disqualify the Trust as a regulated investment company under the Internal Revenue Code, account falls below established minimum).
Shareholders are asked to approve the reorganization of each of the Current Funds Tax-Free Fund of Colorado (TFFC), Churchill Tax-Free Fund of Kentucky (CTFFK), Aquila Narragansett Tax-Free Income Fund (ANTFIF) and Tax-Free Fund For Utah (TFFU) into a series of Aquila Municipal Trust (the “Successor Funds”).
Shareholders should carefully read the Proxy Statement/Prospectus because it contains details that are not in the following summary.
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 10 |
conducted is not expected to be materially affected by the elimination of the fundamental policy regarding permitted fund investments.
| § | Each Successor Fund would continue to invest at least 80% of assets in tax-free municipal obligations. |
| § | Note: This change is currently in effect for Aquila Narragansett Tax-Free Income Fund. Shareholders of Current Aquila Narragansett Tax-Free Income Fund approved the elimination of the fundamental investment policy regarding permitted fund investments in 2012. |
| o | Investments in voting securities, other investment companies and certain other instruments: |
| § | The Successor Funds do not have a fundamental investment policy regarding investments in voting securities, other investment companies and certain other instruments. |
| § | The Current Fund’s fundamental investment policy prohibits the Funds from buying shares of other investment companies, including money market funds. Recent changes to the 1940 Act now permit funds to invest without limit in money market funds. |
| § | The Current Fund’s fundamental investment policy also prohibits the Funds from investing in voting securities including those of other investment companies or equity securities. The Manager has no current intention to invest Fund assets in equity securities. |
| § | The current fundamental investment policy prohibits the Fund from purchasing warrants, puts, calls. The Manager has no current intention to invest Fund assets in warrants, puts or calls. |
| § | Note: This change is already in effect for Aquila Narragansett Tax-Free Income Fund. Shareholders of Aquila Narragansett Tax-Free Income Fund approved the elimination of the fundamental investment policy regarding voting securities, other investment companies and certain other instruments in 2012. |
| o | Concentration of Fund Investments: |
| § | The Successor Fund may not make any investment if, as a result, the Fund’s investments will be concentrated in any one industry, except as permitted by the 1940 Act. |
| o | Lending of Fund Assets: |
| § | The Successor Fund may lend money or other assets to the extent permitted by the 1940 Act. |
| § | The Successor Fund may not borrow money except as permitted by the 1940 Act. |
| o | Issuance of Senior Securities: |
| § | The Successor Fund may not issue senior securities except as permitted by the 1940 Act. |
| o | Investments in Commodities: |
| § | The Successor Fund may purchase or sell commodities or contracts related to commodities to the extent permitted by the 1940 Act. |
| o | Certain Affiliated Transactions: |
| § | The Successor Funds do not have a fundamental investment policy regarding certain affiliated transactions. The 1940 Act prohibits certain transactions between a fund and its affiliates and securities of affiliates. The Board of Trustees and Management believe that it is unnecessary to have a fundamental policy addressing transactions that are addressed in the 1940 Act. |
| § | Note: This change is already in effect for Tax-Free Fund For Utah. Tax-Free Fund For Utah does not currently have a fundamental investment policy regarding affiliated transactions. |
| o | Investments in Real Estate: |
| § | The Successor Funds may not purchase or sell real estate except as permitted by the 1940 Act. |
| o | Restrictions on Control Investments: |
| § | The Successor Funds do not have a fundamental investment policy regarding control investments. Such a policy is not required by the 1940 Act. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 11 |
| o | Restrictions on Short Sales and Use of Margin: |
| § | The Successor Funds do not have a fundamental investment policy regarding short sales and the use of margin. The 1940 Act does not require a fundamental policy about engaging in short sales or relating to purchasing securities on margin. |
| § | The Successor Funds may not engage in the business of underwriting the securities of other issuers except as permitted by the 1940 Act. |
| | Comparison of the Current Fund Declaration of Trust and the Successor Fund Declaration of Trust: |
An anticipated benefit of the Reorganizations is that the Funds will operate under an Amended and Restated Declaration of Trust which will provide administrative efficiencies and will better conform to current law.
