management
investment
[LOGO]
STATEMENT OF
ADDITIONAL
INFORMATION
[LOGO]
One of the
Aquilasm Group of Funds