The Amended Declaration will not change the Funds’ investment objectives, principal investment strategies or investment management teams, and the Funds will continue to furnish the same level of services to shareholders.
Note that provisions of the Amended and Restated Declaration of Trust are subject to approval by shareholders of Tax-Free Trust of Arizona, currently the sole operating series of Aquila Municipal Trust, and some or all of the provisions of the Amended and Restated Declaration of Trust may not be adopted. If some or all of the provisions of the Amended and Restated Declaration of Trust are not adopted, those provisions will not go into effect and the corresponding provisions of the declaration of trust currently in effect for Aquila Municipal Trust will remain in effect following the closing of the Reorganization.
| · | Differences under the Amended Declaration: |
| o | Shareholders have the power to elect Trustees, however an annual meeting and annual election of Trustees is not required. |
| o | Trustees may determine the number of Trustees without limit. In the event no Trustee is left on the Board, vacancies may be filled by elected officers of the fund or by another manner permitted under the 1940 Act. |
| o | A Trustee may be removed from office |
| § | with or without cause by holders of the majority of shares, or |
| § | with cause by two-thirds of the remaining Trustees, or |
| § | without cause by unanimous action of the remaining Trustees. |
| o | Trustees will automatically be deemed to have retired at the age or term limit adopted by two-thirds of the Trustees. |
| o | The majority of the Trustees may amend the Declaration of Trust without shareholder approval, provided that: |
| § | Any amendment to Article V (regarding the Trustees) requires a two-thirds vote of the Trustees |
| § | Trustees may not amend the Declaration to diminish or eliminate shareholder voting rights without consent of at least a majority of shares. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 12 |
| o | Trust may be terminated by unanimous vote of Trustees with notice to, but without approval of, shareholders, or if recommended by the vote of a majority of the Trustees, by vote of at least a majority of shares at any meeting of shareholders. |
| o | Consistent with the Current Declaration, the Amended Declaration provides that shareholders representing at least a majority of the shares of the Fund must consent to the merger, consolidation or sale of all or substantially all of the Fund’s assets to another fund or entity. |
| · | Differences under the Amended Declaration: |
| o | Amended Declaration was drafted to address the operations of a multiple series trust. |
| o | Clarifies voting and other rights of series and classes. |
| o | Provides that shareholders of all series and classes vote together, except where the 1940 Act requires separate votes. |
| · | Indemnification and Liability of Trustees, Officers and Employees -- |
| · | Differences under the Amended Declaration: |
| o | Clarifies and expands provisions limiting the liability of Trustees, officers and employees of the Trust. |
| · | Shareholder/Derivative Actions -- |
| · | Differences under the Amended Declaration: |
| o | Sets forth a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquiries and claims while avoiding the time and expense associated with spurious demands and derivative actions. |
| o | Intended to save the time and expense of bringing a suit that the Trustees in their judgment do not believe would be in the best interests of the Fund and its shareholders. |
| · | Issuance and Redemption of Shares/Small Accounts -- |
| · | Differences under the Amended Declaration: |
| o | The Fund may close a shareholder account that falls below a minimum size, or assess a fee for small accounts and redeem shares to cover such fees, or convert the shares into another share class that is geared to smaller accounts. |
| o | Trustees may involuntarily redeem shares upon certain conditions (such as failure to provide identification required by law, inability to verify information from a shareholder, concentration of ownership that would disqualify the Fund as a regulated investment company under the Internal Revenue Code, account falls below established minimum). |
| · | Disclosure of Shareholder Holdings -- |
| · | Differences under the Amended Declaration: |
| o | Shareholders are required to disclose to the Fund information regarding direct and indirect ownership of shares in compliance with laws or regulations, and the Fund may disclose such ownership if required by law or regulation. |
| · | Determination of Net Asset Value -- |
| · | Differences under the Amended Declaration: |
| o | Trustees have the flexibility to prescribe procedures and methods for determining the value of portfolio assets as may be necessary or desirable. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 13 |
AQUILA THREE PEAKS HIGH INCOME FUND TALKING POINTS
APPLICABLE TO PROXY MATERIALS MAILED TO SHAREHOLDERS FOR THE SEPT. 17, 2013 MEETING
Special Shareholder Meeting on September 17, 2013
Proposals:
| 2. | Ratify selection of independent registered public accounting firm |
| 3. | Adopt an Amended and Restated Declaration of Trust |
| 4. | Approve changes to Fundamental Investment Policies |
ATPHIF shareholders of record on June 19, 2013 are entitled to vote.
Trustee recommendation: Vote “FOR” each of the proposals.
Proposal 3: Adopt an Amended and Restated Declaration of Trust
Reasons for the Proposal:
| · | If approved in its entirety, the Amended Declaration would provide the Fund with an updated governing document that will simplify administration and oversight of the Fund. |
| · | Adoption of the Amended Declaration will not remove any of the protections afforded to shareholders under federal law, including voting rights, or alter Trustees’ existing fiduciary obligations to act with due care and in the best interest of shareholders. |
| · | Intended to simplify administration and oversight. |
| · | Intended to increase flexibility which will allow Trustees to react more quickly to changes in competitive and regulatory conditions. |
| · | The Amended Declaration will not change the investment objective or investment strategies of the Fund; the Fund will be managed by the same personnel. |
Differences in the Amended and Restated Declaration of Trust:
The following is a summary – shareholders should carefully read the proxy materials because they contain details that are not in this summary.
| o | In certain circumstances, the majority of the Trustees may amend the Declaration of Trust without a vote of shareholders |
| § | Any amendment to Article V (regarding the Trustees) requires a two-thirds vote of the Trustees |
| § | Trustees may not amend the Declaration to diminish or eliminate voting rights of shareholders without the consent of at least a majority of shares |
| § | Trustees have the discretion to submit any proposed amendment to the Declaration of Trust for shareholder approval at any time. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 14 |
| o | The Trust may be terminated |
| § | If such action is recommended by the vote of a majority of the Trustees, by vote of at least a majority of shares at any meeting of shareholders or |
| § | By unanimous vote of the Trustees, with notice to, but without approval of, shareholders. |
| · | 3C Annual Shareholder Meetings |
| o | Annual meetings and annual Trustee election not required. |
| o | Trustees and Management will continue to have the capability to hold non-voting meetings of shareholders on a regular basis consistent with prior practices of seeking to keep shareholders as fully informed as possible about the Fund. |
| o | Trustees may be removed from office: |
| § | With or without cause by action of holders of a majority of shares |
| § | For cause by action of at least two-thirds of the remaining Trustees |
| § | Without cause by unanimous action of the remaining Trustees. |
| · | 3E Indemnification and Liability of Trustees, Officers and Employees |
| o | Clarifies and expands provisions limiting the liability of Trustees, officers and employees of the Trust. |
| · | 3F Shareholder/Derivative Actions |
| o | Sets forth a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquires and claims while avoiding the time and expense associated with spurious demands and derivative actions. |
| o | Intended to save the time and expense of bringing a suit that the Trustees in their judgment do not believe would be in the best interests of the Fund and its shareholders. |
| · | 3G Number of Trustees / Vacancies |
| o | The Board of Trustees may establish the number of Trustees without limitation. |
| o | In the event no Trustee is left on the Board, vacancies may be filled by officers of the Trust or by any other manner permitted under the 1940 Act. |
| o | Drafted to address the operations of a multiple series trust. |
| o | Clarifies voting and other rights of series and classes. |
| o | Provides that shareholders of all series and classes vote together, except where the 1940 Act requires separate votes. |
| · | 3I Other Changes Effected by the Amended Declaration |
| o | Authorize Trustees to adopt changes to the Declaration, except those set forth in 3A – 3H |
| § | Mandatory Retirement of Trustees at specified age or term limit established by a least two-thirds of the Trustees. |
| § | Issuance and Redemption of Shares/Small Accounts |
| · | Fund may close a shareholder account that falls below a minimum size, or assess a fee for small accounts and redeem shares in the account to cover such fees, or convert the shares into another share class that is geared to smaller accounts. |
| · | Trustees may involuntarily redeem shares upon certain conditions (such as failure to provide identification required by law, inability to verify information from a shareholder, concentration of ownership that would |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 15 |
disqualify the Fund as a regulated investment company under the Internal Revenue Code, account falls below established minimum).
| § | Disclosure of Shareholder Holdings |
| · | Shareholders are required to disclose to the Trust information regarding direct and indirect ownership of shares in compliance with laws or regulations, and the Trust may disclose such ownership if required by law or regulation. |
| § | Determination of Net Asset Value |
| · | Trustees have the flexibility to prescribe procedures and methods for determining the value of portfolio assets as may be necessary or desirable. |
Proposal 4: Revisions to Fundamental Investment Policies
Reasons for the Proposal:
| · | Revise or eliminate fundamental policies that are not required by law or that are more restrictive than the law requires. |
| · | Intended to simplify compliance monitoring and provide flexibility. |
| · | Continue to manage the Fund in accordance with its prospectus, SAI, and any established policies or guidelines. |
| · | There will be no change to the Fund’s current investment practices, investment objective or principal investment strategies in connection with the proposed revisions to the Fund’s fundamental policies included in Proposal 4. |
| · | Proposal 4 would Revise Fundamental Investment Policies related to: |
| A. | Concentration of Fund investments |
| B. | Lending of Fund assets |
| D. | Issuance of senior securities |
| E. | Investments in commodities |
| F. | Certain affiliated transactions |
| G. | Investments in real estate |
More detailed descriptions appear below
| · | There will be no change to the Fund’s current investment practices, investment objective or principal investment strategies in connection with the proposed revisions to the Fund’s fundamental policies included in Proposal 4. |
| · | The following is a summary – shareholders should carefully read the proxy materials because they contain details that are not in this summary. |
| o | 4A – Concentration of Fund Investments: |
| § | The Fund may not make any investment if, as a result, the Fund’s investments will be concentrated in any one industry, except as permitted by the 1940 Act. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 16 |
| o | 4B – Lending of Fund Assets: |
| § | The Fund may lend money or other assets to the extent permitted by the 1940 Act. |
| o | 4C – Borrowing of Money: |
| § | The Fund may not borrow money except as permitted by the 1940 Act. |
| o | 4D – Issuance of Senior Securities: |
| § | The Fund may not issue senior securities except as permitted by the 1940 Act. |
| o | 4E – Investments in Commodities: |
| § | The Fund may purchase or sell commodities or contracts related to commodities to the extent permitted by the 1940 Act. |
| o | 4F – Affiliated Transactions: |
| § | Eliminate the current policy regarding certain affiliated transactions. The 1940 Act prohibits certain transactions between a fund and its affiliates and securities of affiliates. The Board of Trustees and Management believe that it is unnecessary to have a fundamental policy addressing transactions that are addressed in the 1940 Act. |
| o | 4G – Investments in Real Estate: |
| § | The Fund may not purchase or sell real estate except as permitted by the 1940 Act. |
| § | The Fund may not engage in the business of underwriting the securities of other issuers except as permitted by the 1940 Act. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 17 |
AQUILA THREE PEAKS OPPORTUNITY GROWTH FUND TALKING POINTS
APPLICABLE TO N-14 MATERIALS MAILED TO SHAREHOLDERS FOR THE SEPT. 17, 2013 MEETING
Special Shareholder Meeting on September 17, 2013
Shareholders are asked to approve an Agreement and Plan of Reorganization of Aquila Three Peaks Opportunity Growth Fund into a series of Aquila Funds Trust (the “Successor Fund”).
Proposal:
| 1. | Reorganize Aquila Three Peaks Opportunity Growth Fund (ATPOGF) into Aquila Three Peaks Opportunity Growth Fund, a series of Aquila Funds Trust |
| o | ATPOGF shareholders of record on June 19, 2013 are entitled to vote. |
Shareholders should carefully read the Proxy Statement/Prospectus because it contains details that are not in the following summary.
Reasons for the Proposal:
| · | There will be no change in the Fund’s investment objective, principal investment strategies, or investment management team as a result of the Reorganization. |
| · | The Reorganization is expected to help achieve certain efficiencies in the administration and oversight of the Fund. |
| · | Fewer registration statements and filings will be required within the Aquila Group of Funds. |
| · | The Fund may realize economies in registration fees. |
| · | A reduction in the number of separate Boards overseeing funds in the Aquila Group of Funds, which is expected to help achieve efficiencies in the oversight and management of the Funds. |
| · | The Fund will operate under updated fundamental investment policies and is expected to operate under an updated Declaration of Trust, which will provide administrative efficiencies and better conform to current law. |
Trustee recommendation: Vote “FOR” the proposal.
Steps in the Reorganization:
| · | Shareholders will vote on the proposal, and if the proposal is approved: |
| o | On or about September 20, 2013, the Reorganization will occur. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 18 |
| · | The Current Fund will transfer all of its assets and liabilities to the Successor Fund (a series of Aquila Funds Trust). |
| · | Shareholders of the Current Fund will receive shares of the Successor Fund in proportion to the NAV of their shares on the Closing Date of the Reorganization. |
| · | No sales load, CDSC, commission, redemption fee or transaction fee will be charged, and existing CDSC schedule will be maintained. |
| · | The Reorganization generally is not expected to result in income, gain or loss being recognized for federal income tax purposes by the Fund or by its shareholders. |
| · | Following the Closing Date of the Reorganization, the Current Fund will cease operations and be terminated. |
Why Trustees Recommend the Reorganization:
| · | Trustees determined that the Reorganization is in the best interest of the Fund and its shareholders. |
| · | The Trustees believe the Reorganization offers a number of potential benefits: |
| 1. | Efficiencies in the administration of the Fund may be achieved by reducing the number of separate legal entities, reducing the number of separate Boards, updating the Declaration of Trust and fundamental investment policies. |
| 2. | The Successor Fund will have the same investment objectives and principal investment strategies as the Current Fund. |
| 3. | The Successor Fund will have the same Investment Manager, Sub-Adviser and Portfolio Managers. |
| 4. | Although the Successor Fund’s total annual operating expenses are anticipated to increase in the first year following the Reorganization as a result of the expenses attributable to the Reorganization, because of expense limitation arrangements, the Fund’s net expenses will not increase as a result of the payment of any Reorganization costs. Furthermore, the Reorganization may result in long-term economies based on certain efficiencies in the oversight and administration of the Funds. |
| 5. | No sales load, CDSC, commission, redemption fee or other transactional fee will be charged as a result of the Reorganization. |
| 6. | There will be no dilutive effect on interests of current shareholders as a result of the Reorganization. |
| 7. | It is not necessary to dispose of portfolio securities in order to effect the Reorganization. |
| 8. | Shareholders are not expected to recognize any taxable gain or loss as a result of the Reorganization. |
Fund Reorganization and Expenses
| · | The Current Fund will be responsible for the costs of printing the Proxy Statement/Prospectus, the proxy solicitation, mailing and attestation costs attributable to the Reorganization. Each of the Current Fund and the Successor Fund will bear its allocated share of the costs of preparing the proxy statement and other costs attributable to the Reorganization (excluding proxy solicitation, mailing and attestation costs). |
| · | The Fund is anticipated to experience an increase in total annual operating expenses in the first year following the Reorganization due to the expenses of the Reorganization. However, because of expense limitation arrangements, the Fund’s net expenses will not increase as a result of the payment of any Reorganization costs. Furthermore, the Reorganization may result in long-term |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 19 |
economies to the Fund as a result of certain efficiencies in the oversight and administration of the Fund, providing a long-term shareholder benefit.
Comparison of the Current and the Successor Fund:
There will be no changes to the Fund’s investment objective, principal investment strategies or investment management team as a result of the Reorganization.
| · | The Current and the Successor Fund will |
| o | Have identical investment objectives |
| o | Have identical principal investment strategies |
| o | Be subject to the same principal risks |
| o | Have the same Investment Manager, Sub-Adviser and Portfolio Managers |
| · | The Successor Fund will assume the Current Fund’s historical performance following the Reorganization. |
| · | It is anticipated that the Successor Fund will operate under an Amended and Restated Declaration of Trust. |
| o | The Amended and Restated Declaration of Trust will not change the Fund’s investment objective or principal investment strategies (more information below). |
| o | Note that provisions of the Amended and Restated Declaration of Trust are subject to approval by shareholders of Aquila Three Peaks High Income Fund, currently the sole operating series of Aquila Funds Trust, and some or all of the provisions of the Amended and Restated Declaration of Trust may not be adopted. |
| · | It is anticipated that there will be a reduction in the number of separate Boards overseeing funds in the Aquila Group of Funds. |
| · | There are differences between the fundamental investment policies of the Current Fund and the fundamental investment policies of the Successor Fund. The Current Fund has fundamental investment policies that are not required by law or are more restrictive than the law requires. The fundamental policies of the Successor Fund are intended to simplify compliance monitoring and provide additional flexibility for the Fund. |
Comparison of the Fundamental Investment Policies of the Current Fund and the Fundamental Investment Policies of the Successor Fund:
All mutual funds are required by law to have “fundamental” policies. The Fund’s investment objective and principal investment strategies will not change. There are other differences between the fundamental investment policies of the Current Fund and the Successor Fund. The Current Fund has fundamental investment policies that are not required by law or are more restrictive than the law requires.
The manner in which the Successor Fund’s investment operations are conducted is not expected to be materially affected by any differences between the fundamental policies of the Current Fund and the
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 20 |
Successor Fund. There will be no changes to the investment objective or principal investment strategies of the Funds.
| o | Concentration of Fund Investments |
| § | The Fund may not make any investment if, as a result, the Fund’s investments will be concentrated in any one industry, except as permitted by the 1940 Act. |
| § | The Fund may lend money or other assets to the extent permitted by the 1940 Act. |
| § | The Fund may not borrow money except as permitted by the 1940 Act. |
| o | Issuance of Senior Securities |
| § | The Fund may not issue senior securities except as permitted by the 1940 Act. |
| o | Investments in Commodities |
| § | The Fund may purchase or sell commodities or contracts related to commodities to the extent permitted by the 1940 Act. |
| o | Certain Affiliated Transactions |
| § | The Successor Fund does not have a fundamental investment policy regarding affiliated transactions. The 1940 Act prohibits certain transactions between a fund and its affiliates and securities of affiliates. The Board of Trustees and Management believe that it is unnecessary to have a fundamental policy addressing transactions that are addressed in the 1940 Act. |
| o | Investments in Real Estate |
| § | The Fund may not purchase or sell real estate except as permitted by the 1940 Act. |
| o | Restrictions on Control Investments |
| § | The Successor Fund does not have a fundamental investment policy regarding control investments. Such a policy is not required by the 1940 Act. |
| o | Restrictions on Short Sales and Use of Margin |
| § | The Successor Fund does not have a fundamental investment policy regarding short sales and use of margin. The 1940 Act does not require a fundamental policy about engaging in short sales or relating to purchasing securities on margin. |
| § | The Successor Fund may not engage in the business of underwriting the securities of other issuers except as permitted by the 1940 Act. |
| | Comparison of the Current Fund Declaration of Trust and the Successor Fund Declaration of Trust: |
An anticipated benefit of the Reorganization is that the Fund will operate under an Amended and Restated Declaration of Trust which will provide administrative efficiencies and will better conform to current law. The Amended Declaration will not change the Fund’s investment objectives, principal investment strategies or investment management teams, and the Fund will continue to furnish the same level of services to shareholders.
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 21 |
Note that provisions of the Amended and Restated Declaration of Trust are subject to approval by shareholders of Aquila Three Peaks High Income Fund, currently the sole operating series of Aquila Funds Trust, and some or all of the provisions of the Amended and Restated Declaration of Trust may not be adopted. If some or all of the provisions of the Amended and Restated Declaration of Trust are not adopted, those provisions will not go into effect and the corresponding provisions of the declaration of trust currently in effect for Aquila Funds Trust will remain in effect following the closing of the Reorganization.
| · | Differences under the Amended Declaration: |
| o | Shareholders have the power to elect Trustees, however an annual meeting and annual election of Trustees is not required. |
| o | Trustees may determine the number of Trustees without limit. In the event no Trustee is left on the Board, vacancies may be filled by elected officers of the fund or by another manner permitted under the 1940 Act. |
| o | A Trustee may be removed from office |
| § | with or without cause by holders of the majority of shares, or |
| § | with cause by two-thirds of the remaining Trustees, or |
| § | without cause by unanimous action of the remaining Trustees. |
| o | Trustees will automatically be deemed to have retired at the age or term limit adopted by two-thirds of the Trustees. |
| o | The majority of the Trustees may amend the Declaration of Trust without shareholder approval, provided that: |
| § | Any amendment to Article V (regarding the Trustees) requires a two-thirds vote of the Trustees |
| § | Trustees may not amend the Declaration to diminish or eliminate shareholder voting rights without consent of at least a majority of shares. |
| o | Trust may be terminated by unanimous vote of Trustees with notice to shareholders, but without approval of, shareholders, or if recommended by the vote of a majority of the Trustees, by vote of at least a majority of shares at any meeting of shareholders |
| o | Consistent with the Current Declaration, the Amended Declaration provides that shareholders representing at least a majority of the shares of the Fund must consent to the merger, consolidation or sale of all or substantially all of the Fund’s assets to another fund or entity. |
| · | Differences under the Amended Declaration: |
| o | Amended Declaration was drafted to address the operations of a multiple series trust. |
| o | Clarifies voting and other rights of series and classes. |
| o | Provides that shareholders of all series and classes vote together, except where the 1940 Act requires separate votes. |
| · | Indemnification and Liability of Trustees, Officers and Employees -- |
| · | Differences under the Amended Declaration: |
| o | Clarifies and expands provisions limiting the liability of Trustees, officers and employees of the Trust. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 22 |
| · | Shareholder/Derivative Actions -- |
| · | Differences under the Amended Declaration: |
| o | Sets forth a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquiries and claims while avoiding the time and expense associated with spurious demands and derivative actions. |
| o | Intended to save the time and expense of bringing a suit that the Trustees in their judgment do not believe would be in the best interests of the Fund and its shareholders. |
| · | Issuance and Redemption of Shares/Small Accounts -- |
| · | Differences under the Amended Declaration: |
| o | The Fund may close a shareholder account that falls below a minimum size, or assess a fee for small accounts and redeem shares to cover such fees, or convert the shares into another share class that is geared to smaller accounts. |
| o | Trustees may involuntarily redeem shares upon certain conditions (such as failure to provide identification required by law, inability to verify information from a shareholder, concentration of ownership that would disqualify the Fund as a regulated investment company under the Internal Revenue Code, account falls below established minimum). |
| · | Disclosure of Shareholder Holdings -- |
| · | Differences under the Amended Declaration: |
| o | Shareholders are required to disclose to the Fund information regarding direct and indirect ownership of shares in compliance with laws or regulations, and the Fund may disclose such ownership if required by law or regulation. |
| · | Determination of Net Asset Value -- |
| · | Differences under the Amended Declaration: |
| o | Trustees have the flexibility to prescribe procedures and methods for determining the value of portfolio assets as may be necessary or desirable. |
_________________________________________________________________________________________________________________________________________________________________________________
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION
| Aquila Distributors, Inc., 800-437-1020, www.aquilafunds.com | Page 23 |
